[00:00:00] Speaker 05:
Ladies and gentlemen, we have five cases on the tail end of this morning.

[00:00:15] Speaker 05:
Four patent cases, one from the district court, three from the PCAT.

[00:00:25] Speaker 05:
for the veterans case that's being submitted in the brief, and therefore will not be argued.

[00:00:31] Speaker 05:
Our first case is Oyster Optics versus Alcatel-Felucent, 2019-12-55.

[00:00:43] Speaker 05:
Mr. Mersey?

[00:00:44] Speaker 05:
Yes, Your Honor.

[00:00:47] Speaker 01:
Thank you.

[00:00:52] Speaker 01:
Good morning.

[00:00:55] Speaker 01:
May it please the court.

[00:00:58] Speaker 01:
This court should reverse the district court's summary judgment because the district court committed legal errors in misinterpreting the Oyster Fujitsu Agreement, or the OFA for short, in two separate ways.

[00:01:10] Speaker 01:
Each way requires reversal.

[00:01:12] Speaker 01:
First, it erred in interpreting section 1.3 under the headings of definition, and specifically with regard to licensed products, quote unquote, capital L, capital P, incorrectly.

[00:01:24] Speaker 01:
in a way that violated four different canons of Texas contract interpretation.

[00:01:32] Speaker 05:
Council, we all know that when you interpret a contract, you have to give terms their ordinary meaning and take into account all language in a contract.

[00:01:46] Speaker 05:
We're talking about for further clarity, right?

[00:01:51] Speaker 05:
Clarity means clarity.

[00:01:54] Speaker 05:
It doesn't mean notwithstanding the above.

[00:01:56] Speaker 05:
It doesn't mean different from the above.

[00:02:01] Speaker 05:
It means clarity.

[00:02:03] Speaker 05:
And the preceding language is very clear in providing an open, broad license.

[00:02:11] Speaker 05:
So how did the district court err?

[00:02:14] Speaker 01:
The district court erred, Your Honor, by misinterpreting that clause because although it begins with for clarity, what it says in both for clarity clauses is that the definition does not prevent oyster from exercising certain patent rights.

[00:02:32] Speaker 01:
And so it should be read together as a self-referential clause.

[00:02:37] Speaker 01:
And regardless, Your Honor, appellees in this case agree that at the very least, the Four Further Clarity Clause refers back to the first sentence of 1.3.

[00:02:51] Speaker 01:
And because it refers back to the first sentence of 1.3, it should be applied under normal contract principles, whether it's part of the definition or whether it's simply referring back to it.

[00:03:03] Speaker 05:
You wouldn't say this is a well-drafted provision, would you?

[00:03:06] Speaker 01:
It's frankly a mess.

[00:03:09] Speaker 01:
Admittedly, Your Honor, it could have been drafted more clearly.

[00:03:14] Speaker 01:
However, that question should not control here because other issues require reversal.

[00:03:26] Speaker 01:
the question about it how it could be drafted more clearly was really relevant the parties could have put the for clarity only in section four point one the contracting parties did not it was in section one point three but the district court's misinterpretation applied that for further clarity clause only to the reference to license products in four point one and not in three point one let's assume

[00:03:55] Speaker 04:
put the future tense, present tense theory to the side, one of the observations the district court made.

[00:04:06] Speaker 04:
Nevertheless, we still have to look at 1.3, and why can't 1.3 just be communicating, here's the definition for the category of something called licensed products,

[00:04:20] Speaker 04:
And there's nothing in this definition that restricts the patent owner from exercising any of its patent rights.

[00:04:28] Speaker 04:
This is just only about defining the category of products called licensed products.

[00:04:35] Speaker 04:
And then there are other provisions, other sections, which regulate and restrict how and when the patent owner, Oyster, can exercise its patent rights.

[00:04:47] Speaker 04:
What is wrong with looking at the overall structure of the release agreement that way?

[00:04:56] Speaker 01:
We don't disagree that you have to look at the overall structure of the entire release agreement.

[00:05:00] Speaker 01:
But how the court air it is, when you look at the overall structure, it applied the four further clarity clause only to 4.1 when the capital L, capital P term was used, and not to 3.1 where the same term is used.

[00:05:19] Speaker 01:
And so that violates a contract law, Texas contract law, which requires applying it the same throughout the contract, second to Iran.

[00:05:29] Speaker 01:
It also, it's basis for doing so.

