[00:00:00] Speaker 02:
Good morning, Your Honors.

[00:00:01] Speaker 02:
May I please record?

[00:00:03] Speaker 02:
My name is Louis Taran.

[00:00:05] Speaker 02:
The only issue in this case is whether the district court abused its discretion in holding that this case is not exceptional under Section 285.

[00:00:15] Speaker 02:
Our contention is that the district court based its decision on two factual findings which are erroneous and not supported by the record.

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The first factual finding relates to the reasons that this case was filed to begin with.

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The second issue relates to the manner by which this case was subsequently voluntarily dismissed.

[00:00:39] Speaker 02:
I would discuss those two matters here before you.

[00:00:44] Speaker 02:
On the first issue, the court's order indicates or implies that the case was filed because the appellants refused to produce

[00:00:54] Speaker 02:
verified sales records for the accused products.

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And that, in fact, is erroneous.

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It is not supported by the record.

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In fact, the record indicates that at the time that this case was filed, the parties had been reviewing a settlement agreement that had been proposed and drafted by the appellee, which did not require the appellants to produce verified sales records.

[00:01:19] Speaker 02:
Through months of negotiation prior to that settlement agreement,

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the parties had reached a compromise in which the appellant would simply fill in the sales information into the agreement, and that would then settle the matter.

[00:01:33] Speaker 02:
And in fact, in late July, the appellants communicated to the appellee that they were agreeable to the agreement, would review it within the first week of August, and likely sign it, fill in the information, and sign the agreement.

[00:01:49] Speaker 02:
Before the appellants were able to do that, this case was filed.

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by the appellate, after being communicated that we would likely end up signing the settlement agreement to begin with.

[00:02:01] Speaker 02:
The day after the complaint was filed, we received an amended settlement agreement, which did not, again, did not require the appellants to produce any verified sales records.

[00:02:11] Speaker 02:
The only amendment in that new settlement agreement was the additional monies that we had to pay to compensate

[00:02:19] Speaker 01:
This is Judge Rainer.

[00:02:20] Speaker 01:
Let me ask you a question.

[00:02:21] Speaker 01:
I think the standard of review that you're facing is abuse of discretion.

[00:02:26] Speaker 01:
Can you tell me what is a district court abuse of discretion?

[00:02:30] Speaker 02:
Yes, Your Honor.

[00:02:31] Speaker 02:
So the abuse of discretion was based, the order that was signed was based on two factual findings that were erroneous and not supported by the record.

[00:02:43] Speaker 02:
And I think because that error was so grave,

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I think there was an abuse of discretion.

[00:02:52] Speaker 02:
I think the abuse of discretion standard was identified in a prior case.

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And let me pull that up.

[00:03:15] Speaker 01:
The standard is either an erroneous view of the law

[00:03:19] Speaker 01:
or an erroneous assessment of the evidence?

[00:03:24] Speaker 02:
Right, the erroneous assessment of the evidence, of the facts in the case.

[00:03:28] Speaker 02:
And that is basically our contention.

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Our contention is that the district court erroneously assessed the facts in this case.

[00:03:37] Speaker 02:
And specifically, in the order, the district court identified two main reasons why it believed that this case was not exceptional.

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One, it indicated, because the appellants

[00:03:49] Speaker 02:
did not refuse to produce verified sales records.

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The other one that it indicated was that as soon as the records were produced, a Pelley learned that the damages were low.

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And therefore, it took the proper action of voluntarily dismissing the case.

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And so the court said, there's nothing exceptional about that.

[00:04:13] Speaker 02:
That is actually a proper thing to do.

[00:04:16] Speaker 02:
But that, in fact, did not happen.

[00:04:19] Speaker 02:
The verified records were produced by appellants back in January of 2020 pursuant to a court order.

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So back in January 2020, it was revealed by those records that the damages in this case were substantially low.

[00:04:35] Speaker 02:
But the case was not dismissed until September of 2020, nine months later, after

[00:04:44] Speaker 02:
we had gone through the whole markman process after we had spent a substantial amount of time, resources, and money going through that process.

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So the notion that this case was voluntarily dismissed when the appellee discovered the damages were low is not supported by the record.

[00:05:08] Speaker 02:
Our contention

[00:05:09] Speaker 02:
is that this case was dismissed later on, on that basis.

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It was dismissed because damages were low.

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And so the question is, what took so long?

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Why did the appellee take so long to dismiss the case?

[00:05:23] Speaker 01:
Our contention is because they were trying to force the appellants into an unreasonable settlement, into an unreasonable... Were you ever asked by the other side to consent or to join a motion to dismiss the case at an earlier stage?

[00:05:41] Speaker 02:
I apologize, Your Honor.

[00:05:42] Speaker 02:
I did not hear.

