[00:00:00] Speaker 04:
Our next case is Echo Factor versus Google, 2023-1101.

[00:00:07] Speaker 04:
Mr. Van Nest.

[00:00:10] Speaker 04:
Good morning.

[00:00:14] Speaker 02:
Good morning, and may it please support Bob Van Nest from Kecker, Van Nest, and Peters here this morning on behalf of Google.

[00:00:21] Speaker 02:
I'm going to address the damages issues and the issues arising from the 327 demand reduction patent because

[00:00:29] Speaker 02:
I am today an appellant.

[00:00:32] Speaker 02:
Last week I was an appellee.

[00:00:33] Speaker 02:
As the court knows, Ecofactor dismissed its appeal in its entirety.

[00:00:38] Speaker 02:
That was done voluntarily without any compensation from Google.

[00:00:44] Speaker 02:
The damages opinion of Ecofactor's experts should never have been presented to the jury.

[00:00:50] Speaker 02:
It was based on a completely false premise, manufactured for the litigation by trial counsel, and lacking any basis in the evidence.

[00:00:59] Speaker 02:
Mr. Kennedy testified that the going rate for licenses to EcoFactor's patents was a specific per unit amount.

[00:01:09] Speaker 02:
But the only even arguable support for that was three whereas clauses inserted into settlement agreements by EcoFactor and its trial counsel after this lawsuit began.

[00:01:21] Speaker 01:
Can I ask you a question about?

[00:01:24] Speaker 01:
It seems to me, tell me if I'm missing something.

[00:01:26] Speaker 01:
Your side did not put on any alternative damages theory in the case, correct?

[00:01:32] Speaker 02:
We attempted to impeach Mr. Kennedy.

[00:01:34] Speaker 02:
That's correct, Your Honor.

[00:01:35] Speaker 01:
OK, so you had no alternative number, I guess presuming that strategically or otherwise you thought you were going to win on infringement and so it wouldn't be necessary.

[00:01:45] Speaker 01:
But you were wrong about that.

[00:01:47] Speaker 01:
And so let's assume that we affirm on the infringement verdict and we send it back for a new trial.

[00:01:53] Speaker 01:
What is the jury supposed to do in order to get the number?

[00:01:57] Speaker 02:
The jury could be presented with appropriate evidence.

[00:02:01] Speaker 02:
It could be presented with these license agreements.

[00:02:04] Speaker 02:
It could be presented with evidence of other Google licenses, as was presented to the jury.

[00:02:12] Speaker 02:
But what it couldn't do is rely on these whereas clauses unless EcoFactor came forward with some of the numbers.

[00:02:19] Speaker 01:
What about the testimony of its witness?

[00:02:21] Speaker 01:
Was it Mr. Habib?

[00:02:22] Speaker 02:
Mr. Habib testified that

[00:02:25] Speaker 02:
The per unit amount, which I'm not stating in open court, was what Ecofactor wanted.

[00:02:32] Speaker 02:
But he testified, as did Mr. Kennedy, that no one at Ecofactor or the expert had ever seen any sales or projected future sales for any of the licensees.

[00:02:44] Speaker 02:
They testified that.

[00:02:46] Speaker 01:
And what about the Johnson license?

[00:02:48] Speaker 01:
Isn't that the license that doesn't have the language that you point to in the other licenses about how this isn't based on a determination of royalty or sales?

[00:02:57] Speaker 02:
The Johnson controls has now sued EcoFactor, alleging that they are misusing that agreement.

[00:03:05] Speaker 01:
That's not my case.

[00:03:07] Speaker 01:
Fair enough.

[00:03:07] Speaker 02:
My case is what I've got before me.

[00:03:09] Speaker 02:
Fair enough.

[00:03:10] Speaker 02:
Fair enough.

[00:03:10] Speaker 02:
We asked the courts to take notice of that.

[00:03:12] Speaker 02:
But in the case of Johnson,

[00:03:15] Speaker 02:
The 327 patent wasn't even asserted.

[00:03:17] Speaker 02:
In other words, that license agreement, the 327 patent, although it's part of a big portfolio, wasn't even asserted.

[00:03:25] Speaker 01:
Well, which takes us to another point in the damages, which I think you're raising, which is the failure to apportion based on the patents that are asserted.

[00:03:33] Speaker 02:
That's right.

[00:03:34] Speaker 02:
That's right.

[00:03:34] Speaker 02:
The second problem was that Mr. Kennedy testified that this per unit number was the per unit number, regardless of how many patents were asserted.

[00:03:45] Speaker 02:
And in that regard, he presented again these three license agreements.

[00:03:51] Speaker 02:
They were all portfolio licenses.

[00:03:53] Speaker 02:
In the case of Johnson Controls, as I said, the 327 wasn't even asserted.

[00:03:58] Speaker 01:
And the other two.

[00:03:58] Speaker 01:
But there was testimony about the technical comparability between the patents asserted in those cases and the 327, is there not?

[00:04:07] Speaker 02:
There was, Your Honor, but what there wasn't was any testimony about economic compatibility.

[00:04:12] Speaker 02:
In other words,

[00:04:13] Speaker 02:
And this is the same mistake that Mr. Kennedy made in the Apple versus Weiland case, in which he testified that no matter what, this is the rate, whether you have one patent, 20 patents, 50 patents.

[00:04:26] Speaker 02:
And in Apple versus Weiland, this court held that that was improper.

[00:04:30] Speaker 02:
You have to provide some evidence to apportion the value of other patents that are included in the portfolio.

[00:04:38] Speaker 02:
And in that case, even in that case,

[00:04:41] Speaker 02:
Mr. Kennedy, that's the same expert we're talking about here, applied a 25% discount, which he said, that takes care of all the other patents in the portfolio.

[00:04:50] Speaker 02:
And the court said, that's not good enough.

[00:04:53] Speaker 02:
You've got to provide evidence that apportions out the value

[00:04:57] Speaker 02:
of other licensed paths.

