[00:00:20] Speaker 04:
Okay, our final case this morning is number 182400, Fraunhofer, Gell, Eshraf versus Sirius XM radio.

[00:00:48] Speaker 04:
Mr. McPhee?

[00:00:52] Speaker 04:
Good morning, and may it please the court.

[00:00:55] Speaker 04:
Why don't you begin by addressing the questions that we put in our order?

[00:01:01] Speaker 03:
Absolutely.

[00:01:02] Speaker 03:
I suspected you might want to start there, and we appreciate the opportunity to address those issues.

[00:01:07] Speaker 03:
The first question was whether section 9.5 of the master license agreement requires this court to interpret the MLA according to German law.

[00:01:19] Speaker 03:
The answer to that question is no.

[00:01:21] Speaker 03:
Under consistent precedent from the regional court, circuit court, in this case the Third Circuit, where parties do not address issues of foreign law either in the district court or on appeal,

[00:01:35] Speaker 03:
the appellate court will consider that issue waived.

[00:01:39] Speaker 03:
They'll proceed on the understanding that foreign law either doesn't apply or that any differences between foreign law and U.S.

[00:01:46] Speaker 03:
law are not dispositive or relevant for purposes of issues presented on appeal.

[00:01:52] Speaker 03:
And you see this in a consistent string of precedent.

[00:01:55] Speaker 03:
It's based on, in part, on some of the policies... Have you cited those precedents?

[00:02:00] Speaker 03:
Well, we haven't because of the issues that have come up for the first time.

[00:02:04] Speaker 01:
Just name one with a citation right there.

[00:02:05] Speaker 01:
Yes.

[00:02:06] Speaker 03:
So we have Bel Ray Coe versus Chem Wright, 181 Federal Third, 435 at 440 to 41.

[00:02:14] Speaker 03:
This is a Third Circuit 1999 case.

[00:02:18] Speaker 03:
They considered a potential issue of South African contract law, but no party had raised any sort of issue of South African law either in the district court.

[00:02:27] Speaker 03:
or on appeal.

[00:02:28] Speaker 01:
And if the foreign law doesn't apply, what law does?

[00:02:32] Speaker 01:
There's no such thing as U.S.

[00:02:34] Speaker 01:
law.

[00:02:35] Speaker 03:
Well, it's interesting you say that.

[00:02:36] Speaker 01:
Including omnipresence in the sky, right?

[00:02:38] Speaker 03:
Right, exactly.

[00:02:39] Speaker 03:
So what you'll see is different approaches in some of the cases.

[00:02:42] Speaker 03:
So in the Third Circuit case that I just mentioned, the Belray case, what they said is,

[00:02:47] Speaker 03:
Parties generally carry the burden of raising the issue that foreign law may apply and the burden of adequately proving foreign law to enable a court to apply it.

[00:02:56] Speaker 03:
Where parties fail to satisfy either burden, the court will ordinarily apply the forums law.

[00:03:02] Speaker 03:
Ordinarily.

[00:03:04] Speaker 03:
Ordinarily.

[00:03:05] Speaker 04:
So does the Third Circuit say that we lack authority to order the district court to apply the correct law or that we

[00:03:16] Speaker 04:
confined in our discretion that there was a waiver.

[00:03:20] Speaker 03:
Under the Third Circuit law, there's no rule of requirement.

[00:03:25] Speaker 03:
What you do see is the consistent.

[00:03:27] Speaker 03:
Oh, it's within our discretion?

[00:03:28] Speaker 03:
It is within this court's discretion.

[00:03:31] Speaker 03:
However, I will say that consistently in the Third Circuit law, you find that courts will find waiver on this issue.

[00:03:39] Speaker 04:
OK, we're passing the waiver issue.

[00:03:41] Speaker 04:
I mean, the contract specifically says it's governed by German law.

[00:03:46] Speaker 04:
Why isn't the issue before us about the effect of a termination of the contract governed by German law?

[00:03:55] Speaker 03:
And you're saying setting aside the issue of waiver in this case.

[00:03:58] Speaker 03:
So we go to that issue, right?

[00:04:00] Speaker 03:
This is the second question that the court asked, really, which is, if we do apply German law in this case, is it possible that Sirius XM somehow

[00:04:12] Speaker 03:
maintains or holds on to its sublicense rights?

[00:04:15] Speaker 03:
Do those survive under German law?

[00:04:16] Speaker 03:
Again, the answer is no.

[00:04:18] Speaker 03:
And what I'd like to do is, of course, it's a detailed analysis of German law is probably beyond the

[00:04:25] Speaker 03:
the scope of what we can do in a 30-minute oral argument today.

[00:04:28] Speaker 03:
But I want to address it.

[00:04:29] Speaker 03:
Perhaps why we suggested the possibility of a review.

[00:04:33] Speaker 03:
I'm sure that's true.

