[00:00:00] Speaker 04:
Our second case this morning is number 231506, bit management software versus United States.

[00:00:37] Speaker 04:
Okay, Mr. Fleming.

[00:00:39] Speaker 01:
Good morning, and may it please the Court.

[00:00:40] Speaker 01:
Mark Fleming together with Brent Gurney on behalf of Bit Management.

[00:00:44] Speaker 01:
The Court of Federal Claims recognized that in what it called the usual copyright case, damages would compensate for the unrestricted, unmonitored copies of Bit Management software that the Navy installed.

[00:00:55] Speaker 01:
That, after all, is what the Navy took.

[00:00:57] Speaker 01:
But the Court erroneously believed that footnote five of this Court's prior opinion foreclosed that approach in this case and this case only.

[00:01:05] Speaker 01:
That was legal error, and I don't read the government's brief as defending it.

[00:01:09] Speaker 01:
The problem with the resulting judgment is that it doesn't do what this court in the Gaylord cases said is required, namely paying fair market value for what the defendant took.

[00:01:18] Speaker 04:
So what case says that as part of copyright damages, you have to be paid for each copy?

[00:01:26] Speaker 01:
Well, no case says that for all cases.

[00:01:29] Speaker 01:
But that's not our burden to show, and we're not arguing that it has to be in all cases.

[00:01:33] Speaker 01:
The rule is, as this court stated in Gaylord, Gaylord 3, that copyright damages have to pay fair market value for what the defendant took.

[00:01:42] Speaker 01:
And so in this case, the question is, what kind of a license would have given fair market value for the scope of the copying that the Navy did?

[00:01:50] Speaker 04:
And let's remember.

[00:01:51] Speaker 04:
The question is, what would the result of a hypothetical negotiation

[00:01:55] Speaker 04:
Correct.

[00:01:56] Speaker 04:
And since the license agreement was a floating license to be determined by this Flexera software, why isn't it followed that that's this approach that the parties would have taken in a hypothetical negotiation?

[00:02:15] Speaker 01:
Well, because at the hypothetical negotiation, Judge Dyke, the parties would have known that the Navy either wouldn't or couldn't use the Flexera software.

[00:02:23] Speaker 01:
That's what this court found was the

[00:02:25] Speaker 01:
the fact of the infringement and the reason why all of the installed copies were infringing acts.

[00:02:31] Speaker 01:
So the question of the hypothetical negotiation would have been, what would the parties have negotiated in order to give the Navy installed copies on all 400,000 of its computers with no monitoring, no restriction, and no limit of use?

[00:02:44] Speaker 01:
And the only license that would give that

[00:02:46] Speaker 01:
is a PC license for all those computers.

[00:02:49] Speaker 01:
It doesn't mean we get the full list price and we haven't asked for that.

[00:02:52] Speaker 04:
So in the original briefing, which I went back and looked at to refresh my recollection about, it is quite clear that the parties are arguing about whether you were entitled to be compensated for each copy

[00:03:09] Speaker 04:
or based on a floating license.

[00:03:11] Speaker 04:
That was the heart of one aspect of the briefing.

[00:03:17] Speaker 04:
So I'm having difficulty in understanding, given that focus of the briefing the first time around, how it is that footnote five is dictum.

[00:03:29] Speaker 01:
Footnote five certainly is dictum.

[00:03:31] Speaker 01:
There was no damages ruling.

[00:03:33] Speaker 01:
You're not answering my question.

[00:03:35] Speaker 04:
That was argued the first time around.

[00:03:37] Speaker 04:
You were arguing.

[00:03:39] Speaker 04:
that you were entitled to be compensated on a per copy basis, right?

[00:03:43] Speaker 01:
Well, certainly.

[00:03:43] Speaker 01:
But that was the basis of our claim.

[00:03:46] Speaker 01:
It always has been.

[00:03:48] Speaker 01:
But the Court of Federal Claims didn't decide damages the last time because it found that there was no liability.

[00:03:53] Speaker 01:
This court addressed liability, but there was no argument at the oral argument before this court.

[00:03:59] Speaker 01:
And there was no basis to decide what the royalty base for the damages were going to be.

[00:04:05] Speaker 01:
That was something that was remanded.

[00:04:07] Speaker 01:
for the Court of Federal Claims to do a calculation of damages.

