[00:00:00] Speaker 02:
Please be seated.

[00:00:15] Speaker 01:
Welcome.

[00:00:22] Speaker 01:
We'll have three cases for argument today.

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We'll begin with case number

[00:00:28] Speaker 01:
23-11-23, Fuel Automation versus Energera.

[00:00:34] Speaker 01:
Council.

[00:00:44] Speaker 02:
Good morning, your honors.

[00:00:45] Speaker 02:
May it please the court.

[00:00:46] Speaker 02:
First, I'd like to introduce Jeff Parks, my co-counsel, with me at council's table.

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And I'd also like to reserve five minutes for rebuttal if that's

[00:00:54] Speaker 01:
So you're the master of your own time.

[00:00:56] Speaker 01:
Watch the clock, and we'll try to let you go in time to have some rebuttal.

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Understood.

[00:01:02] Speaker 02:
Thank you, Judge.

[00:01:04] Speaker 02:
Your Honors, no one in this case, including the district court, ever found a prior case holding a party in breach of a covenant not to sue, pursuing somebody not named and protected in that covenant's words.

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The district court instead wrongly transformed a personal right, a contract covenant,

[00:01:25] Speaker 02:
into a product right of effectively a license running all the way through to the end of the stream of commerce.

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That was a first legal error because the contract here deliberately held back and carved out license rights.

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This was the no license hold back in section 13 that the district court should have applied but did not.

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Then on top of this, the district court committed a second legal error.

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It found ambiguity where there was none.

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And this was the foreign patents clause.

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The court let FAS argue to the jury a meaning that was backwards, backwards of what the clause actually says.

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There is no dispute that the Canadian 567 patent is not one related through priority claims to certain U.S.

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patents, but the opposite.

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It is one they claimed priority from.

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I'd like to start with a proper parties issue.

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The district court misapplied the federal circuit's trans-corps ruling to blur the party scope issue in two ways.

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First, on its own terms, trans-corps was not a contract case.

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It was not a case between settlement agreement parties, but it was a patent exhaustion affirmative defense case.

[00:02:47] Speaker 00:
So in what way did the district court here, in your view, rely on patent exhaustion?

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Because I'll tell you how I see part of this, of your argument, and let me know what I've gotten right or wrong.

[00:02:59] Speaker 00:
It seems to me that your argument on the party scope issue turns on the otherwise engaged language.

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Is that fair?

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That's included in the language on which the argument turns.

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I'll take that, yes.

[00:03:12] Speaker 00:
Okay, so I guess I'm having trouble seeing where in the district court you advanced an argument on that language because that seems to me to be the dispositive part of the district court's holding and the district court's

[00:03:26] Speaker 00:
consideration of patent exhaustion was sort of more to inform its general understanding, but it seems that the reading of the contract turned on those words and I didn't see how you argued that in the district court.

[00:03:36] Speaker 02:
Yeah, that's a great question because what happened in the district court was we're talking about now the first summary judgment ruling that was a grant of summary judgment.

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The district court at page 1708 in the appendix, the footnote 11, it pointed out how strange it was that it was FAS

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the move ant who had never raised the otherwise engaged language.

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So the context of the case at the time of summary judgment was FAS's briefing had not triggered any analysis, run any analysis of the otherwise engaged language.

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And so it's in that context that we now come to this court accused of some kind of forfeiture or waiver.

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In fact, it was FAS who had not raised that language, so there was no occasion in the summary judgment response for my side, which I think at the time was Frac Shack, now Intergera.

[00:04:29] Speaker 02:
There was no occasion for us to really go into that in any detail.

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However, if you do read our summary judgment papers, the opposition was at 1609 to 26, you'll see that we were fulsomely arguing the plain language of the section two covenant,

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and fulsomely arguing that it just does not cover this scenario of suing a stranger to the contract.

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And hopefully, if that answers your question, Your Honor, I'll move to the next issue.

[00:04:59] Speaker 00:
I think it does, just to confirm.

[00:05:00] Speaker 00:
So I'm right in not seeing any affirmative argument from you on the otherwise engaged language, but your position is that that doesn't constitute any sort of forfeiture because it was encompassed in the general, sort of more holistic argument that you were making about the construction of the clause.

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Everything you said is fair, Your Honor, I agree with that.

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And one final point on your point, Judge Rossman, is

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Page 2361 of the appendix footnote 14 is the second summary judgment opinion and there the court chided Energera for trying to re-raise the section two coverage question at a later point in the litigation.

