[00:00:00] Speaker 02:
Our last case this morning is similarly applications and internet time versus Salesforce.

[00:00:07] Speaker 02:
2024, 1685, Mr. DeFoon Senso again.

[00:00:21] Speaker 00:
The district court granted nearly $7 million in fees against my client, AIT, who is here.

[00:00:29] Speaker 00:
based on a single sentence in the opinion of fees.

[00:00:34] Speaker 00:
The district court said, we continue to litigate after claim constructing ended any reasonable likelihood of prevailing on the merits.

[00:00:44] Speaker 00:
The district court didn't explain why.

[00:00:46] Speaker 00:
Appellees have never identified any part of any

[00:00:52] Speaker 00:
Description of the specification that would preclude our infringement argument.

[00:00:57] Speaker 00:
They haven't come forth either the district court or here and said, it doesn't have an objective.

[00:01:03] Speaker 00:
It doesn't have rules.

[00:01:05] Speaker 00:
Below, Salesforce conceded on summary judgment that it's a specialized program and their summary judgment motion was not based on that.

[00:01:15] Speaker 00:
So the district court did not provide any rationale on why the case became unreasonable.

[00:01:24] Speaker 00:
Further, in the two years.

[00:01:26] Speaker 02:
Well, the district court said you've lost the key issue.

[00:01:30] Speaker 02:
Therefore, continuing is hopeless and that's sanctionable.

[00:01:36] Speaker 02:
Why shouldn't we respect that?

[00:01:39] Speaker 00:
I understand that.

[00:01:40] Speaker 00:
The reason is here that, as Judge Stoll recognized, the descriptions and the specification are very broad.

[00:01:49] Speaker 00:
And actually, at the claim construction hearing, the judge asked how the accused product worked.

[00:01:58] Speaker 00:
And I responded that we hadn't finished source code review, but generally speaking,

[00:02:04] Speaker 00:
It hits a button, the software goes and compares the metadata in two different applications and detects changes.

[00:02:11] Speaker 00:
And the judge said, then you could argue that they were invoking an intelligent agent.

[00:02:16] Speaker 00:
So even if we're wrong at the end of the day, it certainly wasn't unreasonable to continue this case, given the broad descriptions and the specification.

[00:02:28] Speaker 00:
In the two years following claim construction, upon which Appellee's counsel billed almost $7 million, not once did they write a letter, write an email, place a phone call, and say, you have to drop this case.

[00:02:44] Speaker 00:
We don't have an intelligent agent.

[00:02:46] Speaker 00:
And here's why.

[00:02:48] Speaker 00:
In fact, even in their merits appeal, they never say why they don't have an intelligent agent, why the deploy function's not an intelligent agent.

[00:02:57] Speaker 04:
Now, that's not a dispositive point, right?

[00:02:59] Speaker 00:
What?

[00:03:00] Speaker 04:
That's not a dispositive point, right?

[00:03:04] Speaker 00:
No, it's not.

[00:03:05] Speaker 00:
You are correct, Your Honor.

[00:03:06] Speaker 00:
They don't have to.

[00:03:07] Speaker 00:
But we had no reason to believe the descriptions in the spec would lead to summary judgment.

[00:03:13] Speaker 04:
At the end of the day.

[00:03:15] Speaker 00:
What?

[00:03:15] Speaker 04:
What about POP?

[00:03:17] Speaker 04:
What about the claim of interpretation?

[00:03:19] Speaker 04:
How does it relate to validity?

[00:03:22] Speaker 00:
Well, with respect to POP, the claim construction reading in Intelligent Aid made it harder for them to prove infringement.

[00:03:28] Speaker 00:
Their own expert didn't testify that POP discloses an intelligent agent.

[00:03:32] Speaker 00:
He said he didn't consider it.

[00:03:34] Speaker 00:
But he made up a construction.

[00:03:38] Speaker 00:
out of whole cloth that he called AITs, interpretation.

[00:03:42] Speaker 00:
And you'll note, Pelley argues, well, AI took on reasonably broad positions on intelligent agent and changes that affect.

[00:03:53] Speaker 00:
They cite no record evidence where we ever took such broad positions.

[00:03:58] Speaker 00:
The opinions of Mr. Zakovich, our expert, are pretty clear.

