[00:00:00] Speaker 04:
Our next case for argument is 21-1672, Bernetics versus Apple.

[00:00:05] Speaker 04:
And Mr. Lee, you get to go first this time.

[00:00:11] Speaker 00:
May I proceed, Your Honor?

[00:00:13] Speaker 04:
Please do.

[00:00:13] Speaker 04:
Thank you.

[00:00:15] Speaker 00:
Again, may I please the Court.

[00:00:16] Speaker 00:
My name is Bill Lee, and this time with my partner, Stephen Horn, I represent Apple in the second appeal.

[00:00:22] Speaker 00:
The Court need not resolve the issues presented in this appeal if it affirms the decisions

[00:00:28] Speaker 00:
PTAB decisions in the IPR in the companion appeal just argued.

[00:00:32] Speaker 00:
Affirmance of those decisions would require that the district court's judgment be vacated under Prozenius, XY, Crime R, a series of decisions.

[00:00:43] Speaker 00:
If the court reaches the merits of appeal, I would like to address this morning just two issues.

[00:00:50] Speaker 01:
Let me be so I'm clear in my mind.

[00:00:53] Speaker 01:
If we affirm the first one that we just heard, we just vacate the decision and send it back to the district court to dismiss?

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

[00:01:00] Speaker 00:
That's correct, your honor.

[00:01:01] Speaker 02:
And just to be clear, would that dismissal have to await actual cancellation of the claims by the patent office?

[00:01:08] Speaker 00:
No.

[00:01:09] Speaker 00:
I mean, the cancellation of the claims is not required for the

[00:01:13] Speaker 00:
Judgements will be vacated.

[00:01:15] Speaker 00:
And it is statutorily admitted.

[00:01:17] Speaker 00:
Once Your Honor, this Court, if it does, confirms the PTAT and mandate issues, it's a ministerial act to cancel the claims.

[00:01:26] Speaker 00:
It doesn't have to await that at all.

[00:01:28] Speaker 00:
And in fact, it tries to not await that at all.

[00:01:31] Speaker 02:
And let's just say, to play the hypothetical, let's say that all happened and CERT was sought and granted in the first case, and maybe the Supreme Court did something.

[00:01:42] Speaker 02:
Would all of what we did here get undone as well, I guess?

[00:01:48] Speaker 00:
Not knowing what the Supreme Court would do or what they would say or how they would do it, it's hard to predict.

[00:01:54] Speaker 00:
It's at least possible.

[00:01:55] Speaker 00:
It's possible that you'd come back.

[00:01:56] Speaker 00:
It's possible to come back.

[00:01:57] Speaker 00:
But there is no set of circumstances where if you affirm the PTEP decisions, if you vacate district court judgment and something happened that you couldn't unwind it and bring us back to where we are today.

[00:02:11] Speaker 00:
I would like to address just two damages-related issues if the court receives merits.

[00:02:18] Speaker 00:
The first and foremost is whether a new trial would be warranted because, for an expert, failed to comply with the basic principle outlined in Gerritsen, that in every case there be apportionment of the patentee's damages.

[00:02:32] Speaker 00:
I wanted to discuss this issue because in this case, Mr. Weinstein concedes that on retrial, his royalty rate for four patents and two features did not change when you went to two patents and one redesigned feature.

[00:02:50] Speaker 00:
He also conceded that he did not consider

[00:02:54] Speaker 00:
the number of patents that were involved in the other licenses and made no allowance for them.

[00:03:01] Speaker 00:
Both of them are Daubert problems under the opinions, under several opinions, but under the Apple, YLN, and Omega opinions of the court recently.

[00:03:12] Speaker 00:
The second is what I would call a footprint issue, which is, as the court knows, the infringement verdict here is based upon one feature of VPN.

[00:03:25] Speaker 00:
is focused upon one way of creating a VPN.

[00:03:30] Speaker 00:
It is focused on one optional setting for creating the VPN.

[00:03:35] Speaker 00:
And it's an optional setting that is disabled by default.

[00:03:40] Speaker 00:
There is no evidence in the record that a single customer has ever used it.

[00:03:44] Speaker 00:
And the question then becomes, underlucent, whether that evidence can support a verdict of $500-plus million.

[00:03:54] Speaker 00:
We're not suggesting that there had to be a mathematical precision, but Lewis says there has to be some correlation.

[00:04:00] Speaker 00:
So let me move to the first quickly.

[00:04:02] Speaker 00:
On the first, there are really two points to be made.

[00:04:06] Speaker 00:
They are both doubt there are issues, and they are also substantial evidence issues.

[00:04:11] Speaker 00:
The first is in the 2018 trial, Mr. Weinstein said for four patents and two features, the wealthy would be $1.20.

[00:04:23] Speaker 00:
But the 2020 retrial involved only two patents and one accused feature, which is why the case was sent back for Judge Schrader to consider what should be done.

