[00:00:01] Speaker 04:
Morning, Your Honors.

[00:00:04] Speaker 04:
My name is James Martin.

[00:00:06] Speaker 04:
I'm from the law firm Zell.

[00:00:08] Speaker 04:
I represent PSD.

[00:00:11] Speaker 04:
I'd like to reserve five minutes for a book.

[00:00:12] Speaker 04:
OK, please watch the clock.

[00:00:15] Speaker 04:
I am watching.

[00:00:17] Speaker 04:
Pacific Surf Designs designs, manufactures, and sells sheet wave machines.

[00:00:22] Speaker 04:
Those machines you see on the back of cruise ships or in amusement parks or standalone venues that mimic a surfing experience.

[00:00:31] Speaker 04:
And while I stand here for Pacific Surf Designs, I'm also here on behalf of fledgling competitors in numerous other industries that are faced with monopolists who seek to deter new rivals through conduct other than competition on the merits, other than lower prices, other than better services, other than innovation.

[00:00:52] Speaker 04:
Monopolists who instead seek to raise rivals' costs and engage in other tactics to squelch competition.

[00:00:59] Speaker 04:
And that's what happened in this case.

[00:01:02] Speaker 04:
As soon as Pacific Surf Designs was formed, and I'm going to call it PSD, defendants embarked on a course of conduct that included the filing of meritless lawsuits that they offered to drop if PSD would stop competing, weaponizing those lawsuits to deter customers from doing business with PSD, and otherwise disparaging PSD and its founders.

[00:01:25] Speaker 04:
This appeal asked the question,

[00:01:27] Speaker 04:
By what standards should we evaluate the conduct of monopolists in these situations?

[00:01:32] Speaker 04:
We contend the court should apply the same standards that have been used for decades.

[00:01:37] Speaker 04:
In 1962, the Supreme Court in Continental War versus Union Carbon and Carbon wrote, plaintiffs must be given the full benefit of their proof without tightly compartmentalizing the various factual components and wiping the slate clean after scrutiny of each.

[00:01:52] Speaker 03:
So your objection is that you think the instructions allowed the jurors to compartmentalize the evidence, right?

[00:02:02] Speaker 03:
Because there was a sequence that they went through, and if they decided that the lawsuits that Whitewater filed were not objectively unreasonable, then they stopped the inquiry.

[00:02:14] Speaker 03:
But the district court also gave an instruction that the jurors should consider all of the evidence from all sources.

[00:02:21] Speaker 03:
So how is it that they were not instructed that they're considering all the evidence as they went through that sequential list of instructions?

[00:02:30] Speaker 04:
Okay, so it was actually in the verdict form that the problem arises.

[00:02:34] Speaker 04:
Harm to competition is usually a single entry on the verdict form.

[00:02:38] Speaker 04:
Did defendant's conduct, anti-competitive conduct, allow the defendant to maintain monopoly power?

[00:02:45] Speaker 04:
Here, the journey reform had four questions.

[00:02:48] Speaker 04:
Question three was a form of a sham litigation instruction, which we have issues with as well because of the standard proof.

[00:02:55] Speaker 04:
Question four.

[00:02:55] Speaker 03:
Because you want the burden of proof to be shifted to Whitewater for them to show that it was not objectively unreasonable and that they didn't have subjective bad

[00:03:05] Speaker 03:
bad intent in bringing in the lawsuits because as I read hands guard one the plaintiff has the burden of showing of sham litigation, but you I understand your theory to be if you allege a Monopoly broth, then you can shift the burden to the defendant I don't I hope that we didn't mean to say that we sure didn't mean to say that the burden of proof was on us to show that if you look at all of the evidence by clear and convincing evidence I

[00:03:29] Speaker 04:
Not by clearance, by preponderance of the evidence.

[00:03:31] Speaker 03:
What's your best authority to say it's not, that it's a preponderance?

[00:03:37] Speaker 04:
Every case other than Handguards.

[00:03:39] Speaker 03:
Handguards was a case- Well, can you be a little more specific?

[00:03:42] Speaker 03:
Give me a Ninth Circuit case or a Supreme Court decision.

[00:03:45] Speaker 04:
It is, I know this case name, I don't want to point you on it.

