[00:00:00] Speaker 03:
All right, final argument of the day is Barebox LLC versus Lansing LLC.

[00:00:05] Speaker 03:
This is document number 23.1922.

[00:00:09] Speaker 03:
Okay, Mr. Horton.

[00:00:16] Speaker 04:
Thank you, Your Honors.

[00:00:17] Speaker 04:
My name is Ben Horton, appearing on behalf of the Appellant's Bare Box and Mr. Austin Storms.

[00:00:22] Speaker 04:
May it please the Court.

[00:00:23] Speaker 04:
This appeal follows the trial court's ruling on summary judgment, finding that the plaintiff's conversion claim was preempted by federal patent law, and the trial court's entry of final judgment, finding no correction to inventorship following a bench trial.

[00:00:37] Speaker 04:
This case concluded with a trial on inventorship, and I'd like to begin there.

[00:00:42] Speaker 04:
The first issue I'd like to follow

[00:00:46] Speaker 04:
trial court's inventorship analysis was flawed.

[00:00:49] Speaker 04:
We think it was flawed for a couple of reasons, and if you bear with me, I think I can tie those reasons together.

[00:00:55] Speaker 04:
The first reason we think the trial court's analysis was flawed is that the inventors or the purported inventor's story is foundational to the inventorship analysis.

[00:01:06] Speaker 04:
That's where the analysis begins.

[00:01:09] Speaker 04:
And the inventor's story, the purported inventor's story, in a case like this has two components.

[00:01:15] Speaker 04:
The first component is the purported inventor's conception story.

[00:01:19] Speaker 04:
and then the purported inventor's communication of that conception to the defendants.

[00:01:25] Speaker 04:
And here we think the trial court's analysis did not properly consider either of those components of the inventor's story.

[00:01:32] Speaker 04:
The trial court excluded the purported inventor's story, the communication is hearsay, and the trial court did not consider in its analysis the purported inventor's conception story when evaluating the corroborating evidence.

[00:01:46] Speaker 04:
Speaking of the corroborating evidence, the second reason we feel that the trial court's analysis is flawed is that the trial court looked at the corroborating evidence one piece at a time, rather than collectively as a whole, which is what the inventorship rule of reason analysis requires.

[00:02:03] Speaker 03:
So just curious, on that particular question, what more did the district court need to say beyond what the district court actually said in working its way through each of the email attachments and concluding that they did not establish conception of certain claim elements?

[00:02:25] Speaker 04:
Your Honor, I think one thing that the trial court

[00:02:28] Speaker 04:
should have done and could have done was analyze the conception evidence preceding the exchange of documents with the defendants.

[00:02:38] Speaker 04:
I think the blue gentian case is helpful in framing this issue.

[00:02:43] Speaker 04:
In that case, the court articulated some examples of how the communication between the purported inventor and the defendants can shed light on the conception evidence and vice versa.

[00:02:54] Speaker 04:
For example,

[00:02:55] Speaker 04:
the purported inventor's familiarity with the subject matter and the technology, which would be evidenced by all of the documents we see.

[00:03:02] Speaker 03:
I'm sorry.

[00:03:03] Speaker 03:
Can you point to something specific that's missing from the court's analysis?

[00:03:08] Speaker 03:
Yes, I can, Your Honor.

[00:03:10] Speaker 03:
So what's the hole that should have been filled in?

[00:03:15] Speaker 04:
I think when the district court was going piece by piece through the email that the plaintiff sent to the defendants,

[00:03:24] Speaker 04:
The district court did not look at the contents of that email with the context of the conception or the context of what the purported inventor actually told the defendant, that part of the story.

[00:03:37] Speaker 04:
For example, if we're considering those documents, it would be helpful to know how they were explained to the defendants.

[00:03:44] Speaker 03:
Is there a proffer made as to what Mr. Storm's

[00:03:49] Speaker 03:
would have testified as to his communication with Mr. McNamara at the dinner?

[00:03:56] Speaker 04:
I think we've got two responses to that, Your Honor.

[00:03:58] Speaker 04:
I think the first response is that a proffer was made based on the context of the question preceding the objection, the response to the objection after it was made, and the trial judge's ruling.

[00:04:13] Speaker 00:
Very general.

[00:04:15] Speaker 00:
I didn't read that as a proffer.

[00:04:19] Speaker 00:
question which was answered, there was an objection, and there was a brief discussion that did not include something that I would characterize as a proffer.

[00:04:28] Speaker 00:
What is it that you're pointing to that constitutes a proffer as to what his testimony would have been had he been allowed to testify further about the communications at the dinner?

[00:04:39] Speaker 04:
Well, I think, Your Honor, what I'm pointing to is the proffer is that everyone sort of understood what the subject matter that was going to be elicited from the testimony would be, which is to say, Mr. Storm's communication of his technology to the defense.

[00:04:53] Speaker 00:
Well, but that's a very general characterization, which can include a multitude of sins.