[00:04:33] Speaker 00:
There was no change to the royalty rate, nor any explanation for why the royalty rate remained the same based upon the patents.

[00:04:42] Speaker 00:
There were only two explanations provided to you and to the court below.

[00:04:47] Speaker 00:
The first was that his royalty rate was not dependent upon the patents initiated.

[00:04:53] Speaker 00:
Well, that contradicts Y-Line and Omega and other cases on its face.

[00:04:58] Speaker 00:
He said, we're licensing the technology.

[00:05:02] Speaker 00:
And if there are more patents, the rate stays the same.

[00:05:05] Speaker 00:
If there are fewer patents, the rate stays the same.

[00:05:08] Speaker 00:
That is not consistent with Gerritsen.

[00:05:11] Speaker 00:
It's not consistent with

[00:05:12] Speaker 00:
the cases before Weiland and Omega, and it's certainly not consistent with Weiland and Omega.

[00:05:16] Speaker 02:
Didn't you already make that argument to us in the earlier appeal and we rejected it?

[00:05:21] Speaker 00:
You made it in a... I would say two things.

[00:05:25] Speaker 00:
The first is in the earlier appeals, there are two earlier appeals, each of them involved different products, each of them involved different accused features, each of them involved

[00:05:39] Speaker 00:
different time frame for that.

[00:05:42] Speaker 02:
But fundamentally, as I understand Mr. Weinstein, it's $1.20.

[00:05:46] Speaker 02:
It can be any time, any patents, any number of features.

[00:05:50] Speaker 02:
It's $1.20.

[00:05:52] Speaker 02:
And you guys have crossed him on that repeatedly.

[00:05:55] Speaker 02:
And you presented that issue, at least at that level of generality, to this court previously.

[00:05:59] Speaker 00:
Yeah.

[00:05:59] Speaker 00:
And Your Honor, if that fact precluded us from challenging him again, there would have been no reason for a remit.

[00:06:07] Speaker 00:
There was a remand by the last frenetics panel precisely because the question of whether you could have four patents and two features with the same royalty for two patents and a redesigned feature was not something that could be decided on the record and be decided below.

[00:06:24] Speaker 02:
Well, it wasn't the remand for further factual finding, but nothing we said precluded

[00:06:33] Speaker 02:
the district court and then ultimately a jury from coming to the same conclusion, I don't think.

[00:06:38] Speaker 00:
I think nothing that you said precluded the district court from having another jury trial and the jury trial coming to another conclusion.

[00:06:45] Speaker 00:
But there is no way that you would have known, or the prior panel would have known, that Mr. Weinstein was going to say the royalty remains exactly the same, not because of the patents in issue.

[00:06:58] Speaker 00:
not because of the importance of the accused feature, but because the number of patents doesn't matter.

[00:07:04] Speaker 00:
And that was something that is different because the facts are different here, the accused feature is different here, and as a consequence, the decision to be made is different here.

[00:07:16] Speaker 00:
And you're right.

[00:07:18] Speaker 00:
There's nothing that precluded the court from doing it, but there's nothing that precluded the court from considering the Daubert challenges, and we suggest they should.

[00:07:27] Speaker 04:
And I guess my problem, Mr. Lee, is so I think that Apple's argument and its logic is very simple and persuasive.

[00:07:36] Speaker 04:
Mr. Weinstein's opinion, $1.20 per unit is attributable to VDOT FT, VDOT plus FT, doesn't matter.

[00:07:44] Speaker 04:
He didn't have a built-in apportionment system, and therefore it's contrary to law.

[00:07:49] Speaker 04:
I think it was abuse of discretion to admit it.

[00:07:51] Speaker 04:
However, I think it precluded from making the argument.

[00:07:54] Speaker 04:
You had a shot.

[00:07:55] Speaker 04:
You appealed last time.

[00:07:56] Speaker 04:
You appealed on apportionment last time.

[00:07:58] Speaker 04:
You even mentioned Weinstein's testimony last time.

[00:08:00] Speaker 04:
But you didn't appeal this issue.

[00:08:03] Speaker 04:
Yes, it's riper now.

[00:08:05] Speaker 04:
It's better looking now.

[00:08:06] Speaker 04:
It's lower hanging fruit now.

[00:08:07] Speaker 04:
Go after it, sure.

[00:08:09] Speaker 04:
But you had an opportunity.

[00:08:10] Speaker 04:
You absolutely made arguments that were all around the periphery of this.

[00:08:14] Speaker 04:
That argument was sitting there to be made as part of your last appeal, and you didn't make it.

[00:08:20] Speaker 04:
And so I think that you're now precluded by virtue of that from making it in this case.

[00:08:24] Speaker 00:
Let me respond in three ways.

[00:08:27] Speaker 00:
I think that as a legal... Just two, not three?

[00:08:29] Speaker 00:
Just three.

[00:08:30] Speaker 04:
Three.