[00:03:52] Speaker 04:
city of anaheim is one where was the overall combined effect so you suggesting that we have conflicting case on the ninth circuit and it hasn't been considered on bonk i think that the only cases in which clearing convincing evidence has been used as the standard for sham litigation as apart from the policy right there's three part there's three tests for sham litigation one is a single lawsuit

[00:04:16] Speaker 04:
fraud was obtained by, or the patent was obtained by fraud, and then used to exclude competitors.

[00:04:21] Speaker 04:
That's the Handguard's situation.

[00:04:22] Speaker 04:
That's bad faith prosecution.

[00:04:24] Speaker 03:
But it's not.

[00:04:25] Speaker 03:
As I recall, Handguard said, I forget what that test is called.

[00:04:29] Speaker 03:
It has a particular name.

[00:04:31] Speaker 03:
I'm sure you can remind me.

[00:04:32] Speaker 03:
But they said something to the effect of it.

[00:04:35] Speaker 03:
This is not that situation.

[00:04:36] Speaker 03:
And they went on to apply clear and convincing evidence.

[00:04:40] Speaker 04:
They applied clear and convincing evidence because

[00:04:44] Speaker 04:
because of the facts of that case where they were alleging that the fraud was obtained, I keep getting it backwards, where the patent was obtained by fraud.

[00:04:52] Speaker 04:
And in patent law, when you are alleging that a patent was invalid, you have to show by clear and convincing evidence that the patent was obtained improperly or by fraud.

[00:05:04] Speaker 04:
That was the only reason clear and convincing evidence was used in hand guards.

[00:05:08] Speaker 04:
It was ported over from patent law.

[00:05:12] Speaker 04:
And in this case,

[00:05:13] Speaker 04:
We have lawsuits, only two of which involve patents.

[00:05:17] Speaker 04:
And one of those patents, I would argue, was found to be objectively baseless by the Patent Trial and Appeals Board and by the District Court below.

[00:05:27] Speaker 01:
So I'd like to take you back to question three on the verdict form, because you identified that as the question, as the instruction that was in error.

[00:05:36] Speaker 01:
What should question three have said?

[00:05:40] Speaker 01:
Question three should not have existed.

[00:05:42] Speaker 04:
Okay, we should have gone from two to four.

[00:05:44] Speaker 04:
Question three, four, and five should not have existed.

[00:05:48] Speaker 04:
Question eight is the question that should have been asked.

[00:05:51] Speaker 04:
A simple question that's usually given in antitrust cases, whether defendants maintained or obtained monopoly power by virtue of anti-competitive conduct.

[00:06:03] Speaker 03:
So that's a very general question.

[00:06:06] Speaker 03:
So it doesn't provide any guidance to the jurors.

[00:06:09] Speaker 03:
You're alleging disparagement and sham litigation.

[00:06:14] Speaker 04:
The guidance to the jurors would be in the jury instructions, where they would be instructed.

[00:06:20] Speaker 04:
The difference between competition on the merits and anti-competitive conduct and competition on the merits is well-defined.

[00:06:27] Speaker 01:
So the instructions to the jury, but not the verdict form, could have had questions about

[00:06:33] Speaker 01:
the prior litigation, whether it was objectively baseless and pursued in bad faith.

[00:06:38] Speaker 04:
The instruction that we proposed was one that allowed the jury to hear, to understand what the demonstrate in a competitive conduct and pro-competitive conduct was.

[00:06:48] Speaker 01:
I'm having a hard time understanding why it's appropriate to instruct the jury in the written and oral instructions about objectively baseless and prior litigation and bad faith, but it's not appropriate to put it on a verdict form.

[00:07:03] Speaker 04:
I keep being drawn into this objectively baseless argument, and we're not saying that it should have been.

[00:07:08] Speaker 04:
That is our second argument.

[00:07:10] Speaker 04:
Our primary argument is objectively baseless wouldn't have been part of it.

[00:07:13] Speaker 03:
And that's because you think PASCO applies for a series of cases?

[00:07:17] Speaker 04:
That's because we believe continental law applies.

[00:07:19] Speaker 04:
That is the monopoly broth, for lack of a better term.

