[00:00:00] Speaker 00:
And the next argued case is number 21, 1069, AXDS Incorporated against F-1 Firearms, LLC.

[00:00:10] Speaker 00:
Mr. Mitby.

[00:00:12] Speaker 02:
Thank you, Your Honors, and may it please the Court.

[00:00:15] Speaker 02:
This appeal presents the question of whether a patent owner can avoid a declaratory judgment action without issuing a covenant that covers all of the accused infringer's present activity and planned activity that is not speculative.

[00:00:31] Speaker 02:
Under all of this court's precedence, the answer to that question is no.

[00:00:35] Speaker 02:
For a covenant to deprive the court of jurisdiction, the covenant must, at a minimum, cover all present activity and planned activity that is not speculative.

[00:00:44] Speaker 02:
And the covenant at issue in this case does not satisfy this criteria.

[00:00:49] Speaker 01:
That is the rule of... Mr. Midby, this is Judge Toronto.

[00:00:52] Speaker 01:
Can I explore what, at least for the moment, is kind of central to my

[00:01:01] Speaker 01:
thinking about what to worry about here.

[00:01:06] Speaker 01:
So taking as a given the legal principle that you just asserted, it seems to me that your argument about planned activity pretty much comes down to the sentence in your January 13th, 20 counterclaim document number 28.

[00:01:32] Speaker 01:
that says, you know, we are buying and we plan to buy some handles that sufficiently implicate the design patents that there's a real case of controversy.

[00:01:49] Speaker 01:
And here's what I'm trying to figure out, what the status of that Document 28 is, the first amended answer and counterclaim.

[00:01:58] Speaker 01:
It looks to me, under Rule 15,

[00:02:01] Speaker 01:
that you did not actually have a right to file that complaint.

[00:02:08] Speaker 01:
You needed court permission.

[00:02:11] Speaker 01:
No right, because it's more than 21 days after the answer, which was the responsive leading to that, and more than 20 days after the dismissal motion.

[00:02:29] Speaker 01:
or at least more than 21 days after the dismissal motion, which is enough under Rule 15A to mean that you need permission.

[00:02:40] Speaker 01:
It wasn't more than 21 days after the answer, but 15A1B says whichever is earlier.

[00:02:47] Speaker 01:
So it looks to me like that answer, the first amended answer and counterclaim is not actually part of the case.

[00:02:56] Speaker 01:
And without that, I don't see how your argument works.

[00:03:00] Speaker 01:
So can you address that?

[00:03:02] Speaker 02:
Well, Your Honor, first, I believe that the district court did consider it part of the case.

[00:03:07] Speaker 01:
I don't think number 28 is cited in the district court's opinion.

[00:03:14] Speaker 01:
It makes rather good sense of what the district court said, that the court was focusing only on the set of activities

[00:03:24] Speaker 01:
that had been in the litigation earlier, the 100 units and so on, and it never actually said, here's a piece of docket entry 28 that contains this allegation with an exhibit A with a picture of, with three pictures of three handles, and the Ditcher Court just never addressed that, which seems

[00:03:53] Speaker 01:
reasonable perhaps if that document was not actually properly filed because you needed permission to file it and you didn't get it.

[00:04:02] Speaker 01:
You didn't even ask for it.

[00:04:05] Speaker 01:
That's what I'm struggling with here.

[00:04:08] Speaker 02:
I think, Your Honor, even if the district court properly didn't consider that amended pleading, there was still sufficient present activity at issue that the future sales

[00:04:21] Speaker 02:
identified in the amended counterclaim would not be necessary to sustain jurisdiction.

[00:04:28] Speaker 02:
Let me explain what I mean by that.

[00:04:30] Speaker 02:
Under the original counterclaim, which did seek a declaration of invalidity and non-infringement, there were sales that were challenged by the plaintiff that had occurred in the past that were not covered by the covenant not to sue.

[00:04:47] Speaker 02:
F-1 firearms had sold

[00:04:49] Speaker 02:
a multitude of different handles, including one mil-spec handle that met the definition of accused products laid out by AXPS and it's cited on appendix page 290 through 293.

[00:05:04] Speaker 02:
And those sales had occurred in the past.

[00:05:06] Speaker 02:
They were in controversy, but they were not the subject of a license.

[00:05:11] Speaker 02:
according to the very limited covenant that AXCS provided, which is limited to 100 charging handles that they viewed as a direct copy of the one that they were offering on the market.

[00:05:24] Speaker 02:
So I would submit, Your Honor, that even if you're correct, that Rule 15 didn't allow amendment as a matter of right by that point in time, that there were still sufficient past sales that the district court had to

[00:05:38] Speaker 02:
retain jurisdiction to decide at least that question.

[00:05:43] Speaker 05:
But the past sales that you had a covenant not to sue with respect to those past sales.