[00:08:31] Speaker 04:
I'm not sure how many.

[00:08:32] Speaker 00:
Three by fours of heaven.

[00:08:34] Speaker 00:
The first is, I don't think...

[00:08:36] Speaker 00:
If I take it in parts, there's no legal preclusion for the reasons that I tried to identify for Jetstart.

[00:08:42] Speaker 00:
Different accused products, different features, different patents, different hypothetical negotiation data.

[00:08:46] Speaker 00:
Now, I understand that's different than the question you asked about factually, what the court could do, but if I break it down into those parts, the question is, was there a legal preclusion?

[00:08:55] Speaker 00:
No, because of the four factors I just mentioned.

[00:09:00] Speaker 00:
The second question then becomes, did we make an argument that

[00:09:03] Speaker 00:
basically had the same broad parameters as some of us, the answer is for sure.

[00:09:08] Speaker 00:
And were we unsuccessful?

[00:09:10] Speaker 00:
For sure.

[00:09:10] Speaker 00:
I was the person who did it unsuccessfully.

[00:09:14] Speaker 00:
But that doesn't preclude us from making the arguments now.

[00:09:17] Speaker 00:
And the question for you now that we're narrowly focused on is this.

[00:09:23] Speaker 00:
If we focus on what was put before this jury for this accused feature, which wasn't mitigated before, for these two patents, was there a sufficient predicate for it to go to the jury?

[00:09:39] Speaker 00:
And the answer is no.

[00:09:42] Speaker 00:
Now, Judge Strzok, I think the answer to your question is, if Judge Schrader had decided with YON and Omega in hand that there wasn't sufficient

[00:09:50] Speaker 00:
a sufficient predicate for it to go to the jury, he could have decided that as well.

[00:09:57] Speaker 00:
We are suggesting that under the court's recent decisions, that was what he should have done.

[00:10:02] Speaker 04:
I guess I don't understand.

[00:10:03] Speaker 04:
The issue presented before and the issue presented now in both cases, you were challenging the expert Weinstein's methodology, correct?

[00:10:14] Speaker 00:
Yes, we were challenging his methodology, and yes, you're correct, we challenged the fact that he hadn't apportioned.

[00:10:21] Speaker 00:
We did not challenge this specific apportionment that underlies this specific version.

[00:10:29] Speaker 04:
But it's the same in either case.

[00:10:32] Speaker 04:
And why does it matter that it was different products?

[00:10:36] Speaker 04:
It's too granular.

[00:10:38] Speaker 04:
That's like saying, well, today's Tuesday, and yesterday was Wednesday, so it doesn't count.

[00:10:42] Speaker 04:
I mean, I don't understand.

[00:10:43] Speaker 04:
You haven't meaningfully convinced me that there is a distinction for actual legal estoppel purposes

[00:10:50] Speaker 04:
in the facts of this case versus that case such that you couldn't have made it and it shouldn't have been held against you for not having raised it?

[00:10:58] Speaker 00:
So, Your Honor, I think that if we focus on it as an estoppel question, an issue-proclusion question, that that would require that the issues that were litigated in two cases be the same, and they're different.

[00:11:11] Speaker 04:
But they're not different, meaningfully.

[00:11:14] Speaker 04:
You have made no allegations that they're different vis-a-vis Mr. Weinstein's methodology between the last appeal and this appeal.

[00:11:21] Speaker 04:
You pointed ethereally to different products, but you haven't delineated or fine-tuned that to suggest, and as a result, we can make this argument here challenging his methodology, but we couldn't have made it there or didn't have to or shouldn't have or whatever.

[00:11:37] Speaker 00:
Let me just say two things this time.

[00:11:39] Speaker 00:
The first is that we could not have made the argument that the redesign feature alone, standing alone, under Mr. Weinstein's analysis,

[00:11:54] Speaker 00:
could have a royalty rate of $1.20, because all of the products that had BPN on demand and all had FaceTime as well.

[00:12:01] Speaker 00:
And the focus now is just on the redesign feature.

[00:12:03] Speaker 00:
So focusing on the redesign feature, we couldn't have done before.

[00:12:07] Speaker 00:
Without a doubt, we've been here before, the same parties, the same basic area.

[00:12:12] Speaker 00:
I think the two questions are, is there a legal estoppel, and because there's not an identity of issues,

[00:12:17] Speaker 00:
There's not.

[00:12:18] Speaker 00:
And then the question becomes, could we ever have litigated this issue?

[00:12:22] Speaker 00:
The answer is no, which is why there was a remand.

[00:12:26] Speaker 00:
And I'll reserve my remaining time for the rebuttal.

[00:12:29] Speaker 04:
Thank you, Mr. Lee.

[00:12:31] Speaker 04:
Mr. Lankin?

[00:12:33] Speaker 03:
Thank you.

[00:12:34] Speaker 03:
May I please the court?