[00:07:23] Speaker 04:
That's the most colorful phrasing.

[00:07:25] Speaker 04:
where one component of this conduct was the assertion of patent litigation.

[00:07:30] Speaker 04:
But it was also the weaponization of those lawsuits.

[00:07:33] Speaker 04:
It was also going after PSD and the market.

[00:07:36] Speaker 03:
But that sounds like your run-of-the-mill sham litigation allegation.

[00:07:41] Speaker 04:
Well, the run-of-the-mill sham litigation, well, if we're going to limit it to just the posco, we're not limiting it to a single lawsuit, which is not this case.

[00:07:49] Speaker 04:
That's hand cards.

[00:07:51] Speaker 02:
What about a relevant group?

[00:07:53] Speaker 04:
I'm sorry?

[00:07:54] Speaker 02:
What about a relevant group?

[00:07:57] Speaker 04:
A relevant group?

[00:07:58] Speaker 02:
Yeah.

[00:07:59] Speaker 02:
How do you distinguish that?

[00:08:01] Speaker 04:
Relevant group is, I watched the oral argument yesterday, and I know that you're part of that opinion.

[00:08:07] Speaker 04:
My understanding of that case was it is different on its facts.

[00:08:10] Speaker 04:
It was very CEQA specific.

[00:08:13] Speaker 04:
It was one in which the batting average for the plaintiff was zero.

[00:08:19] Speaker 04:
I don't think they won a single one of those cases.

[00:08:21] Speaker 04:
They settled.

[00:08:22] Speaker 04:
Whereas in our case, the batting average is 1,000%.

[00:08:25] Speaker 04:
Defendant won zero of the cases.

[00:08:29] Speaker 03:
But the point of relevant group was to address sort of the counting exercise that the district court had engaged in and said, yeah, that's okay.

[00:08:40] Speaker 03:
It seems elementary, but it works because in Pasco you had 29 lawsuits and in relevant group you had four.

[00:08:47] Speaker 03:
And the panel parsed through all of the allegations and limited it to the ones that were most like litigation, because there were a lot of allegations about administrative actions and writing a letter and all sorts of things, and then determined which of these were most like a traditional lawsuit.

[00:09:05] Speaker 03:
So four, and you're alleging five, not 29.

[00:09:09] Speaker 03:
So five seems a lot closer to four than 29.

[00:09:13] Speaker 04:
I was thinking about this this morning.

[00:09:16] Speaker 04:
A series to me is three or more.

[00:09:19] Speaker 03:
But that's not allowed under relevant group.

[00:09:22] Speaker 04:
It wouldn't be three or four.

[00:09:24] Speaker 04:
I think that the law has been, unless the relevant group changed it, I didn't see that in it, that it's not a pure counting exercise, that it's more to sham than quantity.

[00:09:35] Speaker 04:
It's also a qualitative analysis.

[00:09:36] Speaker 03:
So and that's another issue that I I think I take issue with your count of five because the first two actions were dismissed and there was a tolling agreement and voluntarily dismissed and PSD did not win that it was a tolling agreement they were refiled as one so we have the same allegations the same claim you're counting that as three could be counted as one and

[00:09:59] Speaker 03:
then one of them is dismissed for standing, the other is dismissed from the patent board who decided the patent was valid.

[00:10:09] Speaker 03:
It's refiled again, so it could still be counted as one at this point, and you're counting that as four, and then there's a separate contract action.

[00:10:17] Speaker 03:
So I get to two when I count the actions here.

[00:10:22] Speaker 04:
I think that we have to think about the effect of these lawsuits, not necessarily just the claims.

[00:10:27] Speaker 04:
First of all, they didn't refile the same claims.

[00:10:31] Speaker 04:
The original lawsuits also alleged fraud, tortious interference, trade secret stealing, theft of confidential information.

[00:10:38] Speaker 04:
Those were never brought back again.

[00:10:40] Speaker 04:
The reason they weren't brought back again, we allege,

[00:10:43] Speaker 04:
is they were out in the marketplace telling people the PSD had stolen their designs.

[00:10:47] Speaker 04:
They were telling people PSD would not survive this litigation.

[00:10:51] Speaker 04:
They didn't have the resources.