[00:05:49] Speaker 02:
But the covenant didn't cover all of the past sales, Your Honor.

[00:05:53] Speaker 02:
The covenant was limited to only 100 charging handles, which were the ones that the plaintiff claimed were a direct copy of their product.

[00:06:00] Speaker 02:
It didn't cover other charging handles that had been pulled in the past.

[00:06:05] Speaker 02:
that fit within the definition of accused products.

[00:06:07] Speaker 02:
And I'm talking specifically about the definition on page 290 of the record that says, a centrally disposed symmetric arch and flat top.

[00:06:17] Speaker 02:
That covers an awful lot.

[00:06:19] Speaker 05:
They conceded that they were not pursuing infringement claims as to those.

[00:06:24] Speaker 02:
They did after they, in their final brief to the district court, they said that they weren't

[00:06:30] Speaker 02:
pursuing infringement claims, but they didn't give us a license, and they would have to give us a license.

[00:06:35] Speaker 02:
They dismissed the case without prejudice.

[00:06:37] Speaker 02:
They didn't actually say that those handles didn't fit within the definition of their patents or that they didn't infringe.

[00:06:44] Speaker 02:
And I would submit, Your Honor, that they would at a minimum ought to do that.

[00:06:47] Speaker 02:
They would have to complete non-infringement or give us a license, and they never did that.

[00:06:53] Speaker 05:
If they were not pursuing them in that case, and they had originally asserted them,

[00:06:58] Speaker 05:
then the race due to Cotter Bar would prevent them from ever pursuing them in the future, isn't that right?

[00:07:04] Speaker 02:
I don't think it would based on the way that they dismissed the case.

[00:07:09] Speaker 02:
They dismissed the claims without prejudice and they never made an affirmative statement that those handles either didn't infringe or that they were licensed.

[00:07:20] Speaker 02:
All they said is that they weren't pursuing them.

[00:07:21] Speaker 02:
That's consistent with dismissal without prejudice and just getting rid of the case

[00:07:27] Speaker 02:
in order to fight another day.

[00:07:29] Speaker 02:
So under the way that AXTF dismissed that and under the representations that they made to the court, they have the ability to come back and sue over those same accused handles again, which I will reiterate involved this centrally disposed symmetric arch and flat top according to AXTF's definition.

[00:07:51] Speaker 02:
And that covers virtually every handle that F1 ever stole.

[00:07:54] Speaker 02:
So even if we don't reach the possibility of future sales, there are sufficient past sales that weren't licensed and weren't specifically disclaimed as being non-infringing that require the district court to take jurisdiction over the case.

[00:08:11] Speaker 02:
The Revolution Eyewear case, I believe, is directly on point with that.

[00:08:16] Speaker 02:
In that case,

[00:08:17] Speaker 02:
Judge Newman wrote, whether a covenant not to sue will divest the trial court of jurisdiction depends on what is covered by the covenant.

[00:08:26] Speaker 02:
We agree with that statement.

[00:08:27] Speaker 02:
The covenant was expressly limited in this case to 100 charging handles and did not cover the other multitude of past sales that fit within the plaintiff's definition of the accused products.

[00:08:41] Speaker 02:
And so this is not a situation where a would-be competitor is trying to test the waters.

[00:08:46] Speaker 02:
This is a situation where F-1 firearms need certainty about whether those past sales which were at issue in its original counterclaim are covered by the Covenant not to sue or have been specifically disclaimed as non-infringer.

[00:09:04] Speaker 02:
The Covenant in the Revolution Eyewear case was actually much broader with respect to the accused infringer than the Covenant that AXTS is offered here because

[00:09:14] Speaker 02:
in Revolution Eyewear, the Covenant did cover all past sales.

[00:09:19] Speaker 02:
In fact, that was specifically stated in the opinion.

[00:09:26] Speaker 02:
The Covenant covered all past manufacturing, sales, and uses of the eyewear product at issue.

[00:09:35] Speaker 02:
Whereas here, AXTS specifically stated that they weren't licensing anything other than the 100 charging handles that they had identified.

[00:09:45] Speaker 02:
So we don't have to get to the issue of future activity.

[00:09:48] Speaker 02:
There's sufficient past activity to require district court jurisdiction.

[00:09:53] Speaker 02:
And this has a practical impact because in this case, F1 is a growing company that is expanding its sales base.

[00:10:04] Speaker 02:
And if the court allows AXEOS to just walk away from this claim without issuing a license or specifically disclaiming infringement,

[00:10:13] Speaker 02:
Then AXCS can wait up to six years, super damages, and wait and see whether F1 makes enough sales to make the case economically justifiable.

[00:10:24] Speaker 02:
The court will remember that AXCS didn't dismiss this case because they thought there was no infringement.

[00:10:31] Speaker 02:
They admit that they dismissed the case because they didn't think that it made economic sense to pursue.