[00:05:31] Speaker 01:
was that the parties, the contracting parties, merely were restating the known law of exhaustion.

[00:05:40] Speaker 01:
And that was its basis for applying it only to the reference back to licensed products in 4.1 and not to the reference in 3.1.

[00:05:48] Speaker 01:
But under Texas contract law, and frankly the law of most states,

[00:05:54] Speaker 01:
The parties are presumed to know the law, and therefore the contract doesn't have to restate it.

[00:05:59] Speaker 01:
So the court's logic in applying that interpretation, that the parties merely with the for further clarity were restating known patent exhaustion law, doesn't hold up.

[00:06:13] Speaker 01:
It renders it purely superfluous of the law that they would have known, not to mention

[00:06:21] Speaker 01:
The second sentence in 1.3 doesn't even lend itself to that type of misinterpretation.

[00:06:27] Speaker 01:
It's not about exhaustion.

[00:06:29] Speaker 01:
So what you have here is a situation where the court created tension

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both by not applying it in 3.1, where it shows up, and only applying in 4.1.

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And again, all sides on this appeal agree that the four further clarity clause at least refers back to the first sentence.

[00:06:52] Speaker 03:
Let me ask you one question, sort of maybe a housekeeping type of question.

[00:06:57] Speaker 03:
The district court opinion refers to two patents, the 952 patent and the 327 patent.

[00:07:06] Speaker 03:
I assume, though, the only one that we're concerned with in this case and that we have to be focusing on is the 327.

[00:07:15] Speaker 01:
Correct?

[00:07:17] Speaker 01:
I believe that's correct, because that was the patent, I believe, that was asserted in the cases on appeal.

[00:07:24] Speaker 01:
But if you include the claims and analysis of the claims of the 952 patent, Your Honor, you reach the same conclusion across the board.

[00:07:33] Speaker 03:
Because you say, though, it says at page 39 of the brief, the only claims that issue on this appeal

[00:07:39] Speaker 03:
are ones for direct infringement under 271A of the 327 patent.

[00:07:45] Speaker 03:
I read that as saying we don't have to concern ourselves with the 952 patent at all.

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And there's no arguments in the briefs about the 952 patent.

[00:07:55] Speaker 01:
That's correct, Your Honor.

[00:07:56] Speaker 01:
I believe the case was narrowed since the complaint stage, and also I believe the court's order is concerning the 327 patent, the order that's being appealed.

[00:08:08] Speaker 01:
So you are correct.

[00:08:11] Speaker 01:
And furthermore, even if you ignore the disharmony and tension created by the court's interpretation, there's a second reason that also requires clear reversal.

[00:08:27] Speaker 01:
The second reason is in 3.1 now, clearly there is a but to the extent

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clause, and the contract appears in several places in the appendix.

[00:08:42] Speaker 01:
I'm referring now to 2318.

[00:08:44] Speaker 01:
In section 3.1, the actual release at issue, there's a clear distinction between the broad release to Fujitsu

[00:08:57] Speaker 01:
which doesn't use the capital L, capital P reference.

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And the narrower release to customers, which begins with the but only to the extent clause.

[00:09:15] Speaker 01:
And it also uses the capital L, capital P.

[00:09:19] Speaker 01:
not just lowercase p, any product, but it's the capital L, capital P. Both sides in this appeal agree that the four further clarity clause references the first sentence of 1.3.

[00:09:35] Speaker 01:
At any rate, the point here, Your Honor, is that the but only to the extent clause was completely ignored.

[00:09:43] Speaker 01:
or misapplied by the court, and this is at Appendix 43.

[00:09:49] Speaker 01:
And because it was not only ignored and does not show up there, but in so misapplying it, the court changed, effectively changed the mentioned, the narrowly mentioned claims for third party rights from

[00:10:13] Speaker 01:
But only to the extent such customers, and I'll skip over a little bit here, made, offered to sell, sold, or otherwise disposed of licensed products or components of licensed products.

[00:10:31] Speaker 01:
If you look at appendix.

[00:10:33] Speaker 05:
The court found all those limitations were met.

[00:10:36] Speaker 01:
The court did find that all those limitations were met in the next section of its order, but on Appendix 43, Your Honor.

[00:10:45] Speaker 05:
Yes, but I'm looking at 44.

[00:10:48] Speaker 05:
What further finds in the event the release is held to be so limited?