[00:04:10] Speaker 04:
So even if the parties argued whether you were entitled to be compensated on a per copy basis because the Court of Federal Claims hadn't addressed that issue, it was dictum.

[00:04:20] Speaker 04:
That's your theory?

[00:04:21] Speaker 01:
It certainly was not essential to the ruling of this court the last time around.

[00:04:25] Speaker 01:
And even if I'm wrong about that, Your Honor, the notion that this court would have created a circuit split with the thoroughbred case, with the deltac case from the Seventh Circuit that the government likes to rely on,

[00:04:36] Speaker 01:
with this court's own Gaylord cases, which talk about fair market value for what the infringer took, it would not have happened.

[00:04:45] Speaker 01:
Well, in the Thoroughbred case from the Sixth Circuit, the defendant argued that there should be no damages awarded for copies of software that it claimed it only made for convenience and didn't use.

[00:04:55] Speaker 01:
The Sixth Circuit reversed the district court for not awarding damages for those copies and awarded damages for those copies.

[00:05:01] Speaker 01:
in the seventh circuit in the deltac case the court made very clear that the value of the use for an infant for uh... copyrighted invention is the value of what the infringer took from the copyright holder namely the value of the license fee for what was uh... for what was taken and that's what we're talking about as i don't read those cases establishing general rule respect

[00:05:29] Speaker 04:
One of the cases seems to be not dealing with this issue at all, but with a fair use question.

[00:05:36] Speaker 04:
The other case is dealing with a situation in which the agreement between the parties contemplated compensation on a per copy basis.

[00:05:50] Speaker 01:
The fair use case, I think, is the wall data case, which is separate.

[00:05:54] Speaker 01:
I can explain why I think that's relevant.

[00:05:56] Speaker 01:
But thoroughbred software most certainly did award damages and reverse the district court for not awarding damages on copies of software that the defendant claimed had not been employed.

[00:06:08] Speaker 02:
The additional point, and I think this is a point of principle... Did the thoroughbred case involve something where previously there had been a floating license between the parties?

[00:06:17] Speaker 01:
Well, there had been, I don't think there was a floating license, but here also the term of the floating license that this court found was infringed or was violated was the using of Flexera.

[00:06:29] Speaker 01:
And the question is, at the hypothetical negotiation, where the parties know that Flexera is not going to work and not going to be used, what is the resulting license that would have given fair market value for what the Navy actually had?

[00:06:42] Speaker 01:
And let's remember, it's not disputed that the Navy got value

[00:06:46] Speaker 01:
far and away beyond the actual number of instances of Spiders 3D that were logged into according to the Navy logs.

[00:06:54] Speaker 01:
This was admitted by their expert Mr. Kennedy on cross-examination, but he gave no value to it.

[00:06:59] Speaker 01:
He called it a convenience factor.

[00:07:01] Speaker 01:
The Court of Federal Claims likewise said it was a convenience factor.

[00:07:04] Speaker 04:
that if the parties in the hypothetical negotiation knew that the Flexera software would work, that they would change the principle of compensation from a floating license to a copy.

[00:07:16] Speaker 01:
Well, there are a number of reasons for this, Judge Dyke.

[00:07:19] Speaker 01:
So first and foremost, that is how bit management and the Navy had always handled every sale of BS Contact Geo that was not going to be monitored by Flexera.

[00:07:28] Speaker 01:
The only time they envisioned the use of a floating license

[00:07:31] Speaker 01:
was when Flexera was going to monitor and limit the use of the software to make sure the Navy did not exceed the number of licenses that it had.

[00:07:39] Speaker 01:
If the parties had known that that wouldn't work, what other option did they have in order to provide fair compensation for what the Navy took, which was unrestricted, unmonitored, widely available?

[00:07:50] Speaker 04:
The option is the one that the Court of Federal Claims followed, which is to figure out how many floating licenses would be required.

[00:07:59] Speaker 01:
Well, so there's no example in the record of any deal that bit management ever signed with the Navy or anywhere else that followed that mechanism.

[00:08:09] Speaker 01:
And bit management would not have.

[00:08:10] Speaker 01:
In fact, this court in its previous decision said it would have been objectively unreasonable for bit management to authorize copying on such a vast scale without any kind of limitation, simply on the basis that you can trust us and our imperfect

[00:08:24] Speaker 01:
logs that will, after the fact, not even track the use of BSContactGeo, but only the use of Spiders3D, even though there are, by admission of the Navy in their interrogatory responses, multiple other repositories of 3D information that would have been viewed using BSContactGeo, those weren't even purported to be tracked, and also no tracking even of the first year of Spiders3D.