[00:04:58] Speaker 00:
Where was the statement that I would have expected to see is, here is what he would testify to, Your Honor.

[00:05:06] Speaker 00:
And number one, it isn't hearsay, and number two,

[00:05:09] Speaker 00:
If you do exclude it as hearsay, that's why it's really critical.

[00:05:14] Speaker 00:
And I want to make sure that the Court of Appeals knows what it is that would have come in had you not sustained the hearsay objection.

[00:05:21] Speaker 00:
And I didn't see anything that falls into that category.

[00:05:24] Speaker 04:
One thing I would point to, Your Honor, it's on page 19 of our reply brief, and it's in APPX 8025.

[00:05:33] Speaker 04:
The preceding question which drew the objection at trial, and what did you tell Mr. McNamara during the cocktail reception?

[00:05:41] Speaker 04:
which is the event that immediately preceded the dinner and was part of an overall conversation.

[00:05:46] Speaker 04:
And the answer was I told him some of the things I was working on at Bearbox.

[00:05:50] Speaker 04:
I told him kind of my general idea about renewable energy.

[00:05:53] Speaker 04:
I talked to him about the power distribution units that I was developing.

[00:05:57] Speaker 04:
All of those things.

[00:05:58] Speaker 00:
That came in vis-à-vis the cocktail party without objection.

[00:06:02] Speaker 04:
Well, he's saying what he was about to describe, Your Honor.

[00:06:05] Speaker 04:
I think those were the categories of information.

[00:06:07] Speaker 00:
So that was at the cocktail party, not at the dinner.

[00:06:09] Speaker 00:
Correct.

[00:06:10] Speaker 00:
Okay, so when we get to the dinner, where is the...

[00:06:13] Speaker 00:
information to us and to the district judge as to what he would have said had the hearsay objection been overruled.

[00:06:22] Speaker 04:
I believe if we look to the trial transcript, Your Honor, you'll see that the trial judge instructed that the substance of the communications at dinner not be elicited during testimony.

[00:06:34] Speaker 04:
And so the questions and the answers that were given at trial

[00:06:39] Speaker 04:
or the sort of the categories.

[00:06:40] Speaker 00:
Yes, I know, but that doesn't tell me the answer to the question about the proffer.

[00:06:46] Speaker 00:
I mean, I think, I didn't see a proffer here.

[00:06:48] Speaker 04:
Well, I think the rule, Your Honor, says that a proffer is not necessary from the context of what's happening.

[00:06:54] Speaker 00:
If it's clear from the context as to what the witness would have said, but I'm not seeing any context here that tells us

[00:07:01] Speaker 00:
in detail what the witness would have said.

[00:07:03] Speaker 00:
Generally, he communicated things about his system, but that sentence itself is not a proffer that has the detail necessary to assess whether exclusion of that evidence would be erroneous or harmless.

[00:07:21] Speaker 01:
For example, I can't tell whether more would have been communicated than what was communicated in the later email.

[00:07:30] Speaker 04:
I can't tell.

[00:07:33] Speaker 04:
Well, Your Honor, Your Honors, I think the test for whether a proffer is needed or whether a proffer is given is not so detailed.

[00:07:42] Speaker 04:
For example, one of the cases we cite in the reply brief says that there only needs to be no uncertainty about the nature of the evidence.

[00:07:51] Speaker 04:
In other words, the proffer need not include the entirety of the testimony, just the nature of what the testimony would have been.

[00:07:56] Speaker 04:
And we think from the record that that

[00:07:59] Speaker 00:
I would read more into nature than simply a categorical statement that I told him things I've been working on.

[00:08:08] Speaker 00:
That doesn't tell the judge or us what exactly he would have said.

[00:08:14] Speaker 00:
That's my problem.

[00:08:16] Speaker 04:
Thank you, I would I would point to and I don't have it handy I will I will on rebuttal point to the remaining trial testimony where the instruction was given by the judge and the questioning had to be very Careful about not to elicit the substance.

[00:08:31] Speaker 04:
I think that's also instructive and helpful and understanding what the scope of the

[00:08:36] Speaker 04:
expected testimony would have been.

[00:08:38] Speaker 03:
And from the context of the entire trial... Can you even identify for us today what it was that Mr. Storms was prepared to testify?

[00:08:46] Speaker 03:
That would be a gloss on or something above and beyond what was already included in those attachments?

[00:08:54] Speaker 03:
Because that's where things might get prejudicial.

[00:08:57] Speaker 03:
I mean, if it's simply repeating things that are already in the contents of the attachments,

[00:09:02] Speaker 03:
then that doesn't seem to move the ball down the field.

[00:09:05] Speaker 03:
But anything that's relevant to any of the particular claim limitations that the district court ended up finding that

[00:09:12] Speaker 03:
Mr. Storms had never conceived of.

[00:09:15] Speaker 04:
Yes, your honor.