[00:04:02] Speaker 00:
It's consistent with the descriptions and the specification.

[00:04:05] Speaker 00:
He said it over and over.

[00:04:06] Speaker 00:
It's in the brief.

[00:04:08] Speaker 00:
He never said it could be anything, never once.

[00:04:11] Speaker 00:
He never said changes that affect would be typing changes into a field.

[00:04:18] Speaker 00:
And further and more importantly on invalidity, when you read a limitation in, you're making it harder to prove invalidity, not easier.

[00:04:29] Speaker 04:
Can I ask you something else?

[00:04:31] Speaker 04:
The court held that Salesforce had satisfied its burden under the court's local rules to provide a reasonable itemization.

[00:04:40] Speaker 04:
Did the court's local rules say anything about redaction?

[00:04:43] Speaker 00:
It does not.

[00:04:44] Speaker 00:
It does not.

[00:04:45] Speaker 00:
It just says you have to provide a bearing.

[00:04:51] Speaker 04:
It says reasonable itemization and description of work performed.

[00:04:55] Speaker 04:
How do you think the district court knew what work was performed?

[00:05:02] Speaker 00:
I don't think the district would.

[00:05:03] Speaker 00:
There was a declaration, right?

[00:05:03] Speaker 00:
There was a declaration.

[00:05:04] Speaker 00:
And it had little, oh, over these four months, we did these things.

[00:05:09] Speaker 00:
But we're talking about $7 million over a little over 18 months.

[00:05:16] Speaker 00:
And my client, as of now, has to pay that.

[00:05:21] Speaker 00:
And we can't even judge how that's reasonable.

[00:05:25] Speaker 04:
Am I correct in understanding that every single entry is redacted?

[00:05:29] Speaker 00:
Every single entry.

[00:05:32] Speaker 00:
And then it's, sorry.

[00:05:38] Speaker 00:
Now, they point to two warnings in their brief.

[00:05:41] Speaker 00:
They say, you were warned.

[00:05:42] Speaker 00:
We were warned at the claim construction hearing because the district court said, well, if you read the claims broadly for infringement, you better be careful on invalidity.

[00:05:51] Speaker 00:
But that was in respect to the intelligent agent limitation.

[00:05:54] Speaker 00:
That was respect to a completely different limitation.

[00:05:57] Speaker 00:
That wasn't a warning.

[00:06:02] Speaker 00:
And then secondly, the second warning was a month before, or alleged warning, a month before the summary judgment hearing.

[00:06:11] Speaker 00:
And at that hearing, two things were discussed.

[00:06:14] Speaker 00:
Appellee was looking for a stay.

[00:06:17] Speaker 00:
Now, Appellee was looking for a stay.

[00:06:19] Speaker 00:
Why would they be looking for a stay if we had a frivolous position on infringement?

[00:06:26] Speaker 00:
And the summary judgment hearing was a month away.

[00:06:30] Speaker 00:
Our position wasn't frivolous.

[00:06:32] Speaker 00:
They never told us it was frivolous.

[00:06:34] Speaker 00:
The basis for the district court's judgment at the end of the day wasn't that the construction precluded infringement.

[00:06:43] Speaker 00:
It was our expert didn't label the tasks and objectives, which are in boxes in his source code analysis with a line that says task and objective.

[00:06:54] Speaker 00:
From reading the district court's opinion, had we done that, we would have survived summary judgment.

[00:07:01] Speaker 00:
And I asked, how could a reasonable client, at getting the claim construction, at the claim construction order, after the claim construction hearing where the district court said, if it goes out, the text changes, and it's a program, you can argue it's an intelligent agent, what reasonable client would drop the claims?

[00:07:22] Speaker 00:
What reasonable client would drop the claims without a letter?

[00:07:25] Speaker 00:
And I know you don't always need a letter.

[00:07:27] Speaker 00:
But in that circumstance, when the language descriptions and the specification are that broad, if you believe the opposing counsel doesn't have a good faith basis to continue, and you're going to continue to bill $6.8 million over the next 18 months,

[00:07:45] Speaker 00:
I think any reasonable litigate would send such letter.