[00:10:52] Speaker 04:
If you bought a PSD machine, they're not going to be around to service it.

[00:10:56] Speaker 04:
You need to be able to service these machines.

[00:10:58] Speaker 04:
So there were additional claims for which they've never offered any basis that it was objectively

[00:11:05] Speaker 03:
So companies can issue press releases about litigation, right?

[00:11:09] Speaker 03:
So how is this different if they are talking to a potential customer and saying, we're in litigation with this entity, which was a truthful statement, right?

[00:11:19] Speaker 03:
How does that become disparagement?

[00:11:20] Speaker 04:
Because they weren't just telling the bureau in litigation.

[00:11:22] Speaker 04:
They were telling them that they'd stolen the trade secrets, that they're not going to be able to survive these lawsuits.

[00:11:28] Speaker 03:
So they're stating the contents of the publicly filed complaints?

[00:11:34] Speaker 04:
I believe so, yes.

[00:11:35] Speaker 02:
Okay, go ahead.

[00:11:40] Speaker 02:
You want to save some time for rebuttal?

[00:11:42] Speaker 04:
I'm sorry?

[00:11:43] Speaker 02:
You want to save time for rebuttal?

[00:11:45] Speaker 04:
I do want to save my time for rebuttal, but I don't want to not answer any more questions that you have.

[00:11:52] Speaker 02:
I think you're good.

[00:11:53] Speaker 04:
Okay, thank you.

[00:12:06] Speaker 00:
May it please the court, Josh Robbins from the Buckhalter law firm for Whitewater West.

[00:12:13] Speaker 00:
Before we get into abstractions about the prior doctrine, I want to be clear, I think it's clear already, what exactly PSD has alleged in this case.

[00:12:24] Speaker 00:
And in the briefs, they talk about this broader overarching scheme.

[00:12:28] Speaker 00:
But as I think the court's recognized, that's really two things.

[00:12:32] Speaker 00:
It's the alleged sham litigation, the prior litigation,

[00:12:36] Speaker 00:
and then several statements that they allege

[00:12:40] Speaker 00:
Whitewater made to others about the litigation.

[00:12:44] Speaker 00:
That's it.

[00:12:45] Speaker 00:
There's nothing beyond that.

[00:12:46] Speaker 00:
And 99% of that is the prior litigation.

[00:12:50] Speaker 00:
Those several statements that they allege Whitewater made are not alleged to be false statements.

[00:12:56] Speaker 00:
And under this court's test in the Harcourt brace, which we've cited, there's never been any dispute among the parties in this case that those separate statements would not rise to an antitrust violation or come close to it under the six-part Harcourt brace test.

[00:13:11] Speaker 00:
As to the prior litigation, as we pointed out, and I think as Judge Beatty astutely noted, it's really two lawsuits, and even the district court in the trial in this case recognized it wasn't really five lawsuits.

[00:13:26] Speaker 00:
And those were cases in which both district judges involved had

[00:13:32] Speaker 00:
responded to arguments by PSD that they were brought in bad faith and that they were frivolous and had rejected those arguments and said, no, they were brought for legitimate purposes.

[00:13:43] Speaker 00:
In one of the cases, Whitewater won a trial, and then it was reversed on an issue of first impression in the Federal Circuit.

[00:13:51] Speaker 00:
So that's the conduct that we're talking about.

[00:13:53] Speaker 00:
What PSD is asking you to hold in this argument they make about continental ore

[00:13:58] Speaker 00:
and Monopoly broth to ask you to hold for the first time of any court that we know of is that non-Sham litigation is effectively not immune under nor Pennington if the plaintiff has alleged something else, anything else as supposedly part of anti-competitive conduct.

[00:14:17] Speaker 00:
Even something as limited as the several statements they claim that Whitewater said that were not false statements.

[00:14:24] Speaker 00:
Not only is there no precedent,

[00:14:27] Speaker 00:
for that proposition, that is foreclosed by Pennington itself.

[00:14:31] Speaker 00:
The Supreme Court in Pennington, which is the namesake of the North Pennington Doctrine, specifically held that a jury could not consider immunized petitioning conduct along with other kinds of conduct as part of a broader scheme.

