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We have five cases on the docket today, four of which will be argued.

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Excuse me, six cases on the docket today, four of which will be argued.

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We're going to start with the first case.

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Sunoco Partners, oh wait, before I do that, I just want to say one thing.

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As you see, we have Judge Cunningham participating today by video.

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And sometimes when you participate by video, it can be hard to interrupt counsel and get your questions in.

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So I'm going to ask all of the attorneys today who are arguing to please be observant of when you see Judge Cunningham raise her hand, that will indicate that she'd like you to pause so that she could ask you a question.

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Thank you for that.

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Our first case today on the docket.

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Can I just for a second lift this up so I

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Does that interfere with any of you?

[00:01:03] Speaker 01:
It does not.

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Okay fine, because that way I couldn't see over the presiding judge's brief.

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How was that?

[00:01:09] Speaker 02:
Yeah, that was perfect, hi.

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Excellent.

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Okay, so our first case for today is Sanoco Partners Marketing and Terminals LP versus Powder Springs Logistics LLC, appeal number 23-12-18.

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Mr. Kevill, is that how, did I pronounce your name?

[00:01:30] Speaker 03:
Yes, you pronounced it correct.

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Great, proceed when you're ready.

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Thank you.

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Thank you, Your Honor.

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May it please the court.

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In this case where the jury found all claims valid and willfully infringed, there are 71 profit sharing agreements with 16 sophisticated companies that both sides experts testified are comparable that are on the patents at issue, agreements under which Sunoco makes and uses the patented invention and shares the net profits.

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Not the gross profits, the net profits.

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Sunoco and Magellan have the same what they call BSA, profit sharing agreement, at one site that Magellan acquired, that's the perimeter site, and they negotiated the same terms for the other sites, but ultimately Magellan decided to quote, keep dollars and do it themselves and they were found to be willful infringers.

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Those BSA profit sharing agreements are the established methodology by which the market valued the patented invention and no more.

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Those are comparable licenses.

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But the damages expert report was stricken with leave to supplement one, to further support that the patents drive demand and the application of the entire market value rule, and two, to further apportion the BSAs.

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In a 34-page supplement, citing 735 pages of documents and 76 pages of deposition testimony, Ugone, the damages expert, did exactly that.

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And by further apportioning, he reduced the lost profits by 10 percent and the reasonable royalty by 4 to 7 percent.

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Oh, I see that Judge Cunningham has a question.

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Yes, Judge Cunningham.

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Yes.

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Counsel, do you agree that you are continuing to pursue a damages theory that at least has been

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rejected part by this court previously.

[00:03:37] Speaker 01:
No, this is a different case with a different defendant, different infringing systems, different BSAs that were found the most economically comparable were applied in this case.

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Second, the Illinois case that you're referring to was a bench trial where the judge did not deny the Dalbert motion on Ugone's opinion and then after trial only disagreed with Panduit Factor IV.

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Only at issue was Panduit Factor II between the parties.

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whether there were non-infringing alternatives.

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The district court said, no, I find there are no non-infringing alternatives, but I find that the number is too high, and I've only got two numbers, Ugones and the other experts.

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And so the court then held here that that was not clear error for the judge to say, I won't rely on that damages number, meaning it was plausible in light of the record there.

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Further, Judge Cunningham, the order striking Ugone's original opinions in this case came out on January 2nd, 2020.

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The Chicago case came out, the judgment came out January 29th, 2020, citing that order as support.

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So this case impacted that case.

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What about the fact that the district court, when it talked about the amount, this is in the Illinois case, when it talked about the amount, it said its reasoning for why that was so was because its view that the BSA agreements did not accurately value the patents, didn't reflect the patent invention.

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the value of it, given that there were other things that were being supplied.

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Right.

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And the distinction here is, after that happened and the Chicago judge had adopted from here, the court here gave leave to supplement.

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And so, Ugone did that.

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And Ugone, in a detailed opinion, went through all the factors again.

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Well, that's the whole question, right?

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Is whether Ugone's supplement

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sufficiently apportioned, right?

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That is the big question here.

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And so Ugone did exactly what he was ordered to.

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He went through each of those services, and I'll talk those about a second, but he went through each of those services.

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He valued them.

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He said, here is the value I take out for two of these services.

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What is the value that he assigned to the trade secret?

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To the trade secret algorithm?

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Yes.

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No, he didn't assign a value to that, because that is, Sunoco kept the rights.

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This is not where Sunoco sells a system to them.

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Sunoco kept the rights to make and use.

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And the algorithm, the software, you can't have an automated blending system without software to run it.