[00:12:35] Speaker 04:
Mr. Lankin, can we start to help with the housekeeping matter?

[00:12:37] Speaker 04:
I know you weren't counsel in the prior appeal, but is Mr. Lee correct that if the prior appeal from the board decision in the IPR is affirmed,

[00:12:46] Speaker 04:
that that basically moots this case in its entirety?

[00:12:50] Speaker 03:
In substance, yes.

[00:12:52] Speaker 03:
If the court upholds the PTAB, the cat patents are on their way to cancellation.

[00:12:56] Speaker 03:
And once the cat patents are canceled, we no longer have a cause of action.

[00:13:00] Speaker 03:
So under Fresenius, if the court upholds the PTAB's decision, we have a big problem.

[00:13:05] Speaker 03:
I don't think we have enforceable judgment anymore.

[00:13:07] Speaker 04:
And the right result for us at that point would just be to vacate this as?

[00:13:11] Speaker 04:
moot or something?

[00:13:12] Speaker 04:
Or would you vacate it as?

[00:13:14] Speaker 03:
I think you'd vacate the judgment for want of a cause of action.

[00:13:18] Speaker 03:
I think it's more like a 12b6 type of thing because we no longer have patents, so we no longer have claims since we lose.

[00:13:23] Speaker 03:
I don't think it goes technically moot in a jurisdictional sense.

[00:13:26] Speaker 03:
But you would remand for dismissal because we've lost our causes of action.

[00:13:31] Speaker 03:
I'm sure hoping that that doesn't occur.

[00:13:33] Speaker 03:
And on that presumption, I'm going to move over to the issue of apportionment and whether or not

[00:13:38] Speaker 03:
our expert was required to reduce his rate when it moved from one to infringing for features to one.

[00:13:46] Speaker 03:
And the argument doesn't make sense.

[00:13:48] Speaker 04:
So just out of curiosity, you're going to go head on with what I started with Mr. Lee, which is said, I agreed with you, their expert didn't apportion, and that his $1.20 doesn't include a built-in apportionment.

[00:14:00] Speaker 04:
Is that where you're starting?

[00:14:02] Speaker 03:
I don't agree with that, because he actually does explain

[00:14:05] Speaker 03:
And the record does show exactly why you would have the same rate, whether it was FaceTime or FaceTime on VPN.

[00:14:12] Speaker 03:
But I wanted to start with preclusion, which is to point out that they could have made exactly the same argument in the prior appeal.

[00:14:18] Speaker 03:
I'd ask the court to turn page 42 of our brief.

[00:14:23] Speaker 03:
Hopefully it's not going to use the appendix.

[00:14:25] Speaker 03:
And if you look at the top graphic, this is the demonstrative from our expert.

[00:14:31] Speaker 03:
If you look at the left-hand column, you look at the infringement period for VPN on demand.

[00:14:36] Speaker 03:
And it's June 17, 2009.

[00:14:37] Speaker 03:
So let me ask you this.

[00:14:40] Speaker 04:
I will definitely let you walk through this, of course.

[00:14:42] Speaker 04:
But you started by saying, I want to show you they could have made the same argument in a prior appeal.

[00:14:46] Speaker 04:
Is that the standard for finding legal collateral assault?

[00:14:50] Speaker 03:
No, no.

[00:14:52] Speaker 03:
The idea of whether you could charge the same rate for two versus one.

[00:14:57] Speaker 03:
was something they squarely had before them in the 417 case.

[00:15:01] Speaker 03:
The district court rejected their argument.

[00:15:03] Speaker 03:
They had argued flat out, and I can point to it in the record, which is, if you look at 15372, they argued that Weinstein did not apportion because he applied the same per unit royalty rate for VPN on demand alone.

[00:15:14] Speaker 03:
for FaceTime alone and for FaceTime and VPN on demand combined.

[00:15:18] Speaker 03:
That's 15372.

[00:15:19] Speaker 03:
And the district court rejected that.

[00:15:22] Speaker 03:
They appealed.

[00:15:22] Speaker 03:
They lost.

[00:15:23] Speaker 03:
That's preclusion.

[00:15:24] Speaker 03:
That's the end of the day.

[00:15:26] Speaker 03:
What I was referring to was Mr. Lee's statement that it really wasn't ripe because everything overlapped.

[00:15:31] Speaker 03:
But it was fully ripe because if you take a look at the graphic, you see that the VPN on demand started infringing on 2009.

[00:15:39] Speaker 03:
The next one over, royalties for FaceTime, it starts in June 2010, because FaceTime was added later.

[00:15:44] Speaker 03:
So you have units that are VPN on demand only, which get $1.20.

[00:15:49] Speaker 03:
You have units that are FaceTime and VPN on demand, which get $1.20.

[00:15:53] Speaker 03:
And so in that case itself, it was very clear that you had both VPN on demand only units and units that were combined.