[00:05:44] Speaker 01:
Were you ever asked by the other side to join in a motion to dismiss a case at a later date?

[00:05:54] Speaker 02:
Yes, Your Honor.

[00:05:55] Speaker 02:
In fact, when the records were produced in January, the other side indicated to us that they would file a motion to dismiss back in March.

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And that is when we were asked to join in that motion.

[00:06:11] Speaker 02:
Um, we did not join in that motion because that motion was never filed back in March.

[00:06:17] Speaker 01:
Did you agree to join the motion?

[00:06:22] Speaker 02:
I'm sorry?

[00:06:23] Speaker 01:
Did you agree to join the motion?

[00:06:27] Speaker 02:
We did not agree to join the motion because the motion that was being asked, uh, was, it was a voluntary dismissal of the case without prejudice.

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And the appellants did not want to have the case dismissed without prejudice.

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The appellants really truly believed that they were not infringing.

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They did not infringe.

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And they had a reasonable belief that the scope of the patent was not valid.

[00:06:58] Speaker 02:
I apologize, Your Honor.

[00:06:59] Speaker 02:
I interrupted.

[00:07:05] Speaker 02:
When the proposal first came to us in March, we did not agree to it, but that motion was not filed in March.

[00:07:13] Speaker 02:
We were forced to proceed with the marketing process.

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We were forced to proceed with marketing discovery and in the marketing hearing and everything like that.

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Our intention is that had this case been dismissed back in March, which is reasonably close in proximity to the date in which it was revealed that the damages were low, that would have been appropriate and that would have been consistent with the district courts holding that it was proper.

[00:07:41] Speaker 02:
But that is not what happened.

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The court did not see or fail to see that the case was actually, the dismissal of the case was delayed for

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almost nine months until September of 2020.

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And that time period was prejudicial to appellants because we had to go through the whole process of money.

[00:08:02] Speaker 02:
Mr. Turan?

[00:08:02] Speaker 03:
Mr. Turan?

[00:08:02] Speaker 03:
This is Judge Chen.

[00:08:04] Speaker 03:
At one point, did you inform the court that you had stopped selling your product or that you were agreeing to no longer sell your product?

[00:08:21] Speaker 02:
Yes, we had done that, Your Honor.

[00:08:23] Speaker 02:
I believe it was done in the first status conference with the court.

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And that was something that had been agreed on by the parties already.

[00:08:34] Speaker 03:
So when did you tell the court this?

[00:08:39] Speaker 02:
Yes, we did inform the court.

[00:08:41] Speaker 03:
When?

[00:08:42] Speaker 02:
In the first status conference.

[00:08:44] Speaker 02:
When was that?

[00:08:45] Speaker 02:
When was that?

[00:08:48] Speaker 02:
I apologize.

[00:08:49] Speaker 03:
When was that?

[00:08:50] Speaker 02:
What's the date?

[00:08:51] Speaker 02:
That was in 2019.

[00:08:55] Speaker 02:
I think it was on the same date that the court ordered us to verify sales rights.

[00:09:00] Speaker 02:
So I think it would have been probably around November 2019, if I'm not mistaken, because our production was due in early January of 2020.

[00:09:13] Speaker 02:
So we did inform the court of that late 2019.

[00:09:18] Speaker 02:
Um, and then when we did produce the fair advice, we're selling records in January, 2020, it became obvious that say the damages were low and the basis for the voluntary dismissal later on, back, uh, later on September, 2020, the basis was, uh, the records that we have produced in January, 2020 indicating this, the damages were substantially low.

[00:09:48] Speaker 02:
So Your Honor, the essence of the case is that we were forced to go through the marketing process unnecessarily.

[00:09:55] Speaker 02:
We believe that if there was an intent to litigate the case on the merits, it should have proceeded.

[00:10:04] Speaker 02:
The appellants were certainly ready to do so.

[00:10:06] Speaker 02:
And based on the information we had, the appellee

[00:10:11] Speaker 02:
intended to do so because they indicated to us back in march they were going to dismiss the case they actually provided us a copy of the motion to voluntarily dismiss back in march and they never did we were forced to go through the markman process that was an indication to us okay well we're going through this case we're going to proceed we have to defend ourselves vigorously we're going to go through the markman process which we did and then later on in september to our surprise the case was dismissed we believe that is you know

[00:10:42] Speaker 02:
The course finding that the case was dismissed soon after it was learned the damages were low is erroneous.

[00:10:50] Speaker 02:
It's just not supported.

[00:10:51] Speaker 02:
There was a nine month delay that was highly prejudicial to us.

[00:10:57] Speaker 00:
Okay.

[00:10:57] Speaker 00:
Thank you.

[00:10:58] Speaker 00:
Let's hear from the other side and you have time for rebuttal.

[00:11:08] Speaker 04:
Thank you, your honor.