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But that was already apportioned out, because what Ugon did, he had the option to either say, using our algorithm, how much would they have blended?

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Or what they said is the algorithm claimed is better.

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You go and said, okay, I'll use your algorithm, your volumes.

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So by using their actual blend volumes, he apportioned out the better trade secret algorithm because he used the volumes from the infringer, not the volumes that would have been created had he used our algorithm.

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Sir, wasn't there a finding by the district court that you had failed to prove that the entire market value

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was attributable to the patents?

[00:06:56] Speaker 01:
Yes, and I believe that was clear error because... Okay, so let's just stop right there.

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Okay.

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So let's assume I disagree with you, and that you failed to show that the entire market value was attributable to the patents.

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You know what that means?

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That means that there's value someplace else.

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Correct, and that's what you go and did.

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And if there's value someplace else, the question is, was it properly apportioned?

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Right, and Ugone did that.

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That was the, in one part of his supplement, he said, here's the demand.

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Well, that's your view, the district would disagree with you.

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Right, and I don't think at that point where Ugone has looked at each one and valued each, it's not for the... So how much, what was the value for helping to people with their regulatory requirements?

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That's already factored out.

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That's already apportioned.

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How's that already apportioned?

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It's in the costs that are taken out from the net profits.

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Maybe what you ought to do is, one by one, go down the list of all the other things that are in the patent, like the million dollars that each Sunoco will pay to build the plant, right?

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And the cost of the fuel, the butane, all the things that are in it, and the software.

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OK, that's fine.

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And I would say, though, if you look at appendix 7508, you go and talks about all the costs that are taken out of the agreement.

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How does he take them out?

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What's that?

[00:08:27] Speaker 01:
I'm sorry, I didn't hear that.

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How does he take them out?

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Oh, because what happens here, Judge Covinger, is the invention is installed at the site.

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It makes a certain number of increased gasoline.

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Only that gasoline and nothing else.

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Well, the invention, doesn't it work that Sunogo comes and says, if you'd like us to do your blending for you, we'll do it.

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We'll build whatever is necessary to build.

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We'll build some tanks.

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If you've got a pipeline, we'll cut holes in the pipeline and then we'll build all this physical structure.

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Right.

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And then what we'll do is we'll go and buy the butane and we'll bring it in.

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So butane has a value.

[00:09:06] Speaker 01:
Right.

[00:09:06] Speaker 02:
And then we're going to run this for you, maybe with your own, send out those own personnel, down the line to Lips.

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Correct.

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And then what happens is- And so you have along, somebody comes along and doesn't want to have you build the plant, doesn't want these services.

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The defendant here obviously didn't want your software, your almost sort of like best-mode algorithm.

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They had their own.

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Correct, and so by using the volumes... All they really needed was access to your

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to your patents, right?

[00:09:46] Speaker 01:
Sure.

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But there's an established methodology.

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And what all the cases say, either on royalty or lost profits, if there's an established licensing methodology, that's considered.

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Now, what Sunoco would have come in and said, OK, if you're going to do that, that puts extra risk on us.

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You're going to end up with lower volumes.

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And so that's why you've gone by using their volumes

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has already apportioned out the value of the trade secret algorithm.

[00:10:18] Speaker 01:
Magellan and Colonial Power Springs.

[00:10:21] Speaker 02:
What do you mean when you use their volumes?

[00:10:23] Speaker 01:
Oh, I understand.

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So you go and could have said, based on our trade secret algorithm, Magellan would have blended this amount.

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But Magellan used their own algorithm, which is less preferred.

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And so if they had got a bear license, they would have only been able to use that and it would have blended less.

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What is the difference in volume?

[00:10:42] Speaker 01:
I don't know that I have that calculation at hand.

[00:10:45] Speaker 03:
What is the logic for why that difference in value is a representation of the value of the trade secret to the people who entered into the BSAs with Sunoco?

[00:10:54] Speaker 01:
Because the only reason people entered into the BSAs was because of the patent, not for the algorithm.

[00:10:59] Speaker 01:
But the testimony they relied on.

[00:11:01] Speaker 03:
There is testimony in the record that says that parties entered into the BSAs for reasons other than the patent.

[00:11:10] Speaker 03:
There is testimony.

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And we have a district court judge who credited that testimony and relied on it, right?

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So you can't just say they're in a conclusory fashion.

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The reason why is because the BSAs are parties entered into the BSAs just because of the patent.

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We need to know in the record what you're relying on.

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If you want to point us to you go and supplement a report or whatnot.