[00:09:15] Speaker 04:
I think Mr. Storms would have testified to the nature of his development, who he was developing this project for, namely a wind farm.

[00:09:23] Speaker 04:
It's a wind farm operating company called Glide Path.

[00:09:26] Speaker 03:
Well, to be more, let me put a finer point on it.

[00:09:29] Speaker 03:
What claim limitations was Storms going to talk about that's above and beyond what's in the attachments?

[00:09:38] Speaker 03:
In a power option agreement?

[00:09:40] Speaker 03:
Yes.

[00:09:40] Speaker 03:
Minimum power threshold?

[00:09:42] Speaker 03:
Yes.

[00:09:42] Speaker 04:
Sorry, I know it was taking a while to get there, but yes, exactly.

[00:09:46] Speaker 04:
A power option agreement, the court construed that to be an agreement between a power entity and a load.

[00:09:51] Speaker 03:
Where the load must use the minimum power threshold.

[00:09:56] Speaker 04:
Correct, for a defined time interval.

[00:09:59] Speaker 04:
That's right.

[00:09:59] Speaker 04:
So, if I still explain the context of what his invention was, or what his conception was for this system,

[00:10:06] Speaker 04:
I created this for a wind farm, where the wind farm would have been able to instruct the miners to turn off and sell that power back to the grid under ideal circumstances.

[00:10:17] Speaker 04:
That would have informed the nature of the disclosure.

[00:10:19] Speaker 04:
That would have given more context for the claim limitations involved.

[00:10:23] Speaker 04:
That sounds like what a proffer sounds like.

[00:10:27] Speaker 04:
I think I think This was the context of all this was clear at the trial This is what the experts were trying to testify to we'll get to that point hopefully within my time a lot of I'm running out already please move on yeah, yeah, so the other issues Relating to the analysis for inventorship include piecemeal Review of the documents we talked a little bit about that the third issue is that the district court viewed the claim elements in isolation and

[00:10:56] Speaker 04:
And that's improper under the law.

[00:10:59] Speaker 01:
It did review all of the claim elements, right?

[00:11:01] Speaker 01:
It went through each of them one by one.

[00:11:03] Speaker 04:
That's correct, Your Honor.

[00:11:04] Speaker 01:
It did determine, as it should, whether there were contributions made by your client prior to conception.

[00:11:14] Speaker 01:
Right?

[00:11:16] Speaker 00:
Yes.

[00:11:17] Speaker 01:
I don't understand, personally, what more was required than actually going through each of the limitations and determining

[00:11:25] Speaker 01:
inventorship for each of them?

[00:11:27] Speaker 04:
Well, I think, Your Honor, because the analysis was structured the way it was, we can't rely on any of the findings.

[00:11:34] Speaker 04:
All claims, or maybe most, the majority of claims, are a combination of known elements.

[00:11:41] Speaker 04:
And so if the district court is looking at the elements in isolation for evidence of earlier conception or conception, it will always be found.

[00:11:48] Speaker 04:
And so when you're approaching things in that framework, I think the entire analysis was disrupted.

[00:11:54] Speaker 01:
Can you explain a little bit more how what he should have done and how that would have changed the outcome?

[00:11:59] Speaker 04:
Sure.

[00:12:00] Speaker 04:
A good example of this is what we referred to as element B4 in the case.

[00:12:04] Speaker 04:
Element B4 we'll call the performance strategy limitation.

[00:12:08] Speaker 04:
Element B4 and the performance strategy we cited in it builds on power option data.

[00:12:15] Speaker 04:
Performance strategy is based on power option data.

[00:12:18] Speaker 04:
That's element B3.

[00:12:20] Speaker 04:
Power option data is based on a power option agreement, which is element B2.

[00:12:27] Speaker 04:
When the district court evaluated the performance strategy, for example, there was no consideration of power option data or the power option agreement.

[00:12:35] Speaker 04:
The result of that analysis was awarding Lantium a conception date of January 2018.

[00:12:42] Speaker 04:
when Lansing's own expert and their contentions were that they did not conceive of that combination of elements until August or August to October of 2019, a year and a half later.

[00:12:54] Speaker 04:
And so that's sort of emblematic of the fraud approach of going element by element.

[00:13:02] Speaker 03:
We're talking about whether storms have conception of all these things.

[00:13:07] Speaker 02:
Yes.

[00:13:08] Speaker 03:
And you're talking about McNamara right now, right?

[00:13:12] Speaker 04:
Correct.

[00:13:12] Speaker 04:
That's an example of the flaw analysis yielding.

[00:13:15] Speaker 01:
Do you have an example where it would have changed the outcome for storms?

[00:13:20] Speaker 04:
Yes, I do, Your Honor.

[00:13:21] Speaker 04:
Claim two, for example.

[00:13:23] Speaker 04:
Claim two is a dependent claim that narrows the earlier independent claim limitation of monitored set of conditions.