[00:10:37] Speaker 01:
And that leaves... This is just Toronto.

[00:10:39] Speaker 01:
I mean, would it...

[00:10:41] Speaker 01:
not be right that if everything that was part of the case before your first amended counterclaims did not support a case or controversy and if it were also true that what you allege in the amended counterclaim in docket entry 28 wasn't considered because it

[00:11:09] Speaker 01:
uh... was never properly filed then you can file a new declaratory judgment action can you if you think that in and that's a we actually are telling these things now they haven't been adjudicated before uh... here's why we have a case of controversy we could file a new action but i don't think we have to file a new action your honor i believe that the that the uh...

[00:11:38] Speaker 02:
that the current action is sufficient because the case of controversy existed at the time that we filed those counterplains.

[00:11:45] Speaker 02:
And Your Honor, to back up and address your original question, I just confirmed that the docket control order in the case gave the parties until March 6, 2020, to amend pleadings without leave.

[00:11:59] Speaker 02:
So we actually did have a right.

[00:12:02] Speaker 01:
So where is that?

[00:12:03] Speaker 02:
I'm looking for it in the record.

[00:12:06] Speaker 02:
My colleague just identified to me that the docket control order actually included that deadline, and I think that that would indeed make a difference if the court is inclined to view the amended pleading as not being part of the case.

[00:12:24] Speaker 02:
The docket control order does state that, which is why

[00:12:31] Speaker 02:
It was not an issue that either side briefed or really addressed in connection with the original briefing about this court.

[00:12:43] Speaker 05:
I'm sure the other side will tell us if you're right, but even if you are right, the district court specifically said that there just wasn't enough detail or information.

[00:12:55] Speaker 05:
It was just vague.

[00:12:56] Speaker 05:
Why isn't that sufficient for the district court to say that it's

[00:13:01] Speaker 05:
inappropriate to exercise DJ jurisdiction in those circumstances?

[00:13:05] Speaker 02:
Because there was sufficient information on two counts, and just to back up to the original point, if the court looks at appendix page nine, that deadline is listed there.

[00:13:16] Speaker 02:
So the docket control order deadline is in the record, and we did have the right to amend without leave of court under these circumstances.

[00:13:27] Speaker 02:
But to answer your question,

[00:13:30] Speaker 02:
Your Honor, there were two ways in which we made it specific.

[00:13:34] Speaker 02:
We said that the Covenant didn't resolve past sales, and we identified three specific charging handles that F1 had a present intent to source and put on its rifles that it was then selling.

[00:13:48] Speaker 02:
So it was specific, and it was non-speculative.

[00:13:52] Speaker 02:
And that's the standard of Revolution Eyewear.

[00:13:55] Speaker 02:
Revolution Eyewear, all of the past

[00:13:58] Speaker 02:
sales and manufacturing of the product were licensed prior to the date of dismissal.

[00:14:05] Speaker 02:
It was just the future sales and the future manufacturing that was not covered, but Revolution Eyewear had a present intention to proceed with the same design, and F1 stated in its counterclaim that it had a present intention to continue proceeding with designs that would allegedly infringe

[00:14:25] Speaker 05:
the patents ensued and identified... It just said it was looking to source products and it didn't really say where or what the products were, right?

[00:14:35] Speaker 02:
In Exhibit A to the amended counterclaim, F1 did identify those handles by picture.

[00:14:44] Speaker 02:
So it was a highly specific

[00:14:47] Speaker 02:
acknowledgement of what the handles were.

[00:14:49] Speaker 02:
And these are handles that are available on the open market.

[00:14:52] Speaker 02:
When a company buys charging handles to put into a rifle, they source them from a third-party supplier.

[00:14:59] Speaker 02:
They go onto the open market and choose among the many options that are out there on the market.

[00:15:05] Speaker 02:
And in this case, F1 said, we are going to go buy these three handles that have been accused of infringing the AXCS patents and put them in our current inventory of rifles.

[00:15:17] Speaker 05:
It is, I mean, we're talking about the court assessing whether or not you provided sufficient detail, so you're asking us to conclude that the district court clearly erred in that factual determination.

[00:15:33] Speaker 02:
I am asking the court to conclude that the district court clearly erred on that, because I don't know how much more specific than it could have been.

[00:15:39] Speaker 02:
We identified specific products in Exhibit A, and it's that record

[00:15:44] Speaker 02:
site appendix 279.

[00:15:47] Speaker 02:
We identified the Griffin armament, we identified the next level armament, and we identified the battle arms development.

[00:15:54] Speaker 02:
We even provided pictures, and we provided the sales website where you can go and order a quantity of them and have them shipped to your manufacturing facility.

[00:16:04] Speaker 02:
Again, it's at appendix 279.

[00:16:06] Speaker 02:
There's no way we could have been more specific about our future.