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So it wasn't as if the otherwise engaged analysis entered the court's thinking at the summary judgment phase and now it's open season, we can now start talking about it.

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The district court shut that down.

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So now here we are on appeal and we're

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were raised, were analyzing, were running through the analysis that the district court did, so there really can't be any fair argument for a forfeiture or a waiver.

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So, back to TransCorp.

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I mentioned it was a contract case between settlement agreement parties.

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It was not that, rather.

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It was a patent exhaustion affirmative defense case urged by a stranger to the contract.

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And, you know, even if TransCorp somehow applies, that supports Energera,

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because the present case is conditional covenant not to sue conveys no rights to customers.

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And so first, the first thread that I just mentioned, I want to go into how patent exhaustion has no role in contract interpretation.

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We cited the Google case, which says just that.

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And here, the plain language in section two, it left out customers, left out customers from the covenant not to sue.

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That is undisputed and it leaps off the page.

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It's just plain language.

[00:06:48] Speaker 01:
Contrast this with Section 8, which names... It doesn't make the whole contract sort of illusory, though, if you take customers out of the mix, because you basically said they could sell the product, but you could go around the back door, sue all their customers so no one would do business with them, and you just take away the benefit of the bargain.

[00:07:12] Speaker 02:
If Your Honor's thinking in that direction, that is a

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that doesn't take into account the context of the prior litigation and the context of the settlement.

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Now, this has a risk of going into extrinsic evidence, but at the time, there was no customer situation.

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FAS and Atlas were not purveying their wares to any customers.

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They were performing services and doing it amongst themselves.

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There might have been some intra-company transactions.

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So the rights that they bargained for, and again, extrinsic evidence, they drafted this term, the rights that they bargained for

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were rights that perfectly suited the kinds of things they had been accused of infringement for.

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There just wasn't the context where it was evident from an objective observer that there was a need for customer rights.

[00:07:58] Speaker 01:
What about the press release?

[00:08:00] Speaker 02:
The press release is interesting.

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I think that's a red herring in every different way.

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It's, you know, the press release simply almost paraphrases section two, but it doesn't expand section two.

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So it doesn't say customers anywhere in the press release.

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So if that addresses your question.

[00:08:18] Speaker 01:
Let me ask you another question.

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I want to ask you about the priority claim discussion in your brief.

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As I understand it, I don't claim to be an expert in the field, but a priority claim is a way to link a later filed patent application to an earlier filed patent application, right?

[00:08:40] Speaker 01:
That's correct.

[00:08:41] Speaker 01:
OK.

[00:08:42] Speaker 01:
If you add the words relate.

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related through, how does that not indicate that as long as there's some relation between the patents, that it can flow either way?

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The answer is because it's not a willy-nilly relation.

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So the word through is a preposition.

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It's a preposition of manner.

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We read related through priority claims to as a modification of related by naming the specific kind of relationship.

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the specific kind of relationship is ultra precise in this verbiage.

[00:09:21] Speaker 02:
Again, the law.

[00:09:21] Speaker 01:
Would your position be different if the word was related to?

[00:09:24] Speaker 02:
That would be a very different case, your honor.

[00:09:28] Speaker 02:
In fact, there was, I think page 16 of FAS's brief on that point, your honor, it goes a long way to explaining why we've continued to see this, what we think is an unreasonable interpretation from FAS, because this is their brief in this court,

[00:09:42] Speaker 02:
They say that the only preposition attached to the word related is the preposition to.

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I hope your honors caught that.

[00:09:49] Speaker 02:
That is wrong because the word through, as I just mentioned, it's a preposition.

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And it explains how the foreign patents are supposed to be related.

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And the answer is through priority claims to particular patents.

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So in the manner of such priority claims, this is the basic grammar mistake by FAS and it's had consequences throughout this case forcing a jury trial.

[00:10:13] Speaker 02:
But this court can correct that through reversal.

[00:10:15] Speaker 01:
Let me ask you a couple more questions.

[00:10:17] Speaker 01:
So your position is that the district court erred in making a finding of ambiguity, right?

[00:10:24] Speaker 02:
On the foreign patents issue, correct.

[00:10:26] Speaker 01:
OK.

[00:10:26] Speaker 01:
And your position also, it depends on it being unambiguous.