[00:04:59] Speaker 01:
So let me, you know, we talked about the earlier case at Sohap.

[00:05:04] Speaker 01:
What did the district court, I mean, we're reviewing for abuse of discretion on this record, right, in terms of a new trial for damages?

[00:05:12] Speaker 01:
That's right, Your Honor.

[00:05:15] Speaker 01:
What analysis do we have for the basis upon which the district court denied your motion for a new trial?

[00:05:22] Speaker 02:
Nothing right or very little very very little very little I don't recall what we chose to do with that well You can do the same thing I think that was done in why land or in the omega case There's a clear record of what was put before the jury It's these three license agreements and the whereas clauses with no apportionment done for the fact that they're all Portfolio licenses and in omega what the court had as you have here is testimony from the expert

[00:05:49] Speaker 02:
that the rate is, in that case, it was $5 per unit.

[00:05:54] Speaker 02:
And there, the expert said, as Mr. Kennedy did here, that's the rate, no matter how many patents are licensed.

[00:06:01] Speaker 02:
And the court said, no, that has to go back for a new trial in which there's some apportionment made for the value of other licenses in the agreement.

[00:06:10] Speaker 02:
So in Omega, just like in YLAN, the court reversed the damages verdict, sent it back for a retrial on damages.

[00:06:17] Speaker 02:
And that's what should happen here.

[00:06:19] Speaker 02:
Mr. Kennedy has the same pattern.

[00:06:21] Speaker 02:
It's the same thing he's done before.

[00:06:23] Speaker 01:
Can I move you before your time runs out and wish my colleagues had more questions on damages to the 101 issue?

[00:06:28] Speaker 01:
Yes.

[00:06:29] Speaker 03:
I have a couple of questions.

[00:06:30] Speaker 03:
Yes, Your Honor.

[00:06:32] Speaker 03:
Back on damages.

[00:06:33] Speaker 03:
I understand your arguments, but it seems to me that equal factors through Mr. Kennedy submitted

[00:06:44] Speaker 03:
you know, maybe not a significant amount of evidence, but they made a good shot at their damages theory.

[00:06:53] Speaker 03:
And they gave information by which the jury can determine, you know, like a range even of numbers.

[00:07:03] Speaker 03:
But I don't see that your side did the same.

[00:07:08] Speaker 03:
I see attorney argument, but I don't see

[00:07:12] Speaker 03:
Evidence that counters the evidence that was presented.

[00:07:15] Speaker 02:
There were two things, Your Honor.

[00:07:16] Speaker 02:
First of all, they didn't provide any backup support for these whereas clauses.

[00:07:22] Speaker 02:
There was no evidence submitted as to any of the licensees.

[00:07:25] Speaker 02:
We have expert testimony.

[00:07:27] Speaker 02:
Right, but he conceded, Mr. Kennedy,

[00:07:29] Speaker 02:
that he was relying on the whereas clause, not any sales or projected sales information, which he never had.

[00:07:35] Speaker 02:
No one had it.

[00:07:36] Speaker 02:
The jury never got it.

[00:07:37] Speaker 02:
And Mr. Kennedy conceded.

[00:07:39] Speaker 03:
So what's your argument here?

[00:07:41] Speaker 03:
Are you saying that there was no nexus between the evidence that was provided and the item of apportionment?

[00:07:50] Speaker 02:
No.

[00:07:50] Speaker 02:
There's two points, Your Honor.

[00:07:52] Speaker 02:
Point one is these cases like WordTech and MLC say,

[00:07:57] Speaker 02:
If you're going to use a comparable license and you're going to be quoting either a lump sum or a royalty, there's got to be some backup information about the number of sales, the amount of sales, or the projected sales in order for the jury to put that in context.

[00:08:11] Speaker 02:
And that wasn't done.

[00:08:11] Speaker 03:
Is that a substantial evidence issue?

[00:08:14] Speaker 02:
No, I think it's a Daubert issue.

[00:08:16] Speaker 02:
I think under Daubert, these cases come up under Daubert.

[00:08:20] Speaker 02:
In MLC, Judge Yelstin Daubert is the expert.

[00:08:22] Speaker 03:
Daubert goes more towards whether the methodology itself is corrupt or invalid.

[00:08:28] Speaker 03:
It doesn't go as to the probative weight or the evidence that's submitted.

[00:08:33] Speaker 02:
It's kind of both in this case, Your Honor, because these cases like WordTech and MLC talk about Daubert.

[00:08:39] Speaker 02:
And they talk about the fact that if the expert's going to rely on comparable licenses, then

[00:08:44] Speaker 02:
He or she's got to give the jury some background, some data, some facts.

[00:08:48] Speaker 02:
And that wasn't done here.

[00:08:50] Speaker 02:
The second point is the one I was making with Judge Prost.

[00:08:52] Speaker 02:
That's from the Omega decision and the Weiland decision.

[00:08:57] Speaker 02:
If you're going to use another license, and that's a portfolio license, you've got to do some apportioning.

[00:09:02] Speaker 02:
And Mr. Kennedy didn't do that.

[00:09:04] Speaker 02:
But to move on, Your Honor, to the 101 issue,

[00:09:08] Speaker 02:
This clearly is a patent ineligible concept.

[00:09:12] Speaker 02:
Now Judge Albright denied our summary judgment motion, but he didn't resolve step one and find whether or not the patent was abstract.

[00:09:22] Speaker 02:
But he sent step two to the jury.

[00:09:24] Speaker 02:
That's what happened.

[00:09:25] Speaker 02:
And in this case, there's really no dispute as to what the patent calls for.

[00:09:30] Speaker 02:
And I think really no dispute whatsoever that this patent is simply ineligible.

[00:09:35] Speaker 04:
The Northern District of California and the ITC came out with different decisions.

[00:09:42] Speaker 02:
They have on other patents, your honor.