[00:11:10] Speaker 04:
I'm just rearranging the camera and standing up.

[00:11:16] Speaker 04:
I hope the court can see me.

[00:11:17] Speaker 04:
May I please the court?

[00:11:20] Speaker 04:
I represent Tiger Manufacturing, the LA in this case.

[00:11:25] Speaker 04:
And I've heard over and over again, just now and throughout the litigation below, how Tiger forced MWI to proceed with the Markman area.

[00:11:40] Speaker 04:
and all the other large expenses that they had to incur, which we also had to incur.

[00:11:48] Speaker 04:
This is simply, absolutely, wholly untrue.

[00:11:55] Speaker 04:
Prior to the Markman hearing, when we were contemplating filing the motion to dismiss without prejudice,

[00:12:07] Speaker 04:
We were concerned about race to Ducato because although the majority of the cases that the Federal Circuit hold that the cause of action creates a new cause of action that's not race to Ducato, there are a lot of cases that go the other way.

[00:12:27] Speaker 04:
But more to the point,

[00:12:31] Speaker 04:
At that meet and confer, I offered not only to dismiss the case without prejudice, but also to give a release as to the prior sold products and no exchange of money, nothing else.

[00:12:49] Speaker 04:
It is completely untrue that we dragged them through the marketing process.

[00:12:56] Speaker 04:
Quite to the contrary.

[00:12:58] Speaker 04:
MWI held us hostage in this litigation, and we had no way of getting out.

[00:13:09] Speaker 04:
I don't want to repeat all the facts found by the judge below, Judge Atlas, who is an experienced judge in patent litigation.

[00:13:21] Speaker ?:
Her brief is concise.

[00:13:27] Speaker 04:
in detail and fully explains the numerous factual findings that the defendants have not even addressed, and her ultimate finding that the case was not exceptional on the part of Tiger.

[00:13:46] Speaker 04:
Tiger submits that none of the factual findings are clearly erroneous.

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and that the ultimate finding of fact of the case not being exceptional is similarly not clearly erroneous.

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And lastly, Tiger has requested, or not by a separate motion, but asking the court to respond to find this case to be frivolous.

[00:14:23] Speaker 04:
Tiger believes that there is no plausibility in any of the arguments raised by MWI.

[00:14:32] Speaker 04:
And this appeal has caused significant harm to Tiger.

[00:14:40] Speaker 04:
I'll close with that.

[00:14:52] Speaker 00:
Okay, thank you.

[00:14:55] Speaker 04:
Thank you.

[00:15:05] Speaker 00:
Okay, Mr. Tarrin, you have your rebuttal.

[00:15:08] Speaker 02:
Yes, Your Honor.

[00:15:09] Speaker 02:
I would like to actually address a question that was raised earlier by Your Honor.

[00:15:17] Speaker 02:
By Your Honor, the question was, had we joined

[00:15:21] Speaker 02:
Had we been asked to join a motion in this case, I indicated that we had been asked and we did not agree to join that motion.

[00:15:31] Speaker 02:
This was back in March of 2020.

[00:15:33] Speaker 02:
And I want to elaborate on that a little bit in that the request was to join a motion to dismiss without prejudice.

[00:15:41] Speaker 02:
And under, I believe, in section 41, whenever there is a dismissal without prejudice, the other side has the option to ask for attorneys fees and various other forms of relief when it is done without prejudice, only to prevent any future litigation and things like that.

[00:16:03] Speaker 02:
There's case law.

[00:16:03] Speaker 02:
I think it was briefed.

[00:16:05] Speaker 02:
And it was something that we argued in front of the district court.

[00:16:10] Speaker 02:
The district court obviously denied our request for attorney's fees later on when it was filed in September.

[00:16:17] Speaker 02:
In September, when the motion for voluntary to dismiss was filed, we asked for that relief under section 41, and then the district court denied that relief.

[00:16:27] Speaker 02:
And then later on when the case was dismissed, we then asked for attorney's fees pursuant to section 285, and that was denied.

[00:16:35] Speaker 02:
But, Your Honors,

[00:16:37] Speaker 02:
The other thing I would like to address, the idea that we held the appellees hostage in this case, it simply is not true.

[00:16:47] Speaker 02:
We did everything we could to avoid this case.

[00:16:50] Speaker 02:
When this case was filed, we had a settlement agreement that appeared to be primarily agreeable to all parties.

[00:16:59] Speaker 02:
It was something that was proposed

[00:17:01] Speaker 02:
by the appellee.

[00:17:03] Speaker 02:
They drafted it.

[00:17:04] Speaker 02:
We were reviewing it.

[00:17:05] Speaker 02:
I indicated to the appellee's counsel that I would provide them with an answer in the first week of August.