[00:08:48] Speaker 01:
So that is an alternative argument as to even if you believe that actual accessing of the software is important, the Navy failed to carry its burden, and it most certainly was its burden, to show that there was any use within the licensure.

[00:09:03] Speaker 04:
There was the Navy's burden because we said that in Putnam.

[00:09:06] Speaker 01:
No, not just that, Your Honor.

[00:09:08] Speaker 01:
It's true.

[00:09:09] Speaker 04:
You do say that that's part of the mandate, right?

[00:09:14] Speaker 01:
No, it's part of footnote five.

[00:09:16] Speaker 01:
The mandate was that the court reconsider the calculation of damages.

[00:09:22] Speaker 04:
Your theory was that the Court of Federal Appointments was bound by that statement in footnote five.

[00:09:27] Speaker 01:
Bound because it's an accurate statement of precedent, Your Honor.

[00:09:30] Speaker 01:
Again, the DELTAC case that the government relies on says that the burden of showing that the cost of the copyrighted product

[00:09:40] Speaker 01:
is anything less than the list price lies with the defendant.

[00:09:43] Speaker 01:
And that's particularly in a case like this, where the uncertainty is due to the defendant's own failure to keep records, and specifically the records that the party's agreement envisioned they would keep.

[00:09:53] Speaker 01:
And that that's the reason for the ultimate infringement, is that the Navy didn't track using Flexera as the court found was the condition of the implied license.

[00:10:01] Speaker 01:
So if there was ever a case in which the burden of proof should be on the defendant, I don't have to argue that footnote five is a mandate.

[00:10:07] Speaker 01:
Footnote five is correct as a matter of the law.

[00:10:10] Speaker 01:
that the burden of uncertainty has to fall on the infringer, particularly where the uncertainty results from the failure of the infringer to keep correct records.

[00:10:17] Speaker 03:
You've said several times that at the hypothetical negotiation the parties would know that Flexera either wouldn't work or that the Navy would somehow fail to use it.

[00:10:27] Speaker 03:
Where is that coming from?

[00:10:29] Speaker 03:
Why would that be part of what they would know as opposed to

[00:10:34] Speaker 03:
the hypothetical license here should be one in which a willing buyer and a willing seller agree to terms which would have included something like flexera to monitor the usage.

[00:10:46] Speaker 01:
Well, the hypothetical negotiation always envisions that the parties know that the defendant is going to infringe.

[00:10:53] Speaker 01:
Otherwise, if the parties didn't know that, what are they negotiating over?

[00:10:56] Speaker 01:
they're negotiating over what the defendant is actually going to take, in the but for world where they had actually known that the infringement was going to happen.

[00:11:04] Speaker 01:
I mean that's what Mr. Gaylord did, right?

[00:11:06] Speaker 01:
I mean Mr. Gaylord didn't know at the time of a hypothetical negotiation that the government was going to take the image of the sculpture and put it on a stamp.

[00:11:18] Speaker 01:
But the hypothetical negotiation was set on the assumption

[00:11:21] Speaker 01:
that the parties knew that that's what was going to happen.

[00:11:23] Speaker 01:
And the question is, what kind of license would have given Mr. Gaylord fair market value?

[00:11:27] Speaker 03:
Is that the theory that your expert articulated and that you argued to the Court of Federal Claims?

[00:11:33] Speaker 01:
We certainly did this.

[00:11:34] Speaker 01:
That was the basis of this.

[00:11:35] Speaker 01:
We said because the government took 400,000 copies unlicensed,

[00:11:42] Speaker 01:
He started with what he thought was the right starting point for a per copy license.

[00:11:46] Speaker 01:
He gave a significant volume discount.

[00:11:47] Speaker 03:
But does your expert say, and the parties would know hypothetically at the negotiation, that flexera would not work or would not be used?

[00:11:57] Speaker 01:
I don't recall whether he says that specifically.

[00:12:01] Speaker 01:
But I think the point is that at every hypothetical negotiation, it is assumed that the parties know what the defendant is going to do that results in an infringement.

[00:12:09] Speaker 01:
This is true in patent cases as well as copyright cases.

[00:12:12] Speaker 01:
And that ultimately, they're bargaining over what it was that the Navy took.