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But you can't keep it at that high level if you're going to be persuasive today.

[00:11:39] Speaker 01:
Sure, I understand.

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If you look at appendix 8233, Ugone was in his deposition talking about a declaration from third-party customer Chevron where they said the strength of the patent was why they entered.

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If you look at

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This is Mr. Vugone saying that the strength of the patent is the reason why customers entered the agreement.

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This is Vugone saying he relied in part on a declaration from Chevron, a non-party customer,

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that said the strength of the patents were why they entered.

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But is that tantamount to that third party person saying, well, the only value here is the patents.

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I don't attribute any value to anything else in the license?

[00:12:24] Speaker 01:
That's the driver of demand issue, and that the patents were the sole reason people were there.

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As you said, Judge Clemenger, they could make their own algorithm

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But the reason people said is, we want the patented invention because we believe the patented invention works better.

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And it will take out all the costs.

[00:12:42] Speaker 02:
Right, but the patented invention works better than the fact that you've got your algorithm is irrelevant because that's not patented.

[00:12:50] Speaker 01:
correct but you asked what's the value of it.

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My point is to whatever value there is that might be attributable I don't think there's any because it's in any automated system you have to have software and I've never seen a case where you had to take each algorithm in the software and a portion that out but even if you're good you go and said there's no value separate and apart from the patents.

[00:13:13] Speaker 02:
How were you able to know that if

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Magellan had used your algorithm, they would have used more butane in there for safe money.

[00:13:23] Speaker 02:
Did you actually find their figures somewhere?

[00:13:26] Speaker 01:
We knew their actual volumes, right?

[00:13:30] Speaker 01:
We had projections of what we could have done.

[00:13:32] Speaker 02:
Their actual volume of butane used?

[00:13:34] Speaker 01:
Yes.

[00:13:35] Speaker 01:
So what they created using the infringing systems in their algorithm, we knew actual those volumes from that.

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Ugone chose to use those as his base for damages, which means whatever value was in our algorithm.

[00:13:51] Speaker 02:
So you then ran your algorithm against their system, so to speak?

[00:13:57] Speaker 01:
Yeah, you don't have to look at that.

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But he said in order to address this as fairly to them as I could and take out any extra value.

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And I know I'm way over time.

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I don't want to lose my time.

[00:14:10] Speaker 02:
Can we talk a little bit about the Rule 50 issue?

[00:14:13] Speaker 02:
What's that?

[00:14:13] Speaker 02:
Can we talk a little bit about the Rule 50 issue?

[00:14:17] Speaker 02:
OK.

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And your argument is that there's a Rule 50 violation here, correct?

[00:14:22] Speaker 02:
So the breach didn't really help us.

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on deciding whose law applies here on the real 50 issue.

[00:14:33] Speaker 02:
It's the Third Circuit.

[00:14:34] Speaker 01:
Yes, I would agree.

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And do you know what the Third Circuit law is?

[00:14:38] Speaker 01:
Your Honor, I don't have that at the top of my head, but I will when I step back up.

[00:14:42] Speaker 02:
Well, it's the Williams case.

[00:14:44] Speaker 01:
OK.

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And Williams says that if you didn't raise a real 50 violation argument before the district court, you've waived it.

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Can't raise it here.

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And we looked at the record and you didn't raise a rule 50 violation.

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argument in front of Judge Andrews with respect to the butane limitation.

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Just to be clear, you are the party that raised the issue in the Rule 50B.

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You're arguing that you were entitled to J-MAL.

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Do I have it in reverse?

[00:15:16] Speaker 05:
I think it's in reverse.

[00:15:18] Speaker 03:
OK.

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So the question is whether it's preserved or not by the party that's challenging Judge Andrews J-MAL

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of infringement based on the issue not being raised into 50A.

[00:15:33] Speaker 03:
So I think you're the party that raised the issue, right?

[00:15:37] Speaker 01:
Right, right, right, right.

[00:15:40] Speaker 01:
Your Honor, I have to look to answer that question.

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I don't want to answer it incorrectly.

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So I don't want to shoot from there.

[00:15:46] Speaker 03:
It's a cross-appeal issue.

[00:15:47] Speaker 01:
Yeah.

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That's why I wasn't there.

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We'll talk about it on the cross-appeal.

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Let's go ahead and thank you.

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I'll restore some of your time.

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Let's hear from Ms.

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Fiorella.

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So Ms.

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Fiorello, maybe you could start with the apportionment damages issues and then consider the issue of waiver of the challenge under Rule 50.