[00:16:01] Speaker 03:
And Mr. Weinstein said, same rate, $1.20.

[00:16:05] Speaker 03:
They lost.

[00:16:06] Speaker 03:
They didn't appeal the issue.

[00:16:08] Speaker 03:
That's the end of the day on preclusion.

[00:16:10] Speaker 03:
But turning to the merits, that's actually.

[00:16:11] Speaker 04:
But Mr. Lee seemed to hinge his response to that exact line of questioning on the idea that it was separate products.

[00:16:19] Speaker 04:
These are different products.

[00:16:21] Speaker 03:
No, it's still VP on demand is still the product.

[00:16:25] Speaker 03:
And there's no meaningful factual distinction.

[00:16:28] Speaker 03:
The question is, was the experts methodology, VPN on demand alone, one price, VPN on demand with FaceTime, same price, admissible methodology.

[00:16:38] Speaker 03:
They lost that issue.

[00:16:40] Speaker 03:
That was the issue.

[00:16:41] Speaker 03:
Whether you change the name and say, well, it's VPN demand with a probe, VPN without a probe, doesn't make a difference.

[00:16:46] Speaker 03:
Legally, the question is, can you have a methodology

[00:16:49] Speaker 03:
in this context where if you have two patents or four patents the value doesn't change and what actually happened was in the prior cases there were products that were covered by two patents and products that were covered by four and it was the same royalty and they raised the issue in district court, they lost and they didn't appeal that issue.

[00:17:07] Speaker 03:
That's the end of the case for them.

[00:17:09] Speaker 03:
But turning back to whether you can do this at all, I think this is important.

[00:17:14] Speaker 03:
This is a context where

[00:17:15] Speaker 04:
When you can do this at all, it's important.

[00:17:19] Speaker 04:
I'm just trying to follow.

[00:17:20] Speaker 04:
There's a lot of issues.

[00:17:21] Speaker 04:
Are you now taking head-on with the stuff I said before?

[00:17:24] Speaker 03:
Exactly what I'm going to do, Judge Moore.

[00:17:27] Speaker 03:
This is the ten-on-ten moment about whether or not that's actually permissible.

[00:17:31] Speaker 04:
I'll focus.

[00:17:31] Speaker 03:
Go ahead.

[00:17:32] Speaker 03:
And the reason for that is this.

[00:17:34] Speaker 03:
The evidence showed exactly why you would have only one rate that you wouldn't make it go up when you added a feature in 2010 or then back down if you took it out or it stopped infringing.

[00:17:44] Speaker 03:
And it's not just that the patents are from the same family.

[00:17:46] Speaker 03:
These are all continuations in part or continuations from the same parent.

[00:17:50] Speaker 03:
And not just that they have the same inventors.

[00:17:52] Speaker 03:
But the technology is so closely related, it meets fundamentally the same need.

[00:17:57] Speaker 03:
If you look at Apple's brief on page six, they say all four patents involve systems, I'm quoting, for securely and privately transmitting communications over public networks.

[00:18:06] Speaker 03:
They all do the same basic thing to meet the same need.

[00:18:11] Speaker 03:
And then if you take a look

[00:18:15] Speaker 03:
The actual negotiations, what happened in the, this is the type of thing that happens when you have all the same patents doing the same thing, you typically will have for one family, one rate.

[00:18:24] Speaker 03:
You don't start processing it out based on different claims or different patents.

[00:18:27] Speaker 03:
The actual negotiations here, if you look at the prior licenses, did they go up and down based on how many patents, how many claims?

[00:18:34] Speaker 03:
No, it was for the patent family.

[00:18:36] Speaker 03:
And then if you take a look at Dr. Short, who was the inventor here and explained what the reason was.

[00:18:41] Speaker 03:
This is page 1419, lines 18 to 21.

[00:18:46] Speaker 03:
Vernetics licenses the family of the technology.

[00:18:49] Speaker 03:
The technology is so interrelated that for us we basically license the family technology that corresponds to the family of patents.

[00:18:56] Speaker 03:
There's simply no rule out there that says when you have a hypothetical negotiation, what will necessarily result is a patent counting regime where if you have two patents,

[00:19:05] Speaker 03:
that it's one price, if you have four patents, it's another.

[00:19:07] Speaker 03:
It's the same family, same basic technology, meeting the same need.

[00:19:11] Speaker 03:
Easy to use.

[00:19:12] Speaker 04:
I don't think that the Federal Circuit has ever suggested, and I don't see district courts going this way either, that the number of patents is what impacts the royalty rate.

[00:19:22] Speaker 04:
So I don't think that setting up that straw man and then beating it down really gets you anywhere.

[00:19:26] Speaker 04:
But I do think that we have consistently held that apportionment based on the value of an independent patent

[00:19:33] Speaker 04:
When you have these family patent licensing scenarios, you often have particular patents at the heart of it, and then they kind of throw in everything else.