[00:09:45] Speaker 02:
Related patents.

[00:09:46] Speaker 02:
Excuse me?

[00:09:47] Speaker 04:
Related patents.

[00:09:47] Speaker 02:
Related patents, that's right.

[00:09:48] Speaker 02:
But here, this patent is fairly unique.

[00:09:51] Speaker 02:
It claims the abstract idea of automating thermostat adjustments in response to energy reduction demands.

[00:09:59] Speaker 02:
That's the type of thing that people do all the time when they turn their thermostat down to avoid peak hour pricing.

[00:10:06] Speaker 01:
And in this instance... I don't understand how that issue was before us.

[00:10:11] Speaker 01:
I mean, until you get to some point in gray, you raised, I think, improperly, and I think maybe you can see that, that you were just challenging the summary judgment, which I don't think under our case law is appropriate.

[00:10:23] Speaker 01:
So if we take that as a given, you're left with the district court having decided

[00:10:30] Speaker 01:
unusually, perhaps, that he's going to go to step two without having resolved step one.

[00:10:35] Speaker 01:
That's right.

[00:10:36] Speaker 01:
I don't think you challenge that, either, the jury instruction.

[00:10:40] Speaker 01:
I mean, this is an odd case, because it's hard to do step two when you don't even know, have an articulation of what the abstract idea is.

[00:10:49] Speaker 01:
That's what seems to have happened in this case.

[00:10:51] Speaker 01:
My problem is that you never really challenged that.

[00:10:55] Speaker 01:
You seem to be challenging the jury fight, either the summary judgment thing, which may well be inappropriate, or the jury determination at step two without having challenged the propriety of the jury instructions or the jury getting it without an articulation of step one.

[00:11:12] Speaker 02:
We preserve that your honor by making our summary judgment motion and objecting to stage step two going to the jury at all But now that it has the evidence is very clear that there wasn't any evidence to support step two either So in this instance in this instance

[00:11:28] Speaker 01:
Well, how are we supposed to adjudicate step two when we don't even know what the abstract idea is?

[00:11:33] Speaker 01:
Because there's never been an adjudication.

[00:11:35] Speaker 01:
This isn't like some of our other cases where we haven't decided step one, but we've assumed, for purposes of getting to step two, that this is the abstract idea.

[00:11:45] Speaker 01:
Is that what happened here?

[00:11:46] Speaker 02:
I think that's what Judge Albright did.

[00:11:47] Speaker 02:
I think Judge Albright assumed that the patent was abstract, and he sent step two to the jury.

[00:11:52] Speaker 02:
And in the case of step two,

[00:11:54] Speaker 01:
But did he adjudicate what the abstract idea was?

[00:11:58] Speaker 01:
Was the jury informed what the abstract idea was?

[00:12:00] Speaker 02:
No, no, no.

[00:12:01] Speaker 01:
And did you challenge that?

[00:12:02] Speaker 01:
We challenged that, too.

[00:12:03] Speaker 01:
The jury instruction did not include it.

[00:12:06] Speaker 01:
Why didn't you challenge the jury instruction?

[00:12:08] Speaker 02:
I believe that we did, Your Honor.

[00:12:09] Speaker 02:
But the fact of the matter is that when we got to step two in front of the jury,

[00:12:15] Speaker 02:
Their expert conceded, Dr. Palmer, conceded essentially that all these elements were conventional.

[00:12:21] Speaker 02:
None of the elements were new.

[00:12:22] Speaker 02:
His only point made in about two minutes, and you can read the transcript, was there's an ordered combination.

[00:12:28] Speaker 02:
But he never set forth what that ordered combination was.

[00:12:31] Speaker 02:
He simply said, here's the order.

[00:12:33] Speaker 02:
Here's the patent.

[00:12:33] Speaker 02:
Here's the order of elements.

[00:12:35] Speaker 02:
You make an estimate of changing temperature.

[00:12:38] Speaker 02:
You get a request from the utility.

[00:12:40] Speaker 02:
And then you respond to the request.

[00:12:42] Speaker 02:
There was absolutely no backup or support.

[00:12:44] Speaker 03:
Your argument is based on what?

[00:12:47] Speaker 03:
That the district court improperly granted serving judgment?

[00:12:53] Speaker 02:
No.

[00:12:54] Speaker 02:
Our argument is that this patent is abstract.

[00:12:58] Speaker 03:
And that the jury verdict as to step two... The court addressed section 101 via summary judgment.

[00:13:07] Speaker 02:
He did, but he didn't resolve it.

[00:13:09] Speaker 03:
What he did was... Now wait a minute.

[00:13:11] Speaker 03:
And you lost that...

[00:13:13] Speaker 03:
You lost on summary judgment.

[00:13:15] Speaker 02:
Well, he didn't grant summary judgment for eco factor.

[00:13:18] Speaker 02:
He didn't grant summary.

[00:13:19] Speaker 02:
We made a summary judgment motion to the court that the patent's abstract based on the face of the patent.

[00:13:24] Speaker 02:
He denied the motion without resolving whether the patent's abstract or not and said, I'm sending step two to the jury, which means you're assuming.

[00:13:32] Speaker 03:
That puts you in an odd position.

[00:13:35] Speaker 03:
You're appealing the loss of the summary judgment motion.

[00:13:38] Speaker 02:
No, I'm appealing not only that, but I'm also appealing the verdict on step two.

[00:13:45] Speaker 03:
You are appealing the loss of a summary judgment motion.

[00:13:48] Speaker 02:
As well as the verdict on step two.

[00:13:50] Speaker 03:
And you know that our precedent says that you can't do that.

[00:13:54] Speaker 02:
But where you have this situation, Your Honor, which I understand is unusual, where the trial judge, Judge Albright, doesn't resolve the abstractness but assumes it, and I think it's clear from the face of the patent it can be assumed,

[00:14:06] Speaker 03:
He sends step two to the jury, and what we're appealing is the verdict on step two, where- OK, so just to move on, I'd like your view, because I want the view of the other side as well.