[00:10:34] Speaker 01:
I mean, so you say there are a couple of canons of construction that require your

[00:10:42] Speaker 01:
us to adopt your position, but at the same time, there's no ambiguity.

[00:10:50] Speaker 01:
And where I'm going with this is, as I understand it, typically to employ the canons of contract construction, you have to first have an ambiguity.

[00:10:59] Speaker 01:
Do you agree with that?

[00:11:01] Speaker 02:
I don't agree or disagree.

[00:11:03] Speaker 02:
I'm unfamiliar with that as a proposition.

[00:11:06] Speaker 02:
But really, I mean, our main argument is plain language, English grammar.

[00:11:10] Speaker 02:
And we brought up these canons as sort of corroborative to show that we're not just.

[00:11:17] Speaker 03:
Yeah, but I mean, you did raise the last antecedent rule.

[00:11:20] Speaker 03:
And I think what Judge Carson's asking is, do we even need to employ that rule when, or as the Supreme Court has said, you maybe only do it if there's not contrary intention when you look at the language itself.

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Does that even apply here at all?

[00:11:33] Speaker 02:
Well, I agree.

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The exceptions are very permissive.

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I think the Colorado Supreme Court says any evidence of intent that counters the last antecedent canon should be given some effect.

[00:11:44] Speaker 02:
But we don't need to rely on the last antecedent canon.

[00:11:46] Speaker 02:
We really don't.

[00:11:52] Speaker 01:
I just want to warn you, you wanted some rebuttal.

[00:11:54] Speaker 01:
That's exactly right.

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So we would simply ask your honor on your honors on both of these two issues on appeal.

[00:12:01] Speaker 02:
We would ask that this court as a matter of law reverse and remand for rendering of judgment.

[00:12:09] Speaker 02:
Thank you, your honors.

[00:12:30] Speaker 03:
May it please the court, Stephen Susser with Evia Law PLC joined with me at the council table is Bianna Hamadi and John Orliva, in-house counsel for my client, Fuel Automation Station.

[00:12:51] Speaker 03:
This appeal stems from a settlement agreement in which Fuel Automation Station paid $5.25 million

[00:12:59] Speaker 03:
in exchange for a covenant not to sue.

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That covenant not to sue applied to all FracShack rights as defined.

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Those included specifically foreign patents related through priority claims to the U.S.

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patents that were at issue in the underlying patent infringement lawsuit.

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including the original patent, which was a Canadian patent that ended in the letters of the numbers 567.

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Counsel, may I ask, is the 567 the only foreign patent that was part of this patent family, or is it the only one that's discussed in this appeal because it's relevant, it's sort of what triggered all this litigation?

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The latter.

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There's also an Australian patent as well.

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But the 567 is sort of key because it's the original patent from which

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basically the parent of the family from which all the other patents stem.

[00:13:58] Speaker 01:
So tell me this, would the Australian patent be related through priority claims as your opponent defines it?

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Or was it a prior patent?

[00:14:13] Speaker 03:
I don't remember offhand if it was prior or not.

[00:14:20] Speaker 03:
But it would only, according to them,

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it would only apply if it were before the 6-6-2, for example, before the U.S.

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patents.

[00:14:33] Speaker 01:
So the 5-6-7 patent was after?

[00:14:38] Speaker 03:
The 5-6-7 patent was the first actually.

[00:14:41] Speaker 03:
The 5-6-7 Canadian, I realize it's confusing with the letters, but the 5-6-7 patent was the Canadian one.

[00:14:48] Speaker 03:
Really, the 662 and the 906, I tend to refer to them together as a 662, was the U.S.

[00:14:55] Speaker 03:
patent about which we were fighting in the underlying lawsuit.

[00:15:01] Speaker 03:
And the language that was chosen, related through priority claims, was chosen specifically to encompass anything, named or not named, that was part of the same patent family, a family that began with the 567 and continued on through some of the U.S.

[00:15:16] Speaker 03:
patents that have been mentioned.

[00:15:17] Speaker 00:
Counsel, could you speak to the district court's conclusion on ambiguity here, or really to your opposing counsel's argument that the district court's ambiguity conclusion here, that there's something about the reading that you're offering that contravenes patent law, that you can't read priority claims to the way that you insist, because that's inconsistent with the technical understanding of that term in patent law?

[00:15:45] Speaker 03:
Gladly, Your Honor.

[00:15:50] Speaker 03:
What Energera is trying to do is to take the words priority claims to out of context and turn them into a technical word that's just used in the art.

