[00:00:00] Speaker 02: 21-1785, Alexam, Incorporated, against MasterCard International, Incorporated. [00:00:07] Speaker 02: Mr. Carter. [00:00:10] Speaker 03: Good morning, and may it please the court. [00:00:13] Speaker 03: I am counsel to the plaintiff appellant who is the patentee licensor here, Alexam, which signed an agreement with MasterCard to license Alexam's patent and give MasterCard a broad covenant not to sue. [00:00:26] Speaker 03: but which required MasterCard to pay royalties and which provided for the exclusive forum for disputes under that agreement. [00:00:34] Speaker 03: We asked this court very respectfully to reverse summary judgment against Alex Ham in the district court against its breach of contract royalty claims because it was based upon the application of judicial estoppel and that application was a legal error and abuse of discretion. [00:00:53] Speaker 03: Judicial estoppel is reserved to cases where a party reverses or takes a position that is entirely irreconcilable with a former position that has been approved in a prior proceeding. [00:01:08] Speaker 03: And the doing of that causes prejudice to the system or impugns judicial integrity. [00:01:15] Speaker 03: That is the opposite of what occurred here. [00:01:18] Speaker 03: The magistrate judge [00:01:20] Speaker 03: in reviewing the motion for summary judgment got it right at Appendix 147 when he said that the flaw in MasterCard's argument is that Alexam never contended before the PTAB that the covenant not to sue precluded its breach of contract claim and the PTAB never held that it did. [00:01:41] Speaker 03: On the contrary, the position taken by Alexam, which is laid out at pages 1491 through 1494, [00:01:50] Speaker 03: or so of the appendix contain its response to MasterCard's assertion about the covenant not to sue, as well as its response to the board's request about the covenant not to sue. [00:02:05] Speaker 00: Council, you also, Council, wasn't, didn't Alexa also have another paper that they filed, if I remember correctly, it's at page 448 to 50 of the record? [00:02:18] Speaker 00: There's two briefs before the PTO on this issue, right? [00:02:24] Speaker 03: Yes. [00:02:25] Speaker 00: OK. [00:02:25] Speaker 03: Thank you. [00:02:28] Speaker 00: You know, I noticed that MasterCard emphasizes one particular sentence in your second brief before the PTO. [00:02:37] Speaker 00: And I'd like to give you an opportunity to respond to it. [00:02:40] Speaker 00: And the sentence that they quote multiple times is found on page appendix 1492 [00:02:48] Speaker 00: and it's the CNS also is sufficient to moot a claim for declaratory release. [00:02:54] Speaker 00: Would you like to explain what you think that means in the context of your entire brief? [00:03:00] Speaker 03: Well, the entire brief, of course, is a response to the patent, the PTAB request for clarification from the parties. [00:03:10] Speaker 03: And so it is addressing what the CNN, the Covenant Not to Sue addresses. [00:03:15] Speaker 03: That sentence can't be cherry picked out of context. [00:03:18] Speaker 03: There are three or four pages there where MasterCard, I'm sorry, Alex Sam explains that it sued MasterCard for breach of contract for loyalty damages and that the Covenant Not to Sue serves as a bar. [00:03:31] Speaker 03: to the petitioner's standing at the PTAB because it applies to the patent infringement claims but not to the contract claim to pay royalties. [00:03:46] Speaker 03: It says, for example, on page 1492 in Alex Timm's brief that the payment of royalties is petitioner's obligation under the license agreement, not a condition of the CNS, [00:03:57] Speaker 03: The petitioner's intentional and admitted refusal to pay loyalty to those supports the claim for breach but not patent infringement. [00:04:05] Speaker 03: And then if you turn to page 1493, it says, Alex Ham said, the party's license agreement contains a covenant not to sue. [00:04:15] Speaker 03: On the one hand, it was included to provide petitioner with assurance it would not be sued for patent infringement. [00:04:21] Speaker 03: On the other hand, patent owner intended to enter into a license agreement and have the ability [00:04:26] Speaker 03: to enforce its terms. [00:04:29] Speaker 03: So the brief that Your Honor is referring to is one that throughout makes the opposite of the point that Matt Ricardo is attempting to argue from that cherry picked sentence. [00:04:43] Speaker 03: It has simply never been the case and we laid this out throughout our red brief, I think, on several pages. [00:04:50] Speaker 03: that Alex Sam has ever contended that the covenant not to sue barred its royalty claim and has consistently argued in the district court before the PTAB at the PTAB and afterwards that the covenant not to sue bars Alex Sam from bringing a patent infringement claim but not a claim for royalties due under the license agreement. [00:05:12] Speaker 01: Except the covenant not to sue says for any claim alleged liabilities [00:05:18] Speaker 