[00:14:19] Speaker 03:
Is step two of the Alice equation, is that a legal question?

[00:14:26] Speaker 02:
It can be, where there's no dispute of facts as there is here.

[00:14:30] Speaker 02:
Here, there was really no testimony that there was anything unconventional about this patent.

[00:14:36] Speaker 02:
No algorithm, no calculation, no nothing.

[00:14:39] Speaker 02:
Nothing about it was unusual or nonconventional.

[00:14:43] Speaker 03:
In your view, is it improper to permit a jury to determine step two of section 101

[00:14:51] Speaker 02:
Certainly without explaining to the jury what the abstract nature of it is, because if you're going to be making a determination of whether the elements are conventional, that's got to be in the context of why the court has found or assumed the patent is

[00:15:05] Speaker 02:
abstract, which is apparently what Judge Albright did.

[00:15:08] Speaker 01:
And where did you challenge that?

[00:15:09] Speaker 01:
That goes back to my question about you may well be right that you can't consider what step two is without having an articulation of step one, because you're supposed to remove the abstract idea from the evaluation of whether or not these factors were conventional, et cetera.

[00:15:25] Speaker 01:
But the jury instruction did not include that.

[00:15:29] Speaker 01:
And I didn't see any argument in your brief about that.

[00:15:33] Speaker 01:
That even comes close to touching upon that issue.

[00:15:35] Speaker 02:
But what we did was, faced with the situation we had on the ground, we presented evidence from our expert, Mr. Williams, and cross-examining the inventor, that all of these elements were known.

[00:15:47] Speaker 02:
They were conventional.

[00:15:48] Speaker 02:
They were routine.

[00:15:49] Speaker 02:
And there was nothing unique about them.

[00:15:51] Speaker 02:
So we presented that evidence.

[00:15:53] Speaker 02:
In the face of that, Dr. Palmer's only testimony is, here's the order.

[00:15:58] Speaker 02:
That's what makes this.

[00:15:59] Speaker 01:
Do you have a citation to that testimony?

[00:16:00] Speaker 01:
You say that's the only testimony.

[00:16:02] Speaker 01:
I'd like to ask your friend on the other side about it as well.

[00:16:05] Speaker 02:
I do.

[00:16:06] Speaker 02:
Dr. Palmer's testimony was made at, it's an appendix 6449 to 6451.

[00:16:24] Speaker 02:
That's the testimony.

[00:16:25] Speaker 02:
It's basically three pages.

[00:16:26] Speaker 02:
That's the testimony from Dr. Palmer.

[00:16:29] Speaker 02:
who is their only witness on this particular point at all.

[00:16:35] Speaker 04:
Thank you.

[00:16:35] Speaker 04:
You have exceeded your time, including rebuttal time.

[00:16:38] Speaker 04:
But we'll give you three minutes back to rebuttal.

[00:16:41] Speaker 02:
Thank you, Your Honor.

[00:16:42] Speaker 02:
Thank you.

[00:16:43] Speaker 04:
Mr. Liddell.

[00:17:01] Speaker 00:
Thank you, Your Honor.

[00:17:02] Speaker 00:
Good morning, and may it please the Court.

[00:17:04] Speaker 00:
Brian Liddell for EcoFactor.

[00:17:06] Speaker 00:
I'd like to start where my friend began on the damages issue, because there's a critical aspect that I think underlies a lot of the Court's questions that my friend didn't talk about.

[00:17:17] Speaker 00:
The standard review here is not just abuse of discretion.

[00:17:21] Speaker 00:
We're talking about admission of evidence.

[00:17:23] Speaker 00:
And the standard review in the Fifth Circuit is abuse of discretion and,

[00:17:28] Speaker 00:
demonstration that the error was not harmless.

[00:17:31] Speaker 00:
So even if, and we certainly don't concede this, even if the evidence shouldn't have been admitted, my friend must also show that the evidence being admitted was not a harmless error.

[00:17:44] Speaker 00:
They can't make that showing.

[00:17:45] Speaker 00:
And indeed, the briefs don't even attempt to make that showing.

[00:17:47] Speaker 00:
And we've heard nothing about that issue, because it's impossible to make such a showing.

[00:17:53] Speaker 00:
Here, there were numerous different ways in which the jury could reach a damages determination, the verdict that it did.

[00:18:01] Speaker 00:
The damages verdict here was not, as in many of the cases cited by my friend,

[00:18:07] Speaker 00:
simply an application of exactly the number that the plaintiff's expert asked for.

[00:18:13] Speaker 00:
In fact, the jury awarded a lesser amount.

[00:18:16] Speaker 00:
So unlike Weiland or Omega, this was not simply an application of that royalty.

[00:18:22] Speaker 00:
In fact, the jury's verdict was supported by multiple different possible evidentiary sources that could support it.

[00:18:28] Speaker 00:
First, my friend said plainly that the jury could consider Google's other licenses.

[00:18:36] Speaker 00:
There was a license presented and the jury was provided evidence as to how that license could also support a verdict that would be in the range awarded by the jury.

[00:18:44] Speaker 01:
Do you think there's an obligation for the district court to articulate these bases in order for us to review it, or we're supposed to just start from scratch and rely on briefs without knowing what the district court's analysis entails?

[00:18:59] Speaker 00:
So I don't think there's any obligation, especially in a Rule 59 motion, for the district court to articulate all the possible ways that the jury's verdict could be supported.

[00:19:10] Speaker 00:
We have a jury verdict here, which is, of course, a black box on damages.

[00:19:15] Speaker 00:
It just is a number.

[00:19:16] Speaker 00:
We don't know exactly how the jury reached that number.

[00:19:19] Speaker 00:
We know it couldn't possibly have been simply by multiplication of the royalty asked for that my colleague objects to.