[00:16:06] Speaker 03:
That's not the case.

[00:16:08] Speaker 03:
If they refer to the phrase claims priority to, the verb claims priority to, that is a commonly used phrase we would acknowledge.

[00:16:19] Speaker 03:
And indeed here,

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If the language said it covers any patent that claims priority to the 662 patent, then we would be in a very different position.

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It would be similar to what Energera wants.

[00:16:36] Speaker 03:
But that's not the reality.

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The reality is that when you claim priority, typically you go to the first patent in the family because you want the earliest date.

[00:16:46] Speaker 03:
Priority is really

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basically cutting the line in a way.

[00:16:50] Speaker 03:
Having a friend save your place in line while you park the car and you go and you jump to that place because it's your friend, you're related or connected.

[00:17:01] Speaker 03:
Typically you'd want to go back to the first patent in time so that you could capture in that patent any products or services that infringe after that date.

[00:17:11] Speaker 03:
Even if the product was out in the market

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before you patented the continuation, but that allows you almost artificially to jump backwards in time to that first priority date.

[00:17:26] Speaker 03:
And so you refer to any patent that is connected to that original patent by having basically the same disclosure and similar claims as part of a family of patents.

[00:17:41] Speaker 03:
And what we wanted to capture with the related to language

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is just that, the family of patents.

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And while I would never say I'm related only to my mother but not to my son, it's multi-directional.

[00:17:55] Speaker 03:
As Judge Carson said, it really goes both ways and was intended to go both ways.

[00:18:03] Speaker 03:
But Council, the language isn't related to, it's related through.

[00:18:06] Speaker 03:
And we sort of keep quibbling over these words.

[00:18:10] Speaker 03:
But can I go back, actually, to something you said a moment ago?

[00:18:12] Speaker 03:
You said Intergera is trying to apply technical meaning to the priority claims to.

[00:18:17] Speaker 03:
Doesn't Colorado law say that technical words are to be given their technical meaning within contracts?

[00:18:25] Speaker 03:
Yes.

[00:18:25] Speaker 03:
So if that's true, then if we give it a more technical reading, as I think you're saying Intergera suggests, does that diminish your argument at all as to how we can interpret these five words?

[00:18:36] Speaker 03:
Well, the five words don't have, I would suggest just Federica that the five words do not have a technical meaning.

[00:18:42] Speaker 03:
They're trying to create a technical meaning out of three words they're choosing, priority claims two.

[00:18:48] Speaker 03:
There is no technical meaning to Priority Claims II.

[00:18:51] Speaker 03:
I mean, I did a search yesterday of all US Supreme Court and Federal Circuit cases that use the phrase Priority Claim II or Priority Claims II and patent, and I got eight decisions.

[00:19:07] Speaker 03:
When I typed in the same search but changed it to Claims Priority II, there was 198.

[00:19:13] Speaker 03:
So Claims Priority II is indeed

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used commonly and I guess you could call it a technical term.

[00:19:20] Speaker 03:
Priority claims to is not.

[00:19:21] Speaker 03:
Priority claims to is a noun form that requires a verb.

[00:19:26] Speaker 03:
Here the verb is related and it's not related through, it's related to, with a prepositional phrase in the middle, through priority claims.

[00:19:35] Speaker 03:
I'm related to my, I'm related to John.

[00:19:38] Speaker 03:
How am I related?

[00:19:40] Speaker 03:
Through blood.

[00:19:41] Speaker 03:
Related through blood to John.

[00:19:43] Speaker 03:
as opposed to other relations.

[00:19:45] Speaker 03:
So it just describes the nature of the relationship.

[00:19:48] Speaker 03:
But in no way is it unidirectional, as NRJR wishes to say it is.

[00:19:54] Speaker 01:
Do you think that their reading is plausible?

[00:20:01] Speaker 01:
No, I do not.

[00:20:04] Speaker 01:
Okay.

[00:20:04] Speaker 01:
So do you agree with them that the district court's conclusion that the term was ambiguous was incorrect?

[00:20:14] Speaker 03:
I think I lost the syntax a little bit, Judge Carson.

[00:20:17] Speaker 01:
Did you argue for ambiguity before the district court?

[00:20:22] Speaker 03:
No.

[00:20:22] Speaker 03:
Personally, I don't think it's ambiguous.