01: of any kind in nature at law, in equity or otherwise. [00:05:24] Speaker 01: In this further language, that does not sound limited to patent infringement. [00:05:29] Speaker 03: One of our complaints, Your Honor, is that the covenant not to sue has not been construed by the district court according to canons of contract construction. [00:05:40] Speaker 03: The covenant not to sue isn't the only provision of that agreement and under familiar canons of contract construction, [00:05:47] Speaker 03: all provisions of an agreement must be reconciled so as to render none of them superfluous. [00:05:52] Speaker 03: The construction that MasterCard urges to which you refer that the covenant not to sue would actually negate the royalties clause in the same agreement is just exactly that kind of provision that this rule of construction applies to so that it cannot be construed to bar a claim for the royalties given in the very same contract. [00:06:18] Speaker 00: Is that issue decided by the court below? [00:06:21] Speaker 00: You said they haven't, did they decide, did the district court look at the scope of the CNS or instead its decision was just based on a stop-all based on statements made to the PTO? [00:06:34] Speaker 03: That's correct, Your Honor. [00:06:36] Speaker 03: The district court had two decisions. [00:06:39] Speaker 03: I referred to the magistrate judge's report and recommendation and then to the district judge's decision rejecting that report and recommendation. [00:06:47] Speaker 03: The report and recommendation, as I said a moment ago, got it right when it said that MasterCard is wrong, that Alex Ham never contended that the covenant not to sue precluded its breach of contract plan. [00:07:02] Speaker 03: And then Judge Laurie just asked a question about the apparent breadth of the language of that covenant not to sue to see whether the covenant bars the loyalty claim. [00:07:11] Speaker 03: But the district court didn't base its decision on the language of the covenant, it based its decision [00:07:17] Speaker 03: on a recharacterization, as we put it, of the position actually taken by Alexam in the PTAB. [00:07:28] Speaker 03: And so far as we have seen, there's not a case of judicial estoppel that uses that device, that takes what was actually argued, sets it aside, recharacterizes it, calls it the functional equivalent of something, [00:07:41] Speaker 03: much less where the result of doing that is to turn it into the opposite of what was argued. [00:07:48] Speaker 03: The consistent argument has been here that in the bargain for exchange of this license agreement, Alex Sam gave up the right to bring a patent infringement claim, gave up the right to seek an injunction to exclude MasterCard from the market to visit on MasterCard the risk of loss of any of its business. [00:08:08] Speaker 03: And therefore, you know, for those reasons, the arguments about metamunit already are also incorrect. [00:08:16] Speaker 03: But as to judicial estoppel, the court exceeds the bounds of its discretion when it leaves aside the legal rules for the application of that doctrine, which has to do with changing positions in order to take an unfair advantage. [00:08:32] Speaker 03: Since there was no change of position here, [00:08:35] Speaker 03: Judge Soule, the court should have construed the contract, should have looked at it and determined whether the contract covenant not to sue barred either Alex Ham's royalties claim, which would be an absurd result, or MasterCard's affirmative counterplains or affirmative defenses based upon insolidity or infringement. [00:08:58] Speaker 03: It simply cannot manufacture for those counterplains subject matter jurisdiction [00:09:05] Speaker 03: because it has a very broad covenant not to sue, pursuant to which it does not realistically face the risk of an infringement claim, wasn't sued for infringement at the time the case was brought, hasn't been sued for infringement since the time the case was brought. [00:09:23] Speaker 03: There has simply never been any reason why MasterCard would have standing under metamune because although royalties [00:09:33] Speaker 03: pardon me, were sought, no injunction could be sought and infringement action had never been filed and was not threatened. [00:09:49] Speaker 03: Do I still have the line? [00:09:53] Speaker 03: Hello? [00:09:55] Speaker 00: Yes? [00:09:55] Speaker 00: Over here. [00:09:57] Speaker 03: Yes. [00:09:57] Speaker 03: I was just afraid we might have lost the line. [00:09:59] Speaker 03: We're still listening. [00:10:00] Speaker 03: That's very good. [00:10:01] Speaker 03: So, you know, Your Honors, I would refer you to a case that came out right about the time just before the red brief was filed. [00:10:07] Speaker 03: It's your decision in a case called Canoe versus Samson. [00:10:13] Speaker 03: And in Canoe versus Samson, I just got the slip of things up in front of me. [00:10:17] Speaker 03: It looks like it's page 11. [00:10:18] Speaker 03: This court, you may recall, was