[00:19:41] Speaker 04:
And there's a really good reason for doing that.

[00:19:43] Speaker 04:
It ends all disputes between two companies, although I'm pretty sure this dispute will never end between these two companies.

[00:19:48] Speaker 04:
But generally, it ends all disputes across the board.

[00:19:51] Speaker 04:
It gives everybody a working understanding of how things are going to go.

[00:19:55] Speaker 04:
So there's a lot of good that can be done in that regard.

[00:19:57] Speaker 04:
But if you sue on just two patents, how do we

[00:20:02] Speaker 04:
portion under those circumstances.

[00:20:04] Speaker 04:
It can't be the case because the law requires apportionment.

[00:20:07] Speaker 04:
It can't be the case that simply because Vernetix says, well, we aren't willing to apportion.

[00:20:11] Speaker 04:
We make everybody license all or nothing.

[00:20:13] Speaker 04:
So take it or leave it.

[00:20:15] Speaker 04:
That can't just prevail.

[00:20:16] Speaker 04:
We can't indoctrinate a rule of law that says because Vernetix says you must do all of our patents for this price.

[00:20:23] Speaker 04:
That's the only price that everybody has to pay when you ensue them on an individual patent.

[00:20:28] Speaker 04:
This is my problem.

[00:20:28] Speaker 04:
This is my problem with your argument.

[00:20:31] Speaker 03:
As an initial matter on never ending, we're now here after five trials, three appeals, the patents have all expired.

[00:20:37] Speaker 03:
We're coming to a close.

[00:20:39] Speaker 04:
I don't doubt that you've got others hiding somewhere.

[00:20:42] Speaker 04:
I don't think this is going to end.

[00:20:44] Speaker 03:
OK.

[00:20:44] Speaker 03:
Well, in terms of the methodology being permissible, I think the general rule is, what is the value we're providing to Apple for this?

[00:20:53] Speaker 03:
What is the value we're providing in licensing?

[00:20:55] Speaker 03:
And the value in our patent family is easy to use, secure communications technologies.

[00:21:01] Speaker 03:
And for providing that value when you're going to get to a point-to-point or a public network and it's going to be secure, what you're going to ask for is the same rate, whether or not they're using it for one inflammation, two implantations, three implementations.

[00:21:15] Speaker 04:
And Lucet makes it very clear that past... Just out of curiosity, in your mind, doesn't that create a scenario where you could go after Apple for these two patents and claim the $1.20?

[00:21:24] Speaker 04:
And if you're unsuccessful, you could just pluck out two other patents from the family and go after the $1.20 and then pluck up two other patents.

[00:21:31] Speaker 04:
And wouldn't this just go on forever?

[00:21:34] Speaker 03:
So I think at some point, Your Honor, that would currently have to end.

[00:21:37] Speaker 03:
I don't think you can actually do that.

[00:21:39] Speaker 03:
Because I think if you have your evidence, you have your licensing scheme set up, and they're all from the same family of patents, you're going to run into a problem evidently that you cannot say, gee, I just want $1.20 each time and just keep going after them.

[00:21:50] Speaker 03:
And especially on this record, where they already have.

[00:21:52] Speaker 04:
So is it worth asking for some sort of rule of law that would suggest that apportionment

[00:21:57] Speaker 04:
doesn't apply in a scenario when licensees only consistently license the entire family, that we shouldn't, as a matter of law, even be thinking about apportionment under those circumstances?

[00:22:09] Speaker 03:
So I think the key for Omega is, look, if you have a different number of patents or you have different uses of them, what you have to do is you have to account for those differences.

[00:22:19] Speaker 03:
There's no rule that says you have to account for it by always reducing or always going

[00:22:23] Speaker 03:
You must account for it.

[00:22:24] Speaker 03:
And after that, then it's a question for the jury.

[00:22:27] Speaker 03:
And the question here is, did we account for the fact that is used for FaceTime or used for this?

[00:22:33] Speaker 03:
And the answer is, yes, we did account for that.

[00:22:35] Speaker 04:
The question here is, did you account for it?

[00:22:37] Speaker 04:
I think this is a question of whether Mr. Weinstein's testimony was consistent with what the law requires and should have been admitted.

[00:22:44] Speaker 04:
This isn't a question of, did you properly account for it in Mr. Weinstein's testimony to the jury, right?

[00:22:49] Speaker 03:
Oh no, I think the question is, if his testimony properly accounts for it, if he accounts for the differences, then that testimony is admissible and there's simply no abuse of the discretion in the district court allowing to go forward.

[00:23:02] Speaker 03:
And here, where it's basically the same fundamental function, if you look at the claims, for example, the differences between the claims at issue, if I could get the court to turn two pages here, compare the 135 to the 504,

[00:23:18] Speaker 03:
And so if you go to the 135 patent, which is one of the patents you were just discussing, it asserts calls for automatically creating a secure VPN using names, service, system, proxy.