[00:10:54] Speaker 05:
Such limitation is met.

[00:10:58] Speaker 05:
So irrespective of further clarity,

[00:11:05] Speaker 05:
The court found against you.

[00:11:08] Speaker 01:
Yes.

[00:11:09] Speaker 01:
And in second holding, Your Honor, the court found that all the limitations of the 327 were met by the Fujitsu modulator at issue or the Fujitsu receivers at issue.

[00:11:23] Speaker 01:
But that must be reversed as well.

[00:11:26] Speaker 01:
Whether the two Fujitsu components at issue could satisfy every element of the transceiver patent card claims

[00:11:34] Speaker 01:
The court did not look at the actual facts of whether it can being the scope of the claim that it had previously construed or the evidence concerning what components of the Fujitsu products... Weren't they clearly accused of infringement in the

[00:11:51] Speaker 03:
underlying Fujitsu litigation?

[00:11:54] Speaker 01:
No, they weren't, Your Honor.

[00:11:56] Speaker 01:
And admittedly, that part of it, the back part of the record is a bit sloppy as well.

[00:12:01] Speaker 04:
There was never an infringement allegation by Oyster against Fujitsu on the Fujitsu 100400G modulator, 100400G receiver?

[00:12:10] Speaker 01:
There were statements in the infringement contentions.

[00:12:14] Speaker 04:
So that's what I was referring to.

[00:12:17] Speaker 04:
Yes.

[00:12:17] Speaker 04:
So then there was an allegation that those individual components did infringe those claims.

[00:12:24] Speaker 01:
There was no formal allegation, Your Honor.

[00:12:26] Speaker 01:
There were statements that were in the preamble that admittedly in a sloppy fashion carried through to the actual other parts of the infringement contentions.

[00:12:35] Speaker 01:
However, the expert reports in the case show

[00:12:38] Speaker 01:
that Oyster's infringement expert did not analyze that product and did not include it in the case.

[00:12:45] Speaker 01:
And further show that Fujitsu, the only other party in that case, understood there to be only two products at issue in that case, and they were both transceiver modules.

[00:12:57] Speaker 01:
And this is on at

[00:13:02] Speaker 04:
4065 through 4068 Are you saying that those individual components are not included in the Fujitsu release as it relates to Fujitsu?

[00:13:16] Speaker 01:
Those individual components are included in the Fujitsu release as it relates to Fujitsu because the Fujitsu part of the release does not use capital L, capital P. It is a broader litigation release that releases all acts concerning actions in the litigation or concerning the patents for not capital L, capital P. But in contrast to the third party rights, it's just any product.

[00:13:42] Speaker 04:
Right.

[00:13:42] Speaker 04:
So the Fujitsu release.

[00:13:44] Speaker 04:
is for any and all theories of infringement under any of your patent rights on account of any product, process, or service

[00:13:57] Speaker 04:
made, used, sold, or otherwise disposed of by Fujitsu, right?

[00:14:01] Speaker 01:
For Fujitsu, yes.

[00:14:02] Speaker 04:
Yeah, and so that includes the modulator and the receiver.

[00:14:06] Speaker 01:
Yes, for Fujitsu.

[00:14:07] Speaker 04:
So any theory of infringement.

[00:14:09] Speaker 04:
And then it moves on and says, oysters released under section 3.1 also shall extend to all customers, but only to the extent such customers made, used, sell, or otherwise disposed of licensed products.

[00:14:26] Speaker 04:
or components of the licensed products.

[00:14:29] Speaker 04:
And if we conclude that the best understanding of licensed products is, you know, any products, product lines, components, and or combination thereof, made, sold, or distributed by Fujitsu,

[00:14:46] Speaker 04:
then wouldn't therefore this release cover any use of these modulators and receivers by Fujitsu's customers?

[00:15:01] Speaker 01:
No.

[00:15:02] Speaker 01:
And the reason why, Your Honor, the but only to the extent clause pertains to licensed products.

[00:15:08] Speaker 01:
In this case, appellees have conceded that the licensed products are only the modulator that they purchase and the receiver that they purchase.

[00:15:17] Speaker 01:
And so the claims at issue in Oyster's case were for a transceiver card that has many more limitations.

[00:15:26] Speaker 01:
It would be unreasonable to read the or use or otherwise dispose of.