[00:19:25] Speaker 00:
It had to be some other mechanism that they used.

[00:19:29] Speaker 00:
The district court is charged with reviewing, was there a problem with this verdict such that a new trial is required?

[00:19:38] Speaker 01:
But the licenses were put forward to establish comparable licenses and to establish the royalty rate that was included there that we're not allowed to mention.

[00:19:48] Speaker 00:
But there was other evidence that also, so that wasn't the only evidence of the trial that would support damages.

[00:19:54] Speaker 00:
There were three licenses of Ecofactors.

[00:19:57] Speaker 00:
There was a license of Google's between Google and Ecobee that was presented.

[00:20:01] Speaker 00:
That license, there was testimony from

[00:20:06] Speaker 00:
the experts about that license.

[00:20:08] Speaker 01:
What if we were to conclude that the licenses that were presented, those three licenses, were not comparable licenses that should not have been used?

[00:20:16] Speaker 01:
What do we do about that?

[00:20:18] Speaker 01:
Do we say we need a new trial, or do we accept what you're saying is, yeah, but there was still some other stuff left that the jury might have relied on.

[00:20:25] Speaker 01:
So the jury may have ignored all three licenses, and all the testimony, and all the expert testimony of Dr. Kennedy.

[00:20:32] Speaker 01:
And we should just go with that.

[00:20:36] Speaker 00:
So what I'm saying is, because there's the twofold inquiry of both abuse of discretion and then if and only if there was an abuse of discretion, was the error harmless or not, you can, as is often the case,

[00:20:50] Speaker 00:
You don't necessarily have to reach the abuse of discretion question, which I think is what you're addressing, as to whether the argument and the evidence about these licenses should have been considered.

[00:20:59] Speaker 00:
And by the way, the licenses themselves were admitted without objection.

[00:21:03] Speaker 00:
There was no challenge to the admissibility of these three license agreements.

[00:21:07] Speaker 00:
So the point that the expert argued literally is recited on the face of unobjected two documents that were submitted to the jury.

[00:21:17] Speaker 00:
You don't have to reach that question, and it would be an unnecessary advisory opinion to reach that.

[00:21:22] Speaker 01:
But the issue is the testimony of Dr. Kennedy with respect to those licenses, right?

[00:21:26] Speaker 00:
Well, no, it's not.

[00:21:28] Speaker 00:
That is an issue that's raised, but it's not the only issue.

[00:21:32] Speaker 00:
It wasn't the only opinion he offered.

[00:21:33] Speaker 00:
It wasn't the only evidence.

[00:21:35] Speaker 00:
As I mentioned, there was this other Google license.

[00:21:38] Speaker 00:
There was also evidence presented about apportioned profit,

[00:21:41] Speaker 00:
essentially an analytic approach testimony about how you would apportion the profits to the features and benefits conveyed by the patent and that the parties might be outside of the three licenses absolutely it was based on a survey that was created by Google it was based on technical expert testimony about

[00:21:59] Speaker 00:
which aspects of the features identified in that survey were benefits provided by the patent and it was based on an analysis of profits calculated as to the accused products and how that profit could be apportioned to the accused features and then would be split between the parties.

[00:22:15] Speaker 01:
But you made a large argument that the licenses were comparable and that the testimony in the whereas clauses should be probative.

[00:22:22] Speaker 00:
So I think it's undisputed that the licenses were comparable in the sense that there was technical testimony about the comparability of the licenses, as was discussed during my friend's presentation.

[00:22:36] Speaker 00:
So there was extensive evidence about why the royalty rate was comparable, including tied to this analysis.

[00:22:43] Speaker 00:
So there was testimony from

[00:22:46] Speaker 00:
EcoFactor CEO about their licensing practices and he talked not about as my friend characterized it One patent is this amount what was discussed was and this is what the expert talked about as well that for a given group of technologies which were the technologies and benefits that were conveyed by this particular patent the rate would be a particular rate and

[00:23:08] Speaker 00:
It may be that there were multiple patents in the same family and in the same area of technology that conveyed exactly the same benefits, and that there would not be repeat charges for that same constellation of benefits.

[00:23:21] Speaker 00:
But that's not the same as saying, whatever patent we have, it's this rate.

[00:23:25] Speaker 00:
If you're conveying this particular feature set, that's the rate.

[00:23:29] Speaker 01:
So do you agree that the jury should not have relied on the number in those two or three licenses, given that the licenses also said that they're relying on sales numbers and they're not relying on a royalty rate?

[00:23:45] Speaker 00:
Absolutely not.

[00:23:46] Speaker 00:
And I think that's not an accurate characterization of the licenses.

[00:23:50] Speaker 00:
So obviously, Your Honor pointed to one during my friend's argument that has nothing like that.

[00:23:56] Speaker 00:
The second, I think it's the Schneider license, there's some language in which the licensee asserts that the rate is not reasonable.

[00:24:04] Speaker 00:
That's not the same as saying that's not the basis for the royalty actually submitted and used in the license.

[00:24:11] Speaker 00:
It's saying they don't want to concede that that amount is reasonable for purposes of possible future assertions against them.

[00:24:17] Speaker 00:
That's totally different.

[00:24:18] Speaker 00:
And arguably,

[00:24:20] Speaker 00:
something they wouldn't have bothered with if it wasn't the basis for the calculation.

[00:24:25] Speaker 00:
But also, there's additional market evidence that was presented in the trial about the relative market share of those licensees and Google that both showed the reasonableness of the rate was properly recognized to be consistent with that, but also evidence that showed that that rate

[00:24:49] Speaker 00:
Whether you accept that it's a royalty rate or not, Google certainly argued that the licenses were lump sums.

[00:24:55] Speaker 00:
Those lump sums could also be adjusted according to this market share data, which is yet another reason why the jury could have reached the conclusion that it did.