dealing with a forum selection clause in a nondisclosure agreement and whether or not that applied. [00:10:26] Speaker 03: to infringement claims brought to an IPR proceeding. [00:10:32] Speaker 03: And the issue on judicial estoppel in that case was whether Samsung had taken incompletely irreconcilable positions arguing in one other case that the foreign selection clause was extremely broad. [00:10:49] Speaker 03: but arguing in the present case that it was very narrow and therefore didn't apply to bar its PTAB proceedings petition. [00:11:00] Speaker 03: And, you know, this court quoted the Second Circuit in the Apple case, which in turn quoted the Supreme Court's New Hampshire case for the three components of what judicial estoppel requires, and emphasized in its quote that relief is granted only when the impact [00:11:17] Speaker 03: on judicial integrity is certain. [00:11:20] Speaker 03: And in quoting the Second Circuit's standards, the first prong is that the courts typically consider whether the party's argument is clearly inconsistent with its earlier position. [00:11:31] Speaker 03: I submit that it's impossible to be clearly consistent with an earlier position if it is exactly the same position in both cases that has been urged and that is what we have here. [00:11:45] Speaker 03: We have clearly demonstrated by reference to the record at the PTAB and indeed to the record before the district court prior to the PTAB that Alexam's position here is that contract claims for royalty damages are owed but that Alexam, unlike perhaps the usual license or patentee, had given up the right to exclude, given up the right to bring an infringement to action. [00:12:13] Speaker 03: And faced with that, there was no basis for the counterclaim that was asserted in the district court. [00:12:20] Speaker 03: There was no basis for the petition in the PTAB that MasterCard asserted. [00:12:24] Speaker 03: And as a result, the application of judicial estoppel was wrong. [00:12:33] Speaker 03: And the district court erred in granting summary judgment, taking, by the way, no inferences in favor [00:12:43] Speaker 03: of Alexam and all inferences about the scope of the Covenant and the position taken in the PTAB against the non-movement, which is an additional basis to recognize that summary judgment here was error. [00:12:59] Speaker 02: Well, let me ask you just one final question about the whole threshold, and it's come up before in this colloquy, that it looks as if the agreement between the parties included an agreement not to sue for anything, including suing for unpaid royalties. [00:13:21] Speaker 02: And unless we can cross that barrier, we really don't even get to the other issues [00:13:30] Speaker 03: A couple of comments and response. [00:13:32] Speaker 03: I understand the question. [00:13:33] Speaker 03: First, it's not for this court, I submit, to interpret as a matter of state law, canons of contract construction. [00:13:42] Speaker 03: for the first time. [00:13:42] Speaker 02: Let's assume that it is because I think you know that we could, of course, send this to the state court to interpret it for us. [00:13:54] Speaker 02: However, I do believe the protocol for decades in the federal circuit is to proceed with the case and if state law needs to be applied, we'll apply it. [00:14:08] Speaker 03: I'm sorry, that wasn't my point, Your Honor, but I do understand yours. [00:14:10] Speaker 03: Judge Newman, my point is that the district court here never engaged in state law canons of contract construction interpretation of the covenant not to sue. [00:14:21] Speaker 03: Had it done so, and I submit that if this court were to do so, you would apply the standard that I referred to earlier with Judge Lurie that no provision of a contract should be construed to be meaningless. [00:14:35] Speaker 03: and that all provisions should be read harmoniously. [00:14:38] Speaker 03: In the very same document, in the opposite pages of the same document, pages three and four, there is both a covenant not to sue and a royalty provision. [00:14:50] Speaker 03: the construction that you're suggesting that the covenant not to sue applies to royalties claims would render the royalty provision nubatory. [00:14:58] Speaker 03: And it was the only and principle, obviously, principle term, but the only economic term of the agreement. [00:15:05] Speaker 03: So that would be an erroneous application of the canons of contract construction. [00:15:09] Speaker 03: A correct one would be to say that the covenant bars all claims except those arising from disagreements such as the breach of the royalty provision. [00:15:19] Speaker 03: That one. [00:15:20] Speaker 03: I see my time has expired unless there's any other questions. [00:15:24] Speaker 02: Okay. [00:15:24] Speaker 02: Anything else at the moment for counsel? [00:15:26] Speaker 03: No. [00:15:27] Speaker 02: No. [00:15:28] Speaker 02: All right. [00:15:29] Speaker 02: Then we'll hear from Mr. Williams. [00:15:33] Speaker 04: Thank you, honor. [00:15:34] Speaker 