[00:07:49] Speaker 00:
And it's not fair to my client that they're on the hook for this amount, if they would have done it and explained it rationally, which they still haven't done to this day, is rationally explain why the deploy function is not an intelligent agent, given the descriptions and the spec.

[00:08:06] Speaker 00:
If they had a reason, they should have told us.

[00:08:09] Speaker 00:
And the fact is they still haven't told us.

[00:08:12] Speaker 00:
That's all I have on the feature.

[00:08:15] Speaker 02:
We will save your rebuttal time.

[00:08:23] Speaker 02:
Thank you.

[00:08:23] Speaker 02:
Mr. Johnson.

[00:08:25] Speaker 01:
Thank you very much.

[00:08:25] Speaker 01:
May it please the court.

[00:08:28] Speaker 01:
A district court's grant of attorney's fees is reviewed for abuse of discretion.

[00:08:32] Speaker 01:
And I think, as Your Honor was indicating, the fact that the sales force was under no obligation to send a Rule 11-type letter

[00:08:42] Speaker 01:
to AIT, this was a case from the very beginning that they knew they were trying to thread the needle on and there's no threading of any needle with respect to trying to argue on the one hand that the Salesforce products infringe and then on the other hand that they're not otherwise, the claims are not otherwise invalid.

[00:09:01] Speaker 04:
So the district court has basically one sentence for its reasoning and that's what we need to review for abusive discretion, right?

[00:09:09] Speaker 04:
And it's that when a patentee continues to litigate after claim destruction, ends any reasonable likelihood of prevailing due word of attorney fees as warranted.

[00:09:18] Speaker 04:
Right?

[00:09:18] Speaker 04:
I mean, that's the gist of the holding.

[00:09:23] Speaker 01:
I think that's part of the gist.

[00:09:24] Speaker 01:
I wouldn't say that's the whole holding, because I think the judge talks about the totality of the circumstances.

[00:09:32] Speaker 01:
And the judge lived this case, as I did, as counsel for AIT did, from the beginning.

[00:09:39] Speaker 01:
It was several different times in different hearings where the judge pointed out that the arguments AIT was advancing were contradictory over and over again.

[00:09:49] Speaker 01:
And it wasn't just in the context of.

[00:09:52] Speaker 04:
Where is this discussion of the totality of circumstances?

[00:09:55] Speaker 04:
I'm not saying that the district court, I just don't see it.

[00:10:01] Speaker 01:
I think there's a reference to looking at

[00:10:04] Speaker 01:
the totality of the circumstances under the case law.

[00:10:07] Speaker 04:
I think you assume you have it in front of you.

[00:10:09] Speaker 04:
I'd like to see where you're pointing to.

[00:10:24] Speaker 04:
I mean, I see it on page A9 is where I'm looking.

[00:10:29] Speaker 04:
There's one paragraph that talks about

[00:10:33] Speaker 04:
You know, it was reasonable to ring the claims initially.

[00:10:38] Speaker 04:
But then, you know, after claim construction, it wasn't reasonable anymore.

[00:10:43] Speaker 04:
I don't see anything else.

[00:10:44] Speaker 01:
What I was saying, Your Honor, with respect to, for example, pages on page nine, lines three down to 13, and the case line, the Justicam case,

[00:10:53] Speaker 01:
Talks about the totality of the circumstances, so he doesn't say page 9 lines 3 to 13 thereabouts.

[00:11:01] Speaker 04:
Yes The words the words not there, okay, then what is there?

[00:11:08] Speaker 01:
It is the it is the rat is the reasoning in this part of the order well reason tell me where the other reasons are please I don't want to miss it I

[00:11:19] Speaker 01:
Well, Your Honor, this is the totality order.

[00:11:22] Speaker 01:
I don't see anything else that's described there other than what Your Honor is pointing to.

[00:11:26] Speaker 04:
So what I pointed to is the totality of circumstances.

[00:11:29] Speaker 01:
Yes, yes.

[00:11:30] Speaker 03:
So your position is that this 10-line discussion is the entirety

[00:11:40] Speaker 03:
of the analysis as to why this is an exceptional case.

[00:11:44] Speaker 01:
I believe that what we have here in Judge Jones' order, the 10-page order, is a reflection of the work that went into making the decision that attorney's fees were justified.