[00:23:31] Speaker 04:
It's sort of curiosity.

[00:23:32] Speaker 04:
You say this is kind of all the same and it doesn't matter which product, but isn't it true that you never asserted the entire family against both features?

[00:23:40] Speaker 04:
In fact, you picked two particular patents and asserted them against VOD.

[00:23:45] Speaker 04:
and you pick two other patents and asserted them against FaceTime.

[00:23:49] Speaker 03:
That is correct.

[00:23:50] Speaker 04:
Doesn't that suggest maybe there ought to be some apportionment?

[00:23:53] Speaker 03:
Isn't that, you know... No, because you have to ask whether or not those differences make a difference in value when you're just providing secure communication technology.

[00:24:00] Speaker 03:
What's the difference between the two patents?

[00:24:01] Speaker 03:
The 135 and the 151 automatically establish a VPN link.

[00:24:06] Speaker 03:
The 504 and the 211, which were our FaceTime patents,

[00:24:09] Speaker 03:
return an indication that secure communications are supported.

[00:24:12] Speaker 03:
That's a patentable difference, but it's not a difference in value.

[00:24:15] Speaker 03:
I think this is very much unlike Omega, where you have a portfolio of patents, and you ask, and the testimony in Omega was, five dollars, doesn't matter how many patents, and it was in the words of the court, I believe, the court said, it's five bucks, regardless of what the technology was covered,

[00:24:30] Speaker 03:
or without addressing economic or technological differences.

[00:24:33] Speaker 03:
Here, what are the technological differences between these that would make you price one differently from the other?

[00:24:39] Speaker 03:
The answer is none.

[00:24:40] Speaker 03:
They're all the same secure communications technology to make sure that you can easily use your iPhone or whatever it is to communicate across the network without having to worry about your stuff being interrupted.

[00:24:53] Speaker 03:
That same basic technology at issue, you don't charge, gee, you've used it one additional implementation, I'm going to charge you more, an additional implementation more.

[00:25:01] Speaker 03:
In the market, that's not done.

[00:25:02] Speaker 03:
And as Lucent explains, you don't do that because it's completely inadministrable.

[00:25:07] Speaker 03:
You have huge monitoring costs.

[00:25:09] Speaker 03:
And so we're in the land of the hypothetical negotiation.

[00:25:11] Speaker 03:
And you would ask, what would we do in the market?

[00:25:13] Speaker 03:
And it's a very similar, same patent family, same function.

[00:25:17] Speaker 04:
OK, so logistically.

[00:25:19] Speaker 04:
Suppose you got your $1.20, which is what you get usually for licensing the entire family of patents per unit.

[00:25:25] Speaker 04:
You got your $1.20, and it's based entirely on two patents.

[00:25:30] Speaker 04:
Does that mean you can sue them on the rest of the patents after that?

[00:25:33] Speaker 04:
And if so, what would your damage amount be then?

[00:25:36] Speaker 04:
Would you be willing to admit on the record that you would have zero rights against them as to the other patents since you consistently licensed the entire family for $1.20?

[00:25:46] Speaker 03:
I think if our history is licensing the entire family for $1.20, and we got our $1.20 in damages, we wouldn't be able to come back, Your Honor.

[00:25:54] Speaker 03:
I mean, I think it may go to the jury, but the jury would be very well-advised to say, no, I'm sorry.

[00:25:58] Speaker 03:
You've already exhausted because you got your $1.20 for the family.

[00:26:01] Speaker 03:
That's what you charge.

[00:26:02] Speaker 03:
You don't get it again when you add another member of the family.

[00:26:05] Speaker 03:
And that's actually how it tends to work in practice.

[00:26:08] Speaker 03:
Even in those areas where courts use patent counting, where you have patent pools that use patent counting, they don't go patent by patent or feature by feature.

[00:26:16] Speaker 03:
They look at patent families.

[00:26:18] Speaker 03:
And in these negotiations, the comparable license is here.

[00:26:21] Speaker 03:
What do they license?

[00:26:22] Speaker 03:
They license the entire patent family.

[00:26:24] Speaker 03:
They don't go back and say, gee, we're going to try and add money every time you have a new feature.

[00:26:29] Speaker 03:
So if you look back at 2009, when there was the initial hypothetical negotiation, what did Apple have at that time?

[00:26:36] Speaker 03:
It had VPN on demand, one thing.

[00:26:38] Speaker 03:
And the rate was $1.20.

[00:26:39] Speaker 03:
In June 2010, this is all on page 42 in this graphics, you can see it, they add FaceTime.

[00:26:45] Speaker 03:
Did the price go up?

[00:26:46] Speaker 03:
No, the price didn't go up.

[00:26:47] Speaker 03:
It stated $1.20.

[00:26:49] Speaker 03:
So it makes no sense to say, as a matter of apportionment, you had to then lower the price from $1.20 when it came out.