04: May I proceed? [00:15:35] Speaker 02: Yes, proceed. [00:15:37] Speaker 04: It pleads the court. [00:15:37] Speaker 04: Alex Sam here made many arguments to the PTUB, two are particularly important. [00:15:42] Speaker 04: First, it told the PTUB that it couldn't sue MasterCard for patent infringement because of the license agreement. [00:15:48] Speaker 04: The second argument it made was that it was, the covenant not to sue was sufficient to move the claim for declaratory relief. [00:15:56] Speaker 04: It is the second argument there that is the problem for Alex Sam. [00:16:00] Speaker 04: If it hadn't made that second argument, we likely would have been in the PTUB. [00:16:04] Speaker 04: proceeding with the covered business method review as MasterCard had asked for. [00:16:07] Speaker 04: But instead, Alexander made this argument about the scope of the Covenant not to sue. [00:16:12] Speaker 04: They told the PTAB that the Covenant not to sue was sufficient to moot MasterCard's claim for declaratory relief. [00:16:18] Speaker 00: Council, this is Dr. Stoll. [00:16:20] Speaker 00: I see the sentence you're referring to. [00:16:22] Speaker 00: It's on page A1492. [00:16:25] Speaker 00: But what about the sentences that precede that and follow it in context what they're saying there [00:16:33] Speaker 00: is that there can be no, that there's a support for a claim for breach, but not patent infringement. [00:16:43] Speaker 00: They say that multiple times before and after the sentence you're referring to. [00:16:48] Speaker 00: I agree that the sentence you're referring to sounds very broad, but they never say that there's no right to claim for a breach. [00:16:58] Speaker 00: They are simply talking about [00:17:00] Speaker 00: that they will cannot sue for patent infringement. [00:17:05] Speaker 04: Right. [00:17:05] Speaker 04: I mean, like I said, Judge Stoll, I think they make two arguments here. [00:17:08] Speaker 04: One, I agree. [00:17:10] Speaker 00: They think that... So, wait, just to be clear. [00:17:12] Speaker 00: So even though the sentence, you know, one sentence above the sentence you're referring to says that expressly, that you still think this is a separate second argument, this one sentence that says the CNS also is sufficient to mood a claim for declaratory relief. [00:17:29] Speaker 00: Yes, and I think it... What if I disagree with you? [00:17:31] Speaker 00: Do you have anything else you're relying on besides this sentence? [00:17:34] Speaker 00: Because I have to say, I don't see where you're citing anything else in your brief. [00:17:40] Speaker 04: Well, we could look... I mean, the PTADS analysis of this issue is fulsome. [00:17:45] Speaker 04: They go on at significant length and explicitly rely on the arguments that the patent owner had made. [00:17:55] Speaker 04: So, for instance, if you look at... That's a separate issue, right? [00:17:58] Speaker 00: So, the one question is whether they've taken inconsistent positions, and another question is whether the PTO relied on the inconsistent position, right? [00:18:07] Speaker 01: It is. [00:18:08] Speaker 01: It is. [00:18:08] Speaker 00: You're not pointing me to where the PTO relied on the inconsistent position. [00:18:12] Speaker 00: I'm asking you, do you have any other evidence that an inconsistent position was taken? [00:18:17] Speaker 00: We can move to the PTO's analysis in a minute. [00:18:20] Speaker 00: But I want to make sure that you stay on track for me and that you understand my question. [00:18:25] Speaker 04: No, and I think this has to be the inconsistent position. [00:18:28] Speaker 04: I mean, it's clear for MedImmune that on the facts we had in the absence of a covenant not to sue, MasterCard had the right to a covered business method review. [00:18:37] Speaker 04: It's clear as day in MedImmune, these are exactly the facts that MedImmune had. [00:18:40] Speaker 04: You've got a license agreement. [00:18:42] Speaker 04: You've got the patentee asserting royalties under a license agreement that are disputed. [00:18:46] Speaker 04: And the licensee says, I'm entitled to a declaration that I don't owe royalties for these transactions and that the patent is invalid to the extent that I do. [00:18:54] Speaker 04: Those are the exact facts we had here. [00:18:56] Speaker 04: And if Alexam had not made this argument that it makes in this sentence, I mean, I recognize it's just one sentence, but it's extremely important. [00:19:05] Speaker 04: Without that argument, we would have been in the PTAB because it's clear endometrium and MasterCard would be entitled to that proceeding. [00:19:10] Speaker 04: And instead, it's because of this argument [00:19:14] Speaker 04: the one that the PTAB focused on in its analysis that it stripped MasterCard of the right to cover business message review. [00:19:19] Speaker 00: Okay. [00:19:20] Speaker 00: Let's look at the PTAB. [00:19:21] Speaker 00: I understand. [00:19:22] Speaker 00: And I understand the weight you're giving this one