[00:11:55] Speaker 03:
Well, maybe, but it would have been helpful if she had described exactly what in the totality of circumstances it was that led her to reach this conclusion.

[00:12:08] Speaker 03:
I mean, just saying,

[00:12:09] Speaker 03:
Based on the totality of circumstances, this is an exceptional case without explaining exactly

[00:12:18] Speaker 03:
Why she reached that conclusion leaves us a bit in the dark here.

[00:12:22] Speaker 01:
Well, I think what we have is Judge Jones indicating that it wasn't losing claim construction.

[00:12:30] Speaker 01:
That was not what rendered the case exceptional.

[00:12:33] Speaker 01:
It was continuing to litigate after the claim construction was handed down.

[00:12:38] Speaker 03:
But that happens all the time, where parties disagree on the merits of that claim construction ruling.

[00:12:47] Speaker 03:
That is correct, Your Honor.

[00:12:48] Speaker 03:
But here- That doesn't make the case exceptional unless the argument is so devoid of merit that it warrants reaching that exceptional conclusion.

[00:13:00] Speaker 03:
Well, we don't know that.

[00:13:01] Speaker 03:
There's no explanation as to why litigating after the claim construction here was so inappropriate.

[00:13:10] Speaker 03:
that it warranted this judgment.

[00:13:13] Speaker 01:
Well, what we have is a utter failure of proof on the very exact element that was the subject of the court's claim construction decision.

[00:13:21] Speaker 02:
In other words, you're saying once you've had a bad claim construction, you should stop arguing an appeal.

[00:13:28] Speaker 01:
Not every case, Your Honor.

[00:13:30] Speaker 01:
Not every case.

[00:13:31] Speaker 01:
But this was one that was on the outer edge of what was reasonable.

[00:13:35] Speaker 01:
This was unreasonable in light of what the claim construction was.

[00:13:39] Speaker 04:
There was no- What about the broad definition of intelligent agent in the specification?

[00:13:46] Speaker 01:
Again, Your Honor, I don't characterize it as broad.

[00:13:49] Speaker 01:
I mean, I look at it as intelligent.

[00:13:51] Speaker 04:
Just the definition of the event and characterization of broad.

[00:13:56] Speaker 01:
Yeah, even under that definition, there is no proof whatsoever.

[00:14:04] Speaker 01:
And again, it's their burden to establish that the deploy function meets the elements of the claim, even under the definition that's in the specification for intelligent agent.

[00:14:13] Speaker 01:
There simply is no proof.

[00:14:16] Speaker 01:
of describing doing the analysis comparing what's in the deploy function looking at the code describing the code and saying here is where it does.

[00:14:26] Speaker 01:
x, y, and z. What we have are conclusory statements.

[00:14:29] Speaker 04:
If we disagree, just hypothetically, if we disagreed with that characterization, would that be enough to say that district court was wrong here?

[00:14:38] Speaker 04:
No, Your Honor, because- Because it relied on one single finding, which was that it was unreasonable to continue after the claim was made.

[00:14:45] Speaker 01:
And what was unreasonable about it was, on the one hand, if we were right about intelligence- It was a hypothetical.

[00:14:51] Speaker 01:
Understood.

[00:14:52] Speaker 04:
So based on my hypothetical, what would be the answer?

[00:14:57] Speaker 01:
Based on your hypothetical, I think it's not.

[00:15:02] Speaker 01:
The district court was correct.

[00:15:05] Speaker 01:
And in that scenario, they're either.

[00:15:08] Speaker 04:
My hypothetical was assuming the district court was wrong.

[00:15:12] Speaker 01:
Right.

[00:15:12] Speaker 01:
So if they're wrong.

[00:15:13] Speaker 01:
OK.

[00:15:15] Speaker 04:
But if they're.

[00:15:16] Speaker 04:
And because that is the only reason provided for why attorney fees were granted, I would think you would have to concede that attorney fees would have to be vacated.

[00:15:25] Speaker 01:
Your Honor, with all due respect, I don't think so.

[00:15:28] Speaker 04:
Even under my hypothetical?

[00:15:30] Speaker 01:
Even under your hypothetical, because then their patent's invalid.

[00:15:35] Speaker 01:
And that's exactly the point the judge made over and over again, was you can't have it both ways.