[00:12:16] Speaker 01:
And that's what this court said in Gaylord 2 and Gaylord 3, that that's the purpose of the hypothetical negotiation, is to provide fair market value of a license that covers the copyrighted work that the defendant took.

[00:12:28] Speaker 01:
Otherwise, there would never be a hypothetical negotiation resulting in a license, because the defendant could always say, well, the plaintiff wouldn't have known back then that we were going to infringe.

[00:12:38] Speaker 01:
The whole point of the hypothetical negotiation is they are negotiating over a license that covers the infringement.

[00:12:43] Speaker 01:
All the cases say that.

[00:12:45] Speaker 02:
Can I ask you about a different issue?

[00:12:47] Speaker 01:
Of course there is.

[00:12:47] Speaker 02:
In your argument about the use of contact, do you go outside of spiders 3D?

[00:12:53] Speaker 02:
Is there a quantification of that anywhere?

[00:12:55] Speaker 01:
No, there can't be a quantification because again, the Navy failed to do what this court found was a condition of the implied license.

[00:13:02] Speaker 01:
They didn't even try to track that.

[00:13:05] Speaker 02:
During discovery for damages, did anyone try to figure out what this amount was?

[00:13:12] Speaker 01:
I believe the Navy conceded that it did not even purport to track that.

[00:13:17] Speaker 02:
Was there any attempt to seek that discovery?

[00:13:21] Speaker 02:
The thing that I find odd is that I have a concern

[00:13:25] Speaker 02:
that perhaps you were deciding that the better way to approach this would be to say we want a per copy license and not a per use license.

[00:13:36] Speaker 02:
And so this, which might have been small potatoes, was just set aside during discoveries, maybe not being a theory worth pursuing.

[00:13:44] Speaker 02:
So I'm trying to figure out what efforts were made

[00:13:47] Speaker 02:
to try to determine this as a potential damages theory?

[00:13:51] Speaker 01:
I believe that the government, and I want to make sure I'm correct before I say it, so if you'll forgive me to find the exact page.

[00:14:00] Speaker 01:
And I'll give it to you if it does in fact say what I believe it does.

[00:14:07] Speaker 01:
So if one looks at page 10087, 10087 of the appendix, this is in the second volume,

[00:14:18] Speaker 01:
This is the government's response to our second set of interrogatories.

[00:14:22] Speaker 01:
If the court is with me, if you look at the paragraph that has one in brackets there, it says, BS contact geo licenses were procured to support viewing of X3D files used in the context of Spiders 3D.

[00:14:33] Speaker 01:
The Navy has not tracked whether Navy personnel have used BS contact geo to view X3D files outside the context of Spiders 3D.

[00:14:41] Speaker 01:
and thus cannot identify whether such use has occurred or each such use.

[00:14:46] Speaker 01:
I don't know what more we could have asked after we got that response.

[00:14:49] Speaker 01:
With the court's permission, I reserve the balance of my time.

[00:14:52] Speaker 04:
OK, we'll give you two minutes.

[00:14:53] Speaker 01:
Thank you, Your Honor.

[00:14:58] Speaker 04:
Mr. Baldwin?

[00:15:09] Speaker 00:
Good morning.

[00:15:10] Speaker 00:
May it please the court.

[00:15:12] Speaker 00:
The Court of Federal Claims correctly awarded a hypothetical license based directly on the party's actual licensing practices for the software at issue.

[00:15:24] Speaker 00:
Bit management's relevant arms-length transactions, licenses, and offers focused on the number of users of the software and not the raw number of copies.

[00:15:37] Speaker 00:
The trial court found, and bit management does not contest,

[00:15:41] Speaker 00:
that bit management's website licenses allowed unlimited downloads and unlimited installations without restriction.

[00:15:50] Speaker 00:
Bit management offered website licenses with unlimited downloads to the Navy, or at least it was considered in the context of the Navy's Earth Globe project.

[00:16:02] Speaker 00:
Their bit management considered a BS contact geo domain license with unlimited downloads.

[00:16:09] Speaker 00:
They offered it to a foreign capital city for an unrestricted number of citizens and users.

[00:16:17] Speaker 00:
The price for that was a single lump sum royalty of 45,000 euros, far less than what the Court of Federal Claims awarded here.