[00:15:31] Speaker 04:
But what I'm trying to get at is the customer's release is closely, deeply linked to Fujitsu's release.

[00:15:40] Speaker 04:
And if Fujitsu's release is for any infringement theories that are on account of any product Fujitsu makes and sells, that means any infringement theory

[00:15:55] Speaker 04:
as a result of any Fujitsu product.

[00:15:59] Speaker 04:
And so therefore, wouldn't you also be blocked under the customer release of any infringement theory

[00:16:07] Speaker 04:
that's a result of, that relies on these very components that Fujitsu's received this release from?

[00:16:14] Speaker 01:
No, Your Honor.

[00:16:15] Speaker 01:
And that is because the Fujitsu release, the customer release in stark contrast says, but only to the extent the customers have made, offered to sell, or sold, or otherwise disposed of the modulator or the receiver.

[00:16:30] Speaker 01:
In this case, they did not purchase the transceiver cards, for example, that our case was based on.

[00:16:37] Speaker 01:
So that is the distinction.

[00:16:39] Speaker 03:
The modulator and the receiver components and that's one of the licensed products.

[00:16:46] Speaker 01:
There are components among many other components, as we spell out, that the appellees obtained from other third parties build in a specific infringing manner into a much larger transceiver card.

[00:17:01] Speaker 01:
Our claims at issue here in the district court level were for offer for sale and sale of the transceiver card, meeting all those elements.

[00:17:10] Speaker 05:
You've consumed all of your time, including your rebuttal time.

[00:17:14] Speaker 05:
But let's hear from the other side, and we'll give you two minutes back for public.

[00:17:18] Speaker 01:
Thank you.

[00:17:27] Speaker 05:
Mr. Stevens, will it take six minutes and then lateral to Mr. O'Quinn?

[00:17:33] Speaker 02:
Exactly, Your Honor.

[00:17:33] Speaker 02:
Thank you.

[00:17:35] Speaker 02:
Good morning and may it please the court.

[00:17:36] Speaker 02:
I'm Scott Stevens from Alston and Byrd on behalf of the appellee Alcatel-Lucent in this matter.

[00:17:42] Speaker 02:
Judge Gilstrap correctly applied the customer release provisions that Fujitsu had paid for and received as a part of the Oyster Fujitsu agreement, and Judge Gilstrap correctly granted summary judgment as a result.

[00:17:54] Speaker 02:
Before I get into the why I did want to address one question Judge Shaw that you had asked earlier about the the nine five two patent When the summary judgment motion was filed there were still two patents pending in the litigation But between the time they were filed and Judge Gilstrap resolved that motion the nine five two patent had been dropped So as of the present the only remaining infringement claim in the litigation is in fact the three two seven patent Okay, thank you quite welcome

[00:18:21] Speaker 02:
The application of the oyster food gist to agreement is a relatively straightforward and simple two-step process.

[00:18:28] Speaker 04:
What would you call it relatively straightforward?

[00:18:31] Speaker 02:
Well, for our point of view, what we need to do first is ask the question, is it a licensed product?

[00:18:36] Speaker 02:
So is it a component?

[00:18:37] Speaker 02:
Is it a device?

[00:18:39] Speaker 04:
What's the purpose of the unless clause in 1.3?

[00:18:42] Speaker 02:
The for-further-clarity clause?

[00:18:44] Speaker 02:
Yes.

[00:18:45] Speaker 04:
The purpose of that?

[00:18:46] Speaker 04:
Specifically, the final clause of the last sentence of 1.3.

[00:18:51] Speaker 04:
It begins with unless.

[00:18:53] Speaker 02:
Correct.

[00:18:54] Speaker 02:
So if you look at that, I'm going to get to the unless part.

[00:18:56] Speaker 02:
But if you look at the whole sentence, what it is doing there is it's saying, just because we've anointed these products with the moniker of licensed products, just because these things might fall within the ambit

[00:19:08] Speaker 02:
of this broad definition, and we use the phrase licensed product.

[00:19:12] Speaker 02:
Don't take away from that that these products will be licensed in the future for any particular purpose.

[00:19:18] Speaker 02:
We need to look at other points in the agreement to figure that out.

[00:19:20] Speaker 02:
And so the four further clarity clause is saying that because of that, don't look at that.

[00:19:25] Speaker 02:
But the unless clause is, of course, consistent with generally accepted principles of an exhaustion and represents the bargain that Fujitsu and Oyster agreed to.