[00:16:10] Speaker 05:
Council, even if we were to send it back for purposes of

[00:16:14] Speaker 05:
examining the question of whether you were specific enough that district court would still have the discretion to say that in these circumstances where there is no actual threat of infringement with respect to any particular handle that the court would have the right to decline to exercise D.J.

[00:16:38] Speaker 05:
jurisdiction because it's all discretionary, right?

[00:16:40] Speaker 02:
I don't think that that's

[00:16:43] Speaker 02:
necessarily the case.

[00:16:45] Speaker 02:
I think under the standard of metamune, the district court would be at least strongly encouraged to take this case because there's a real threat that we would be sued for infringement based on the plaintiff's conduct in making the very infringement claim that we're trying to litigate and then trying to abandon.

[00:17:03] Speaker 05:
Well, I don't think metamune would be enough to say that you can do something because you think it might infringe in the future, even though no one's ever claimed that it infringed.

[00:17:15] Speaker 02:
But we submit, Your Honor, that they did claim that it infringed based on the definition of accused products in this case.

[00:17:22] Speaker 02:
What this case really comes down to is what's the definition of an accused product?

[00:17:26] Speaker 02:
AXDS is trying to say retroactively that the accused products were a lot narrower than what they told the district court.

[00:17:35] Speaker 02:
But in reality, they told the district court at Appendix 290 through 293 that

[00:17:41] Speaker 02:
a charging handle would infringe if it met one of three different criteria, one of which is having a centrally-disposed symmetric arch and a flat top.

[00:17:50] Speaker 02:
And then there are two other independent criteria that AXCS claims is enough to cover the scope of their patents.

[00:17:58] Speaker 02:
And they didn't actually stop there with the definition of accused products.

[00:18:03] Speaker 02:
They submitted a declaration at Record Appendix 179 where their lead counsel affirmed

[00:18:10] Speaker 02:
that the definition of accused products are actually covered by the three design patents in suit.

[00:18:20] Speaker 02:
He used that language.

[00:18:21] Speaker 02:
He said the request included a definition of accused products that described the charging handle design covered by each of the three design patents in suit.

[00:18:31] Speaker 02:
So AXCS represented to the court that the design patents in question cover that scope

[00:18:40] Speaker 02:
of material and all we're asking for is a declaration from the court as to whether our past sales, which fall within that definition, and the future specifically planned sales, which fall within that definition, are subject to liability because otherwise S1 faces the risk that they will accrue damages and potentially damages for local infringement.

[00:19:05] Speaker 02:
if this case is not resolved.

[00:19:07] Speaker 02:
That's the problem presented here.

[00:19:09] Speaker 02:
It can't be the case that a plaintiff can file a lawsuit, accuse a broad range of products of infringing, then dismiss that lawsuit if they decide that there haven't been enough present sales to justify the litigation economically, wait several years, and refile that case seeking to capitalize on the sales that the defendant has made in the interim.

[00:19:33] Speaker 02:
It can't be the case

[00:19:34] Speaker 02:
that the law allows that.

[00:19:36] Speaker 02:
And there isn't any case law that suggests that the law allows that.

[00:19:40] Speaker 02:
Both the Benetech case and the Revolution Eyewear case make clear that if you have present activity or planned activity that is not speculative, that we are entitled to a declaratory judgment.

[00:19:55] Speaker 02:
And I would add, in response to the question about discretion,

[00:20:00] Speaker 02:
that at least the case should be sent back to the district court for the court to consider whether it should exercise its discretion to hear this case because our identification of products that fell within the scope of accused products was highly specific.

[00:20:26] Speaker 00:
Any more questions for Mr. Mitby at the moment?

[00:20:32] Speaker 00:
Hearing none, we'll hear from Ms.

[00:20:34] Speaker 00:
Jones.

[00:20:36] Speaker 04:
Thank you, Your Honor.

[00:20:37] Speaker 04:
May it please the court, Miranda Jones, for the appellee, AXPS.

[00:20:41] Speaker 04:
AXPS requests that this court affirm the district court's dismissal of F-1's declaratory judgment counterclaims.

[00:20:48] Speaker 04:
I'd like to start by addressing the question that Judge Toronto raised with respect to whether F-1's pending seating was properly before the court.

[00:21:00] Speaker 04:
F1's counsel is correct that there was a date in the scheduling order that permitted filing amended pleadings.

[00:21:08] Speaker 04:
But if you look at the scheduling order itself, which I do not believe is included in the appendix to the court, it says that if the amendment would affect preliminary infringement conditions or preliminary validity conditions, a motion must be made.

[00:21:22] Speaker 04:
And I would submit that here, the amendments that

[00:21:29] Speaker 04:
F1 was making to its counterclaims would have impacted potentially the preliminary infringement conditions or preliminary invalidity contentions.