[00:20:23] Speaker 03:
I think the only reasonable interpretation is ours.

[00:20:27] Speaker 03:
However, standing here today, I believe that all this court needs to find is that our interpretation is reasonable, not that it's correct.

[00:20:36] Speaker 03:
and not that their interpretation is wrong, just that ours is reasonable.

[00:20:39] Speaker 03:
I think we carry the day on that issue.

[00:20:41] Speaker 03:
And that's because you have a jury verdict in your favor?

[00:20:44] Speaker 03:
Correct.

[00:20:46] Speaker 03:
So if it was at least reasonable, then it was ambiguous.

[00:20:50] Speaker 03:
The judge was right to find it was ambiguous.

[00:20:55] Speaker 03:
And then the jury followed up with its conclusion.

[00:20:59] Speaker 03:
If I could turn for a moment to exclusion, excuse me, exhaustion.

[00:21:06] Speaker 03:
And I want to harken back to Judge Rossman's question in this because I do believe that exhaustion was critical to Judge Verhollick's summary judgment decision.

[00:21:17] Speaker 03:
The concept of exhaustion basically says if you have an authorized sale, you give up all of your exhaust, all of your rights to alleged patent infringement through that sale.

[00:21:31] Speaker 03:
So if I buy a Ford car,

[00:21:33] Speaker 03:
Ford cannot come after me and say, well, you're infringing the patent on the radio and on the tires and on the engine.

[00:21:39] Speaker 03:
And that also applies downstream.

[00:21:41] Speaker 03:
So it means that if I were to take it to a mechanic, the car to a mechanic, Ford cannot sue the mechanic for working on the car, working on the patented engine, because that right was exhausted.

[00:21:54] Speaker 03:
The right to exclude was exhausted through the first authorized sale.

[00:21:59] Speaker 03:
And it's why I can sell the cart to my son, and my son is immunized, if you will, from patent infringement allegations.

[00:22:07] Speaker 03:
It's a concept that goes back to at least the 1800s, and the Supreme Court has repeatedly stated that, that the first authorized sale basically ends your right under patent infringement.

[00:22:19] Speaker 03:
You can sue for breach of contract or tort or anything else that's applicable, but just not patent infringement after the first authorized sale.

[00:22:28] Speaker 03:
there was a first authorized sale.

[00:22:30] Speaker 03:
And we agree, of course, with Judge Verhollock's finding that there was an authorized sale.

[00:22:35] Speaker 03:
That authorized sale would be any sale from Fuel Automation Station or FAS to any of its customers, whether sale or lease, by the way, because they've been treated as equivalent.

[00:22:50] Speaker 03:
The reason why you can get a first authorized sale from

[00:22:57] Speaker 03:
in this case, fuel automation station as opposed to the patent holder Energera is because Energera gave to us, fuel automation station, a covenant not to sue.

[00:23:08] Speaker 03:
That covenant not to sue puts us effectively in the position of a patent owner when it comes to exhaustion and the right to sell with authority.

[00:23:20] Speaker 00:
So here's where I'm stuck.

[00:23:22] Speaker 00:
It seems that patent exhaustion bears on the declaratory judgment action, doesn't it, in terms of the declaratory relief that authorizes your sales, that that is not contested in this case?

[00:23:39] Speaker 03:
I'm not sure I fully understand your question.

[00:23:41] Speaker 00:
I apologize.

[00:23:42] Speaker 00:
No, it's my misstatement.

[00:23:45] Speaker 00:
The settlement agreement, it's uncontested, authorizes

[00:23:50] Speaker 00:
FAS's sales, correct?

[00:23:54] Speaker 03:
That's our position, yes.

[00:23:56] Speaker 00:
And that's something that Judge Varholik determined?

[00:23:59] Speaker 03:
Yes.

[00:23:59] Speaker 00:
In the declaratory judgment context, right?

[00:24:02] Speaker 03:
Yes, Your Honor.

[00:24:03] Speaker 00:
And my question is, it seems that the patent exhaustion concept relates to that.

[00:24:09] Speaker 00:
Am I misunderstanding?

[00:24:12] Speaker 03:
I believe what the judge was saying is it relates to our right, FAS's right, to sell or lease

[00:24:20] Speaker 03:
and bestow on the person to whom we sell our lease an immunization from patent infringement through the doctrine of exhaustion, as if we were Energera granting that same right to somebody.