[00:19:34] Speaker 02:
Fujitsu and Oyster did agree

[00:19:36] Speaker 02:
that as it would relate to the future, questions of customer rights would be adjudicated under the quanta series of cases and exhaustion.

[00:19:46] Speaker 02:
That's completely different than the scope of the 3.1 release provision, which has much more explicit language.

[00:19:52] Speaker 04:
So you think the unless clause, just so I understand, is only referring to a subcategory of the previously defined license products, i.e.

[00:20:04] Speaker 04:
components of the products?

[00:20:10] Speaker 02:
No, Your Honor.

[00:20:10] Speaker 02:
We believe it applies to the whole

[00:20:14] Speaker 02:
scope of the ambit of licensed products.

[00:20:16] Speaker 02:
So that I'm clear here, under 4.1, the forward-looking release provision, Fujitsu would have received explicitly a license to the licensed products.

[00:20:27] Speaker 02:
But it's silent as to what rights customers would get.

[00:20:30] Speaker 02:
Unlike the 3.1 release provision,

[00:20:32] Speaker 02:
The 4.1 license is silent as to customers.

[00:20:35] Speaker 02:
So what this unless is doing is saying, just because we've anointed it as a licensed product doesn't mean a customer in the future will receive any particular right unless what they purchase meets the substantial embodiment test, meets the quanta test.

[00:20:50] Speaker 02:
So if they purchase entire transponders from Fujitsu, then they have a forward-looking license.

[00:20:56] Speaker 02:
If it's something less than that, then we'd have to perform the analysis that the courts have laid out relating to substantial embodiment.

[00:21:07] Speaker 02:
As it would relate under 4.1 for the future-looking license, yes.

[00:21:12] Speaker 02:
As it relates to the rearward-looking, the past-looking release under 3.1, no, because we have an explicit... In your view, it doesn't have any bearing on the retrospective release, the 3.1 release.

[00:21:27] Speaker 02:
It doesn't have a practical ramification on the 3.1.

[00:21:31] Speaker 02:
It is simply saying, okay, we've decided that this modulator is a licensed product.

[00:21:36] Speaker 02:
Don't take from that definition that there's any license rights coming with it for customers.

[00:21:40] Speaker 02:
But then we read the agreement and see where we get.

[00:21:43] Speaker 02:
We read 3.1, and we see very clearly that Fujitsu and its customers have been fully released for anything on account of those products.

[00:21:52] Speaker 02:
We received a complete release for anything that we did with those modulators and receivers.

[00:21:58] Speaker 02:
And just to put this in context, again, at the time this agreement was signed in May of 2018,

[00:22:04] Speaker 02:
There was ongoing litigation with everybody.

[00:22:07] Speaker 02:
Precisely what Alcatel-Lucent and precisely what Cisco did with these modulators and receivers was faxed entirely within the knowledge of Oyster.

[00:22:17] Speaker 02:
They knew exactly how we disposed and sold the modulators and receivers.

[00:22:21] Speaker 02:
They knew what we did with them.

[00:22:23] Speaker 02:
And yet they still sign this.

[00:22:25] Speaker 04:
Right.

[00:22:25] Speaker 04:
We disagree with Judge Gilstrap to the extent that he said that this final sentence of 1.3 has no relevance and cannot apply in the context of 3.1.

[00:22:35] Speaker 04:
Then where does that leave you?

[00:22:38] Speaker 02:
I think what Judge Grossdrapp was attempting to say in that paragraph was that the practical ramifications of what the Four Further Clarity Clause is attempting to clarify has more practical applications to 4.1, the future looking license,

[00:22:54] Speaker 02:
as opposed to 3.1, the past looking release.

[00:22:57] Speaker 02:
I didn't take Judge Grillstrap to mean that it somehow vanishes away in 3.1, but all of a sudden has a spotlight on it in 4.1.

[00:23:06] Speaker 04:
I took it to read that as a grammatical way, in a grammatical way, it necessarily only applies in 4.1.

[00:23:15] Speaker 02:
Correct.

[00:23:15] Speaker 04:
I'm telling you, what if I disagree with that?

[00:23:17] Speaker 04:
Then where does that leave me?

[00:23:19] Speaker 02:
Well, then I think you look at the whole agreement, and it goes back to what is this clause doing?