[00:16:27] Speaker 00:
They also considered a similar license for a foreign regional state that was described as unlimited in time

[00:16:36] Speaker 00:
and number of users, that was 11,000 euros, roughly seven times less than what the court of federal claims awarded here.

[00:16:45] Speaker 00:
The key point is that the fair market value for these licenses in quotes was driven by the number of users, not the number of copies.

[00:16:55] Speaker 00:
The right to make unlimited copies was essentially a selling point by bit management.

[00:17:00] Speaker 00:
It was baked into the royalty and captured by the per use royalty.

[00:17:07] Speaker 00:
There is no authority in this court that mandates a per-copy royalty in all cases of copyright infringement.

[00:17:15] Speaker 00:
And this court did not mandate and could not have mandated that in the prior appeal.

[00:17:23] Speaker 00:
There is no circuit split.

[00:17:26] Speaker 00:
What the cases hold is that the royalty must match the evidence.

[00:17:31] Speaker 00:
That's what Gaylord holds.

[00:17:33] Speaker 00:
That's what On Davis holds.

[00:17:34] Speaker 00:
And that's what the Court of Federal Claims holds in this particular case.

[00:17:39] Speaker 00:
Talking about Gaylord, Gaylord directly rejects the premise of an automatic one size fits all royalty in all cases.

[00:17:48] Speaker 00:
The Gaylord cases illustrate that the hypothetical license should account for how the government used the work at issue and what kind of royalty best matches that use.

[00:18:01] Speaker 02:
How do you respond to the argument that during the hypothetical negotiation, the parties would know that Flexera wouldn't operate, and therefore bit management contends that it would not have agreed to a usage agreement?

[00:18:15] Speaker 00:
Your Honor, the way that the parties would have encountered that is, counsel is correct, that the parties would have been aware that there would be infringement or that they were negotiating for royalty to cover the Navy's uses.

[00:18:30] Speaker 00:
The Flexera issue is simply a technical issue that resulted in the infringement.

[00:18:37] Speaker 00:
But in determining the fair market value for a license to cover that infringement, the parties are going to be looking at those benchmark licenses that I mentioned and bit management's website licenses.

[00:18:48] Speaker 00:
And they're going to know that bit management has actually extended those kinds of licenses for exactly the kind of use that the Navy made of the software.

[00:18:59] Speaker 03:
But just to be clear, you're agreeing with your friend on the other side that at the hypothetical negotiation time, the parties would know that even though part of the deal was supposed to be the Navy would use Flexera to limit, as I understand it, the number of simultaneous users, that that would not happen, and you would have something on the order of 400,000 or 500,000

[00:19:20] Speaker 03:
copies, and you'd agree to compensate them fairly for that.

[00:19:26] Speaker 00:
That's correct, Your Honor.

[00:19:27] Speaker 00:
And in fact, that's what the parties actually did between 2006 and 2013, as illustrated in the first appeal.

[00:19:36] Speaker 04:
What's your theory is that in the hypothetical negotiation, even though the parties knew that Flexera wouldn't work, they would not have departed from the principle of a floating license to go to a per copy license instead.

[00:19:49] Speaker 00:
That's correct, Your Honor.

[00:19:50] Speaker 00:
Flexera was initially proposed in 2011 or 2012 in response to Bit Management's offer of three different options for tracking how the software was going to be used.

[00:20:03] Speaker 00:
And by used, it was specifically focused on the number of copies of software that were actually running at the same time.

[00:20:11] Speaker 00:
So the overall intent of the parties from 2006 through 2013

[00:20:17] Speaker 00:
was to go to a use-based license approach.

[00:20:21] Speaker 00:
And the parties did go to a use-based license approach.

[00:20:25] Speaker 00:
Yes, the technicalities did not work.

[00:20:28] Speaker 00:
But in retrospect, we have evidence that the Navy actually did not use the software more than 38 times during that time period.

[00:20:38] Speaker 03:
In your view, how does the license, the hypothetical license that the Court of Federal Claims found here, how does it account for

[00:20:47] Speaker 03:
all of the many hundreds of thousands of copies that were made, and for the convenience that the Navy gained from making all those copies.

[00:20:55] Speaker 03:
How is that accounted for in this license?

[00:20:59] Speaker 00:
Your honor, the court of law claims specifically acknowledged the convenience aspect of things in footnote 17 of its opinion, where it said the convenience factor is appealing to the court.

[00:21:12] Speaker 03:
It suggests it could be worth $10 a copy, I think.