[00:24:33] Speaker 03:
So, because the covenant not to sue, according to the TransCore case, gives that right, that authorization, if it's not restricted, and ours is not restricted.

[00:24:47] Speaker 03:
It doesn't say you can make or use, but you can't sell, for example.

[00:24:50] Speaker 03:
It's unrestricted and the press release supports that and I think Judge Verhollack used the press release and indeed otherwise engaged to support this issue that we FAS were not in any way encumbered in the covenant not to sue.

[00:25:05] Speaker 03:
And because we were unencumbered, that covenant not to sue places us in the same position as Energera when granting the right to be

[00:25:13] Speaker 03:
free from patent infringement threats.

[00:25:16] Speaker 03:
Counsel, can I ask, if the patent exhaustion doctrine just applies as a matter of law so it doesn't even need to be referenced in this contract, then what's the purpose of the licensing language?

[00:25:30] Speaker 03:
The covenant not to sue certainly, in this case, Your Honor, it was a covenant not to sue.

[00:25:35] Speaker 03:
The trans-corps case did say that a license and a covenant not to sue for purposes of exhaustion are equivalent.

[00:25:41] Speaker 03:
So it could be either.

[00:25:43] Speaker 03:
In our case, the covenant not to sue is very important because if it had been restricted, if it said you could make or use but not sell, then we would not be in the position to make an authorized sale or lease.

[00:25:57] Speaker 03:
So we would not be able to bestow exhaustion to our downstream customers.

[00:26:01] Speaker 03:
But because the covenant not to sue was not restricted in any way,

[00:26:08] Speaker 03:
And if it had been a license, it wouldn't have been restricted in any way.

[00:26:11] Speaker 03:
It would be the same thing.

[00:26:11] Speaker 03:
But because it was not restricted in any way, that now gives us the authority to trigger the exhaustion doctrine and basically say, you're free downstream from suit for patent infringement.

[00:26:22] Speaker 03:
But again, if that's true, if we look at all the four corners of this agreement, then again, what is the purpose of the no license language then?

[00:26:30] Speaker 03:
I mean, Intergera gives it a specific purpose here.

[00:26:34] Speaker 03:
But what purpose would you give it?

[00:26:36] Speaker 03:
I'm sorry.

[00:26:36] Speaker 03:
I think I misunderstood your earlier question.

[00:26:37] Speaker 03:
I apologize.

[00:26:38] Speaker 03:
So the fact that the agreement says no license, which by the way the Transcor case also said no license, although I think they're disputing, they said that's the context of a release and it's different from a covenant not to sue.

[00:26:54] Speaker 03:
The Transcor case by the way was a settlement agreement just like ours, so it's similar in that sense.

[00:26:59] Speaker 03:
But I want to explain that

[00:27:01] Speaker 03:
A license is not the same thing as a covenant not to sue.

[00:27:04] Speaker 03:
We're not saying they're exactly the same.

[00:27:06] Speaker 03:
For example, an exclusive license gives you rights that you can't get with a covenant not to sue, which is not exclusive.

[00:27:13] Speaker 03:
A license in the trademark context requires the transfer of goodwill.

[00:27:16] Speaker 03:
There are things that a license does that the covenant not to sue does not do.

[00:27:21] Speaker 03:
However, the Federal Circuit made quite clear in the trans-corps case, when it comes to exhaustion, the doctrine of exhaustion, they're treated as equivalent because both

[00:27:31] Speaker 03:
give up the right to exclude.

[00:27:33] Speaker 03:
And that right to exclude is really what patent gives you.

[00:27:36] Speaker 03:
It's not the right to make, use, or sell.

[00:27:38] Speaker 03:
It's the right to exclude others from making and using and selling.

[00:27:42] Speaker 03:
And a covenant not to sue gives that up and therefore transfers the right that comes with the first authorized sale in the exhaustion context.

[00:27:52] Speaker 00:
I have one more question.

[00:27:54] Speaker 00:
Go ahead.

[00:27:55] Speaker 00:
I wanted to get your position on the otherwise engaged language, both your position on the construction of that language, but more specifically on what we're to do with how the district court interpreted it and the views of your opposing counsel on that issue.

[00:28:11] Speaker 03:
I see, Your Honor, the otherwise engaged language and the press release in the district court judge's opinion, magistrate judge's opinion, as being

[00:28:22] Speaker 03:
support for his finding of the sort of the authorized sale.