[00:23:24] Speaker 03:
You looked at his alternative graph.

[00:23:26] Speaker 02:
Well, you could go there, too.

[00:23:28] Speaker 02:
But I would say, respectfully, before you even arrive at that point, what you would do is look at it and analyze it for the two questions that you asked earlier.

[00:23:36] Speaker 02:
Judge Laura, you asked, isn't it simple?

[00:23:38] Speaker 02:
It says it's clarifying.

[00:23:39] Speaker 02:
Why can't we just take it at face value that it's clarifying?

[00:23:42] Speaker 02:
And Judge Chen, your question said, well, isn't this just talking about the licensed products and what that means to be within the ambit of that definition?

[00:23:51] Speaker 02:
And even just looking at that, putting aside

[00:23:53] Speaker 02:
the tense of the verb and gerund or whatever it may be, I still think we come to the same end point.

[00:23:58] Speaker 02:
It's still simply saying, just because a little, let's call it a screw, just because a screw might fall into the definition of licensed product.

[00:24:07] Speaker 02:
For that reason alone, don't read anything into that.

[00:24:10] Speaker 02:
That's not the end of the analysis.

[00:24:11] Speaker 02:
You're going to have to keep reading this agreement.

[00:24:13] Speaker 05:
You're going to have to split your time, and your time is up.

[00:24:15] Speaker 02:
Thank you, Your Honor.

[00:24:16] Speaker 02:
Appreciate it.

[00:24:17] Speaker 05:
Mr. O'Quinn.

[00:24:22] Speaker 00:
Thank you, Judge Lori.

[00:24:23] Speaker 00:
May it please the court, John O'Quinn on behalf of Cisco.

[00:24:26] Speaker 00:
So Judge Chen, to your question about what if you disagree with Judge Gilstrap's passing observation that grammatically this was forward-looking, I don't think it affects anything at all.

[00:24:35] Speaker 00:
I think it was just a passing observation, and I don't think it really affects how you would interpret these provisions, because

[00:24:43] Speaker 00:
What you have in the section 1.3 is you have a definition and then you have two clauses or two provisions that follow it.

[00:24:51] Speaker 00:
The four clarity clause and the four further clarity clause.

[00:24:55] Speaker 00:
And I think all those two provisions are doing in a very straightforward way.

[00:25:00] Speaker 00:
The first one is just simply reserving rights to the extent that something is not licensed.

[00:25:07] Speaker 00:
And the second is simply reserving rights to the extent that something is not exhausted.

[00:25:12] Speaker 00:
I think Judge Gilstrap was exactly right to think as a practical matter, that's only going to, that second one is only going to matter in the context of the forward-looking license because that's where exhaustion principles would potentially come into play.

[00:25:28] Speaker 00:
And as to one of the questions that I think you asked, it also does, by being there for clarification,

[00:25:36] Speaker 00:
make it clear that the definition itself, that first sentence of 1.3, is not a license.

[00:25:43] Speaker 00:
And if you didn't have clarity clauses that followed, you might think that it was.

[00:25:47] Speaker 00:
Why?

[00:25:48] Speaker 00:
Because it says that these are, quote, licensed products.

[00:25:51] Speaker 00:
It says that they are at, quote, any time, and it includes ones that are sold to, quote, customers.

[00:25:57] Speaker 00:
And so if you didn't have any clarification, you might think that definition itself was a license.

[00:26:04] Speaker 00:
But instead,

[00:26:06] Speaker 00:
The license is of course in 4.1, it is only to Fujitsu, and it is only to licensed products.

[00:26:13] Speaker 00:
And so one of the upshots of their position is if you read licensed products the way that they would have you read it, then that would mean that Fujitsu

[00:26:21] Speaker 00:
would not have a forward-looking license to products that were specifically and repeatedly accused of infringing, including just one week before they entered into this agreement.

[00:26:36] Speaker 00:
And that would not be a reasonable interpretation of the agreement, no matter how you come at it.

[00:26:41] Speaker 00:
And that's exactly what Judge Gilstrap concluded, which is no matter how you look at this contract,

[00:26:47] Speaker 00:
You cannot read this definition of licensed products in a way that would exclude the modulator and receiver devices that were specifically and repeatedly accused, including in the original contentions at 1888, the proposed amended contentions,

[00:27:03] Speaker 00:
Appendix 2065 in the expert report at Appendix 2270 and indeed the second complaint which was filed literally days before entering into the agreement that's at Appendix 2305 and to say as Oyster does well this was just sloppy we didn't really mean it it just strains credulity when it's

[00:27:26] Speaker 00:
These were two out of 11 products that were specifically identified in the infringement contention and two of eight that were sold by Fujitsu Optical identified in that second complaint.