[00:21:42] Speaker 04:
And so no motion was made to put that pleading before the court properly and so that pleading was not before the court.

[00:21:53] Speaker 04:
But beyond that, AXPS's covenant not to sue fully extinguished the dispute as to the 100 charging handles that were initially before the court.

[00:22:06] Speaker 04:
And those were the only charging handles that were... Hold on, hold on.

[00:22:13] Speaker 01:
Sorry.

[00:22:15] Speaker 01:
This is Judge Toronto.

[00:22:16] Speaker 01:
So there are, let's call them the...

[00:22:21] Speaker 01:
three amended counterclaim units that were involved in the case, and then these three Exhibit A units that are referred to and pictured in the February 18, 2019 amended counterclaim.

[00:22:39] Speaker 01:
Let's start with the first group.

[00:22:42] Speaker 01:
In that first group, I think Council on the other side said,

[00:22:47] Speaker 01:
that there are units beyond the 100, the 100 being the only subject of the covenant, that he doesn't think you made a sufficient disclaimer of infringement to allow them to go forward, the defendant here to go forward and sell those.

[00:23:15] Speaker 01:
Can you address that?

[00:23:17] Speaker 01:
Have you in fact disclaimed infringement of all but the 100 units that were in the case before January 13th?

[00:23:31] Speaker 04:
Your Honor, I believe that our infringement contingent only focused on four units.

[00:23:37] Speaker 04:
And then when we received the picture of seven units that F1 identified as units,

[00:23:45] Speaker 04:
sold or used, there was only overlap of one unit that was not an AXTS sold unit.

[00:23:55] Speaker 04:
And that one unit I referred to in the brief as charging handle number three.

[00:24:00] Speaker 04:
And as to that charging handle number three, F1's position was that there were only 100, approximately 100 units that had not been returned and that were at issue.

[00:24:14] Speaker 04:
And so AXPS issued a covenant not to sue with respect to those 100 charging handle units.

[00:24:22] Speaker 01:
I heard counsel on the other side to say, and maybe I misinterpreted, that there were units in the case before January 13, 2019 that are not covered by the covenant and that are not covered by

[00:24:43] Speaker 01:
any kind of binding disclaimer of infringement from you?

[00:24:53] Speaker 04:
So I'm not entirely clear what counsel for F-1 was referring to, but my understanding is that we have disclaimed infringement as to the units that were at issue prior to the amended counterclaim.

[00:25:11] Speaker 04:
which were represented by the seven units that are shown at appendix, I believe it's 566.

[00:25:18] Speaker 04:
And so those seven different models of charging handles that F1 itself identified were the only ones that had been used or sold at that time.

[00:25:28] Speaker 04:
We have addressed all of those.

[00:25:29] Speaker 04:
Either they weren't ever accused of infringement or they're covered by the covenant not to sue.

[00:25:34] Speaker 05:
So I think his point is that even if you didn't

[00:25:41] Speaker 05:
specifically accuse them of infringement, your definition of accused product would seem to cover them.

[00:25:48] Speaker 05:
Is that wrong?

[00:25:50] Speaker 04:
I would submit that that is wrong, that there is not any case that would support looking at a definition that is in a discovery document, so this was in the request for production of documents, where we're trying to gather information that would inform the infringement contention.

[00:26:09] Speaker 04:
as a basis of an accusation of infringement.

[00:26:13] Speaker 05:
So you're saying those other products that he's talking about just don't even appear in the infringement contingent?

[00:26:20] Speaker 04:
They were not accused in the infringement contingent.

[00:26:24] Speaker 04:
And I'm not clear.

[00:26:26] Speaker 04:
Beyond where counsel points to the definition in the request for the production of documents, I'm not sure that there is any specific model

[00:26:38] Speaker 04:
that he's identifying as a model that was at issue that we have not given them a covenant not to sue upon.

[00:26:44] Speaker 05:
Okay, so you're saying that the request for protection of documents might have been broader than what you were actually accusing of infringement, but what you were accusing of infringement shows up in the infringement contentions, period.

[00:26:55] Speaker 01:
That's correct, Your Honor.

[00:26:57] Speaker 01:
And further, that any of those units on those seven units that you have not accused of infringement, do you agree that you could not

[00:27:08] Speaker 01:
legally, whether by judicial estoppel or otherwise, accuse them of infringement on a going forward basis?

[00:27:16] Speaker 04:
That's correct, Your Honor.

[00:27:17] Speaker 04:
With respect to charging handle number three, as it's identified in that appendix 566, it is a product that has been returned and that the manufacturer is now deceased and it's no longer being made.

[00:27:34] Speaker 04:
And so my understanding is that there is no dispute about future units as to that specific charting handle.

[00:27:41] Speaker 04:
The other units that were AXTS units, I believe there was one or two that inadvertently was included in the infringement contentions because we were not certain of the source.