[00:04:34] Speaker 03:
But let me try to cover at least some high-level principles, as well as then go to the two cases that this court mentioned in the second question.

[00:04:44] Speaker 03:
So the first key principle of German law that I think is important to understand here

[00:04:49] Speaker 03:
is the German law known as the Schutzstatut, or the statute of protection.

[00:04:56] Speaker 03:
And what the statute of protection does under German law is it distinguishes between two types or two categories of legal issues that may come up when you're considering a contract.

[00:05:07] Speaker 03:
The first set of issues relates to issues relating to the contract itself, formation of the contract, termination, things like interpretation of a term in the contract.

[00:05:19] Speaker 03:
For those sorts of issues, they are deemed to fall outside of this statute of protection.

[00:05:25] Speaker 03:
And so what you do is you look to the German Civil Code for answers to how to address those kinds of issues.

[00:05:31] Speaker 03:
Germany, of course, is a civil law system, not a common law system.

[00:05:35] Speaker 03:
And Fraunhofer actually addressed a few of these civil law principles of German law in the district court below in a few places.

[00:05:44] Speaker 03:
We felt that in a few instances those principles provided some additional support for our positions.

[00:05:50] Speaker 01:
Is that the footnote reference to 133 and 157 or something?

[00:05:54] Speaker 03:
Yes, there's a reference there and maybe one or two other places it gets mentioned.

[00:05:58] Speaker 03:
But by and large, what we find is that applying either German law or, for example, New York law or the way that that law is applied in federal district courts, we end up getting about the same interpretation of the contract either way.

[00:06:17] Speaker 04:
Well, what about the cases that we cited?

[00:06:20] Speaker 04:
Don't those cases suggest that even if the master license agreement is terminated, that the sublicense survives?

[00:06:28] Speaker 03:
They do not, Your Honor, and this is the point I wanted to get to.

[00:06:30] Speaker 03:
So we talked about that first set of issues where you apply the civil code.

[00:06:34] Speaker 03:
Under the statute of protection, there's a second set of issues, and these issues have to do with the substantive property right that is addressed in the contract itself, in this case an intellectual property right.

[00:06:48] Speaker 03:
And under the statute of protection, issues about those substantive issues, things like origin of those rights or transferability, ownership, licenseability, those issues are decided under German law by looking to the law of the country where those rights originated.

[00:07:10] Speaker 03:
And that is a matter of pretty clear German law.

[00:07:14] Speaker 04:
Are you saying that as a matter of choice of law, Germany would look to US law or some version of US law to decide this issue?

[00:07:25] Speaker 03:
That's correct, Your Honor.

[00:07:28] Speaker 04:
Let's suppose hypothetically that we conclude that Germany would apply its own law.

[00:07:36] Speaker 04:
Is it not clear from those cases that under German law,

[00:07:39] Speaker 04:
that the termination of the master license would not terminate the sublicensee's rights?

[00:07:45] Speaker 03:
It is not, Your Honor.

[00:07:46] Speaker 03:
And so if I understand your question, you're asking, let's set aside the statute of protection, this choice of law issue, for whatever reason Germany has decided that we're going to apply German law to these contracts.

[00:07:59] Speaker 03:
Even though, so you do look at those decisions first, and you see that they do involve German IP rights, not US IP rights.

[00:08:07] Speaker 03:
I understand what you're saying.

[00:08:08] Speaker 03:
OK.

[00:08:09] Speaker 03:
But there's a number of other important distinguishing features.

[00:08:12] Speaker 03:
First of all, the cases both involve copyright law, not patent law.

[00:08:18] Speaker 03:
Now under German law, this is a very important distinction.

[00:08:21] Speaker 03:
The decisions actually cite to specific statutory provisions of German copyright law

[00:08:26] Speaker 03:
that are not present in the German patent statute.

[00:08:31] Speaker 03:
And there are numerous salient differences between patent law and copyright law under German law.

[00:08:37] Speaker 04:
But you agree that if it were copyright law, the termination of the master license would not terminate the sublicense under German law.

[00:08:46] Speaker 03:
Under German law, under copyright law, based on these provisions, you would find that, yes, the sublicense would survive under the narrow circumstances of those decisions, not applicable here.

[00:09:00] Speaker 03:
And moreover, we find that, in fact,

[00:09:03] Speaker 03:
Those decisions, by the way, which were issued from the First Division of the Germany Highest Court, which deals with copyright, that sort of issues, not the Tenth Division, which deals with patent-related issues.

[00:09:17] Speaker 03:
To our knowledge, there's been no patent case, certainly nothing at the appellate level,

[00:09:21] Speaker 03:
where the principles of those two copyright cases have been applied in the German attack context.

[00:09:28] Speaker 04:
Is there a mechanism under German law for a US court to ask the German court to tell us what German law would be in the circumstances here?

[00:09:39] Speaker 03:
I want to understand the question.