[00:27:41] Speaker 00:
So I think no matter how you come at this, the definition of licensed products cannot exclude these components.

[00:27:50] Speaker 00:
And likewise, if you turn to their fallback argument about the to the extent language, I'd note a couple of things.

[00:27:56] Speaker 00:
Number one, this is not an argument that they made to Judge Gilstrap.

[00:28:00] Speaker 00:
You can look at appendix 4001 to 4005.

[00:28:03] Speaker 00:
It's not in there.

[00:28:05] Speaker 00:
You can look at appendix 4720.

[00:28:07] Speaker 00:
This is their sir reply in the district court.

[00:28:11] Speaker 00:
It's not in there.

[00:28:12] Speaker 00:
In fact, their argument at 4720 was about substantial embodiment.

[00:28:16] Speaker 00:
It doesn't talk about this to the extent language.

[00:28:19] Speaker 00:
And I think, Judge Chin, the way that you were reading it in your colloquy with opposing counsel is exactly the right way to read that language.

[00:28:28] Speaker 00:
And all it means is that

[00:28:30] Speaker 00:
The customers are not getting a broad release.

[00:28:34] Speaker 00:
That is, the customers of Fujitsu are not getting a broad release to their entire product catalog to the extent that that product catalog includes things that do not include Fujitsu components.

[00:28:46] Speaker 00:
So I think that the arguments that they did present to the district court, the district court decided exactly correctly.

[00:28:54] Speaker 00:
This other argument about to the extent which they didn't present to the district court, they're simply wrong about.

[00:28:59] Speaker 00:
And it just means that a licensed product must be part of the infringement theory.

[00:29:06] Speaker 00:
And that's exactly what Judge Gilstrap concluded, by the way.

[00:29:09] Speaker 00:
If you look at appendix 43, he said, with respect to the... The components themselves, though, do not infringe.

[00:29:16] Speaker 04:
So we're talking about releasing a customer not from even though what the customer is selling is a larger product that just happens to incorporate these individual components.

[00:29:32] Speaker 04:
It's sort of like it's somehow inoculating the component rather than releasing the customer from true infringement of the ultimate product that they make and sell.

[00:29:45] Speaker 00:
So Judge Chen, I agree that it is a broadly worded license, excuse me, a broadly worded release.

[00:29:54] Speaker 00:
And you had identified in the colloquy the on the account of language.

[00:29:58] Speaker 00:
That is very broad language.

[00:29:59] Speaker 00:
It means because of, but for, due to.

[00:30:03] Speaker 00:
And it means that the customers can do essentially anything they want with those licensed product.

[00:30:10] Speaker 00:
And there can't be a claim of infringement whatsoever

[00:30:15] Speaker 00:
of the license patents that in any way depends on that use.

[00:30:18] Speaker 00:
And there's no dispute here that their infringement theory depends on that use.

[00:30:23] Speaker 00:
And this was the point from Appendix 43, as Judge Gilstrab noted.

[00:30:27] Speaker 00:
He said, quote, with respect to those accused products, that is the accused products of Cisco and Alcatel-Lucent containing the Fujitsu components,

[00:30:34] Speaker 00:
Oyster specifically alleges that the Fujitsu MZM meets the modulator limitation and that the receiver meets the receiver limitation, end quote.

[00:30:44] Speaker 00:
And one other point I would make Judge Chen is to the extent that Oyster wanted to avoid the situation where Cisco and Alcatel-Lucent would have received a release here, and that's what we're talking about.

[00:30:57] Speaker 00:
We're talking about the backward-looking release.

[00:30:59] Speaker 00:
That's all that's at issue in this appeal.

[00:31:02] Speaker 00:
They could have easily done that.

[00:31:04] Speaker 00:
They could have carved Cisco and Alcatel Lucent out of the release and just said this release will not apply to those entities or will not apply to anything at issue in the Cisco or Alcatel Lucent litigation.

[00:31:20] Speaker 00:
They didn't do that.