[00:27:52] Speaker 04:
Once it was confirmed that those were from AXTS, we made it clear that we're not accusing the units that AXTS sold to F1 of infringing.

[00:28:02] Speaker 04:
And going forward, F1 has indicated that it no longer intends to purchase AXPS's own units.

[00:28:10] Speaker 04:
And then there were two other units, I believe, that appeared in that picture that were never accused of infringement in the infringement conventions.

[00:28:20] Speaker 01:
And just, I mean, just to be absolutely clear about what I'm after, I want you to say, and as to those two units, you agree

[00:28:30] Speaker 01:
that your client cannot accuse those units of infringement in the future?

[00:28:38] Speaker 04:
Yes, and just so we're entirely clear.

[00:28:40] Speaker 01:
Is there a potential difference between what you didn't say and what you are now essentially asserting to be a freedom that the defendant has not to worry about those units being infringed, being abused?

[00:28:58] Speaker 01:
Can you make that assertion?

[00:29:00] Speaker 04:
Yes, we have not accused, you know, one or two that appears at Appendix 566 of infringement and there is no intention to accuse those two units of infringement.

[00:29:15] Speaker 05:
And you made that clear to the district court?

[00:29:17] Speaker 04:
Yes, they were not.

[00:29:18] Speaker 04:
These units were in the documents that were submitted to the court and we've made clear by this annotated copy that is in the record here.

[00:29:27] Speaker 04:
that these were not accused of infringement.

[00:29:30] Speaker 01:
And can I now just turn to the Exhibit A point at Appendix 279, which is the pictures of the three units that in paragraph three of the amended counterclaim on page 262 of the appendix are expressly said by AXT, I mean,

[00:29:54] Speaker 01:
F1 is sourcing the charging handles attached as Exhibit A. I assume that's a typo since they're talking about themselves, F1 is.

[00:30:06] Speaker 01:
What is your view about whether those three pictured handles in Exhibit A are potentially infringing or not?

[00:30:18] Speaker 04:
So at this point in time, F1 has never accused those units of infringing.

[00:30:24] Speaker 04:
Those units are, as far as I can tell, seeking to source those additional three charging handle models means that those models appear to be available on a third-party manufacturer's website for sale.

[00:30:39] Speaker 04:
There is no allegation that F1 has undertaken any steps to fire them or enter into any kind of relationship or has any

[00:30:48] Speaker 04:
concrete plans with those manufacturers to undertake any activity that would constitute an infringing act here.

[00:30:55] Speaker 01:
And so we have not had the opportunity to analyze those three charging handles, but it would be... And do you think that the district court in deciding that there was no continuing case or controversy drew any conclusion about those

[00:31:17] Speaker 01:
those three handles.

[00:31:20] Speaker 04:
So as Your Honor pointed out earlier, the district court judge did not specifically reference the amended pleadings in the order.

[00:31:30] Speaker 04:
And it appears that the judge below did not

[00:31:43] Speaker 04:
consider that the amended counterclaims were properly before the court, although there's nothing in the order that expressly makes that clear.

[00:31:54] Speaker 04:
So it is a little bit of a point of unclarity in the record exactly what the district court judge was considering as properly before it or not before it.

[00:32:06] Speaker 04:
And just looking back over the actual order,

[00:32:14] Speaker 04:
The order appears to focus just on the 100 charging handles that the parties had previously discussed.

[00:32:24] Speaker 04:
Although at some point the judge does mention, relying on Benetech, that there weren't any other additional details about other charging handles to the extent that those were before the court.

[00:32:39] Speaker 01:
But that would be a slightly odd thing to say given the pictures in Exhibit A.

[00:32:43] Speaker 01:
particularly odd for design paths.

[00:32:46] Speaker 04:
Right.

[00:32:47] Speaker 04:
And I believe... I'm sorry, Your Honor.

[00:32:50] Speaker 04:
I didn't mean to interrupt there.

[00:32:53] Speaker 04:
I believe what the district court judge was indicating as far as additional details is that there was no indication beyond pulling something from a third-party manufacturer's website that F-1 had any intention of actually

[00:33:11] Speaker 04:
doing anything with those third-party charging handles.

[00:33:14] Speaker 04:
So they hadn't made them, they hadn't used them, they haven't offered them for sale or sold them.

[00:33:18] Speaker 04:
So there are no allegations to that extent in the amended counterclaims.

[00:33:25] Speaker 04:
And there's no description of concrete steps to undertake some act of infringement.

[00:33:33] Speaker 04:
So if all F-1 has to do is

[00:33:36] Speaker 04:
pull some other units or some other models from third-party manufacturer's websites to establish a sufficient case of controversy, I think that that raises a lot of concerns in terms of, you know, if there was remand on that basis, are we going to have to look at every, you know, potential charging handle that they could buy out there?