[00:17:12] Speaker 02:
But then they went ahead and filed this case in August 1.

[00:17:17] Speaker 02:
So the idea that we held them hostage is just simply not true.

[00:17:20] Speaker 03:
In March 2020, did you offer to settle this case by

[00:17:31] Speaker 03:
having the patent owner pay your side $75,000 and then provide you a license, an unrestricted license?

[00:17:43] Speaker 02:
Right, Your Honor.

[00:17:44] Speaker 03:
So that was your idea of how to settle this case.

[00:17:48] Speaker 02:
Well, Your Honor, so by that time, by March 2020, we had undergone months of negotiating a settlement agreement.

[00:17:59] Speaker 02:
They filed the case anyways, as I indicated.

[00:18:02] Speaker 02:
And then when they filed the case, they wanted more money.

[00:18:06] Speaker 02:
And then soon after the case was filed, we offered to settle the case for a reasonable amount, a very reasonable amount.

[00:18:15] Speaker 02:
I think it was $5,000, which is more than what actual damages was.

[00:18:19] Speaker 02:
They turned this down.

[00:18:20] Speaker 03:
Now, you don't have to tell me the whole story.

[00:18:23] Speaker 03:
I'm just trying to understand.

[00:18:27] Speaker 02:
why a plaintiff patent owner would take a settlement offer where you get a royalty free license and you get from them seventy five thousand dollars yeah i mean yes your honor i mean at that time they had proposed they had made the proposal to indicate to us that we're going to file the motion to dismiss without prejudice and our position was well you know what we're going to be entitled to attorney's fees and that was our belief we're going to be

[00:18:55] Speaker 02:
You know, we should be entitled to attorney's fees if you're going to dismiss without prejudice.

[00:19:00] Speaker 02:
And so yes, at that point I said, look, OK, let's sell it for this amount.

[00:19:07] Speaker 02:
So yes, that did occur.

[00:19:11] Speaker 00:
Yes, I appreciate that was an opening conversation.

[00:19:14] Speaker 00:
What was the state of the agreement at the time that they filed that suit?

[00:19:23] Speaker 00:
The agreement that you were, where did you sign?

[00:19:27] Speaker 00:
When they filed the suit?

[00:19:28] Speaker 02:
That is the agreement.

[00:19:30] Speaker 02:
I apologize, Your Honor.

[00:19:34] Speaker 00:
I was asking the state, the monetary, or the relationship, whatever it was, when you had an agreement that you thought was final.

[00:19:47] Speaker 02:
Right.

[00:19:47] Speaker 02:
So the agreement basically called for the

[00:19:52] Speaker 02:
the appellants to seize a sale of the accused goods, which we had no problem with that.

[00:19:59] Speaker 02:
It identified a percentage of gross sales that would be the damages.

[00:20:04] Speaker 02:
That percentage was a number that we didn't have a problem with.

[00:20:09] Speaker 02:
The only thing that was pending was for the appellants to fill in the number of the actual sales figures from their records.

[00:20:21] Speaker 02:
And then that in turn would calculate the settlement amount, which was I think 8% of gross sales.

[00:20:27] Speaker 02:
So we had to fill in gross sales for all the items that they had identified in the settlement agreement.

[00:20:33] Speaker 02:
So we had to go to the records, pull those numbers out, fill it in, calculate the total settlement amount, and then sign the agreement.

[00:20:42] Speaker 02:
That was essentially what we needed to do.

[00:20:45] Speaker 02:
And we had, I had communicated to Appellate's Council that we would do that

[00:20:50] Speaker 02:
by, if I remember correctly, it was August 7 or August 8.

[00:20:55] Speaker 02:
And I think I made that representation late July.

[00:20:58] Speaker 02:
I think it was July 29.

[00:20:59] Speaker 02:
And then this case was filed in August 1 without giving me any kind of notice or retracting that settlement proposal.

[00:21:14] Speaker 02:
It was simply filed on August 1.

[00:21:16] Speaker 02:
And then the day after, I received an amended settlement

[00:21:20] Speaker 02:
offer or settlement agreement, where the only amendment was more money for us to pay to cover attorney's fees for a complaint that really should not have been filed to begin with, because we're in the middle of negotiating the settlement.

[00:21:35] Speaker 00:
OK.

[00:21:36] Speaker 00:
Any more questions?

[00:21:37] Speaker 00:
Any more questions?

[00:21:39] Speaker 00:
OK.

[00:21:40] Speaker 00:
Thank you.

[00:21:41] Speaker 00:
Our thanks to both counsel.

[00:21:42] Speaker 00:
The system seems to have worked.

[00:21:45] Speaker 00:
Thanks to our staff.

[00:21:47] Speaker 00:
The case is taken under submission.

[00:21:49] Speaker 00:
That concludes this panel's argued cases for this morning.