[00:13:32] Speaker 04:
Claim two recites monitored set of conditions comprising

[00:13:37] Speaker 04:
Price of power I think something like that the district court found that storms did conceive of the subject matter and claim to While simultaneously find that storms did not conceive of the subject matter of the broader term in the independent claim

[00:13:53] Speaker 04:
That's an incompatible result.

[00:13:55] Speaker 04:
And if we back up and look at the analysis as a whole, it might have yielded a different result for Storm's contributions to the claim.

[00:14:02] Speaker 03:
At the same time, the court found that many limitations were not conceived of by Storms.

[00:14:10] Speaker 03:
Including power option agreement and things like this That's correct.

[00:14:15] Speaker 04:
I mean we contended at trial the power option agreements been known for 20 years But it's the combination of that structure with the other elements that was passed

[00:14:26] Speaker 04:
If I could quickly turn to the position of plaintiffs that the supplemental expert report of Dr. McClellan was striking, it was an abuse of discretion.

[00:14:38] Speaker 04:
Appellees have not cited a case, nor have we been able to find one where district court has struck a supplemental report that incorporated a court's mark and ruling

[00:14:49] Speaker 04:
that resolved a dispute that the power party raised after the close of expert discovery.

[00:14:56] Speaker 04:
And we think it was an abusive discretion for the district court to do so here.

[00:15:00] Speaker 04:
And we think that the striking of the report and the characterization of the supplemental report at the time of striking, that is to say the district court said the entire supplement has new opinions, which we think is not correct, influenced the whole course of the case through trial.

[00:15:18] Speaker 04:
And it resulted in the district court finding of inconsistent testimony, which again is the result of our position.

[00:15:25] Speaker 04:
The district court said that old opinions in the supplement were actually new opinions.

[00:15:30] Speaker 04:
So that set off dominoes.

[00:15:33] Speaker 04:
And so we think it was not harmless error.

[00:15:37] Speaker 04:
We think it was an influential error.

[00:15:40] Speaker 04:
And so we would ask this court to vacate the judgment.

[00:15:44] Speaker 03:
You've used up all your rebuttal time, but we'll give you a little.

[00:15:46] Speaker 03:
Thank you, Your Honor.

[00:16:06] Speaker 02:
May it please the court, Mark Nelson, representing Appellees, Lansium, and Mr. Klein and Mr. McNamara, who are the defendants.

[00:16:16] Speaker 02:
We think that the district court was correct in its rulings, both at the bench trial and in its granting of summary judgment on the conversion claim.

[00:16:27] Speaker 00:
Can I just add directly to the hearsay question, because we spent a lot of time with your opposing counsel on that, it struck me that,

[00:16:36] Speaker 00:
This was a case in which what was attempted to be shown was not whether the statements were true, but whether it was true that they were made.

[00:16:48] Speaker 00:
And you objected on hearsay grounds, notwithstanding that the explanation of what was the use that the statements were going to be put to was whether they were made, not whether they were true.

[00:17:02] Speaker 00:
And yet the district court excluded those statements.

[00:17:05] Speaker 00:
That strikes me.

[00:17:06] Speaker 00:
as a non-hearsake purpose for the statement.

[00:17:10] Speaker 00:
Would you agree with that now in retrospect?

[00:17:12] Speaker 02:
In retrospect, Your Honor, I guess I would say I'm not sure, because I think still what Mr. Storm's conception is what's in the mind of the inventor.

[00:17:22] Speaker 02:
And if I was talking to you and I said, I have a system that

[00:17:28] Speaker 02:
can go to the moon with a person inside of it and using rocket propulsion, that doesn't mean that I've actually conceived it.

[00:17:36] Speaker 00:
No, what's important is that you have told me something that I then go back and use to invent my invention.

[00:17:49] Speaker 00:
And that's the whole crux of what the reason that this testimony was put in for.

[00:17:54] Speaker 00:
I'm not saying that it's hearsay or not introduced for a hearsay purpose.

[00:17:59] Speaker 02:
And I understand your position, Your Honor.

[00:18:00] Speaker 02:
I'm not conceding that it isn't.

[00:18:03] Speaker 02:
But regardless, as Your Honor said, there was no proffer here.

[00:18:09] Speaker 02:
This objection was made about the content of Mr. Storm's testimony at a cocktail reception.

[00:18:17] Speaker 00:
Well, it's actually the dinner, I think.

[00:18:20] Speaker 00:
The cocktail reception was not objected to.

[00:18:22] Speaker 00:
As I understand it, the later testimony was about the communication at the dinner.

[00:18:27] Speaker 02:
So it's actually the flip side, Your Honor.

[00:18:29] Speaker 02:
The objection was made about the testimony he was going to give at the cocktail reception.

[00:18:34] Speaker 02:
I believe that's correct.

[00:18:35] Speaker 02:
And then there was never any follow-up with what was said at the dinner or what would have been said at the dinner.