[00:33:59] Speaker 04:
Would they really be in a position?

[00:34:00] Speaker 01:
No, it would just be the ones that they specifically assert they are sourcing

[00:34:06] Speaker 01:
if sourcing means looking to buy so they can attach them to their firearms for resale.

[00:34:16] Speaker 04:
And I think that the level of activity there was not sufficiently alleged in the amended complaints to the standard that, or sorry, the amended counterclaims to the standard that's required by the Expo Sports President.

[00:34:34] Speaker 04:
And so I would just also point out that

[00:34:37] Speaker 04:
There is a concern, perhaps it's more of a policy concern here, that if you allow F1 to place at issue another manufacturer's product and the question of whether or not that product infringes, where that manufacturer has no relationship with F1, that manufacturer has no interest in the case, there is a question about whether F1, who hasn't undertaken any activity that would traditionally constitute infringement, would really have a motivation to defend that third-party manufacturer's

[00:35:06] Speaker 04:
products against an allegation of infringement.

[00:35:10] Speaker 04:
And so I think that this illustrates the lack of connection between the parties here and that there is not a real case or controversy over these particular units.

[00:35:23] Speaker 04:
And then also, in terms of timing, I would point out to the court that at the time that F-1 submitted its amended counterclaims,

[00:35:35] Speaker 04:
AXPS had already given it the covenant not to sue.

[00:35:38] Speaker 04:
We filed a petition to dismiss.

[00:35:41] Speaker 04:
And so the case of controversy was fully extinguished.

[00:35:45] Speaker 04:
It was only when they filed their opposition that they raised these additional units.

[00:35:50] Speaker 04:
And by that point in time, the more appropriate way to raise that would have been filing a new case instead of filing amended counterclaim.

[00:35:58] Speaker 04:
Thank you, Your Honor.

[00:35:59] Speaker 00:
Any more questions for Ms.

[00:36:01] Speaker 00:
Jones?

[00:36:02] Speaker 00:
Not for me.

[00:36:03] Speaker 00:
No, thank you.

[00:36:05] Speaker 00:
Okay.

[00:36:06] Speaker 00:
Thank you, then, Mr. Mitby.

[00:36:07] Speaker 00:
We have some rebuttal time.

[00:36:08] Speaker 02:
Thank you, Your Honor.

[00:36:10] Speaker 02:
This was a very unusual case in which the covenant that the district court relied on is limited to just 100 charging handles.

[00:36:21] Speaker 02:
And as a result, it doesn't cover all of F-1's present activity, and it doesn't cover any of F-1's planned activity that is not speculative.

[00:36:31] Speaker 02:
to quote from Revolution Eyewear and Benetech.

[00:36:34] Speaker 02:
And as such, that covenant is insufficient to resolve the dispute.

[00:36:39] Speaker 02:
My colleague pointed out that the definition of accused products first appeared in a discovery request.

[00:36:47] Speaker 02:
And while that's certainly true, it wasn't a discovery definition, because on page 179 of the record, AXCS's prior counsel, Mr. Heiser,

[00:36:59] Speaker 02:
submitted a declaration in which he stated, and I quote, the request included a definition of accused products that described the charging handle design covered by each of the three design patents in suit.

[00:37:11] Speaker 02:
So Mr. Heiser was representing that that definition explained the scope of the patents.

[00:37:19] Speaker 02:
It wasn't just being used as a phishing expedition, it was consistent with the scope of the patents and he represented that

[00:37:26] Speaker 02:
to the district court in a declaration.

[00:37:28] Speaker 02:
And so how much clearer would AXPS have to be in stating that that's the definition that should control when looking at whether an accused product infringes?

[00:37:38] Speaker 02:
They didn't just limit it to the initial 100 handles.

[00:37:44] Speaker 02:
They broadened the definition to include a lot of other handles that F1 had sold in the past and was planning to sell in the future.

[00:37:53] Speaker 02:
And as to the future products, the specificity required, we stated in the counterclaim that F1 has a present intent to source all three of the handles shown in Exhibit A at Appendix 279.

[00:38:08] Speaker 02:
The point of this is

[00:38:10] Speaker 02:
F-1 and most rifle manufacturers don't make their own handles.

[00:38:14] Speaker 02:
They source them.

[00:38:16] Speaker 02:
And we actually provided not only a picture of the handle and the name of the handle, but the website where we were planning to buy it from.

[00:38:24] Speaker 02:
We couldn't have been more clear that we were intending to buy those products.

[00:38:29] Speaker 02:
And therefore, it is planned activity that is not speculative within the definition of Revolution Eyewear.

[00:38:35] Speaker 02:
I think it's important to recognize that in Revolution Eyewear, the Covenant was

[00:38:40] Speaker 02:
broad enough to cover all past infringing activity.