[00:14:48] Speaker 00:
It specifically said that the jury had to be instructed not to consider

[00:14:53] Speaker 00:
that petitioning conduct as part of a broader scheme, and that to fail to instruct the jury accordingly was itself reversible error.

[00:15:01] Speaker 00:
What PSD is proposing here is the opposite, to say that it would be reversible error not to instruct the jury that it must consider the immunized conduct along with the rest of it.

[00:15:11] Speaker 00:
That's foreclosed by Pennington.

[00:15:13] Speaker 00:
It's foreclosed by the Supreme Court's decision in Linkline that we've cited, by this Court's decision in Dreamstime, which also said you can't combine

[00:15:22] Speaker 00:
clearly lawful conduct with other clearly lawful conduct and make an unlawful antitrust violation.

[00:15:29] Speaker 00:
And it would result in absurd results.

[00:15:32] Speaker 00:
It would lead to absurd results because it would mean, essentially, that there is no North Pennington doctrine.

[00:15:39] Speaker 00:
There is no immunity for non-Sham litigation as long as something else is alleged.

[00:15:44] Speaker 00:
And it's not very difficult for a plaintiff in an antitrust case to allege something

[00:15:50] Speaker 00:
in addition to the petitioning conduct to get around nor pennington and if they alleged that and they alleged that it was done with anti-competitive intent that's it you no longer get nor pennington protection you are under this

[00:16:03] Speaker 00:
The jury instruction, sorry, the verdict form question that they are proposing that the jury was supposed to decide, which is this broad, amorphous concept with no guidance for the jury.

[00:16:15] Speaker 00:
And no one would have the benefit of nor Pennington.

[00:16:18] Speaker 00:
And you would see any number of retaliatory lawsuits going forward against anyone who tries to enforce any of their rights, patent or otherwise, in court.

[00:16:28] Speaker 00:
The other point we've made is that this court doesn't need to reach that issue because PSD has effectively waived it and a minimum not preserved it for objections.

[00:16:38] Speaker 00:
If you look at the record to ER 76 to 77, that's in the instructions, the last version of the instructions that PSD proposed to the district court.

[00:16:52] Speaker 00:
And there they said that nor would be, nor Pennington would be a complete defense

[00:16:58] Speaker 00:
unless it was sham litigation, and they said, quote, the jury would be further instructed that if it finds that Whitewater's conduct viewed as a whole but without immunized lawsuits was insufficient to show willful maintenance of monopoly power,

[00:17:15] Speaker 00:
then it should render a verdict for Whitewater.

[00:17:17] Speaker 00:
Well, that's not what they're saying on appeal.

[00:17:19] Speaker 00:
What they're saying on appeal is that it must be considered with immunized lawsuits, and that you don't take the non-Sham litigation out of the equation.

[00:17:30] Speaker 00:
But that's what they told the district court in their proposed written jury instructions.

[00:17:35] Speaker 00:
So at most, even if the court thought that it was error not to give what they proposed, it would be invited error, and it would be waived.

[00:17:44] Speaker 00:
Aside from waiver, the district court gave the parties two separate chances after the district court had disclosed the instructions that it proposed to give.

[00:17:54] Speaker 00:
It gave the parties two separate chances on two consecutive days, that's August 24th and August 25th, the last two days of trial, to raise any objections or concerns that they had about the instructions that the court was proposing.

[00:18:10] Speaker 00:
And at no time,

[00:18:11] Speaker 00:
In any of that, did PSD raise any objections or issues with respect to this monopoly broth or this broader holistic concept issue that they're raising now?

[00:18:24] Speaker 00:
That was not discussed.

[00:18:26] Speaker 00:
And that under Rule 51 and this court's decision in Skidmore v. Led Zeppelin would mean that they have not preserved the issue and plain error would apply, and they did not argue that they would meet a plain error test.

[00:18:40] Speaker 03:
So are there any, what would you say are the limiting principles on a monopoly broth theory?

[00:18:45] Speaker 03:
Does some of the conduct have to be illegal or anti-competitive?

[00:18:48] Speaker 03:
I mean, I understood your earlier comments to be that you can't group together a series of lawful acts and then say you have anti-competitive unlawful acts.