[00:25:04] Speaker 00:
My point is there are about five different paths by which the jury could have reached its verdict, any one of which is

[00:25:13] Speaker 00:
proper, and under those circumstances, it cannot be anything but harmless error, even if my friend is right that the licenses, or at least the argument about them, because they don't contest the admission of the licenses, even if you accept that the argument about them shouldn't have been submitted,

[00:25:31] Speaker 00:
There's no showing that it affected the verdict.

[00:25:33] Speaker 00:
And here, one of the ways we know that is Google waived any argument that the damages verdict was not supported by substantial evidence when it waived making that argument in its rule 50B motion.

[00:25:48] Speaker 00:
They made an argument about damages in their 50A, not in the 50B.

[00:25:52] Speaker 00:
Nothing in there suggests that the jury's verdict on damages was not supported by substantial evidence.

[00:25:57] Speaker 00:
Under those circumstances, it's hard to imagine how it could be anything but harmless.

[00:26:02] Speaker 01:
Can I move you to 101?

[00:26:04] Speaker 00:
Absolutely.

[00:26:04] Speaker 01:
In your reading of the record, did the district court draw a conclusion about whether or not there was an abstract idea?

[00:26:15] Speaker 01:
What did the district court do with respect to step one?

[00:26:18] Speaker 01:
Did the jury have any information with respect to the abstract idea?

[00:26:22] Speaker 00:
I think it's fair to say that the district court did not present any specific information to the jury about a particular abstract idea.

[00:26:30] Speaker 01:
Well, do you think what he did was he said, we'll assume for the sake of argument that there's a step one abstract idea, and therefore we should move on to the jury at step two?

[00:26:39] Speaker 01:
Is that your view of what went down?

[00:26:41] Speaker 00:
Yes.

[00:26:42] Speaker 01:
But then doesn't the jury have to know what the abstract idea is in order to establish?

[00:26:50] Speaker 01:
I mean, our case law, do you agree that our case law says that in order to evaluate step two inventive concept, you can't include the abstract idea in that analysis?

[00:27:00] Speaker 01:
So if you agree with that, then how does the jury not need to know what the abstract idea is?

[00:27:07] Speaker 01:
Now, your friend may not have made that argument, and maybe that's the answer.

[00:27:11] Speaker 00:
So the first answer is exactly that, that if that's an argument, it's an argument about jury instructions.

[00:27:16] Speaker 00:
And it was waived because it was never raised.

[00:27:18] Speaker 00:
And it's not raised in this appeal.

[00:27:20] Speaker 00:
You heard no citation to anywhere in the brief.

[00:27:23] Speaker 03:
There was no jury instruction as a step one.

[00:27:25] Speaker 00:
That's right.

[00:27:27] Speaker 00:
And there was no jury instruction that was objected to.

[00:27:30] Speaker 00:
And there's certainly nothing, even if they objected to it before trial,

[00:27:35] Speaker 00:
I defy anyone to find it in the briefs before this court, which is how we determine what issues are presented on appeal.

[00:27:41] Speaker 01:
But leaving that aside, and that may be an important factor, how does the jury go forward and evaluate step two without having any idea what the abstract idea is?

[00:27:52] Speaker 00:
Well, I think the short answer to that is, whatever the abstract idea is, the question for the jury is, is this simply an application of conventional principles and conventional

[00:28:04] Speaker 00:
combination both individually and as an ordered combination.

[00:28:07] Speaker 00:
I think the way to read the verdict is there's no abstract idea that could be articulated where that would be true, because the jury found that this is not conventional.

[00:28:18] Speaker 00:
And that's certainly well supported.

[00:28:19] Speaker 00:
I would disagree with my friend that this was only Dr. Palmer's testimony.

[00:28:25] Speaker 00:
There was also testimony and admissions from Google's expert on cross-examination, Mr. Williams, about this at pages 64, 15 to 16 of the appendix.

[00:28:34] Speaker 00:
There was testimony from the inventor about this at pages 5402 to 5403, 5397 to 5398.

[00:28:41] Speaker 00:
There was a study presented, an evidentiary document.

[00:28:47] Speaker 00:
It was a field study about this technology.

[00:28:51] Speaker 00:
It was Plaintiff's Exhibit 928, which starts at page 10819 of the appendix.

[00:28:58] Speaker 00:
There's information at pages 10, 823 and 10, 830 about how this technology was non-conventional, was new and novel and different and applied.

[00:29:10] Speaker 00:
One of the key differences, in fact, that was discussed by the experts was the fact that the temperature

[00:29:16] Speaker 00:
the recognition and the adjustment based on rate of change was not calculated as one might conventionally do by simply looking at how does the temperature change in the room, but by calculating a rate of change in light of the outside temperature as well as the inside, which was completely unconventional.

[00:29:35] Speaker 00:
and completely contrary to the way that those in the field had ever done this.

[00:29:39] Speaker 00:
And so there was extensive evidence about unconventionality.

[00:29:44] Speaker 00:
I want to add, however, that this is an issue on which my friend bore the burden of proof by elevated evidence, clear and convincing.

[00:29:50] Speaker 00:
The circumstances under which a jury verdict rejecting the contention of a party with a clear and convincing burden can be overturned are incredibly limited.

[00:29:59] Speaker 03:
Before you sit down, I want you to respond to the question that I promised to defend on the other side concerning whether this issue is even proper before us.

[00:30:13] Speaker 00:
Absolutely not.

[00:30:14] Speaker 00:
Your Honor is absolutely correct.

[00:30:16] Speaker 00:
The red brief

[00:30:18] Speaker 00:
explicitly indicates that this is an appeal of the district court's denial of summary judgment.

[00:30:23] Speaker 00:
That's the point heading at page 51.

[00:30:25] Speaker 00:
This court's precedent and Supreme Court precedent make 100% clear that when you have a trial on the merits, a denial of summary judgment is never an appealable order.

[00:30:35] Speaker 03:
They did not appeal a denial of the JMAAL.