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B, by failing to, I guess, well, I guess it's waver, you're arguing that there was a waiver below by failing to raise an issue under Rule 50A before raising it in Rule 50B.

[00:16:41] Speaker 03:
But because you didn't raise it before Judge Andrews, whether that would be a waiver under Third Circuit law.

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But if you could talk about damages first, I think that would be a good place to start.

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Will do.

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Thank you, Judge Stoll.

[00:16:53] Speaker 00:
May please support Natika Fiorella on behalf of the Cross Appellants.

[00:16:57] Speaker 00:
So jumping right into the EMBR and apportionment issues, our position is this court should affirm all of the district court's rulings on these issues because it went through and said that Sunoco simply had not met its burden, a very heavy burden on an entire market value rule to show that it applied, and then subsequently did not do the required apportionment, so its methodology was unreliable.

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What about lost profits for a minute?

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I think the argument is that because the Panduit factors are satisfied and some apportionment has occurred through the base, I guess, that there is no further apportionment that needs to be done.

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So we disagree with that.

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This is an issue that Judge Burke looked at as well, because what they're citing is the Mentor Graphics case, which essentially says that in some circumstances, satisfying

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factors one and two can build in the apportionment.

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The problem here is the way that this

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BSA-based methodology works.

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So even if we were to accept that you go and had satisfied the demand for the patented system, the first factor, and no non-imprinting alternatives, which we dispute in real-world facts show that there is a non-imprinting alternative, but even if you were to take those two together, that would only show you the value of the patented system.

[00:18:21] Speaker 00:
And yet what they are calculating lost profits on is the value of the BSAs.

[00:18:25] Speaker 00:
So that's what Judge Burke identified at 8711 in his opinion, that the mentor graphics style of using the Panduit factors is not sufficient.

[00:18:36] Speaker 00:
And this court has recognized that as well in the Western Gecko case, where it said, you can't simply stop at one and two if it's clear that there's more apportionment that needs to be done.

[00:18:46] Speaker 00:
And certainly here, since it is undisputed that the BSAs contain other elements that are valuable,

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Dr. Yugo needed to account for those.

[00:18:57] Speaker 00:
So that's why I would disagree that the idea of simply satisfying those two factors does not require apportionment.

[00:19:05] Speaker 03:
Sunoku seems to argue to a certain extent that it is

[00:19:10] Speaker 03:
But for the infringement, which also used something like their BSA, they would have had the opportunity to enter into a BSA with these particular customers.

[00:19:22] Speaker 03:
Why isn't that sufficient under our law on lost profits?

[00:19:28] Speaker 03:
That's a lost opportunity for them.

[00:19:32] Speaker 00:
Sure, and there are some cases that address if you were just not able to use your invention in any other way than in agreement or a contract with another person, then perhaps that's a factor that gets considered.

[00:19:45] Speaker 00:
But ultimately here what happened is we can do everything else, right?

[00:19:49] Speaker 00:
The real world facts show that we don't need their services, we don't need their algorithm, we don't need their blending software, we don't need their design and construction, we just need a bare license.

[00:19:58] Speaker 00:
And what both Ugone and our expert were discussing is what's the value of that fair license.

[00:20:03] Speaker 00:
So they're kind of assuming here that we wouldn't necessarily enter a VSA if not for the patents, but that actually dovetails into the entire market value rule because the evidence that they have for that is completely speculation and conjectural.

[00:20:16] Speaker 00:
They have very little evidence from actual customers that says no, if not for these pens, we would not have entered the BSAs.

[00:20:25] Speaker 00:
It is the patents is why we're entering the BSAs.

[00:20:28] Speaker 00:
They need that link in order to

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Even for lost profits.

[00:20:31] Speaker 00:
Even for lost profits.

[00:20:32] Speaker 00:
Because fundamentally, what is the lost profits calculation and the reasons why this court has said that satisfying those factors can satisfy apportionment is because this is an idea that they reflect the value of the patented feature and nothing more.

[00:20:48] Speaker 00:
That's still the fundamental black-letter law.

[00:20:51] Speaker 00:
Now, in some cases, perhaps you can get to that feature, adjust the patented feature value, using the lost profits analysis, but then you have to show that the patents are what drives the actual relationship.

[00:21:02] Speaker 02:
And that takes you to the AMVR analysis.

[00:21:04] Speaker 02:
Yes.

[00:21:05] Speaker 02:
Right.

[00:21:06] Speaker 02:
So your adversary believes that there was a clearly erroneous fact-finding here.

[00:21:11] Speaker 02:
What is your argument defending the judge's decision that there was a failure to prove EMDR?