[00:18:58] Speaker 03:
Yes.

[00:19:01] Speaker 03:
I'm not sure the case law is as clear on that point.

[00:19:04] Speaker 03:
So what would you say are the limiting principles and what do you rely on for that?

[00:19:09] Speaker 00:
Yes, continental lore, which is where this whole concept starts, is often misunderstood.

[00:19:15] Speaker 00:
The term monopoly broth comes from the Seventh Circuit decision that's discussing continental lore.

[00:19:21] Speaker 00:
But it's kind of been a number of litigants and some district courts have misconstrued continental lore.

[00:19:27] Speaker 00:
And there's an entire very good law review article about it that we cited in the brief.

[00:19:33] Speaker 00:
What Continental Orr says is that you can, not that you can combine different types of definitely lawful conduct to make an unlawful whole, it's that if you have conduct that may or may not be unlawful, but has a certain effect that in by itself would not be enough to harm competition.

[00:19:53] Speaker 00:
There's a different element of a Sherman Act section two claim that has to harm competition.

[00:19:57] Speaker 00:
If you have conduct A that by itself doesn't have a significant enough effect to harm competition, and conduct B that by itself doesn't have that effect, and conduct C, you can look at the combined effects.

[00:20:10] Speaker 00:
that those different elements of conduct have and whether or not together they affect competition.

[00:20:16] Speaker 00:
So it's the effects, it's the combined effect of them, not whether or not they're different types of lawful activity that amount to willful maintenance of monopoly power if you put them together.

[00:20:31] Speaker 00:
So it goes to a different element.

[00:20:33] Speaker 00:
of the Sherman Act, Section 2 claim.

[00:20:36] Speaker 00:
And that's how the Continental Ore Rule is applied.

[00:20:40] Speaker 00:
And if you look at a number of the cases that are cited, including ones that they cite, with respect to Continental Ore, that's how they're applied, is you look at whether or not the effects of these different things together can have, can meet the element of the required harm to competition.

[00:20:58] Speaker 00:
But if you look at Linkline, which is where the Supreme Court looked at two different types of sort of pricing conduct, one at the retail level and one at the wholesale level, the Supreme Court said, well, neither of those by itself is unlawful, meets the tests that we have set out for when this kind of pricing

[00:21:17] Speaker 00:
is willful maintenance of monopoly power, or this kind of pricing is.

[00:21:21] Speaker 00:
And when you look at them together, you can't take those two and put them together and say, well, now it is unlawful.

[00:21:29] Speaker 00:
That's what it said.

[00:21:30] Speaker 00:
In Dream's time, that was a case involving Google, and it was alleged that it had done these various different things that altogether

[00:21:38] Speaker 00:
were a violation, and this court said, well, no, each one of those things is lawful under our case law.

[00:21:44] Speaker 00:
You can't say now that because they did a number of them, we can look at it as unlawful.

[00:21:49] Speaker 00:
I think the concept was zero plus zero equals zero.

[00:21:54] Speaker 00:
It doesn't equal one.

[00:21:57] Speaker 00:
I do want to make sure, with the time left, I touch on a couple of the other issues.

[00:22:02] Speaker 00:
You discussed a bit the clear and convincing question.

[00:22:06] Speaker 00:
This court set out the standard in the Handguards case, clearing convincing.

[00:22:11] Speaker 00:
There is no decision, not City of Anaheim, not any other case, that has said that Norpennington is decided under a lower standard than set out in Handguards.

[00:22:21] Speaker 00:
Handguards did not concern the Walker process claim that Mr. Martin referred to, which is where the allegation is that the patent was obtained through fraud.

[00:22:31] Speaker 00:
It actually concerned the same types of allegations as in this case,

[00:22:36] Speaker 00:
sham litigation was being used in some predatory fashion to put too much pressure on the competitor, and the test that it set out was clear and convincing.

[00:22:46] Speaker 00:
And that's an appropriate test because what North Pennington protects is First Amendment activity, the right to petition the government, whether it's the executive branch

[00:22:56] Speaker 00:
or the judicial branch to address grievances.

[00:23:00] Speaker 00:
And that's something that this court has said repeatedly in North Pennington cases has to be overprotected, if necessary, to avoid chilling parties' rights to go to court to vindicate their rights.