[00:09:40] Speaker 03:
Are you saying how would the district court go about determining what German law is?

[00:09:45] Speaker 04:
No, is there a provision, you know,

[00:09:47] Speaker 04:
as exists within the United States.

[00:09:49] Speaker 04:
A federal court can ask a state court to opine on state law if the district court is in doubt about it.

[00:09:57] Speaker 04:
Is there a provision that would allow such a reference to a German court?

[00:10:04] Speaker 04:
And would the German court answer the question if it were put to it?

[00:10:09] Speaker 03:
I don't believe so, or at least I'm not aware of any.

[00:10:11] Speaker 03:
My understanding, under Federal Rule of Civil Procedure 44.1, that district courts are allowed to essentially, with the assistance of the parties, arrive at these issues, for example, by reference to certified translations of foreign law and, in particular, expert analysis.

[00:10:30] Speaker 03:
So you get someone who's usually a member of the bar of that foreign court who can come in and provide assistance to the court in deciding those issues.

[00:10:41] Speaker 04:
Unless my colleagues have other questions about this aspect.

[00:10:46] Speaker 04:
I have a couple of questions about termination.

[00:10:48] Speaker 04:
Under the Supreme Court's decision in the Mission case, it's now clear that the rejection of a contract doesn't terminate the contract in bankruptcy.

[00:10:56] Speaker 04:
So if I understand your position is that your client had a right to terminate the master license agreement, there are a couple of reasons.

[00:11:12] Speaker 04:
because there was a failure to make this payment of these PTO fees and and second that it had the right to terminate the because of the bankruptcy and that's correct right there are a few different ways to get there those are those are two of the theories that were presented yes there was also a theory that

[00:11:37] Speaker 03:
Under the contract itself, I believe 7.2, a party, if a material provision hasn't been complied with, if there's been a breach, a party may provide notice to the other side that the agreement is terminated.

[00:11:49] Speaker 04:
And those breaches would be the failure to pay and the bankruptcy?

[00:11:53] Speaker 04:
The failure to pay and or the bankruptcy in this case.

[00:11:57] Speaker 04:
So when did your client elect to terminate the master license agreement?

[00:12:04] Speaker 03:
So it happened, there are a few different theories.

[00:12:08] Speaker 03:
It happened at the very latest in 2015 when Fraunhofer... November.

[00:12:12] Speaker 03:
In November, exactly.

[00:12:13] Speaker 03:
The letter that was provided the district court didn't consider as part of the motion to dismiss.

[00:12:19] Speaker 03:
But wasn't that the first time that it was terminated?

[00:12:22] Speaker 03:
I would say no, Your Honor.

[00:12:23] Speaker 03:
So the earliest would have been in 2010 when WorldSpace and Fraunhofer jointly agreed

[00:12:31] Speaker 03:
that the master license agreement would be rejected.

[00:12:35] Speaker 03:
In other words, this is not a situation where you sometimes see bankruptcy.

[00:12:39] Speaker 03:
But rejection is a termination under the mission.

[00:12:41] Speaker 03:
And that's correct, Your Honor.

[00:12:42] Speaker 03:
But this isn't a situation where, for example, you have a licensor who has declared bankruptcy, and a licensee says, no, no, no.

[00:12:54] Speaker 03:
I want to keep that contract.

[00:12:57] Speaker 03:
I want to maintain my rights under that contract, even though the licensor is trying to reject it in bankruptcy.

[00:13:02] Speaker 03:
Here we had a situation where both Fraunhofer and the licensee, WorldSpace, said, yes, we agree this is rejected.

[00:13:10] Speaker 03:
We want to walk away from this contract.

[00:13:12] Speaker 03:
So it's a very different situation.

[00:13:16] Speaker 04:
The unpaid fees.

[00:13:18] Speaker 04:
Let me clarify.

[00:13:20] Speaker 04:
My understanding is that those were not fees related to the licenses at issue in this case, but they were fees with respect to foreign licenses for PCT applications.

[00:13:32] Speaker 04:
Am I correct about that?

[00:13:35] Speaker 03:
I'm not sure of the distinction there that you're making, Your Honor, but what I know is that under 7.4 of the master license agreement, it's very clear, it states all amounts specified.

[00:13:46] Speaker 04:
Yeah, but what I'm asking you, I understand what it said.

[00:13:48] Speaker 03:
Yes.

[00:13:48] Speaker 04:
What I'm asking you is, are the amounts at issue here related to the patents that are at issue in this case or to other patent applications?

[00:13:59] Speaker 03:
I believe that at least some of the fees were related to the patents at issue in this case, if not the patent families.

[00:14:06] Speaker 04:
At the USPTO?

[00:14:08] Speaker 04:
That doesn't seem to make sense.

[00:14:10] Speaker 03:
No, no, part of the patent families, so the foreign counterparts.

[00:14:13] Speaker 03:
So not the actual patents that are at issue here.