sentence. [00:19:24] Speaker 00: So let's turn to the PTO's decision and show me where they emphasize the importance of this. [00:19:32] Speaker 04: Right. [00:19:32] Speaker 04: So there's a couple places. [00:19:34] Speaker 04: I'll start on appendix page 1522. [00:19:36] Speaker 04: Okay. [00:19:41] Speaker 04: just kind of with their conclusion, and I'll point you to footnote four at the bottom of that page, the last sentence. [00:19:47] Speaker 04: In contrast, in determining whether a petitioner has met the standing requirement to initiate this CBM review, we have interpreted the license agreement, Perin, including the covenant not to sue in Perin, as part of our analysis to determine the petitioner has not been charged with infringement by patent owner. [00:20:03] Speaker 04: So, this covenant was [00:20:05] Speaker 04: Clearly the key bit, we can then go back and look in more detail at its analysis, which starts a few pages earlier on page 1519. [00:20:13] Speaker 04: They say, on page 1519, quote, we find that the broad language of the covenant not to sue provision and the license agreement removes any imminent possibility that patent owner could bring an infringement action against petitioner. [00:20:29] Speaker 04: It goes on to find that the language of that covenant [00:20:34] Speaker 04: is so broad that it's not conditioned on the payment of royalties, that it couldn't be. [00:20:38] Speaker 00: Which page are you looking at right now? [00:20:39] Speaker 00: I put note four and I apologize. [00:20:43] Speaker 00: What page? [00:20:44] Speaker 04: I'll back up. [00:20:45] Speaker 04: I was starting on page 1519. [00:20:46] Speaker 00: I got, okay. [00:20:48] Speaker 00: Thank you. [00:20:49] Speaker 04: All right. [00:20:51] Speaker 04: Top of that page, let's begin there. [00:20:53] Speaker 04: So the PTAB here notes that Patent Owner and its supplemental response asserts that the covenant not to sue is further evidence that Patent Owner cannot sue Petitioner for infringement and [00:21:03] Speaker 04: The second argument, it is just another reason why petitioner lacks standing. [00:21:08] Speaker 04: So again, here the PTAB is keying in on this covenant not to sue as the reason that MasterCard is not able to proceed in the PTAB. [00:21:17] Speaker 04: And then bottom of 1519, they begin their analysis with the terms of the covenant and they say they've taken into account the party's submissions. [00:21:27] Speaker 04: And they find that the broad language of the Covenant Not to Sue provision removes any imminent possibility the Patent Order could bring an infringement action against petitioner. [00:21:34] Speaker 04: And it goes on for the next page or two to walk through the various arguments about the scope of this patent license agreement, the Covenant Not to Sue, the patent license agreement, ultimately culminating in the section I just showed you in footnote four. [00:21:51] Speaker 04: So all of that is clearly, there's just no, [00:21:55] Speaker 04: Based on the PTAP's actual analysis here, it is clear that they relied on the scope of this covenant not to sue to strip MasterCard of its right to the covered business master review. [00:22:04] Speaker 00: And importantly... Do you think they relied on the scope of the covenant not to sue with respect to even the ability to sue for royalties based on breach of contract? [00:22:17] Speaker 00: Or were they interpreting it based on infringement? [00:22:21] Speaker 00: For example, if I look at the board's regulations [00:22:24] Speaker 00: about what's required for standing to seek CBM review. [00:22:27] Speaker 00: There's some language there that's pretty key and it says, charge with infringement means a real and substantial controversy regarding infringement of a covered business method exists. [00:22:39] Speaker 00: So the petitioner would have standing to bring a declaratory judgment in federal court. [00:22:42] Speaker 00: It's not having standing to bring a declaratory judgment action for breach of contract, it's or for validity [00:22:50] Speaker 00: Well, I guess it is for validity, but the way this sentence ties it to infringement, does that make it so the PTO's statement about, hey, we understand the district would not have reached the issue we address here means that they aren't, in fact, relying on anything other than infringement and not relying on the ability to bring a breach of contract to. [00:23:12] Speaker 04: Sorry. [00:23:14] Speaker 04: I would say two things are important to point out. [00:23:18] Speaker 04: So first, at page 1520 of the PTUBS decision in footnote three, they're explicit about this. [00:23:23] Speaker 04: They say, we need not and do not address the question of whether patent owners breach of contract claim in the New York action itself violates the covenant not to sue. [00:23:33] Speaker 04: They realize that this is a potential issue. [00:23:36] Speaker 04: They explicitly leave that open for the district court to decide what to do about, which the district court