[00:23:11] Speaker 00:
And that's why you have this clear and convincing standard.

[00:23:14] Speaker 00:
It's to ensure additional protection and avoiding that chilling effect.

[00:23:21] Speaker 00:
The argument that they've made in their briefs, the PSD has made,

[00:23:25] Speaker 00:
is that, well, that only applies strictly when it's just a certain type of patent case.

[00:23:32] Speaker 00:
Well, there's no court, certainly within this circuit, that has ever said that.

[00:23:36] Speaker 00:
We're not aware of any court outside that has said that it's limited to that.

[00:23:40] Speaker 00:
Even if it were, this is a patent.

[00:23:42] Speaker 00:
This was patent litigation.

[00:23:44] Speaker 00:
Not just the litigation in front of Judge Benitez, the four that were really won.

[00:23:52] Speaker 00:
The other case was also a patent litigation.

[00:23:54] Speaker 00:
We've called it the contract case because there was a contract claim in it.

[00:23:58] Speaker 00:
There were also patent claims.

[00:24:00] Speaker 00:
That's why when it was appealed, it went to the Federal Circuit because there were patent claims about inventorship of patents in that case as well.

[00:24:08] Speaker 00:
And the contract claim had to do with ownership of patents.

[00:24:13] Speaker 00:
So this was really patent litigation, all about patents through and through.

[00:24:17] Speaker 00:
Even if you accepted PSD's proposed limitation of hand guards based on no precedent that we know of, even if we accepted that, then it would still fall within that test and it would be clear and convincing.

[00:24:32] Speaker 00:
The other point that I make about the clear and convincing standard, or whatever standard of proof we're using, is it really doesn't matter at the end of the day.

[00:24:40] Speaker 00:
This goes to the harmless error point.

[00:24:43] Speaker 00:
First of all, objective baselessness, which does apply here, whether you think it's POSCO or not, and we think under relevant group, it's clearly not the POSCO approach.

[00:24:54] Speaker 00:
Objective baselessness is a question of law.

[00:24:58] Speaker 00:
to be decided by the court.

[00:24:59] Speaker 00:
The court said that in relevant group.

[00:25:02] Speaker 00:
The Supreme Court has said that that's really not a question.

[00:25:06] Speaker 00:
That was for the court to decide, and it did decide that, and so did Judge Sabraw in the other case.

[00:25:13] Speaker 00:
They had addressed those things before.

[00:25:14] Speaker 00:
This was not baseless litigation.

[00:25:18] Speaker 00:
The cases went to trial, and Whitewater one-on-one trial lost on the other and then had a reversal.

[00:25:27] Speaker 00:
But they already said that these were not baseless, frivolous lawsuits.

[00:25:32] Speaker 00:
And that issue should never have gone to the jury at all.

[00:25:35] Speaker 00:
I mean, if there was an error, it was even allowing us to get to a jury instead of dismissing it or having a Rule 50 decision.

[00:25:45] Speaker 00:
As we pointed out, the district court did entertain the Rule 50 motion and deferred it on this point until after the jury verdict, we suspect that

[00:25:56] Speaker 00:
It would have been granted.

[00:25:57] Speaker 00:
We certainly think it should have been granted because the issue of sham litigation should never have had to go to the jury in the first place.

[00:26:06] Speaker 00:
That should have been eliminated.

[00:26:07] Speaker 00:
All that was left was the supposed disparaging conduct, which PSD has never alleged could by itself amount to an antitrust violation.

[00:26:17] Speaker 00:
And with a few seconds left, just as to the objective baselessness, again, we think Relevant Group clearly controls this would be under the standard PREI test.

[00:26:28] Speaker 00:
But even if you did the – if you used the POSCO test, there is a requirement of objective baselessness in that as well.

[00:26:35] Speaker 00:
It has to be a series of baseless lawsuits, not just – it's not only about bad faith, subjective intent.

[00:26:44] Speaker 00:
Unless the panel has any other questions, we would submit with that.

[00:26:49] Speaker 02:
Thank you.

[00:26:50] Speaker 02:
We have your argument.

[00:26:52] Speaker 02:
You have a few minutes left for rebuttal.