[00:21:19] Speaker 00:
A few things, Your Honor.

[00:21:20] Speaker 00:
So first is the district court properly looked at what is the evidence that underlies their theory, that it's the patents and the patents solely that are the driver, not just... Well, as this third party said, I really am hot for the patents.

[00:21:34] Speaker 00:
Sure, but even that just said, I rely on the strengths of the patents.

[00:21:38] Speaker 00:
That does not say that the reason, the sole reason that that customer Chevron decided to enter into the VSA is because of the patents.

[00:21:46] Speaker 00:
There is no testimony like that.

[00:21:48] Speaker 00:
In fact, Colella, one of their witnesses, specifically talked about the expertise that Sanoco brings.

[00:21:56] Speaker 00:
Phillips 66 is a customer that they cite and they say, wait, this customer came to us because they couldn't get their infringing system to work.

[00:22:06] Speaker 00:
So again, it's expertise.

[00:22:07] Speaker 00:
It's their fact that they had been blending before.

[00:22:09] Speaker 00:
It's the way that they designed their

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their systems.

[00:22:12] Speaker 00:
Evidence from them themselves is showing that the patents are not the sole driver.

[00:22:16] Speaker 00:
And so what the district were properly looked at, at A22 and A23, is where is the evidence?

[00:22:23] Speaker 00:
If it's speculative and conjectural, Laser Dynamics says that's insufficient.

[00:22:27] Speaker 00:
But there's a second reason beyond just this evidentiary issue.

[00:22:31] Speaker 00:
And that is the actual methodology that Dr. Hugo used.

[00:22:34] Speaker 00:
What he did was say, and this is at 8990 in the record, he lists out all of his services.

[00:22:42] Speaker 00:
And what he says, he goes through and he says, the blending algorithm, for example, this one has, it maximizes the value of the blending because you're able to blend up to the butane limit.

[00:22:54] Speaker 00:
So you get lots of profits.

[00:22:56] Speaker 00:
So he's recognizing the value.

[00:22:57] Speaker 00:
But then he says, but no one would want that separate and apart from the patent.

[00:23:03] Speaker 00:
So I'm going to assign it no value.

[00:23:04] Speaker 00:
And also I'm going to say it can't be what is the driver of demand.

[00:23:08] Speaker 00:
So we actually use that same analysis for both apportionment and EMBR.

[00:23:13] Speaker 00:
The problem is laser dynamics is extremely clear.

[00:23:16] Speaker 00:
It's not enough that someone wouldn't want the BSAs without the patent.

[00:23:20] Speaker 00:
It's not enough that someone wouldn't want the other features.

[00:23:23] Speaker 00:
you have to show it is the sole driver of demand, and there's simply no evidence on that.

[00:23:27] Speaker 00:
So we would say there's no abuse of discretion in the district court finding exactly that.

[00:23:30] Speaker 02:
Well, I didn't mean to harp on, but it sure looked to me like the EMVR was the Achilles heel for your adversary here, that if he can break through that fact-finding, then you're in trouble.

[00:23:40] Speaker 02:
Certainly on a lot of profits.

[00:23:42] Speaker 02:
You know, I would agree that if they were able to satisfy that, it is a... Right, but it just seemed to me, I mean, what I look for in a case as complicated with this is I look for, is there a

[00:23:53] Speaker 02:
turning point in the analysis.

[00:23:56] Speaker 02:
And it seemed to me that the court's finding that there was no showing that there was EMVRS to the patents.

[00:24:03] Speaker 02:
That means there is value to something else.

[00:24:05] Speaker 02:
And then I'm going to have a look and see where it's actually proven.

[00:24:08] Speaker 00:
Exactly.

[00:24:09] Speaker 00:
And that's our position.

[00:24:10] Speaker 00:
And I will just note that they had two chances at this, right?

[00:24:13] Speaker 00:
So Judge Burke at A8713 specifically says, oh, I'm sorry, Judge Cunningham?

[00:24:20] Speaker 04:
I think you're going to go towards one of the areas I want to explore with you anyway.

[00:24:24] Speaker 04:
So do you agree that you are not, you know, this is really not a collateral or stackable situation with the Illinois ruling?

[00:24:32] Speaker 04:
Do you agree with that?

[00:24:34] Speaker 04:
And instead you're more so arguing because you have inconsistency in terms of how repressive will play out?

[00:24:41] Speaker 00:
I think it's both, Your Honor, and the reason I say that is because it really depends on how we identify the issue for collateral estoppel.