did. [00:23:41] Speaker 04: The second thing I would point out is that in the opinion, the PTAB, I mean, in terms of what that actual regulation means, we could certainly have an interesting discussion about it. [00:23:51] Speaker 04: I think it's entirely relevant to this case because the PTAB itself told us how it was interpreting it. [00:23:56] Speaker 04: So page 1516 of the opinion, the PTAB points out, analyzing the regulation, which I think you were just reading from 42.302A, they say, the foregoing regulation has made it [00:24:10] Speaker 04: quote, clear that it is the ability to seek relief in federal court that is important to the standing inquiry, unquote. [00:24:16] Speaker 04: And they're quoting there from this court's return mail decision. [00:24:18] Speaker 04: And so they say in our analysis, we've considered this case law addressing when a party might have Article III standing to bring it to a clerical judgment action. [00:24:26] Speaker 04: And then they start with MedImmune, which, of course, is the exact case on point from the Supreme Court. [00:24:31] Speaker 04: So they've interpreted this regulation in terms of what it means to be charged with infringement. [00:24:34] Speaker 04: Remember, the statute is broader than just sued for infringement. [00:24:37] Speaker 04: It's sued or charged. [00:24:38] Speaker 04: And so the PTAB has interpreted what charge means with its regulations, and then it's further explained how it understood that regulation in this opinion, which is to say it goes to the question of what standing under the Declaratory Judgment Act, under Article III for declaratory judgment would be, applying the federal case law. [00:24:55] Speaker 04: So that's why Metamune is directly on point. [00:24:57] Speaker 04: Given those facts, MasterCard, as I pointed out, would have had the ability to seek a covered business method review had it not been for this covenant. [00:25:06] Speaker 04: I think I answered the question you were asking, Judge Stoltz. [00:25:09] Speaker 04: But if not, let me know. [00:25:10] Speaker 00: You did. [00:25:10] Speaker 00: You did. [00:25:14] Speaker 00: What about they have to be clearly in a consistent position? [00:25:18] Speaker 00: What is your view on that? [00:25:19] Speaker 00: I mean, you're reading a lot into a sentence. [00:25:22] Speaker 04: Right. [00:25:22] Speaker 04: Well, I mean, it's not OK. [00:25:23] Speaker 04: First of all, let me just back up and remind the court what the standard review here is. [00:25:26] Speaker 04: The question is, did Judge Glasser abuse his discretion in applying these factors? [00:25:31] Speaker 04: And we have to keep in mind several things in judicial estoppel when answering that question. [00:25:36] Speaker 04: First is, [00:25:36] Speaker 04: There is no rigid formula for judicial estoppel. [00:25:40] Speaker 04: The Supreme Court made that clear in New Hampshire versus Maine. [00:25:43] Speaker 04: It obviously talked about some factors that are typical and it applied them, but it was very clear that there is no rigid rule, so we shouldn't be looking for some inflexible requirement that set in stone. [00:25:54] Speaker 04: The key inquiry in any judicial estoppel inquiry is to decide as a matter of essentially looking at the integrity of the judicial system, [00:26:03] Speaker 04: has one party put a second court into position where it would have to, in some sense, impeach the first court's ruling in order to resolve a case. [00:26:11] Speaker 04: And it's the desire to avoid that that leads to judicial estoppel. [00:26:15] Speaker 04: The argument is we don't want to create a mess. [00:26:18] Speaker 00: It's a question, though, here, which is there's a factual conclusion or a fact finding, I should say, that there were inconsistent positions taken. [00:26:29] Speaker 00: Now, I review that for whether it's clearly erroneous, right? [00:26:33] Speaker 04: Well, I mean, in the course of deciding whether the judge abused his discretion, you would need to ask whether he made an error of law. [00:26:42] Speaker 04: I mean, I agree with that. [00:26:43] Speaker 00: Well, first there's the question of an abuse of discretion can be made by making an error of law or it can be made by making clearly erroneous fact-finding, right? [00:26:54] Speaker 04: Fair enough. [00:26:54] Speaker 04: And so here, I mean, certainly Judge Glasser articulated the standard correctly. [00:26:59] Speaker 04: I mean, Appendix page 44, he says, [00:27:02] Speaker 04: Doctor of Digital Estoppel applies where a party's position is clearly inconsistent with its earlier position. [00:27:08] Speaker 04: So he certainly understood the correct standard as it exists today. [00:27:13] Speaker 04: And he applied it repeatedly. [00:27:17] Speaker 04: And for instance, in appendix page 51 in his decision in footnote 17, he finds that all three elements are satisfied and that Alex Am advocated inconsistent positions by demanding royalties under the license agreement while insisting [00:27:31] Speaker 04: that