[00:21:16] Speaker 00:
You have to remember that the proper construct here is you have to look at what the fair market value is.

[00:21:21] Speaker 00:
If you look at the Sona, if you look at on Davis, the focus is always on what the owner has lost, not what the taker has gained.

[00:21:29] Speaker 00:
So yes, they can point to the fact that the government perhaps did value the convenience, but that convenience value was completely baked in to the per use model that bit management had and advertised to others where it said,

[00:21:45] Speaker 00:
You can use unlimited copies or unlimited downloads as long as you pay us for what you use.

[00:21:52] Speaker 00:
And that's how we price our licenses.

[00:21:57] Speaker 00:
I mentioned the On Davis decision.

[00:21:59] Speaker 00:
I mean, On Davis is a perfect illustration that this isn't just the rule in the context of Title 28 with cases against the government.

[00:22:07] Speaker 00:
It's true of all copyright cases that encounter the issue of actual damages.

[00:22:12] Speaker 00:
On Davis,

[00:22:14] Speaker 00:
The plaintiff there wanted $2.5 million based on per copies and per viewers, essentially.

[00:22:21] Speaker 00:
And the court, the Second Circuit there, said, that's speculative.

[00:22:26] Speaker 00:
That's not going to work.

[00:22:27] Speaker 00:
But the plaintiff in that case had produced evidence of a lump sum $50 royalty for a possibly comparable license and remanded on that particular basis.

[00:22:41] Speaker 00:
So the point is,

[00:22:43] Speaker 00:
that the plaintiff has to come up with objective, reliable, comparable evidence that supports the royalty that they demand.

[00:22:52] Speaker 00:
And here, bit management did not do that.

[00:22:56] Speaker 04:
Do you agree that in the original appeal, that the briefing focused on whether they were compensated on a for copy basis or on a floating license basis?

[00:23:09] Speaker 00:
The first appeal, I do not agree.

[00:23:12] Speaker 00:
The first appeal was completely focused on libel.

[00:23:15] Speaker 04:
I can quote you from the briefs where the parties argue about that.

[00:23:20] Speaker 00:
In the first appeal?

[00:23:21] Speaker 04:
Yes.

[00:23:23] Speaker 04:
Have you looked back at the first appeal?

[00:23:25] Speaker 00:
I've looked at the first appeal decision.

[00:23:27] Speaker 00:
I have not reviewed the briefs in quite some time.

[00:23:29] Speaker 04:
Well, you might want to go look back at the briefs because that was the central argument that both sides were addressing.

[00:23:35] Speaker 00:
I do recall that there was a citation to how bit management had originally argued in its complaint that it was entitled to $596 million.

[00:23:48] Speaker 04:
Both parties argued about the question of whether per copy compensation should result or not.

[00:23:56] Speaker 00:
Take a look at it.

[00:23:58] Speaker 00:
Yes, I take your representation, Your Honor.

[00:24:01] Speaker 00:
But my sense is that

[00:24:03] Speaker 00:
Throughout the case, bit management has argued that it's entitled to a per-copy royalty, and in fact suggested and argued to the Court of Federal Claims that it was entitled to a per-copy royalty because it was controlling law.

[00:24:18] Speaker 00:
And the Court of Federal Claims originally bought into that argument, that it was controlling law, that bit management was entitled to a per-copy royalty.

[00:24:28] Speaker 02:
How does the damages that was awarded account for the potential use of ContactTO outside of Spiders3D?

[00:24:38] Speaker 00:
Your Honor, there was no use or no objective evidence of use of the software outside of the context of Spiders3D.

[00:24:48] Speaker 02:
Can the government admit that there may have been use?

[00:24:52] Speaker 00:
It's possible that there could have been use.

[00:24:56] Speaker 00:
It's not something that the Navy actually purchased BS Contact Geo for.

[00:25:02] Speaker 00:
We have three different Navy witnesses who testified at trial that they were aware of no other use of BS Contact Geo outside of the context of SPDRS 3D.

[00:25:13] Speaker 00:
SPDRS 3D was the driving force for the Navy to negotiate licenses for BS Contact Geo.

[00:25:19] Speaker 00:
And we have

[00:25:21] Speaker 00:
We have one of the witnesses who maintained those repositories that opposing counsel referenced.

[00:25:27] Speaker 02:
Did the judge below address this factual issue?