[00:18:41] Speaker 02:
That was never brought in.

[00:18:42] Speaker 02:
I don't remember the judge instructing them that they couldn't bring it in.

[00:18:49] Speaker 02:
But I believe the question that was objected to was what he would have said at the cocktail reception.

[00:18:57] Speaker 02:
But either way, even if it was error, which we're not admitting that it was, but even if it was, I'm really unable to find any case where there's no proffer of what would have been said that rises to the reversible error.

[00:19:15] Speaker 02:
Another thing that's important here is what happened after that objection.

[00:19:25] Speaker 02:
Mr. Storms did provide some testimony about the dinner, Appendix 8026.

[00:19:30] Speaker 02:
They could have asked Mr. McNamara about what Mr. Storms told him at the dinner.

[00:19:35] Speaker 02:
They did not do that.

[00:19:37] Speaker 02:
Mr. McNamara testified without objection some things about the dinner.

[00:19:42] Speaker 02:
Their own expert, who was aware of all of Mr. Storm's deposition testimony that was given in the case earlier, said, and I quote, it's unlikely an enormous amount of pertinent information was communicated at the dinner, appendix 6157 at 18624 through 12720.

[00:20:01] Speaker 01:
In short, the comments you're making right now, I guess, are going to

[00:20:09] Speaker 01:
your view that there's other things they could have done in addition to a proffer to try to get this testimony in?

[00:20:16] Speaker 02:
It's going to be several things.

[00:20:17] Speaker 02:
There's other things they could have done in addition to a proffer.

[00:20:20] Speaker 01:
His talking about the conversation would not have been hearsay.

[00:20:23] Speaker 02:
Correct.

[00:20:24] Speaker 02:
They could have done many things to get this testimony in.

[00:20:27] Speaker 02:
And the expert never relied on it in his expert report at all, or his deposition.

[00:20:33] Speaker 02:
The expert basically

[00:20:35] Speaker 02:
dismissed sort of the communication at the dinner with a quote that I just gave you during questions on deposition.

[00:20:43] Speaker 02:
So if there is error here, Your Honor,

[00:20:48] Speaker 02:
It does not rise to the manifest error necessary for reversal.

[00:20:53] Speaker 02:
And moreover, the district court's opinion, I think in their brief, they say that there was only two pages of Mr. Storm's testimony cited or something to that effect.

[00:21:04] Speaker 02:
And we've got the right quote here.

[00:21:13] Speaker 02:
Appendix 9 through 12, which is the district court's decision, the district court is citing numerous statements from Mr. Storms.

[00:21:24] Speaker 02:
So it wasn't like he wasn't allowed to talk to anything.

[00:21:27] Speaker 02:
The bottom line is there is a lot of ways that this could have been brought in.

[00:21:31] Speaker 02:
There is a lot of ways that they could have made a proffer.

[00:21:35] Speaker 02:
And it just simply wasn't done.

[00:21:36] Speaker 00:
Let me go back, if I could, to your statement that the expert

[00:21:41] Speaker 00:
did not rely extensively on what would have been testimony regarding the Denver cocktail party.

[00:21:53] Speaker 00:
Where would I find that?

[00:21:55] Speaker 02:
So I believe, Your Honor, the statement, and I'm trying to read my own handwriting here, so if I mispronounced it, I apologize.

[00:22:02] Speaker 02:
But I think it's in Mr. McClellan's deposition testimony

[00:22:10] Speaker 02:
at appendix 6157, lines 18624 through 12720.

[00:22:16] Speaker 02:
I believe it's in the briefing somewhere too, but I don't know where that is.

[00:22:23] Speaker 02:
And so this case was litigated from the beginning based on the contents of these emails, the email and its attachment.

[00:22:33] Speaker 02:
And so

[00:22:34] Speaker 02:
It's our position that regardless of whether the hearsay objection was or was not, whether the judge's ruling on the hearsay objection was or was not error, that it was harmless error if it was error.

[00:22:49] Speaker 02:
So turning to the example that counsel gave about element B4 and the linking of the testimony.

[00:23:02] Speaker 02:
The district court went through a detailed analysis, element by element, and as a whole, of the claims.

[00:23:12] Speaker 02:
And counsel said that the district court erroneously came to a conclusion that conception of element B4 happened prior to the admitted conception date by Lansium of August, I think, of 2019.

[00:23:27] Speaker 02:
And that's not what the district court's opinion was saying.

[00:23:30] Speaker 02:
But Mr. Storms was looking at this.

[00:23:32] Speaker 02:
Mr. Storms was saying, well, I invented pieces of this and this and this.

[00:23:37] Speaker 02:
And one of the things he says he invented was I had a way to turn off power distribution units one by one based on

[00:23:47] Speaker 02:
my software, or my simulation, my hardware, and because I can turn them off one by one, that's a performance strategy, and therefore I had that element.