[00:26:55] Speaker 03:
And I think Vernetix 3 is pretty clear on that.

[00:26:58] Speaker 03:
Vernetix 3 actually points out that Weinstein had testified that it was the same price for one feature or two features.

[00:27:05] Speaker 03:
It didn't vary.

[00:27:06] Speaker 03:
And then it remanded for new trial, not because they expected Weinstein's testimony to change.

[00:27:10] Speaker 03:
There was no comment on that.

[00:27:12] Speaker 03:
Because the jury could think it was different.

[00:27:14] Speaker 03:
And the jury here, rather than returning $1.20, returned $0.84.

[00:27:17] Speaker 03:
So maybe it did think it was different.

[00:27:21] Speaker 03:
But that doesn't mean that Weinstein's testimony is admissible.

[00:27:23] Speaker 03:
And it certainly doesn't mean that they can get out from under-issue preclusion where they have the exact same issue.

[00:27:29] Speaker 03:
Can you charge the same rate for one feature versus two in the prior case?

[00:27:35] Speaker 03:
They lost in the trial court.

[00:27:37] Speaker 03:
and then they didn't raise it on appeal.

[00:27:38] Speaker 03:
That forecloses this assertion here.

[00:27:40] Speaker 03:
Thank you very much.

[00:27:41] Speaker 03:
Are there no further questions?

[00:27:42] Speaker 04:
Thank you, Mr. Lampkin.

[00:27:44] Speaker 04:
Mr. Lee, you have some rebuttal time?

[00:27:47] Speaker 00:
I'll be brief.

[00:27:47] Speaker 00:
Just three points.

[00:27:50] Speaker 00:
To clarify, we did not raise the issue that the chief referred to in the 417 action, the very first action.

[00:27:57] Speaker 00:
You are correct that we raised this apportionment issue in the 855 action, although, as I said, not directed to the same features of the same products.

[00:28:08] Speaker 00:
Second point, apportionment and comparability of licenses are not too distinct.

[00:28:15] Speaker 04:
On your first point, can you just tell me what are the different features?

[00:28:18] Speaker 04:
I mean, because I understand your different products argument, but that could just be a serial number in the products bill, though it has to be identical.

[00:28:25] Speaker 04:
Because I think Mr. Lampkin said it is the same feature.

[00:28:28] Speaker 00:
It's the same feature as the second case.

[00:28:31] Speaker 00:
It's not the same feature as the first case.

[00:28:33] Speaker 00:
So there was a VPN on demand that was in the first case, the 417.

[00:28:39] Speaker 00:
The redesign feature was in the 855.

[00:28:41] Speaker 00:
So the feature was the same, but the accused products had both FaceTime and VPN on demand, the redesign feature.

[00:28:51] Speaker 00:
The second point just is that apportionment and comparability are not

[00:28:55] Speaker 00:
two sort of unrelated concepts floating around separately from each other.

[00:28:59] Speaker 00:
Apportionments, the Gerritsen requirement.

[00:29:01] Speaker 00:
Comparability, technologically and economically, is the way that you demonstrate that you have, in fact, apportioned.

[00:29:08] Speaker 00:
And no one's suggesting that there be a being-counting mentality to this, but there has to be some testimony demonstrating comparability of licenses in order for you to demonstrate apportionment.

[00:29:19] Speaker 00:
That's why the constants are related.

[00:29:22] Speaker 00:
And the last is this.

[00:29:24] Speaker 00:
It is time for this scene.

[00:29:25] Speaker 00:
And this court has decided eight different cases involving the verdict's patents and invalidated 389 claims from this basic technology.

[00:29:36] Speaker 00:
The idea that you would have a damages award that didn't have to identify in some way the specific patents among all these claims that drove the negotiation doesn't make real sense or legal sense.

[00:29:49] Speaker 00:
Thank you.

[00:29:50] Speaker 02:
Your Honor, why wasn't that a factual issue that you had a fair chance in front of the jury to raise?

[00:29:56] Speaker 00:
Your Honor, all of the damages issues are factual issues.

[00:30:01] Speaker 00:
But the question under Dalbury is whether the

[00:30:04] Speaker 00:
factual issues that underlie the methodology are sufficiently reliable to go to the jury.

[00:30:09] Speaker 00:
You could take the Weiland opinion or the Omega opinion.

[00:30:12] Speaker 00:
And what's discussed by the court, each one of them are factual issues that theoretically could be a subject of cross-examination.

[00:30:19] Speaker 00:
But what those opinions recognize is these are sophisticated concepts.

[00:30:25] Speaker 00:
The gatekeeper role is to decide whether they should go to the jury or not.

[00:30:30] Speaker 00:
Thank you, Your Honor.

[00:30:31] Speaker 04:
I thank both counsels.

[00:30:32] Speaker 04:
This is a very helpful argument.

[00:30:33] Speaker 04:
This case is taken under submission.