[00:26:58] Speaker 04:
Thank you.

[00:26:58] Speaker 04:
Just a few points.

[00:27:00] Speaker 04:
First of all, I've been thinking about the dismissed and refiled question you raised earlier.

[00:27:07] Speaker 04:
And I keep reverting to the policies of the competition laws.

[00:27:13] Speaker 04:
If it were the rule that you could file a lawsuit, dismiss it, file a lawsuit, and dismiss it, file a lawsuit, and dismiss it,

[00:27:20] Speaker 04:
That would have a pretty chilling effect on competition.

[00:27:24] Speaker 03:
But wouldn't that be accounted for in the North Pennington Doctrine in the sham litigation exception?

[00:27:29] Speaker 03:
So you're talking about competing policies here, a concern arising under statute to preclude anti-competitive conduct and a First Amendment right to petition the courts.

[00:27:41] Speaker 04:
That is one of the, that's the tricky part of this case, right?

[00:27:43] Speaker 04:
I mean, it is tricky and it was difficult for the judge and these are,

[00:27:48] Speaker 04:
interesting facts.

[00:27:49] Speaker 04:
I think they are facts that will pop up again and again in the context of patent litigation and in tech litigation.

[00:27:56] Speaker 04:
But if a monopolist, in order to get to these things, you have to prove that it's a monopolist, that this entity already has the market power and the ability to squeeze out competitors.

[00:28:10] Speaker 04:
And we want people to compete.

[00:28:12] Speaker 04:
But allowing them to file a lawsuit and then dismiss it, file a law and dismiss it, it has the same chilling effect on the rival.

[00:28:21] Speaker 04:
They're still raising their costs.

[00:28:23] Speaker 04:
They're still fending off litigation rather than competing, right?

[00:28:29] Speaker 04:
And the whole point of this is when a rival comes in,

[00:28:31] Speaker 04:
The monopolist should react by saying, I'm going to give you a better deal.

[00:28:35] Speaker 04:
I'm going to give you a better service.

[00:28:36] Speaker 04:
I'm going to give you better prices.

[00:28:38] Speaker 04:
We didn't see any of that in this case.

[00:28:40] Speaker 04:
It was, we're going to follow a lawsuit.

[00:28:43] Speaker 04:
We're going to use it to complain about you.

[00:28:45] Speaker 04:
We dismissed it after we achieved our objectives, after folks had already in the most important time in PSD's history, they were labeled, and the evidence was,

[00:28:55] Speaker 04:
A liar, a fraud, they weren't going to survive it.

[00:28:58] Speaker 04:
Every customer, every customer knew.

[00:29:00] Speaker 04:
And the evidence was customers talked.

[00:29:03] Speaker 04:
Every customer knew that PSD was being targeted by these folks.

[00:29:07] Speaker 04:
And it was a five-year series of lawsuits.

[00:29:11] Speaker 04:
And that series of lawsuits was supplemented by all of these comments to customers specifically.

[00:29:18] Speaker 04:
And there's not a ton of customers out there.

[00:29:21] Speaker 04:
So it is this combined effect that is what concerns me, and that's why I start off saying it's not just PSD that's here.

[00:29:29] Speaker 04:
It's every rival that's trying to get into the market.

[00:29:34] Speaker 04:
And knowing where, it would be helpful to know where the guidance is on the lines of, and particularly POSCO and in the

[00:29:42] Speaker 04:
evidence as a whole test.

[00:29:44] Speaker 04:
And going back to the clear and convincing evidence standard, I don't know of any case that clear and convincing evidence was used for any case in Pasco.

[00:29:53] Speaker 04:
I just don't think it's come up.

[00:29:55] Speaker 04:
I only know it's come up in that handguard's decision.

[00:29:58] Speaker 04:
And if you look at the handguard's decision, they talk about how they are using that standard because it's derived from the statutory presumption of validity in that particular kind of case.

[00:30:11] Speaker 02:
I think we have your argument.

[00:30:13] Speaker 04:
Okay, that's it.

[00:30:14] Speaker 04:
And thank you so much for listening to us.

[00:30:17] Speaker 02:
The case of Pacific City Designs versus Whitewater West is submitted.