[00:24:00] Speaker 02:
And what Lansing did at trial was defend every single one of those sort of piecemeal allegations that Mr. Storms made.

[00:24:08] Speaker 02:
And Lansing said, no, we've been in this business, you're a salesperson trying to sell us a box, we've been in this business

[00:24:15] Speaker 02:
for a year and a half before we met you or longer.

[00:24:18] Speaker 02:
And with response to having the claim languages, providing instructions to a set of computing systems to perform one or more computational operations based on the performance strategy,

[00:24:31] Speaker 02:
We had, and the computer systems are Bitcoin miners in this case, we had a system in the 632 application a year and a half before we met you that did monitor conditions and it developed a performance strategy.

[00:24:44] Speaker 02:
It didn't develop the performance strategy of the 433 patent as claimed, but in response to your saying you're simply turning off power distribution units based on information

[00:24:58] Speaker 02:
whether I should run, whether I should mine Bitcoin or not, we had that system a year and a half before you did.

[00:25:03] Speaker 02:
And that's what the district court is finding here.

[00:25:05] Speaker 02:
It's not saying inconsistently, oh, Lansium, you conceived the 433 patent a year and a half before you say you did.

[00:25:14] Speaker 02:
That's just not what the district court is saying.

[00:25:20] Speaker 00:
You mentioned a moment ago that the district court had both done a

[00:25:26] Speaker 00:
part-by-part analysis, but also a global characterization of the patent and the arguments with respect to conception.

[00:25:39] Speaker 00:
Your opposing counsel said he never did the latter.

[00:25:41] Speaker 00:
Can you point us to someplace where you could characterize it with whatever specificity that is available to you that the district court said the latter?

[00:25:53] Speaker 00:
talked in terms of having viewed the entire patent as a whole.

[00:25:58] Speaker 00:
I think conception was not shown.

[00:26:02] Speaker 02:
I don't know if I can point you to it verbatim at this point, but what I can say, Your Honor, is this is a 60-plus page district court opinion, I think.

[00:26:09] Speaker 02:
I mean, it's very lengthy.

[00:26:10] Speaker 02:
It starts out with a recitation of all sorts of factual issues.

[00:26:14] Speaker 02:
And then when it goes into the analysis,

[00:26:16] Speaker 02:
Before each one, it summarizes sort of all the evidence up front.

[00:26:21] Speaker 02:
And then it applies it, and then it moves on and applies it.

[00:26:24] Speaker 02:
And it also considered Dr. Asani's testimony, which was a Pelley's expert.

[00:26:29] Speaker 02:
And Dr. Asani's testimony, I may have that cite, Dr. Asani's testimony clearly applied

[00:26:38] Speaker 02:
looked at all the evidence.

[00:26:39] Speaker 02:
He testified individually that the evidence didn't indicate that Mr. Storms was an inventor, and he testified that taking everything as a whole and looking at everything as a whole, he didn't think Mr. Storms was an inventor.

[00:26:53] Speaker 02:
And I think that's... Well, I have a Sony written here, but I don't have the site.

[00:27:03] Speaker 00:
We can find it.

[00:27:04] Speaker 00:
If you were done with that,

[00:27:07] Speaker 00:
portion of your argument.

[00:27:09] Speaker 00:
Could I ask you to comment, at least briefly, on the preemption issue?

[00:27:14] Speaker 02:
Sure, Your Honor.

[00:27:16] Speaker 00:
Yeah.

[00:27:17] Speaker 02:
I don't have much time left.

[00:27:18] Speaker 02:
And I understand that you're one of the judges that were sitting on the American Sahamid case.

[00:27:25] Speaker 02:
The preemption issue here, the judge got it right for a couple of different reasons.

[00:27:31] Speaker 02:
First of all, the way this claim was

[00:27:35] Speaker 02:
is different from how it was litigated.

[00:27:38] Speaker 02:
Throughout how it was litigated, the plaintiff tried to conflate

[00:27:47] Speaker 02:
There never was a clear estimation of what it was outside of the patent that was allegedly converted.

[00:27:53] Speaker 01:
What should we be looking at?

[00:27:54] Speaker 01:
I had understood to look at this, we should really be focusing on the complaint.

[00:27:58] Speaker 01:
Are you suggesting we should be looking at something else?

[00:28:01] Speaker 02:
Well, you can look at the complaint, but you can also look on what the judge found.

[00:28:07] Speaker 02:
Because a lot of his findings that it was preempted as a patent-like claim

[00:28:12] Speaker 02:
were based on plaintiff's own admissions.

[00:28:14] Speaker 02:
And so that's in the appendix 85 through 88.

[00:28:19] Speaker 02:
The complaint, first of all, the inventorship claims were integrated into the conversion claim.

[00:28:27] Speaker 02:
The bare box technology was described, Appendix 693, as proprietary technology relating to cryptocurrency.