MasterCard did not have stamping. [00:27:33] Speaker 04: So he found those positions to be the clearly inconsistent positions, and that decision is clearly correct. [00:27:38] Speaker 04: Under MedImmune, we had the ability to bring a covered business method review action on these facts. [00:27:44] Speaker 04: If it was stripped from us, the only way it could have been, and the way it actually was, was by arguing that this covenant not to sue was so broad as to prevent Alexam from seeking those disputed royalties. [00:27:58] Speaker 04: So that is the clearly inconsistent position. [00:28:00] Speaker 04: Judge Glasser correctly found that those positions were inconsistent and relied on them in finding that Alexam was now stopped from seeking these royalties. [00:28:11] Speaker 04: I mean, and I would just point out in response to the discussion by my counterpart earlier about the difficulty of construing this covenant not to sue and the desire to have the district court do some fulsome analysis, this is exactly [00:28:24] Speaker 04: what judicial estoppel is meant to prevent. [00:28:26] Speaker 04: The PTAB did the analysis that is being requested. [00:28:30] Speaker 04: It was because of that analysis that the covered business method review was denied. [00:28:34] Speaker 04: You can't now go back to the district court and have the district court construe that covenant in a different way. [00:28:39] Speaker 04: That is precisely what the judicial estoppel doctrine acts to prevent. [00:28:45] Speaker 04: And there's many cases where sort of similar facts have applied to prevent this kind of second look at the argument that was already accepted. [00:28:54] Speaker 04: in the prior decision. [00:28:56] Speaker 04: New Hampshire versus Maine is such an example where having convinced the court to accept one interpretation of a prior judicial document, we'll call it, although I think it was actually a finding from King George II, and benefited from that interpretation, there was a judicial stopple applied against the state in that case, which was... But there was no explicit argument or holding that the reasonable interpretation [00:29:24] Speaker 02: of the covenant not to sue means that we're not going to sue you for royalties if you decide not to pay us. [00:29:31] Speaker 02: I don't recall any discussion of royalties in that proceeding. [00:29:36] Speaker 02: It was entirely validity or infringement, was it not? [00:29:40] Speaker 04: Well, New Hampshire case was not a patent case at all. [00:29:44] Speaker 04: But you're right that I'm not aware of a situation where [00:29:50] Speaker 04: that particular argument was made in the case law and instead what we have generally in the case law is broad covenants taking place in the context where there is no prior license agreement. [00:30:02] Speaker 02: Well, I'm looking at this case and at the subject matter which is where the issue is whether or not estoppel arose. [00:30:12] Speaker 02: So let's stick with this case. [00:30:15] Speaker 04: Yeah, well in this case the covenant not to sue is [00:30:18] Speaker 04: is broad, it's not limited to infringement actions. [00:30:21] Speaker 04: And that's the language, and it's because of that that the PTAB found MasterCard could not bring a covered business method review action. [00:30:28] Speaker 04: If there was such a distinction, if the Covenant not to sue were limited to claims for patent infringement, this would be a much different case because there would have been no way to strip MasterCard of its right to bring a covered business method. [00:30:39] Speaker 02: Well, neither of those issues is before us. [00:30:41] Speaker 02: What's before us is unpaid royalties. [00:30:44] Speaker 02: Only. [00:30:46] Speaker 04: Wow, wow. [00:30:47] Speaker 04: Sorry, can I finish my answer, Your Honor? [00:30:49] Speaker 02: Yes, please proceed. [00:30:50] Speaker 04: Yes. [00:30:51] Speaker 04: I would say what's before the court now is the district court's decision to invoke judicial estoppel to prevent Alexam from collecting royalties after having told the PTAB that this kind of thing is so broad. [00:31:02] Speaker 04: Yes, that's the question. [00:31:04] Speaker 02: And I'm trying to find in the decision or argument that said to invoke the estoppel where they argued that we also gave up the right to royalties. [00:31:18] Speaker 04: Right. [00:31:18] Speaker 04: Well, so what they said is that the covenant not to sue is sufficient to move to claim for declaratory relief. [00:31:24] Speaker 04: The under-controlling law, that has only one meaning, which is that MasterCard cannot be forced to pay disputed royalties because if MasterCard can be forced to pay disputed royalties, there is a declaratory relief claim and therefore MasterCard can bring the covered business method review. [00:31:42] Speaker 04: So that is the inconsistency in the argument Alex Ham made. [00:31:46] Speaker 04: It is one that's based on the context of controlling law. [00:31:49] Speaker 04: Remember that judicial