[00:15:41] Speaker 01:
You can't thread the needle and argue that somehow there's infringement broadly, and the claim maintain its validity.

[00:15:48] Speaker 01:
that that was the unreasonable nature that they took and that's what distinguishes this case from all the other claim construction cases that

[00:15:56] Speaker 01:
This court has dealt with, and I've dealt with in my career, where if you get the claim construction wrong, that doesn't mean the case is over and it's unreasonable to proceed.

[00:16:05] Speaker 01:
But here, it was unreasonable to proceed.

[00:16:08] Speaker 01:
And the court highlighted that issue from the beginning.

[00:16:11] Speaker 01:
And we had the PTAB decision, even before then, which invalidated the claims on the same basis that Judge Joan, which he ultimately invalidated the claims on.

[00:16:22] Speaker 01:
And so it's not about whether- The PTAB made facts, right?

[00:16:28] Speaker 01:
The PTAB, I would characterize it differently.

[00:16:32] Speaker 01:
I would say the PTAB made a determination that the POP reference was anticipatory.

[00:16:40] Speaker 04:
That's a fact question.

[00:16:42] Speaker 04:
Anticipation's a question of fact.

[00:16:44] Speaker 01:
So with that, I would agree, Your Honor.

[00:16:47] Speaker 04:
OK.

[00:16:47] Speaker 04:
What about the redaction that the court held

[00:16:51] Speaker 04:
you provided reasonable itemization and description of the work performed.

[00:16:56] Speaker 04:
How am I to review that?

[00:16:58] Speaker 04:
And I don't understand how the district court could determine that as well, given the lengthy redactions of every single entry

[00:17:07] Speaker 04:
the description of the work.

[00:17:09] Speaker 01:
Let me first point out there was never a challenge by AAIT to ask for the redactions through that process.

[00:17:15] Speaker 01:
And obviously, producing the descriptions would have been a waiver of attorney-client privilege.

[00:17:20] Speaker 01:
And there was never any discussion of them trying to approach us about trying to provide.

[00:17:25] Speaker 04:
Are you suggesting that parties don't usually provide descriptions of the work performed?

[00:17:29] Speaker 01:
In some situations, yes, they do.

[00:17:31] Speaker 01:
But not all situations, in my experience.

[00:17:33] Speaker 01:
And what we have here is an attorney declaration that was submitted that

[00:17:38] Speaker 01:
It's 170-something pages, largely with redactions from the bills.

[00:17:42] Speaker 01:
But we provided it.

[00:17:42] Speaker 04:
Because of all of these descriptions?

[00:17:44] Speaker 04:
Because the entire thing is redacted.

[00:17:45] Speaker 04:
You're saying everything on the page was under attorney-client privilege?

[00:17:50] Speaker 01:
Well, what's on the page is the description of what every lawyer did during its time entry.

[00:17:55] Speaker 04:
So something like respond to some rejudgment motion would be redacted as attorney-client privilege?

[00:18:01] Speaker 01:
I don't know if something as broad as that was actually redacted or not.

[00:18:05] Speaker 01:
But the fact that the work we have

[00:18:08] Speaker 01:
The attorney-client privileges are there.

[00:18:09] Speaker 04:
Did you say you don't know whether that was redacted?

[00:18:11] Speaker 04:
I mean, I'll show you everything.

[00:18:13] Speaker 01:
Well, no, I know it's all redacted.

[00:18:14] Speaker 01:
But I don't know if there was a particular broad description like that sitting here before you.

[00:18:20] Speaker 01:
So what I do know is that there was a concern about attorney-client privilege waiver.

[00:18:26] Speaker 01:
And there was a declaration that was submitted.

[00:18:28] Speaker 01:
And in opposition, there was never any request to produce anything that was unredacted.

[00:18:37] Speaker 01:
And again, so as I said, what makes this case exceptional is not losing the claim construction.

[00:18:43] Speaker 01:
It's continuing to litigate after the claim construction.

[00:18:46] Speaker 01:
And again, as we just heard in the earlier appeal, there was another failure of proof on the deploy function.

[00:18:54] Speaker 01:
And what we saw were conclusory statements about what the deploy function supposedly did not in his expert report But only in his deposition and it was not the item specific Analysis that's required in laying out where the infringement actually appears with respect to the deploy function and Unless your honors have any other questions.