[00:14:16] Speaker 03:
I don't know specifically whether there could have been some fees related specifically if you're talking about a USPTO.

[00:14:22] Speaker 03:
This provision doesn't cover maintenance fees, right?

[00:14:26] Speaker 03:
I don't think that's true your honor.

[00:14:27] Speaker 04:
I think it could really absolutely never taken that position Who's never take that your clients never taken the position that covers maintenance fee?

[00:14:36] Speaker 04:
Under the under seven point four if you go to part of all four answer my question has your client ever taken the position that covers maintenance fee?

[00:14:44] Speaker 03:
It certainly does cover maintenance has your own ever taken that position

[00:14:48] Speaker 03:
So I don't know that it's ever been objected to or someone has raised this issue that it doesn't cover maintenance fees We absolutely have taken the position that it covers all prosecutors and there's no claim that maintenance fees weren't paid right?

[00:15:02] Speaker 03:
Well we put in our claim has there ever been a claim that maintenance fees were due and not paid Your honor I need to look at the appendix to see what specifically the line items were in the unpaid

[00:15:18] Speaker 03:
proof of claim that was made.

[00:15:20] Speaker 03:
It was, I think, 16,000 euros.

[00:15:23] Speaker 03:
And there were various fees in there.

[00:15:25] Speaker 03:
Some of them may have been made.

[00:15:26] Speaker 04:
If it was US maintenance fees, why would it be in euros?

[00:15:28] Speaker 04:
That makes no sense.

[00:15:30] Speaker 03:
I think that's right, Your Honor, that it does not cover the US maintenance fees.

[00:15:36] Speaker 03:
But again, I go to the language of Article 4, which is very broad.

[00:15:41] Speaker 03:
It covers all costs and fees related to the prosecution of these families.

[00:15:47] Speaker 03:
No, it says prosecution.

[00:15:49] Speaker 03:
It doesn't say maintenance, but that's another issue Okay, I if I may your honor I'd like to just emphasize just this is stepping back a bit one other well Let me actually reserve the rest of my time.

[00:16:02] Speaker 03:
Well.

[00:16:02] Speaker 03:
You have no time, but we'll give you two minutes.

[00:16:03] Speaker 00:
Thank you Mr.. Bagdasarayan May please the court

[00:16:13] Speaker 00:
Let me start with the order that the court issued on this German law issue, if I may.

[00:16:18] Speaker 00:
The good news here, Your Honor, whether we apply German law or we apply U.S.

[00:16:24] Speaker 00:
law as von Hopper is advocating here, the district court can be affirmed.

[00:16:29] Speaker 00:
It's just that simple.

[00:16:31] Speaker 00:
The German law is the two cases that this court brought to the parties' attentions.

[00:16:36] Speaker 00:
Both say unequivocally... Well, what's your position?

[00:16:39] Speaker 04:
Should we apply German law?

[00:16:42] Speaker 00:
Our position is that German law under section 9.5 governs the natural license agreement.

[00:16:49] Speaker 00:
Our position is that you don't need to apply German law in order to resolve this case.

[00:16:53] Speaker 00:
But if you do, you can affirm the district court.

[00:16:56] Speaker 00:
If you apply US law, then based on the parties' arguments, that the sub-license and the settlement agreement are separate independent bases to affirm the district court's opinion here.

[00:17:09] Speaker 00:
And the reason for that is the sublicense is governed under New York law.

[00:17:13] Speaker 00:
Under the Four Corners Act agreement, it's an exclusive, irrevocable sublicense to the patents at issue here.

[00:17:20] Speaker 00:
And that should end the matter.

[00:17:22] Speaker 01:
I guess I really hadn't thought that the contract question that we need to resolve is a contract question about the sublicense, but rather about the master license.

[00:17:35] Speaker 01:
I took it as,

[00:17:37] Speaker 01:
essentially beyond dispute, or maybe actually undisputed, that XM had a unrestricted sublicense from WorldSpace.

[00:17:52] Speaker 01:
By the time things went south for WorldSpace, and at least by the time of the settlement agreement in the bankruptcy, XM had fully paid everything provided for

[00:18:07] Speaker 01:
under the sublicense.

[00:18:10] Speaker 01:
So it didn't have any more money to pay to use the patents for the next 10 years or whatever the life of it was.

[00:18:18] Speaker 01:
But the question is, what happens in that circumstance when the master license is terminated?

[00:18:26] Speaker 01:
And that is a question of interpreting the master license, which provides that it is subject to German law.

[00:18:33] Speaker 00:
Your honor, the answer to that question, whether it's done under US law, as von Hoffer is now in this court, under German law, the outcome is the same.

[00:18:44] Speaker 00:
Under German law, based on the truth... Yeah, yeah, yeah.

[00:18:46] Speaker 04:
But what's your position?

[00:18:47] Speaker 00:
Is your position that German law applies or not?