[00:38:44] Speaker 02:
It covered the making, the using, and the selling of the eyeglass product that had happened.

[00:38:51] Speaker 02:
I'm sorry, Your Honor?

[00:38:56] Speaker 02:
The covenant in Revolution Eyewear covered all of the previous activity, and the only dispute left was whether that company's aspects could continue to sell

[00:39:08] Speaker 02:
a similar design in the future.

[00:39:10] Speaker 02:
And this court held that it presented an actual controversy because it was future activity that was non-speculative.

[00:39:23] Speaker 02:
It's clear that under this court's precedent and under the Supreme Court's precedent in MedImmune that we don't have to actually take the step of infringing in order to file a declaratory judgment action.

[00:39:36] Speaker 02:
And in this case, we've identified

[00:39:38] Speaker 02:
future products that we intend to buy.

[00:39:42] Speaker 02:
And the only step that we would have to take in order to infringe is to actually put them on a rifle.

[00:39:49] Speaker 02:
So we, under the Supreme Court's precedent and met it immune.

[00:39:53] Speaker 01:
Whether that's true seems to me to depend rather a lot on what this word sourcing means.

[00:40:02] Speaker 01:
It could be, you know, looking around to consider, or it could mean

[00:40:08] Speaker 01:
something more concrete and definite about an imminent purchase.

[00:40:13] Speaker 01:
And if it's the former, that might not actually be enough, but I guess I'm not entirely sure what that word means.

[00:40:22] Speaker 02:
Well, it means the latter, Your Honor, because in this case, it wasn't just looking around at different potential suppliers and deciding

[00:40:32] Speaker 02:
which ones we wanted to consider, it was identifying three specific products that looked an awful lot like the 100 or so charging handles that were licensed.

[00:40:43] Speaker 01:
So F1 was trying to replace like for like, as is apparent from the choice of handles reflected in Exhibit A. If you were to file a new declaratory judgment action, that would provide you an opportunity to be more concrete and specific, wouldn't it?

[00:41:03] Speaker 02:
It would, but respectfully, Your Honor, I don't believe we have to file a new declaratory judgment action, and it would make little sense from the point of judicial efficiency to assign that case to a new judge and go through the delays inherent in the filing process.

[00:41:23] Speaker 02:
It makes sense for the district court, which has already had some exposure to ASDS's claims, to decide this case as a matter of judicial efficiency.

[00:41:33] Speaker 05:
Well, it wouldn't really go to a different judge.

[00:41:37] Speaker 05:
It would probably go back to the same judge as related to an earlier case, correct?

[00:41:42] Speaker 02:
It might.

[00:41:45] Speaker 02:
It's always difficult to know how that would end up, but at a minimum there would be motion practice related potentially to venue and other types of issues that we don't have in this case since

[00:42:02] Speaker 02:
AXCS is the party that filed it.

[00:42:05] Speaker 02:
AXCS brought the lawsuit and so therefore the case law has traditionally recognized that a defendant is entitled to file a counterclaim of the sort that we did.

[00:42:19] Speaker 02:
And I'm not aware of a precedent that says that we would have to file a new action or should file a new action under these circumstances.

[00:42:32] Speaker 02:
And again, I look back at the docket sheet on page nine, and there does not appear to be any restriction on the ability of F1 to file the amended counterclaim that's at issue here.

[00:42:47] Speaker 02:
It was within the deadline of March 20th, 2020.

[00:42:51] Speaker 01:
Right, but as Ms.

[00:42:53] Speaker 01:
Jones said, the docket control

[00:42:57] Speaker 01:
order does expressly say if the amendment, note, if the amendment would affect preliminary infringement contentions or preliminary invalidity contentions, a motion must be made pursuant to the patent.

[00:43:12] Speaker 02:
I don't see that in the record, Your Honor.

[00:43:15] Speaker 01:
It's possible, but I... You can get the record from PACER.

[00:43:23] Speaker 01:
It's not in the Joint Appendix.

[00:43:24] Speaker 01:
It is in the record.

[00:43:27] Speaker 01:
minutes to follow up.

[00:43:31] Speaker 02:
Sure, and that's right.

[00:43:33] Speaker 02:
And we would submit that the counterclaim wouldn't affect the scope of the infringement contentions because AXES had already identified through its definition of accused products what the fraud infringes.

[00:43:51] Speaker 00:
Any more questions for Mr. Misbe?

[00:43:58] Speaker 00:
Okay.

[00:43:59] Speaker 00:
Hearing none.

[00:44:00] Speaker 00:
All right.

[00:44:01] Speaker 00:
In that case, with thanks to both counsel, the case is submitted.

[00:44:05] Speaker 00:
And that concludes this panel's argued cases for this morning.

[00:44:12] Speaker 02:
The Honorable Court is adjourned from day to day.