[00:28:28] Speaker 03:
So support for the exhaustion doctrine application.

[00:28:32] Speaker 03:
He was basically saying, as I read it and understood it, that the exhaustion certainly gives the right to protect your customers.

[00:28:41] Speaker 03:
But in addition, there are other telltale signs in the settlement agreement taken as a whole

[00:28:47] Speaker 03:
that indicate that that's what the parties anticipated and thought was right.

[00:28:51] Speaker 03:
For example, you wouldn't be otherwise engaged.

[00:28:53] Speaker 03:
So you wouldn't be in this position where your customer was sued and you're seeking indemnification from us, from FAS, as an example.

[00:29:00] Speaker 03:
The press release puts no restriction on making, using, or selling.

[00:29:03] Speaker 03:
So the fact that the press release says you're not restricted in selling is further support that there was an unrestricted, unencumbered covenant not to sue in the agreement itself.

[00:29:15] Speaker 00:
And you don't think that the otherwise engaged language is ambiguous?

[00:29:20] Speaker 00:
Or renders the covenant ambiguous?

[00:29:22] Speaker 03:
Oh, I do not, no.

[00:29:25] Speaker 03:
Because the covenant not to sue is, in fact, I would almost argue that

[00:29:31] Speaker 03:
the otherwise engaged, if anything, bolsters the covenant not to sue language and just makes clear, unlike Transcor, and I think that's what the judge said, this is even a broader grant of rights than Transcor, because Transcor did not have the otherwise engaged language, but we did.

[00:29:49] Speaker 03:
It further emphasizes what the parties were trying to accomplish as the judge read that settlement agreement.

[00:29:56] Speaker 01:
Okay, thank you, counsel.

[00:29:57] Speaker 03:
Thank you.

[00:29:57] Speaker 01:
Let's go ahead and add three minutes on to the rebuttal here.

[00:30:05] Speaker 01:
And now that you're up, I'm going to use part of your three minutes.

[00:30:09] Speaker 01:
We had some discussion earlier about the timing of these various foreign patents.

[00:30:18] Speaker 01:
And I guess my question is, if we use your construction, how many

[00:30:25] Speaker 01:
patents actually fit within your definition of the foreign patents?

[00:30:30] Speaker 01:
Does the Australian patent fit?

[00:30:34] Speaker 02:
There's an ambiguity, I'm sorry.

[00:30:35] Speaker 02:
In your question, I'll answer both ways.

[00:30:38] Speaker 02:
Under our interpretation of the contract, the Canadian patent and the Australian patent are excluded from coverage of any grant of rights.

[00:30:47] Speaker 01:
Are there any other patents, any other foreign patents?

[00:30:50] Speaker 02:
Under our interpretation of the contract, there do not exist any foreign patents that would be covered

[00:30:55] Speaker 02:
by the foreign patents clause.

[00:30:58] Speaker 01:
What would be the purpose of the language any foreign patent related through priority claims if there are none?

[00:31:06] Speaker 02:
Right.

[00:31:06] Speaker 02:
In our reply brief, we go into this.

[00:31:07] Speaker 02:
It's something like a comfort and insurance clause.

[00:31:10] Speaker 02:
It's just in case we're all wrong.

[00:31:13] Speaker 02:
Our records were messed up.

[00:31:15] Speaker 02:
It's something to give comfort to the parties that there is some categorical extra scope.

[00:31:21] Speaker 02:
It may never get invoked on the facts on the reality of the world.

[00:31:25] Speaker 02:
But as just a plain language read through of the contract, it does categorically give extra scope to the rights.

[00:31:31] Speaker 01:
Or it could suggest that your opponent's construction is plausible.

[00:31:36] Speaker 01:
Right?

[00:31:38] Speaker 02:
Not on plain language, Your Honor.

[00:31:40] Speaker 02:
I can't go there.

[00:31:42] Speaker 01:
Well, you're reading that out.

[00:31:45] Speaker 02:
Well, to structure the thing that Your Honor just ran through just in a different way,

[00:31:52] Speaker 02:
Your Honor is saying, well, if the real world didn't have any foreign patents that would trigger under Energera's construction, maybe that renders the term ambiguous.

[00:32:04] Speaker 02:
But we don't look to what's going on in the real world to answer the initial legal, pure legal question of whether a contract term is ambiguous.

[00:32:14] Speaker 01:
Yeah, but these are your patents though, right?

[00:32:18] Speaker 01:
I mean, correct.