[00:30:42] Speaker 03:
It is proper before us because the issue was bifurcated and one was left to the jury and the other was not.

[00:30:49] Speaker 00:
There's no authority for that assertion and it's simply not true.

[00:30:52] Speaker 00:
The Supreme Court says once you have a denial of summary judgment and then a trial on the merits, the summary judgment is simply an interlocutory order that is not to be the subject of appeal.

[00:31:04] Speaker 04:
But the issue is still alive for decision.

[00:31:07] Speaker 00:
The issue of the sufficiency of the verdict.

[00:31:11] Speaker 04:
Not the correction of the summary judgment denial, but the issue.

[00:31:17] Speaker 00:
But I would argue that the issue was not preserved and presented in the appeal, because what would have to be appealed would be the denial of Jamal under Rule 50A and 50B.

[00:31:26] Speaker 01:
But you argued on step one too.

[00:31:29] Speaker 01:
You made an argument.

[00:31:30] Speaker 00:
Well, we responded to the argument, obviously.

[00:31:36] Speaker 00:
We believe it's improper, and that's the first argument that we put in our brief, that this is not properly before the court.

[00:31:42] Speaker 03:
Obviously, it's prudent to address the issue.

[00:31:59] Speaker 00:
No, I'm not sure I understand the question exactly.

[00:32:03] Speaker 00:
And I don't think it was bifurcated in quite the way my friend suggested.

[00:32:07] Speaker 00:
This court's cases, Atrix and many others, make very clear that step two is almost always, or it's certainly very often, a factual inquiry and relies on underlying questions of fact.

[00:32:21] Speaker 00:
Many cases have so held.

[00:32:23] Speaker 00:
And many cases often don't reach the step one analysis because they take for

[00:32:29] Speaker 00:
Even if you take it as a given, if there are factual issues on step two, motions to dismiss are often denied, for example, because it wouldn't be productive for the court to render advisory opinions on one issue when the other is dispositive.

[00:32:42] Speaker 00:
Here, the district court basically said, I don't necessarily agree with you on either step.

[00:32:49] Speaker 00:
But at a minimum, there seem to be fact issues as to step two.

[00:32:53] Speaker 01:
Let's let the jury decide that.

[00:32:55] Speaker 01:
Is that really the way our case law needs?

[00:32:57] Speaker 01:
I mean, I understand there certainly have been cases that come to mind where our court has said, we don't need, without resolving it, we will just accept

[00:33:07] Speaker 01:
Sure.

[00:33:08] Speaker 01:
The idea.

[00:33:09] Speaker 01:
It's not that they say, we don't care what the abstract idea is.

[00:33:12] Speaker 01:
Let's just move on to step two.

[00:33:14] Speaker 01:
It's that we adjudicated, or at least tentatively adjudicated, for purposes of reaching step two.

[00:33:20] Speaker 01:
And was that done here in your jury?

[00:33:23] Speaker 00:
I think the district court, in submitting step two to the jury, effectively, I mean, I think you have to take all inferences in favor of the verdict and presume that the district court did, in fact,

[00:33:37] Speaker 00:
it wasn't necessary for it to resolve that question and submit step two to the jury.

[00:33:44] Speaker 00:
And once the jury ruled that

[00:33:47] Speaker 00:
There was no showing by Google to support its burden on step two.

[00:33:51] Speaker 01:
There was no need for the district court to further address step one, once there's a verdict that- Do you agree that in order to get to step two, there has to be at least an assumption for purposes of reaching step two, that there is an abstract idea, and this is that abstract idea?

[00:34:08] Speaker 03:
I don't think I would agree with that, that I think the district court can do exactly what it did here and submit the issue to the jury under the assumption that under... Well, in our cases where that has happened, there's, as Judge Prost is saying, at least an assumption that step one has been addressed and it's time to move on.

[00:34:28] Speaker 03:
I don't think that... I don't recall a situation where

[00:34:36] Speaker 03:
Well, if

[00:34:51] Speaker 00:
So I think that there are vanishingly few, as Your Honor pointed out, cases in this court where there's been a trial judgment on an aspect of Section 101.

[00:35:07] Speaker 00:
That's very rare, a circumstance that we don't see very often in these cases.

[00:35:11] Speaker 00:
And so I don't know that there's a case specifically addressing that question of how you present it to the jury.

[00:35:17] Speaker 00:
I'm not aware of any case in this court addressing that issue.

[00:35:21] Speaker 00:
What I am aware of is numerous cases which are typically being adjudicated on a motion to dismiss under Rule 12, for example, where the district court says, I don't need to decide whether there's an abstract idea of what it is, because it's quite clear that there are factual disputes as to the step two inquiry.

[00:35:38] Speaker 01:
Really?

[00:35:39] Speaker 01:
And have we just affirmed a case?

[00:35:42] Speaker 00:
I'm hard pressed to think of one off the top of my head, although I believe this court's rulings in cases like Atrix and Hewlett-Packard sending cases back where there were factual issues on step two are indicative of that.

[00:35:56] Speaker 00:
I know that certainly sitting on the district court bench, I'm familiar with a number of Judge Stark's decisions that

[00:36:03] Speaker 00:
one at least in which I argued the case, so I'm intimately familiar with it, in which he frequently would make such a ruling.

[00:36:10] Speaker 00:
Because otherwise, the court is essentially rendering an advisory opinion.

[00:36:15] Speaker 00:
And that's not appropriate.

[00:36:16] Speaker 00:
But I do want to get back to the fact that if the issue is, as Your Honor seemed to be suggesting.

[00:36:21] Speaker 04:
Counsel, you can't get back there for very long.

[00:36:24] Speaker 04:
Fair enough, Your Honor.

[00:36:25] Speaker 04:
You want to conclude your argument?

[00:36:27] Speaker 00:
Absolutely.

[00:36:27] Speaker 00:
I will just note that.