[00:28:36] Speaker 02:
But then a couple of paragraphs later, on Appendix 694, the claim subject matter of the 433 patent falls fully within the scope of, quote, the bare box technology.

[00:28:47] Speaker 02:
The district judge then looked at one of the touchstones of Louisiana law on conversion is you have to deprive somebody of the actual property.

[00:28:58] Speaker 02:
And here, to try to get to a deprivation of property, Bearbox's expert conceded that the power arbitrage, which sort of became the euphemism for the idea that you can sell back power if it's profitable to do so, or if it's not profitable to sell back the power, you mine Bitcoin with it.

[00:29:18] Speaker 02:
You pick your choice.

[00:29:22] Speaker 02:
Conceded that that may infringe the 433 patent,

[00:29:25] Speaker 02:
Bearbox, answering brief talks about monopolizing portions of Storm's systems that were communicated, again, in the patent context.

[00:29:34] Speaker 01:
The damages measures here.

[00:29:35] Speaker 01:
I still agree that the allegation being made is that there is use of Mr. Storm's property, assuming that I'm just trying to understand.

[00:29:50] Speaker 01:
This is how I'm looking at it.

[00:29:52] Speaker 01:
There's an allegation that there was use of that property,

[00:29:55] Speaker 01:
And that, for that use, a royalty should be provided.

[00:29:59] Speaker 02:
That seems to be sort of how we're looking at it, is that there was a use.

[00:30:06] Speaker 01:
Because the type of this is one of the patent infringement.

[00:30:09] Speaker 01:
It's a patent infringement.

[00:30:10] Speaker 01:
You can't make use or sell, right?

[00:30:12] Speaker 02:
You can't make use or sell.

[00:30:14] Speaker 02:
The damages for conversion are you to get the property back, or you get the value of the property at the time it was converted.

[00:30:21] Speaker 02:
And here, the damage model was,

[00:30:23] Speaker 02:
Lancium, you incorporated this idea somehow into your software and you raised a whole bunch of money several years after the fact in investment purposes based on that alleged incorporation and that's much more of a patent loyalty like type damage model than otherwise.

[00:30:44] Speaker 02:
And the other thing, even later on,

[00:30:47] Speaker 02:
Lancia conflates, or I'm sorry, Bearbox conflates the Bearbox technology, which really was the mining container holder.

[00:30:57] Speaker 02:
And this is a quote from Appendix 7219.

[00:31:00] Speaker 02:
Lancia was wrong to suggest that the system conceived and communicated to Machimera is something different than what's claimed in the patent.

[00:31:08] Speaker 02:
And so the whole of the way it was

[00:31:13] Speaker 02:
conflated the two.

[00:31:15] Speaker 02:
And besides that, and I guess I'm out of time here in a second, besides that, they made it public.

[00:31:21] Speaker 02:
And so the purposes underlying patent law, the three purposes that the case law talks about, one of them is not depriving the public of what is in the public domain.

[00:31:32] Speaker 02:
Before this communication ever happened with Mr. McNamara,

[00:31:36] Speaker 02:
The same data file, it's not the exact same one, but a very similar data file with the same general information in it, was communicated to a third party, Todd Garland.

[00:31:46] Speaker 02:
Without confidentiality restrictions, it was also communicated to Ben Hakes.

[00:31:50] Speaker 02:
There's evidence in the record that Dennis LeBige, who's a third party, is the one who told storms about this in the first place.

[00:31:57] Speaker 02:
And so even if

[00:31:59] Speaker 02:
the district court's decision was not correct based on what I just said, which it was, there's a secondary purpose under the Bonito votes doctrine that this specific conversion claim should not be allowed to go forward because it would deprive the public of what's otherwise in the public domain.

[00:32:19] Speaker 02:
And that disclosure to Gollum was made May 3rd

[00:32:22] Speaker 02:
The email communication to McNamara was made May 9.

[00:32:26] Speaker 02:
So it was before.

[00:32:26] Speaker 02:
So it's more of the altered precision type context than the American satellite context.

[00:32:31] Speaker 03:
This is beyond what the district court found, right?

[00:32:34] Speaker 02:
This is beyond what the district court found.

[00:32:36] Speaker 02:
But this was in the record.

[00:32:37] Speaker 02:
I mean, the district court ruled based on what was in the papers.

[00:32:41] Speaker 02:
But this was in the record at the time the district court found it.

[00:32:44] Speaker 00:
If you had to summarize the preemption point in one sentence, would it be unfair, or would it be fair to characterize it as,

[00:32:50] Speaker 00:
This was an inventorship claim under the cover of the conversion claim.

[00:33:03] Speaker 02:
I think that might be fair, but I want to add one more point there.

[00:33:07] Speaker 02:
There is no Seventh Amendment issue here, because the way they've pledged now.

[00:33:11] Speaker 00:
I understand.

[00:33:12] Speaker 00:
But if there's preemption, the Seventh Amendment issue goes away.