stopple is all about context. [00:31:53] Speaker 04: You have to look at the statement in the context it was made. [00:31:56] Speaker 04: Here it was made in a very clear context to strip MasterCard of the relief that it would be entitled to under MedImmune. [00:32:02] Speaker 04: And it's for that reason that the district court judge correctly exercised its discretion in holding Alex Ham to that position and precluding it from collecting those disputed royalties. [00:32:11] Speaker 02: Okay. [00:32:12] Speaker 02: Any more questions for counsel? [00:32:14] Speaker 04: No. [00:32:15] Speaker 03: No. [00:32:16] Speaker 02: Okay. [00:32:16] Speaker 02: And we have rebuttals. [00:32:17] Speaker 02: Mr. Carter. [00:32:20] Speaker 03: Thank you very much, your honor. [00:32:21] Speaker 03: Let me begin with the assertion that the court first took up with my friend that the phrase that this covenant not to sue is sufficient to move declaratory relief in Alex and submission to the PTAB. [00:32:36] Speaker 03: I think it's by now very clear that's out of context with respect to the rest of the content of the submissions actually made. [00:32:46] Speaker 03: The question came up about an error of law is abuse of discretion, but so is a clearly erroneous fact-finding. [00:32:52] Speaker 03: If it were to be characterized as a fact-finding by the district court that Alex Ham's positions were that the covenant reaches breach of contract loyalty claims, [00:33:05] Speaker 03: or sufficient to moot any claim whatsoever for any matter whatsoever, that would be a clearly erroneous factual finding. [00:33:14] Speaker 03: I think this court can be comfortable with that. [00:33:17] Speaker 03: There's no need to look beyond the written record before the P tab and its own ruling. [00:33:23] Speaker 03: There's no need to deal with things like interpretation of the credibility of witnesses or inferences. [00:33:28] Speaker 03: That would be a clearly erroneous fact finding. [00:33:30] Speaker 03: But that's not what was said there. [00:33:33] Speaker 03: What the error seems to be here is that MasterCard argues that when you sue for royalties, you necessarily trigger [00:33:41] Speaker 03: standing to bring a DJ client for indolentity or non-infringement. [00:33:46] Speaker 03: But at the same time, they argue that but for the covenant not to sue, this case would be like MedImmune. [00:33:54] Speaker 03: We contend, as you know from our papers, that the district court erred in saying this case is the same as MedImmune. [00:34:00] Speaker 03: It is not. [00:34:00] Speaker 03: MedImmune uses the phrase totality of circumstances to describe the Supreme Court's standing determination, standard for standing determination. [00:34:10] Speaker 03: And this set of circumstances, unlike MedImmune, includes a covenant not to sue that is written very broadly. [00:34:18] Speaker 03: Indeed, this license agreement contains provisions for enforcement. [00:34:23] Speaker 03: It contains a choice of forum clause, for example. [00:34:27] Speaker 03: Those are clearly meant for something to be enforced and the principle, the only economic term in the license agreement is the royalty provision. [00:34:35] Speaker 03: So that takes us out of MasterCard's argument [00:34:38] Speaker 03: that the covenant not to sue doesn't alter the mix in comparing our case with Medellin. [00:34:49] Speaker 03: Unless the court has other questions for me, I think those are the points I wanted principally to respond to. [00:34:53] Speaker 03: But I do think that it bears emphasis based on Judge Stoll's colloquy with my friend to review pages 1519 through 1521 of the appendix. [00:35:03] Speaker 03: That's the section of the PTAP's decision entitled Analysis of Covenant Not to Sue, [00:35:09] Speaker 03: It starts out, we begin our analysis with the terms of the covenant. [00:35:13] Speaker 03: Having taken into consideration the party's submissions, we find the broad language of the covenant not to sue provision. [00:35:20] Speaker 03: In the license agreement, we lose any imminent possibility that patent donor could bring an infringement action against the petitioner. [00:35:27] Speaker 03: I'm sorry, may I conclude? [00:35:31] Speaker 02: Yes. [00:35:34] Speaker 03: Just pointing out that footnote three was cited to you and footnote three is where the patent, where the PTAB clearly says it's not addressing anything beyond and agreeing with any argument beyond the covenants effect on patent infringement claims. [00:35:48] Speaker 03: So there is no inconsistent positions between the cases. [00:35:52] Speaker 03: We respectfully request that this court reverse the order of summary judgment and remain for further proceedings not inconsistent with its ruling. [00:36:00] Speaker 02: Any more questions for Mr. Carter? [00:36:03] Speaker 03: No. [00:36:04] Speaker 02: No. [00:36:05] Speaker 02: Okay. [00:36:05] Speaker 02: Thank you again. [00:36:06] Speaker 02: Thanks to both counsel. [00:36:08] Speaker 02: The case is taken under submission.