[00:36:29] Speaker 00:
If this is an issue about what the jury instructions were, that was never appealed, and so it's not properly before the court.

[00:36:35] Speaker 04:
Thank you.

[00:36:35] Speaker 04:
Thank you, Your Honor.

[00:36:37] Speaker 04:
Mr. Van Ness has three minutes if you need it.

[00:36:45] Speaker 02:
Thank you, Your Honor.

[00:36:46] Speaker 02:
I want to clear up one misimpression that counsel left.

[00:36:49] Speaker 02:
Judge Prosh, your reading of the license agreements is correct.

[00:36:52] Speaker 02:
The Dyken agreement and the

[00:36:55] Speaker 01:
I know, but you want to address one of his main arguments, which is that even if you take all of that stuff off the table, there was still enough evidence that the jury had to reach its determination.

[00:37:06] Speaker 02:
Absolutely, I will.

[00:37:08] Speaker 02:
His main point is harmless error.

[00:37:11] Speaker 02:
You know that that's sort of the last spot to go.

[00:37:14] Speaker 02:
The error wasn't harmless because the entire damages opinion

[00:37:18] Speaker 02:
of Mr. Kennedy was based on the whereas clause.

[00:37:21] Speaker 02:
These other things he's talking about were all posed by him as confirmatory or background.

[00:37:26] Speaker 02:
The whole point of this is these license agreements

[00:37:30] Speaker 02:
were low lump sums, modest lump sums.

[00:37:33] Speaker 02:
Again, they're under protection.

[00:37:35] Speaker 02:
But this verdict is a huge multiple of those.

[00:37:38] Speaker 02:
And it was based on the fact that he made his ask based on this per unit number.

[00:37:44] Speaker 02:
Everything else was window dressing in that opinion.

[00:37:47] Speaker 02:
And you know that's the case, because they didn't present anything else.

[00:37:50] Speaker 02:
The only thing I heard counsel say was there were a couple of Google licenses there also.

[00:37:55] Speaker 02:
something that he didn't rely on.

[00:37:57] Speaker 02:
Mr. Kennedy didn't rely on those.

[00:37:59] Speaker 02:
He dismissed everything and said they want this number per unit.

[00:38:03] Speaker 02:
That's what they're entitled to.

[00:38:04] Speaker 02:
Now, I will say this.

[00:38:06] Speaker 02:
These license agreements weren't admitted without objection.

[00:38:08] Speaker 02:
We moved to redact the whereas clauses from these agreements.

[00:38:13] Speaker 02:
We asked Judge Albright that because the opinion shouldn't have been in in the first place, would he redact

[00:38:19] Speaker 02:
The number, he refused to do that.

[00:38:21] Speaker 02:
So they weren't admitted without objection.

[00:38:25] Speaker 02:
There was plenty of objection to them.

[00:38:27] Speaker 02:
The other point I want to make is this was a two patent case when it went to the jury.

[00:38:32] Speaker 02:
The jury found infringement of only one.

[00:38:36] Speaker 02:
Mr. Kennedy said,

[00:38:37] Speaker 02:
That doesn't matter.

[00:38:38] Speaker 02:
It's the same number, no matter how many patents there are.

[00:38:41] Speaker 02:
And when he put these license agreements in front of the jury with no background evidence and no support whatsoever, and said it's the per unit number from the whereas clauses, he made no effort to say, well, this is a full portfolio license, and this is why it applies to this one patent.

[00:38:58] Speaker 02:
Or in any one of these three, even the Johnson Controls Agreement

[00:39:04] Speaker 02:
327 wasn't even asserted.

[00:39:06] Speaker 02:
Wasn't even asserted.

[00:39:08] Speaker 02:
Now turning very briefly to the step two issue we've been discussing, I don't know what we were expected to do.

[00:39:14] Speaker 02:
We made the motion.

[00:39:15] Speaker 02:
Judge Albright must have assumed that step one was satisfied, or there'd be no basis to send it to the jury.

[00:39:21] Speaker 02:
It went to the jury.

[00:39:23] Speaker 02:
There was only testimony from Palmer about this so-called order

[00:39:33] Speaker 02:
ordered combination, and that's where I cited 64496451.

[00:39:37] Speaker 02:
You can read that.

[00:39:38] Speaker 02:
There's absolutely no substance to it whatsoever.

[00:39:41] Speaker 02:
It's a conclusory statement.

[00:39:43] Speaker 02:
And no other witness addressed that other than Mr. Williams, our expert, who said, no, this is a routine conventional elements put together in a routine conventional way.

[00:39:53] Speaker 02:
And it's the absence of any evidence to contradict that that we're complaining about.

[00:39:58] Speaker 02:
And once it's given to the jury, as Judge Raina says,

[00:40:01] Speaker 02:
Once it's given to the jury, then yes, it's a sufficiency of evidence issue.

[00:40:05] Speaker 02:
There wasn't evidence sufficient to show that there were unconventional or non-routine elements.

[00:40:12] Speaker 01:
I'm just switching the burden around here.

[00:40:13] Speaker 01:
It was your burden to show by clearing convincing evidence that it was.

[00:40:18] Speaker 02:
We presented our expert testimony, and they conceded that every element was conventional.

[00:40:23] Speaker 02:
Their expert conceded every element was conventional.

[00:40:27] Speaker 02:
Our expert testified that every element was conventional.

[00:40:29] Speaker 02:
The only rebuttal they had

[00:40:32] Speaker 02:
at all was their expert putting the patent up and showing the order of the elements and saying in a conclusory way, that's the ordered combination that I'm relying on.

[00:40:42] Speaker 02:
That's simply not enough to support the verdict on step two.

[00:40:47] Speaker 02:
And that's why we're here.

[00:40:48] Speaker 04:
Thank you, counsel.

[00:40:49] Speaker 02:
Thank you.

[00:40:51] Speaker 04:
Case is submitted.