[00:32:19] Speaker 01:
So if there were foreign patents that related to, related through whatever the term is, you would have known about them at the time.

[00:32:28] Speaker 01:
That's correct.

[00:32:29] Speaker 01:
So the idea that it's in there because it's a belt and suspenders kind of position doesn't make a lot of sense if you're in possession of the knowledge that there aren't any.

[00:32:39] Speaker 02:
And that argument works in the other direction too, which is there is a whole exhibit with named patents

[00:32:45] Speaker 02:
Why didn't, when they drafted the clause, why didn't they simply put the exhibited patents in the rights clause?

[00:32:52] Speaker 02:
But they didn't, instead they used the framing.

[00:32:54] Speaker 01:
Because presumably you're the one who knows what foreign patents you have.

[00:32:58] Speaker 02:
I understand the point, Your Honor.

[00:32:59] Speaker 02:
My last response to this is... Go ahead.

[00:33:01] Speaker 01:
I won't take up any more of your time.

[00:33:03] Speaker 02:
Yeah, the anti-surplusage canon, which is kind of what you and I have been bantering about,

[00:33:09] Speaker 02:
doesn't exist to create an ambiguity in a contract that's not already there, or that's not otherwise there.

[00:33:14] Speaker 02:
You can't use it to create an ambiguity.

[00:33:16] Speaker 02:
You can use it to resolve one, but not create one.

[00:33:20] Speaker 02:
So, the rebuttal points I'd like to walk up here and talk about.

[00:33:25] Speaker 02:
Judge Rossman, you asked Mr. Susser about the otherwise engaged language.

[00:33:31] Speaker 02:
I just want to remind the court that the language isn't just otherwise engaged, two words.

[00:33:37] Speaker 02:
much longer than that.

[00:33:38] Speaker 02:
It's in a judicial or administrative proceeding.

[00:33:42] Speaker 02:
So to my eye, it does expand a little bit beyond just a plain vanilla lawsuit from Energera against FAS.

[00:33:52] Speaker 02:
But the expansion is engagement in a proceeding, which to my eye seems of the nature of, you know, it prevents jointers, it prevents subpoenas, it prevents garnishments.

[00:34:03] Speaker 02:
things that would lock in a court or administrative agency's jurisdiction into a party.

[00:34:08] Speaker 02:
So we didn't do, Energera, our side, didn't do anything that would fit this otherwise engaged expanded scope even in actions aggressive toward let's say KVA or letters to the industry.

[00:34:20] Speaker 02:
And Judge Federico, in response to your question to my friend, Mr. Susser waives the quote authorized sale

[00:34:30] Speaker 02:
concept around as I think as a talisman, but that's not how Transcor worked.

[00:34:36] Speaker 02:
That just begs the question and the question is, are sales somehow restricted?

[00:34:42] Speaker 02:
Are they authorized but yet still somehow restricted a little or a lot?

[00:34:48] Speaker 02:
If Mr. Susser were right, why did the Transcor Court run through the license hold back analysis?

[00:34:54] Speaker 02:
That's on page 1377 of Transcor.

[00:34:57] Speaker 02:
And just reading plain language from the decision, the inclusion of the language no express or implied license or future release whatsoever is granted to Mark IV or to any third party by this release refers only to the effect of the release provision and thus, I emphasize the word thus, does not require a different result.

[00:35:16] Speaker 02:
Now, it's a bit of a negative pregnant legal argument for me to the panel, but had there been a no license hold back in trans-corps,

[00:35:25] Speaker 02:
that reached all the way to that covenant, this would have been a different case outcome in TransCore.

[00:35:30] Speaker 02:
That's how I read TransCore.

[00:35:34] Speaker 02:
Finally, on the question of foreign patent clause ambiguity at the outset, plain language, I just observe for your honors that Mr. Susser's argument unblues the word to, lifts it,

[00:35:54] Speaker 02:
moves it around in the clause, drops it and regloos it next to the word related.

[00:36:01] Speaker 02:
To me, that's the sign of an unreasonable contract interpretation.

[00:36:06] Speaker 02:
Unless there are any further questions, we would simply ask the court to reverse.

[00:36:11] Speaker 01:
Thank you, counsel.

[00:36:11] Speaker 02:
Thank you, your honors.

[00:36:13] Speaker 01:
The case will be submitted.

[00:36:14] Speaker 01:
Counselor excused.