[00:25:33] Speaker 00:
He addressed it only in the context of his finding that there was no other need for the Navy for BS contact geo.

[00:25:41] Speaker 00:
And that's supported by the record.

[00:25:44] Speaker 00:
The record shows three different witnesses testifying that there

[00:25:48] Speaker 00:
was no need for BSContactGeo.

[00:25:50] Speaker 00:
The record shows that before BSContactGeo there were perhaps at most five users, Navy-wide, who might have been interested in this kind of technology.

[00:26:03] Speaker 00:
The repositories were down for several months and no one complained that the repositories were down.

[00:26:10] Speaker 00:
And even stepping outside the context of the Navy, if you look at the record, as far as

[00:26:16] Speaker 00:
bit management was able to sell at that particular time, or even the downloads of its free version that made from its website.

[00:26:25] Speaker 00:
All of that was falling.

[00:26:26] Speaker 00:
So the overall objective evidence shows that there really was not much interest in bit management software, and there's certainly no evidence of that interest in bit management software within the Navy, other than BS Contact Geo.

[00:26:42] Speaker 03:
You don't think, evidently, that the Court of Federal Claims had to follow footnote five.

[00:26:48] Speaker 03:
Do we have to decide now, I guess again, who had the burden on proving the amount of use?

[00:26:55] Speaker 03:
You're correct.

[00:26:58] Speaker 00:
The government contends that footnote five is not controlling.

[00:27:02] Speaker 00:
You do not have to reach who controls the burden, because no matter who has the burden, if one party

[00:27:10] Speaker 00:
brings objective evidence to trial, and the other party brings speculation, then the party who brings objective evidence to trial is going to prevail, no matter what the burden is.

[00:27:21] Speaker 03:
You're saying you brought the objective evidence, right?

[00:27:23] Speaker 03:
That's correct.

[00:27:24] Speaker 03:
Now, they say, though, that was a failing on the government's part, because you admitted, and we saw the interrogatory, you admitted there was a whole bunch of evidence that you couldn't produce going to actual usage.

[00:27:39] Speaker 03:
Shouldn't that have led the trial court to draw an adverse inference against the government?

[00:27:44] Speaker 00:
No, Your Honor.

[00:27:44] Speaker 00:
There was no argument about spoliation.

[00:27:47] Speaker 00:
There's really no room for misconduct or wrongful activity in the context of a 1498 case.

[00:27:57] Speaker 00:
If you look at Lisona, if you look at Gaylord II, both of those say that this is an imminent domain context where the government does not act wrongfully, it acts lawfully.

[00:28:08] Speaker 00:
when it takes a license in patents or in copyrights under Gaylord and then pays fair market value for it.

[00:28:19] Speaker 00:
So in this particular context

[00:28:21] Speaker 00:
We offered the best evidence possible as to the government's use of BS contact geo during the time period of infringement.

[00:28:30] Speaker 04:
And the one area where you didn't was an area where you had witnesses testify that there would have been no need for that particular technology.

[00:28:39] Speaker 00:
That's correct, your honor.

[00:28:41] Speaker 00:
The evidence we offered were the Spiders 3D logs, and the Spiders 3D logs were complete.

[00:28:46] Speaker 00:
The Court of Federal Claims found them to be reliable evidence.

[00:28:50] Speaker 00:
They were complete within the last two years of the infringement, and the Court of Federal Claims used an estimate for the first year of infringement, completely within his discretion.

[00:29:03] Speaker 03:
Bit Management also argues that the Court of Federal Claims concluded that Footnote 5 required it to deviate from the damages rules that would apply in the usual copyright case.

[00:29:14] Speaker 03:
Do you agree that that's what the Court of Federal Claims saw in our Footnote 5?

[00:29:20] Speaker 00:
I'm not sure what the Court of Federal Claims saw in Footnote 5.

[00:29:25] Speaker 00:
I think the Court of Federal Claims was certainly confused by Footnote 5.

[00:29:29] Speaker 00:
But as far as sort of this concept of

[00:29:32] Speaker 00:
The usual copyright case, that is something that bit management has argued since even before the first trial, that the usual copyright case essentially requires a per copy approach.

[00:29:43] Speaker 00:
And when the Court of Federal Claims initially excluded the government's damages expert, the Court of Federal Claims appears to have bought into that theory, that the usual copyright case requires a per copy award.

[00:29:58] Speaker 00:
Now, that's not true.