[00:24:48] Speaker 00:
And our point here is they have now, Sunoco has now, before the district court in Delaware, twice, and before the Illinois court once, and before this court now, has said its unapportioned BSAs are a proper basis of damages.

[00:25:02] Speaker 00:
So if we look at that as the issue, that issue has been thoroughly vetted and thoroughly rejected in many different situations.

[00:25:10] Speaker 00:
And if I could, I just have two points I'd like to note with respect to Estoppel that we didn't get a chance to put in the briefs because it came in in theirs.

[00:25:19] Speaker 00:
The first is on this waiver forfeiture issue.

[00:25:21] Speaker 00:
This court's opinion did not come down until April 2022, which was after the trial in our case was already complete.

[00:25:29] Speaker 00:
And Unalak says there is no forfeiture.

[00:25:31] Speaker 00:
You don't need to find forfeiture when you're simply waiting for the appellate process of the preclusive case to finish.

[00:25:38] Speaker 00:
So we don't think there's any forfeiture waiver here.

[00:25:41] Speaker 00:
But the second issue, I think, dovetails to your question, Judge Cunningham, and it has to do with, you know, it's not just an inconsistent verdict, though we do think that there would be an inconsistent decision if they were allowed to re-argue this and then your honors were to come to a different conclusion.

[00:25:57] Speaker 00:
But the bigger problem is they are

[00:26:02] Speaker 00:
truly wasting judicial resources, in our view, because it's the same exact argument.

[00:26:06] Speaker 03:
So it's the same, I don't think... What about the fact that it's a different standard of review, and it's different in that one, the judge is acting as a gatekeeper, and in the other, the judge is making a fact-finding.

[00:26:20] Speaker 03:
That seems distinctly different to me for purposes of collateral estoppel.

[00:26:24] Speaker 00:
And certainly, Your Honor, I think that there are situations where that can make a difference.

[00:26:28] Speaker 00:
Here, though, first on standard of proof,

[00:26:31] Speaker 00:
I'll get to standard review in a second, but on standard of proof, they had to prove lost profits or reasonable royalty by preponderance of the evidence before the fact-finder in U.S.

[00:26:40] Speaker 00:
venture, and they had to prove reliability of their expert methodology under Rule 702,

[00:26:46] Speaker 00:
by preponderance of the evidence.

[00:26:48] Speaker 00:
So standard of proof-wise, we're looking at the same thing.

[00:26:51] Speaker 00:
Standard of review-wise, this court, in affirming the USB decision, did do so for clear error for lost profits, but for reasonable royalty, both reviewed for clear error and abusive discretion, because it was looking at the methodology, which is the same methodology between reasonable royalty and lost profits.

[00:27:10] Speaker 00:
So even the standard of review is actually not as distinct as it might seem.

[00:27:15] Speaker 00:
And then finally, one last point on this.

[00:27:17] Speaker 00:
This is a case of whether or not Dr. Ugone's theory was legally viable.

[00:27:23] Speaker 00:
So there were no more facts that you could have allowed in, that Judge Stark could have allowed in and gone to a jury that would have changed his legally unviable theory into a viable one.

[00:27:36] Speaker 00:
And that also dovetails into this idea that

[00:27:39] Speaker 00:
Judge Burke already gave Dr. Ugo a second chance.

[00:27:42] Speaker 00:
If he had more facts that he could have presented to show the entire market value rule was met or that the apportionment to be done.

[00:27:50] Speaker 02:
Is the theory no good or is the attempt to prove that the theory happened no good?

[00:27:59] Speaker 02:
You see, nobody gave us

[00:28:00] Speaker 02:
to try to decide whether in the other case Ugon was talking exactly the same language.

[00:28:06] Speaker 02:
So nobody gave me in my appendix the actual expert report that he put in in the other case.

[00:28:12] Speaker 02:
So I got apples and oranges to start with.

[00:28:15] Speaker 02:
I can't see what it is.

[00:28:18] Speaker 02:
And it seemed to me like here his theory as to why you should have damages was proven to be failure-proof.

[00:28:27] Speaker 02:
Right?

[00:28:27] Speaker 00:
It was, but it was a failure.

[00:28:29] Speaker 02:
I don't know what his arguments may have been on apportionment in the other case, baked in apportionment or otherwise, because nobody showed me that.

[00:28:37] Speaker 00:
Understood, Your Honor.

[00:28:38] Speaker 00:
I guess what I would say to that is the reason there was a failure of proof on the actual amount of damages is because Dr. Yagone was tying all the damages to the full 40% from the BSAs, or 50%.

[00:28:51] Speaker 00:
And that's the same thing that's happening here.