[00:18:52] Speaker 00:
German law applies to the interpretation of the natural license agreement.

[00:18:57] Speaker 00:
Which is the issue that we have here.

[00:18:59] Speaker 04:
It's also the consequences of a breach of the master license agreement.

[00:19:06] Speaker 04:
It's not just an interpretation of the agreement itself, it's also a determination of what the consequences of a breach are.

[00:19:13] Speaker 04:
Is that governed by German law?

[00:19:15] Speaker 00:
that section 9.5 of the MLA says would be governed by term and law.

[00:19:20] Speaker 02:
Your Honor, the- And that issue was not addressed by the district court, nor was it raised or argued by the parties?

[00:19:28] Speaker 00:
That's correct, Your Honor.

[00:19:30] Speaker 00:
So I don't think that that issue- we recognize that the court issued an order bringing the parties' attention, but we don't think that issue makes a difference in this case.

[00:19:39] Speaker 00:
We don't need to resolve questions.

[00:19:41] Speaker 02:
of German law to... It would be a question in this case if that was the governing principle.

[00:19:53] Speaker 00:
Well, Your Honor, the issue is if it is the governing principle under the cases that this Court has brought to our attention, and we have certified translations if the Court wants to see them, it is clear and unequivocal by the

[00:20:08] Speaker 00:
court in Germany that a sublicense does not terminate.

[00:20:12] Speaker 04:
Yeah, but your opposing counsels made two arguments as to why those cases are distinguishable.

[00:20:17] Speaker 04:
One, they didn't involve US intellectual property rights, and Germany would look to US law if they were US property rights.

[00:20:26] Speaker 04:
And second, they say that the German court would treat copyright and patent differently.

[00:20:37] Speaker 00:
On the first point, Your Honor?

[00:20:38] Speaker 00:
The district court should be affirmed if U.S.

[00:20:41] Speaker 00:
law applies here.

[00:20:42] Speaker 00:
We can go through the agreements and show how they're not connected in the way.

[00:20:47] Speaker 04:
I'm asking about German law.

[00:20:50] Speaker 04:
Understood.

[00:20:51] Speaker 04:
Are they right that German law, because it's a U.S.

[00:20:55] Speaker 04:
intellectual property right, would look to U.S.

[00:20:57] Speaker 04:
law?

[00:20:58] Speaker 00:
Your Honor, I don't know the answer to that question.

[00:21:00] Speaker 00:
What about the second question?

[00:21:01] Speaker 00:
The second question, that second question is answered in the decisions that you brought to our attention.

[00:21:08] Speaker 00:
M2 trade case, the federal court in Germany specifically references a passage in there that they have checked with the 10th Civil Division of the Federal Court of Justice, which is competent for patent law and has responded that has no objection to the decision in this case.

[00:21:28] Speaker 01:
Right, but the no objection doesn't apply to us, so why do we care?

[00:21:32] Speaker 01:
Or it could mean same rule for patent law.

[00:21:35] Speaker 00:
Your Honor.

[00:21:36] Speaker 00:
I respectfully submit that if they're going to check with the 10th Division to determine whether their decision on a copyright case would be different in Batten's case, that they would alert the bar that that would be the case.

[00:21:52] Speaker 00:
So, Your Honor, I think if, as I've said, German laws clear on this point and would result in infirmities.

[00:22:01] Speaker 00:
Separate and apart from that,

[00:22:02] Speaker 00:
If we look at the sublicense and the interaction with the master license agreement as well as the settlement agreement, which was approved and adopted by the bank in the context of banks of the court, that is a final order by the U.S.

[00:22:17] Speaker 00:
court preserving Sirius XM's ongoing sublicense rights.

[00:22:21] Speaker 00:
They paid millions of dollars in connection with these licenses.

[00:22:25] Speaker 00:
They fulfilled all obligations under

[00:22:28] Speaker 00:
the terms of those agreements.

[00:22:30] Speaker 00:
And the Bankruptcy Court made sure to resolve all disputes in connection with that bankruptcy where WorldSpace was present and Fraunhofer was present.

[00:22:37] Speaker 04:
Yeah, but the settlement agreement didn't involve Fraunhofer, right?

[00:22:43] Speaker 00:
It does not name Fraunhofer's parties between WorldSpace and SiriusXM.

[00:22:47] Speaker 00:
Fraunhofer had an opportunity in the context of the WorldPrice Bankruptcy as a creditor to WorldSpace to certainly object to that settlement agreement.

[00:22:55] Speaker 00:
And they said nothing at that point in time.

[00:22:58] Speaker 00:
And it was approved and ordered by the bankruptcy court in connection with the WorldSpace bankruptcy.

[00:23:04] Speaker 02:
Let me change the subject a little bit and ask you a hypothetical.

[00:23:09] Speaker 02:
Let's suppose in the license agreement that WorldSpace had made the first installment payment of, what, $200,000?