[00:33:16] Speaker 00:
If what they are doing is making what amounts to an inventorship claim and calling it making a separate contention of conversion, then that would be preempted, presumably, because you can't litigate a patent issue such as inventorship in a state court toward action.

[00:33:38] Speaker 00:
And is that a fair summary of what your position is?

[00:33:41] Speaker 00:
Or is that oversimplified to the point of making it misleading?

[00:33:45] Speaker 00:
I think that you should feel free to answer the latter.

[00:33:48] Speaker 02:
That's a fair summary in some respects, Your Honor.

[00:33:52] Speaker 02:
I mean, I think it's a second bite or a fallback position, however you want to characterize it, at the inventorship claim that then is further preempted under the Bonita Boats Doctrine because they made it public.

[00:34:03] Speaker 02:
All right.

[00:34:04] Speaker 02:
Thank you, Your Honors.

[00:34:06] Speaker 03:
Thank you.

[00:34:14] Speaker 04:
Thank you.

[00:34:15] Speaker 04:
I'll jump right in on the preemption issue, addressing points raised there.

[00:34:22] Speaker 04:
In the University of Colorado case, the 2003 decision, not the 1999 decision, addresses many of the points that Mr. Nelson just made and that the court was inquiring about.

[00:34:33] Speaker 04:
In that case,

[00:34:34] Speaker 04:
the court found that an unjust enrichment claim, a state law claim, was not preempted by federal law, despite the fact that the unjust enrichment claim was based on the recipient of information, essentially copying and pasting it into the patent.

[00:34:50] Speaker 04:
The court in that case said that the unjust enrichment claim was determining the rights between those two parties.

[00:34:58] Speaker 04:
It was not assessing the parties' rights to exclude against the rest of the world, as the federal patent law does.

[00:35:08] Speaker 04:
That case, I think, is really instructive for the conversion claim in this case.

[00:35:12] Speaker 04:
The facts were not developed, which I think Mr. Nelson conceded.

[00:35:16] Speaker 04:
The pleading accounts for the fact that the subject matter that was converted could have been in the patent, might have been outside the patent.

[00:35:25] Speaker 04:
That's an open fact issue that was not in the trial.

[00:35:27] Speaker 00:
But the point is in the Cyanamid case, if I recall correctly,

[00:35:31] Speaker 00:
were not interested in being co-inventors.

[00:35:33] Speaker 00:
They wanted to keep their information private.

[00:35:36] Speaker 00:
And there was a violation, as the court found, of an applied contract not to disclose this.

[00:35:45] Speaker 00:
And that was the basis for the court's ruling.

[00:35:48] Speaker 00:
But in this case, Mr. Storms, as I understand it, does want to be an inventor.

[00:35:53] Speaker 00:
It seems to me a big difference.

[00:35:55] Speaker 04:
I don't know that that's.

[00:35:57] Speaker 04:
Then I read the University of Colorado case the same way, Your Honor.

[00:36:00] Speaker 04:
I understood that the plaintiffs in that case did want to be inventors.

[00:36:04] Speaker 04:
And I also understand that the same.

[00:36:06] Speaker 04:
I'm sorry.

[00:36:07] Speaker 04:
I also understand at the same time that the plaintiffs sent the information to the defendant.

[00:36:13] Speaker 04:
They also sent it to a journal for publication.

[00:36:17] Speaker 04:
And the confidential nature of that communication, the way the court considered it, was only because the unjust enrichment claim was based on a breach of an implied contract.

[00:36:28] Speaker 04:
And one of the terms of the implied contract was confidentiality.

[00:36:31] Speaker 04:
Conversion doesn't require confidentiality.

[00:36:34] Speaker 04:
And so that's why I think the confidential

[00:36:35] Speaker 04:
discourse isn't really related here.

[00:36:38] Speaker 04:
But the rest of the University of Colorado, which also awarded sustained or upheld the district court's award of damages based on a royalty model, 6% royalty, and said that that was a fair evaluation.

[00:36:52] Speaker 04:
And because it was resolving rights between the two parties and not the enforcement of patents, the patent against the rest of the world, it was not preempted.

[00:37:02] Speaker 04:
If I have time, 12 seconds.

[00:37:08] Speaker 04:
The last thing I want to mention is about the reduction of practice standard that the district court applied to Mr. Storm's evidence.

[00:37:14] Speaker 04:
In many of the court's rulings, it found that Mr. Storms had not conceived of an item because the simulation he created could not do the claim limitation.

[00:37:25] Speaker 04:
And that's not the correct test.

[00:37:26] Speaker 04:
And we'll put that on the pile of our other arguments about why the inventorship analysis was blocked.

[00:37:31] Speaker 04:
Thank you.

[00:37:32] Speaker 04:
Good.

[00:37:32] Speaker 04:
Thank you.

[00:37:33] Speaker 04:
The case is submitted.