[00:28:53] Speaker 00:
We acknowledge that in the supplemental report, Dr. Yugoin did take out one or two additional things, but he certainly did not account for everything that he himself admitted had value.

[00:29:03] Speaker 00:
So the theory is still an improper one.

[00:29:05] Speaker 00:
But, Your Honors, we do not need to find a stopple in order to affirm on all the district court's rulings.

[00:29:11] Speaker 00:
We certainly think there is no abuse of discretion in any of them.

[00:29:15] Speaker 03:
On the J-Mall issue, I was wrong when I said it was the cross-appeal issue, but nonetheless.

[00:29:22] Speaker 02:
Basically what happened here on the directed verdicts, but before the case went to the jury, your side moved for a directed verdict on both the gasoline and the butane limitations, right?

[00:29:34] Speaker 02:
Yes.

[00:29:35] Speaker 02:
And that was oral.

[00:29:36] Speaker 00:
Yes, sir.

[00:29:37] Speaker 02:
And we have all that in the transcript.

[00:29:39] Speaker 02:
Then after the creation, you file your 50B.

[00:29:43] Speaker 02:
Yes, sir.

[00:29:44] Speaker 02:
And in your 50B, your other side came in and objected to your 50B with regard to the gasoline side and said, whoops, you can't do that.

[00:29:52] Speaker 02:
You've got a new graph.

[00:29:54] Speaker 00:
Exactly.

[00:29:55] Speaker 02:
They did not make that argument with regard to your beauty.

[00:29:59] Speaker 00:
Right.

[00:29:59] Speaker 00:
In their 50B motion, in their response, they did not make this argument.

[00:30:06] Speaker 02:
Well, not only didn't they respond, they agreed that you had, with regard to the gasoline, there was one issue, but with regard to the butane, you had preserved that issue before the district judge on your oral motion.

[00:30:20] Speaker 00:
Yes.

[00:30:20] Speaker 00:
I mean, one of the things we're looking at is there are no district court fact findings on this issue, and normally in a waiver situation.

[00:30:25] Speaker 02:
The law under the Williams case in the Third Circuit is that if a party who is opposing a 50B, which Sunoco was here,

[00:30:34] Speaker 02:
And if the grounds for opposing it is a violation of the rule for new matter, the Williams case says that Sunoco has to raise that in front of Judge Andrews, saying, hey, there's a real 50-point violation.

[00:30:47] Speaker 02:
And if they don't raise that, which they did not do with regard to the butane limitation, they waived the right to raise it on appeal.

[00:30:53] Speaker 00:
Yes, I agree with that, Your Honor.

[00:30:55] Speaker 02:
Well, I know you agree, but I mean, neither one of your briefs cited the correct standard of review.

[00:31:02] Speaker 02:
which is using third-circuit law.

[00:31:04] Speaker 02:
And neither one of your briefs cited the Williams case, which is the square four clear precedent.

[00:31:09] Speaker 00:
I agree, Your Honor.

[00:31:10] Speaker 02:
In all candidness... So it leaves us and our law clerks to do the work for you, right?

[00:31:14] Speaker 00:
Yes, and I apologize for that.

[00:31:15] Speaker 00:
I apologize for that oversight.

[00:31:18] Speaker 02:
So I assume that your position now, although you didn't say so in your brief, is that Sonoco has waived the right to raise its challenge to the 50B.

[00:31:29] Speaker 00:
Yes, that is when I was prepared for their argument, that was going to be my opening line because I apologize it was not in the brief.

[00:31:35] Speaker 00:
But yes, that is our position.

[00:31:39] Speaker 03:
Did you have anything you wanted to say on your cross appeal?

[00:31:42] Speaker 00:
I would.

[00:31:43] Speaker 00:
I know I'm running out of time, so I'll make it quick.

[00:31:45] Speaker 00:
We believe that this court should find all the claims invalid under 101.

[00:31:51] Speaker 00:
You can look to set the claims.

[00:31:53] Speaker 00:
At A122, we see the claims for the 629 patent

[00:31:57] Speaker 00:
They start with the computer-implemented method for blending, and then each step in the method is simply relating to receiving, calculating, or transmitting steps.

[00:32:06] Speaker 00:
These are the types of data-focused claims that this court has previously held to be invalid.

[00:32:11] Speaker 03:
Now, one thing that I think is interesting is trying to understand what is the- Which claims in particular do you think are your strongest claims for an ineligibility argument?

[00:32:20] Speaker 03:
Because they're definitely varying degrees.

[00:32:23] Speaker 00:
I agree.