[00:19:16] Speaker 01:
I'll see the rest of my time.

[00:19:18] Speaker 02:
Thank you counsel I

[00:19:26] Speaker 02:
Mr. DeFrancenzo, you have quite a bit of time if you need it.

[00:19:30] Speaker 00:
Yeah, I'm just going to have to be brief.

[00:19:33] Speaker 00:
I want to address the thread-the-needle argument.

[00:19:36] Speaker 00:
Because they say it in their brief.

[00:19:37] Speaker 00:
They say, you can't thread the needle between the deploy function and the input control of pop.

[00:19:43] Speaker 00:
The two are nothing alike.

[00:19:45] Speaker 00:
Their experts never said they were anything alike.

[00:19:49] Speaker 00:
No one's ever compared them.

[00:19:51] Speaker 00:
The district court's opinion itself recognized that POP's an input field.

[00:19:55] Speaker 00:
You type in information, and it stores it.

[00:19:58] Speaker 00:
The deploy function, as you can see in the first three pages of the detailed source code description of the deploy function, is nothing like an input field.

[00:20:08] Speaker 00:
You have two applications, a developer application and a production application.

[00:20:13] Speaker 00:
The production is the one that's live.

[00:20:15] Speaker 00:
the developer application is worked on.

[00:20:18] Speaker 00:
Then, at a certain point, so you're not entering into this one, you're entering into this one.

[00:20:23] Speaker 00:
The changes are changes to metadata that affect the operation.

[00:20:28] Speaker 00:
Now, when it's time to update, it doesn't go and just pull all of the changes, the whole developer application, and put it in the production aid.

[00:20:38] Speaker 00:
It doesn't.

[00:20:39] Speaker 00:
It goes, it iterates through, it finds only what's detected, only the metadata that's detected, and incorporates that into the production application without the need for program.

[00:20:50] Speaker 00:
It's exactly what's taught in the specification.

[00:20:52] Speaker 00:
That's what the deploy function is.

[00:20:54] Speaker 00:
POP is nothing like that.

[00:20:56] Speaker 00:
And there's no evidence it is.

[00:20:57] Speaker 00:
Their own expert on invalidity didn't look at infringement.

[00:21:00] Speaker 00:
He admits it.

[00:21:02] Speaker 00:
He just made up a construction that he called AITs, and he said, if I can screw it broad enough to encompass any type of program that can detect anything, I would find anticipation.

[00:21:14] Speaker 00:
That is not threading the needle.

[00:21:16] Speaker 00:
We don't have to thread the needle.

[00:21:17] Speaker 00:
There's no needle to thread.

[00:21:19] Speaker 00:
The two are completely different.

[00:21:20] Speaker 00:
And if you're going to make a thread the needle argument, you need an expert to say, this is what's being used.

[00:21:26] Speaker 00:
This is the prior art.

[00:21:28] Speaker 00:
And the two are the same, or the same for purposes of the claim construction.

[00:21:32] Speaker 00:
You can't get up with an attorney argument and say, can't thread the needle.

[00:21:37] Speaker 00:
Why?

[00:21:39] Speaker 00:
This is about fees here.

[00:21:41] Speaker 00:
They say we couldn't continue after the district court's order because of the descriptions of intelligent agent in the spec.

[00:21:48] Speaker 00:
They haven't come forward either in their merits brief or the fees brief and identified any aspect of any description in the specification that as a matter of undisputed fact is not encompassed by the deploy function.

[00:22:05] Speaker 00:
All they've said is,

[00:22:07] Speaker 00:
It's not there.

[00:22:08] Speaker 00:
Our expert didn't say it.

[00:22:09] Speaker 00:
He said it expressly.

[00:22:10] Speaker 00:
He gave the support for it.

[00:22:12] Speaker 00:
So we should win on the merits.

[00:22:13] Speaker 00:
And therefore, there would be no fees.

[00:22:15] Speaker 00:
But I have nothing further.

[00:22:18] Speaker 00:
And thank you very much for your time.

[00:22:20] Speaker 00:
My client really appreciated it.

[00:22:22] Speaker 02:
Thank you to both counsel.

[00:22:24] Speaker 02:
The case is submitted.