[00:23:21] Speaker 02:
and refused to make any more payments.

[00:23:26] Speaker 02:
And Fraafer had come in and said, you know, you're in breach of the agreement and the agreement is terminated.

[00:23:36] Speaker 02:
What would happen to the sublicense under those conditions if the

[00:23:43] Speaker 00:
sublicense to be granted prior to that breach, Sirius X would continue to have a sublicense under the terms of the agreements.

[00:23:51] Speaker 00:
It would.

[00:23:52] Speaker 00:
It would.

[00:23:52] Speaker 02:
And who would it, there were obligations on Sirius's part to make payments to the license or to WorldSpace.

[00:24:03] Speaker 02:
To whom would those payments go?

[00:24:06] Speaker 02:
To WorldSpace?

[00:24:10] Speaker 00:
to WorldSpace?

[00:24:12] Speaker 00:
Yes, to WorldSpace.

[00:24:13] Speaker 02:
And WorldSpace, the WorldSpace's license is terminated, but nonetheless, WorldSpace continues to receive royalty payments?

[00:24:23] Speaker 00:
Well, I think they do.

[00:24:25] Speaker 00:
And in the scenario that you're talking, the hypothetical you're talking about, which is not what happened here, Fraunhofer, under those circumstances, would have a breach of contract claim against WorldSpace.

[00:24:34] Speaker 00:
So Sirius would be paying to WorldSpace the licenses that it owes, and Fraunhofer, under the breach of contract in your hypothetical, could go and sue WorldSpace for a breach of contract.

[00:24:46] Speaker 00:
If the scenario you're contemplating and the termination occurred,

[00:24:50] Speaker 00:
before any license grant was put in place, well, I think that would be a different scenario.

[00:24:55] Speaker 00:
The scenario that you posited was under the terms of the agreements that they had begun to make payments.

[00:25:00] Speaker 00:
And I think in particular under these agreements, so your honor understands, there was a time period under which the license fees needed to be paid within 30 to 45 days after execution of them.

[00:25:10] Speaker 00:
All those payments were made, and the rights were granted.

[00:25:13] Speaker 04:
And so there were no further payments to be made under the sublicense.

[00:25:17] Speaker 00:
And there were no further payments to be made under the sublicense.

[00:25:22] Speaker 04:
I don't think we have the sublicense.

[00:25:24] Speaker 04:
Is it in the record?

[00:25:25] Speaker 00:
It is in the record, and I will give you that site.

[00:25:34] Speaker 01:
Page 185?

[00:25:36] Speaker 01:
This is the technology license agreement?

[00:25:38] Speaker 01:
That's correct, Your Honor.

[00:25:41] Speaker 01:
There were a few years of payments that had to be made, but they were all made.

[00:25:45] Speaker 01:
By the time things went southward.

[00:25:48] Speaker 00:
Everything was made.

[00:25:49] Speaker 01:
And there was a $298,000 payment as part of the settlement agreement to take care of all obligations.

[00:25:56] Speaker 00:
To take care of everything else.

[00:25:57] Speaker 00:
Number one, to take care of all whatever outstanding amounts were owed.

[00:26:00] Speaker 00:
And number two, to confirm and make sure, because Syria saw this.

[00:26:05] Speaker 00:
They saw there was a bankruptcy proceeding.

[00:26:07] Speaker 00:
They came in specifically to take care of their rights and assure that their rights continued in the context of that settlement.

[00:26:13] Speaker 00:
All parties here plus WorldSpace were there.

[00:26:17] Speaker 01:
Can I ask you, I guess, a record question?

[00:26:19] Speaker 01:
And records, I guess, can be finned on 12b6 motions.

[00:26:25] Speaker 01:
At the time that XM's predecessor entered into the negotiation to get the sublicense with WorldSpace, having been referred to WorldSpace by Fraunhofer, what does the record say about whether

[00:26:42] Speaker 01:
world space understood, and maybe even more importantly, whether Fraunhofer understood that XM was licensing technology that it was going to build into its system that was going to be hard to remove.

[00:26:58] Speaker 00:
I think all parties understood that that wasn't the case.

[00:27:02] Speaker 01:
What kind of evidence?

[00:27:04] Speaker 01:
I mean, it seems plausible, but what evidence or assertions that we can

[00:27:11] Speaker 01:
count on as evidence, explain that background.

[00:27:15] Speaker 01:
Because that might affect how the parties, in particular Front Hover and World Space, understood the scope of the Section 3 grant to World Space of authority to sublicense.

[00:27:30] Speaker 01:
Your Honor, there is... Not just stop playing this song.

[00:27:33] Speaker 00:
Sure.

[00:27:34] Speaker 00:
Your Honor, there is an exhibit E within the context of the pleadings here where Fraunhofer identifies a list of technology, including a list of patents, that were identified as relating to the underlying technology to build the SiriusXM, the XM broadcast system.