[00:29:59] Speaker 00:
As noted, I've already discussed on Davis, there's the Bruce case from the First Circuit.

[00:30:07] Speaker 00:
There are plenty of cases under Title 17 that do not require a per copy award.

[00:30:13] Speaker 00:
In fact, the overall rule is that the royalty has to best match the evidence.

[00:30:17] Speaker 00:
And that's exactly what happened here.

[00:30:21] Speaker 04:
OK.

[00:30:22] Speaker 00:
If there are no further questions, Your Honor, we ask that the court of federal claims be affirmed.

[00:30:26] Speaker 00:
Thank you.

[00:30:27] Speaker 00:
Okay.

[00:30:27] Speaker 04:
Thank you.

[00:30:28] Speaker 04:
Mr. Fleming, you have two minutes.

[00:30:32] Speaker 01:
Thank you, your honor.

[00:30:34] Speaker 01:
On the website licenses, Mr. Bolden was very clear that he was talking about website licenses.

[00:30:40] Speaker 01:
They do not cover what the Navy took because they simply allow for users who are accessing a single website to view content on that website, whether it is a city map or something from a particular

[00:30:52] Speaker 01:
jurisdiction and view only that material.

[00:30:55] Speaker 01:
They do not allow all employees of the entity to view material not just of the entity, but out on the public internet or any other repository.

[00:31:04] Speaker 01:
All the examples that he spoke about were website licenses.

[00:31:07] Speaker 01:
That is not what the Navy took.

[00:31:08] Speaker 01:
It's not what the Navy wanted from bit management.

[00:31:11] Speaker 01:
The right to make unlimited copies would never have been given without flexera.

[00:31:16] Speaker 01:
That's what this court said in the prior case.

[00:31:19] Speaker 01:
And I'll read it specifically so that there's no question about it.

[00:31:22] Speaker 01:
Flexera would function by limiting from the time of copying the number of simultaneous uses of the program.

[00:31:27] Speaker 01:
This condition rendered reasonable the otherwise objectively unreasonable decision of bit management to allow the Navy to make unlimited copies of its commercial product.

[00:31:36] Speaker 01:
Without Flexera tracking it, there would never have been a floating license arrangement.

[00:31:41] Speaker 01:
where the Navy could have used the software throughout its system without monitoring, without tracking, without restriction, it would have been objectively unreasonable to do so.

[00:31:50] Speaker 04:
So what is the evidence that the Navy would have agreed to pay for each copy?

[00:31:55] Speaker 01:
Well, because that is the only license that would have given them what they needed.

[00:32:00] Speaker 01:
They specifically wanted to have it everywhere.

[00:32:02] Speaker 01:
They didn't want to have to call BitMedic.

[00:32:04] Speaker 04:
So they have a license with another mechanism for computing usage.

[00:32:07] Speaker 01:
there's no evidence of anything like that that's the point to be the uh... nothing like that that would give them what they wanted a website license wouldn't done it and only a license wouldn't done it the only license structure that gave them what they wanted and what they wound up taking which was responding to my question why is it the most reasonable uh... conclusion is that having uh... agreed to a floating license

[00:32:34] Speaker 04:
finding that the mechanism for monitoring usage didn't work, that they would have adopted some other mechanism for computing usage.

[00:32:42] Speaker 01:
Well, the system, the question of the hypothetical negotiation is not would the Navy have rather not infringed.

[00:32:49] Speaker 01:
Of course the Navy would rather not have infringed.

[00:32:51] Speaker 01:
Every infringer would rather not.

[00:32:53] Speaker 01:
I don't think you're responding to my question.

[00:32:54] Speaker 01:
But there is, the point Judge Dyke is, we put in evidence that but for FlexEra, bit management would never have agreed to a floating license scheme.

[00:33:03] Speaker 01:
The court's prior opinion supports that.

[00:33:06] Speaker 01:
And so what we have left is a PC license structure.

[00:33:09] Speaker 01:
There is no evidence in the record at all of any license agreement with anybody that approximates what the Court of Federal Claims impose on bid management here, which is widespread copying without any control.

[00:33:23] Speaker 01:
That is exactly not what bid management would have agreed to.

[00:33:27] Speaker 04:
I'd like to turn them to... I think we're out of time.

[00:33:29] Speaker 04:
Thank you.

[00:33:30] Speaker 04:
Thank both counsel for pieces of that.