[00:31:21] Speaker 00:
They instead

[00:31:23] Speaker 00:
entered into a very broadly worded release that specifically included customers, and they did so at a time when they were telling Fujitsu one thing in order to induce settlement, that is that certain products, the MZM and the receiver, were quote, directly infringing, and now they're trying to argue the opposite in order to avoid that result here.

[00:31:46] Speaker 00:
Judge Gielstrap correctly interpreted this contract to find that that was not tenable.

[00:31:50] Speaker 04:
So Oyster can still sue Alcatel and Cisco for infringing activities after the effective date of this release?

[00:31:59] Speaker 00:
There's nothing in terms of the language of the release that we're talking about that would prevent them from suing.

[00:32:07] Speaker 00:
And indeed, those allegations are still pending in the district court.

[00:32:12] Speaker 00:
The district court has before it claims against Cisco and Alcatel-Lucent.

[00:32:18] Speaker 00:
for products that do not include Fujitsu components and for products that post-date the settlement agreement.

[00:32:24] Speaker 00:
That's exactly right.

[00:32:26] Speaker 00:
Those are still pending and then that would be subject to exhaustion principles.

[00:32:32] Speaker 00:
But those are not at issue in this case.

[00:32:34] Speaker 00:
What is at issue in this case are entirely products that predate the settlement agreement and thus were released under section 3.1.

[00:32:42] Speaker 05:
Do you have a final thought on your final minute?

[00:32:45] Speaker 00:
Unless the court has further questions, I'm happy to seek back the final 30 seconds.

[00:32:50] Speaker 05:
Thank you, Mr. Aucoin.

[00:32:52] Speaker 00:
Thank you, Judge Laurie.

[00:32:54] Speaker 05:
Mr. Mersey has two minutes for a bottle if you need it.

[00:32:57] Speaker 01:
Thank you, Your Honor, and I appreciate the two minutes.

[00:33:01] Speaker 01:
Just a few short points.

[00:33:03] Speaker 01:
The customer release in section 3.1 does not state that it's based on a component or on account of a component, unlike the Fujitsu release.

[00:33:16] Speaker 01:
It says, but only to the extent

[00:33:19] Speaker 01:
Such customers have made, offered to sell, or sold, or otherwise disposed of the modulator or receiver.

[00:33:27] Speaker 01:
So that's the key limitation.

[00:33:29] Speaker 01:
Both sides agree now that it's a narrower limitation, and you have to apply it.

[00:33:34] Speaker 01:
The error the district court made was by changing the words of that to any product that includes a licensed product.

[00:33:44] Speaker 01:
Now, under Texas law, Texas law requires that you must specifically mention the claim to be released for a release, and also that the release has to clearly fall within the discharge section.

[00:34:01] Speaker 01:
If it does not, you cannot release the claim.

[00:34:08] Speaker 01:
Because my colleagues mentioned that the circumstances of the settlement should be taken into account.

[00:34:15] Speaker 01:
When they are, that's the very reason why the Four Further Clarity Clause and other things are in 1.3 and not only in 4.1.

[00:34:25] Speaker 01:
And this case is similar.

[00:34:28] Speaker 01:
The law in this case, Texas case, is similar to UNOVA, the California law applied in UNOVA, but stronger.

[00:34:35] Speaker 01:
The Texas law here is similar in that they both require reading the contract as a whole and looking at the circumstances surrounding the transaction, the contract.

[00:34:47] Speaker 01:
In both cases, it was a settlement with other litigation pending.

[00:34:52] Speaker 01:
Texas law, however, goes two steps further.

[00:34:55] Speaker 01:
It requires that you can't release claims unless it's clearly within the contract.

[00:35:03] Speaker 01:
And that's at Victoria Bank, the case that we cite.

[00:35:06] Speaker 01:
And also, for third-party beneficiary claims, it requires that any doubts be resolved against that third party.

[00:35:14] Speaker 01:
And that's Resolution Trust that we cite.

[00:35:18] Speaker 01:
Our claims are only based on the transceiver claim that you saw depicted in both briefs.

[00:35:24] Speaker 01:
That's the broadest independent claim.

[00:35:27] Speaker 01:
And these receiver components and modulator components are just a couple of elements of that.

[00:35:33] Speaker 01:
The district court itself recognized that on 43.

[00:35:37] Speaker 05:
Councilman, as you see, the red light has been on.

[00:35:40] Speaker 05:
The case is submitted.