[00:27:54] Speaker 00:
As part of that, Fraunhofer specifically directed

[00:27:59] Speaker 00:
WorldSpace or XM to obtain their rights to these patents from WorldSpace.

[00:28:05] Speaker 00:
That was how Fraunhofer wanted this orchestrated.

[00:28:08] Speaker 00:
Fraunhofer knew under that agreement, under their separate agreement, not at the sublicense or the MLA, all the parties understood here, under all these agreements,

[00:28:19] Speaker 00:
that the technology that was developed in conjunction with XM and Fraunhofer at the time would be used as part of the repeater network, the retransmission of the satellite broadcast system here in the United States.

[00:28:32] Speaker 00:
That, I don't think, is in dispute at all.

[00:28:35] Speaker 00:
And to your reference to section 3.1 of the national license agreement, that is as clear as possible on its face.

[00:28:42] Speaker 00:
It has one restriction.

[00:28:44] Speaker 00:
in that scope of the license grant here, it is limited to the world space business.

[00:28:49] Speaker 00:
And the world space business is defined as basically satellite radio.

[00:28:52] Speaker 00:
There are no other restrictions in the master license agreement.

[00:28:57] Speaker 00:
That was the only restriction.

[00:28:59] Speaker 00:
There are termination provisions.

[00:29:01] Speaker 00:
Termination provisions say nothing.

[00:29:03] Speaker 00:
about conditioning the ongoing rights under the sublicense to the continuation of the master license.

[00:29:08] Speaker 04:
If I understand what you're saying correctly, is that even if Frauhofer had the authority to terminate the master agreement, that the license had already been granted to Sirius under the sublicense and pursuant to the master agreement, and that the termination wouldn't affect that.

[00:29:29] Speaker 00:
And the reason for that is that nothing in the Marshall License Agreement conditions serious existence of ongoing rights on, as the district court said, the non-termination of the Marshall License Agreement.

[00:29:42] Speaker 00:
Now, Fraunhofer's pulled together some provisions to try to make that case, but it's clear, for example, under Section 7.5.

[00:29:48] Speaker 00:
If you look at page two of their reply brief, they characterize that provision.

[00:29:53] Speaker 00:
The way they characterize that provision, and I can take the court through it, it is the opposite.

[00:29:58] Speaker 00:
It is the opposite of what the actual provision in Section 0.5 says.

[00:30:04] Speaker 00:
That's number one.

[00:30:05] Speaker 00:
The second provision they point to, Section 7.4, that they characterize as an ongoing payment obligation.

[00:30:11] Speaker 00:
And what that agreement actually says is that no termination of the national license agreement shall affect the rights provided that WorldSpace has paid or agrees to pay license fees at the time of termination.

[00:30:30] Speaker 00:
So basically, it gives WorldSpace an option at that point.

[00:30:32] Speaker 00:
If it's going to be terminated.

[00:30:33] Speaker 04:
But it seems to me that there could be a difference between fees to be paid to the PTO.

[00:30:42] Speaker 04:
for maintenance of the patents, and the failure to pay those might terminate the sublicense.

[00:30:52] Speaker 04:
Whereas here, we don't have a situation in which the unpaid amounts

[00:30:57] Speaker 04:
relate to the license for the patents at issue here?

[00:31:02] Speaker 00:
Well, I agree.

[00:31:03] Speaker 00:
The unpaid amounts have nothing to do with the payment of license fees.

[00:31:08] Speaker 00:
To the extent there is a claim of non-payment, it's reimbursement for, I think, European patent office fees.

[00:31:14] Speaker 01:
You think or you know.

[00:31:15] Speaker 00:
I know.

[00:31:17] Speaker 00:
What the claim they put in was actually 16,000 euros, which translates to $22,000.

[00:31:22] Speaker 00:
It is an invoice from European Council that goes to either prosecution fees or to maintenance fees in Europe.

[00:31:30] Speaker 00:
It has nothing to do with the U.S.

[00:31:31] Speaker 00:
We're talking about 16,000 euros or $22,000.

[00:31:35] Speaker 00:
that they're using as the foundation to say, okay, there was non-payment under the natural license agreement, and that has a cascading effect to now undo the sublicense.

[00:31:45] Speaker 00:
When you go to section 7.4 of the MLA, there is not a single word that conditions the ongoing rights of the sublicense in section 7.4.

[00:31:56] Speaker 00:
Fraunhofer knew how to put in restrictions into the MLA.

[00:31:59] Speaker 00:
And they did that by restricting to the world space business.

[00:32:01] Speaker 01:
They have, there's not a single word in section 7.4, 7.5, or any of the termination provisions where they say, and they could have said this, remember, they orchestrated this whole thing, said, listen- I guess they make an argument, maybe overstated, but here's a slightly more moderate version of it, that you can get a implicit, but only implicit restrictive message out of 7.5, because what 7.5 does

[00:32:29] Speaker 01:
is preserve products and services sold prior to the date.

[00:32:34] Speaker 01:
One would then argue that that doesn't mean that that covers only the actual physical products or the past services, but not licenses, which is a funny way to talk about products and services.

[00:32:49] Speaker 01:
And therefore, by omitting that, I realize there's a lot of steps in trying to squeeze a negative implication out of this.

[00:32:59] Speaker 01:
But the language is not expressed in saying, as you said, the opposite.

[00:33:05] Speaker 00:
Well, I think what Frauhofer says on page 2 of its WI-brief is that Article 7.5 makes clear that customers with sublicensee like SiriusXM may not use the license technology with respect to any product sold after termination of the MLA.

[00:33:20] Speaker 00:
What at appendix 450, what section 7.5 actually says is no termination or expiration of the MLA shall prevent the continued use by customers or customers of sublicense C of products and services sold prior to the date of termination or expiration.

[00:33:36] Speaker 00:
That's a very straightforward provision that says, if it's previously granted, you get to continue to use it.

[00:33:41] Speaker 00:
We didn't go on to say that if this agreement terminates, well, that undoes your right to continue to use it.

[00:33:47] Speaker 00:
It doesn't say that.

[00:33:48] Speaker 00:
It could have.

[00:33:49] Speaker 00:
And the Brunswald Treatise and the other support that we've given to you, it's a very easy way to put it into a provision.

[00:33:55] Speaker 00:
They orchestrated this deal.

[00:33:57] Speaker 00:
And the key point I want to make here is that the use of the term irrevocable

[00:34:03] Speaker 00:
is important here.

[00:34:05] Speaker 04:
Well, that's a hard one because there are statements about termination of the agreement.

[00:34:12] Speaker 04:
And I think we're about out of time unless my colleagues have questions.

[00:34:18] Speaker 04:
Thank you.

[00:34:21] Speaker 04:
Mr. McPhee, you have a couple of minutes here.

[00:34:26] Speaker 03:
If I may briefly.

[00:34:29] Speaker 03:
We would agree that the result is the same under German or US law.

[00:34:32] Speaker 03:
We just think the result is different.

[00:34:34] Speaker 03:
And under US law in particular, Mitchell versus Hawley, the 1873 Supreme Court case going all the way back, this principle that you can't give what you don't have we think is very well established under US law.

[00:34:46] Speaker 03:
And an agreement between World Space and Sirius XM, whatever it looks like, cannot be used to undo the rights of the patent holder, Fraunhofer.

[00:34:55] Speaker 03:
I'll say, too, with respect to German law, there are additional distinguishing features with respect to those cases.

[00:35:02] Speaker 03:
And if this were remanded, we would address those in the district court in the first instance.

[00:35:07] Speaker 03:
We think they're pretty significant.

[00:35:09] Speaker 03:
I'd also just mention the context of this, of course, is a motion to dismiss.

[00:35:14] Speaker 03:
The record, as you mentioned, it is thin.

[00:35:17] Speaker 03:
And we don't think that there's sufficient evidence.

[00:35:19] Speaker 03:
Certainly, it's not proper for the court to bring in things such as the statement that

[00:35:24] Speaker 03:
Well, there was a substantial investment of capital, and it was in reliance on a statement that was made.

[00:35:29] Speaker 03:
We don't see any of that, of course, in the simple complaint or the amended complaint that Fraunhofer has submitted.

[00:35:39] Speaker 03:
You wouldn't expect it, right?

[00:35:40] Speaker 03:
You wouldn't expect it.

[00:35:42] Speaker 03:
We didn't even get an answer to our complaint in this case.

[00:35:46] Speaker 03:
There was this argument that was raised that there's nothing in the MLA

[00:35:50] Speaker 03:
that addresses the rights of the sub-licensee or constrains them in any way.

[00:35:55] Speaker 03:
I think we've outlined that pretty in a detailed way in the reply brief, but 7.4 and 7.5, it's a clear

[00:36:07] Speaker 03:
a well-established principle of contract interpretation that the inclusion of the one excludes the other.

[00:36:14] Speaker 03:
And in this case, we have statements that say you can continue your rights after termination provided that payment has been made in full according to Article 4.

[00:36:26] Speaker 03:
And 7.5 says the sub-licensee customers can continue to use products sold before termination.

[00:36:36] Speaker 03:
So we think that both of those provisions give a pretty clear implication of what happens and what doesn't happen after termination.

[00:36:44] Speaker 03:
Indeed, under serious exempts reading of the agreement, those provisions would be completely superfluous, which of course is.

[00:36:52] Speaker 03:
Mr. McPhee, I think we're out of time.

[00:36:53] Speaker 03:
Thank you.

[00:36:53] Speaker 03:
Thank you very much.

[00:36:54] Speaker 03:
The case is submitted.

[00:36:55] Speaker 04:
That concludes our session for this morning.