[00:32:24] Speaker 00:
I think the 629 claims are the strongest, so claim 31 is probably one of the strongest.

[00:32:30] Speaker 00:
I think the 686 claim 3 is also extremely strong.

[00:32:34] Speaker 00:
I mean, to be honest, Your Honor, although they are different, it's the same underlying issues.

[00:32:38] Speaker 03:
I know that's your position.

[00:32:39] Speaker 03:
I just want to know which ones you think now are strongest.

[00:32:42] Speaker 00:
So let me change that order.

[00:32:44] Speaker 00:
I'll say 686 claim 3s first and then the 629 claims.

[00:32:47] Speaker 03:
Okay.

[00:32:48] Speaker 00:
And that will save the rest of my time for rebuttal.

[00:32:50] Speaker 00:
Thank you.

[00:32:50] Speaker 00:
Thank you.

[00:32:54] Speaker 03:
Okay, Mr. Cavill, I will give you four minutes.

[00:32:58] Speaker 03:
Restore four minutes.

[00:33:00] Speaker 01:
Thank you.

[00:33:04] Speaker 01:
Judge Clevinger, looking back at the briefs to understand that issue on the waiver, as I understand what happened, and I recall it, they raised a new ground

[00:33:13] Speaker 01:
post verdict on their 50B that they hadn't raised before.

[00:33:17] Speaker 02:
What new ground is that?

[00:33:18] Speaker 01:
The issue of transmitting or receiving and they had not raised that previously.

[00:33:24] Speaker 02:
That's within the heart of the butane limitation and I was looking at your brief

[00:33:30] Speaker 02:
Did you bring your brief that you filed on this subject matter?

[00:33:36] Speaker 02:
Specifically, your opposition brief in the district board.

[00:33:40] Speaker 01:
I do not have that with me.

[00:33:41] Speaker 03:
Which we have reviewed.

[00:33:43] Speaker 01:
When they raised that orally at the hearing, this new issue, we filed a letter saying that shouldn't have been raised.

[00:33:52] Speaker 01:
In reply, we raised rule 50.

[00:33:54] Speaker 03:
I see the letter.

[00:33:56] Speaker 03:
I've read your letter, which is in the appendix.

[00:33:59] Speaker 03:
But it says nothing about how.

[00:34:02] Speaker 03:
It says they're raising a new claim construction issue.

[00:34:05] Speaker 03:
It doesn't say that they are raising an issue, a non-infringement issue, that they failed to raise.

[00:34:13] Speaker 03:
in their Rule 50A motion.

[00:34:15] Speaker 03:
That argument is not made.

[00:34:16] Speaker 03:
And if I'm wrong, please point it out to me.

[00:34:18] Speaker 01:
No, I understand.

[00:34:19] Speaker 01:
To me, in saying that we interpret the claims this way when they hadn't said it before, that's a claim destruction issue.

[00:34:27] Speaker 03:
That's not saying that they didn't raise it in Rule 50A motion.

[00:34:30] Speaker 03:
It's not giving notice to Judge Andrews of your position.

[00:34:33] Speaker 02:
In your answering brief to their motion, their 50B motion,

[00:34:38] Speaker 02:
And when they're talking about the gasoline vapor pressure, you say, defendants never move for JMAW on the gasoline vapor, but instead only on the rack and, quote, butane vapor pressure limitations.

[00:34:55] Speaker 01:
Right.

[00:34:56] Speaker 01:
Which is not the transmitting issue that they tried to use as their hook for non-infringement.

[00:35:01] Speaker 02:
Why isn't it?

[00:35:03] Speaker 01:
because that's a separate issue.

[00:35:05] Speaker 01:
One is measuring, and one is how you deal with either the baked-in butane vapor pressure or the actual vapor pressure.

[00:35:12] Speaker 01:
And I would say this.

[00:35:14] Speaker 01:
The JMAW is still wrong, because there is expert testimony on infringement, and that is substantial evidence that the court could not overcome on JMAW.

[00:35:24] Speaker 01:
So I would say that even regardless of the waiver argument, the JMAW still needs to be reversed.

[00:35:30] Speaker 01:
I would say on back to damages.

[00:35:34] Speaker 01:
The Western GECO case is inapplicable in that you had survey equipment that was tied to the patents, and then you had profits from that, from the surveys, and then you had ship rental profits.

[00:35:45] Speaker 01:
And the issue was, how do we split that up?

[00:35:47] Speaker 01:
You don't have that here.

[00:35:49] Speaker 01:
Everything in the BSAs is either making or using the patented invention.

[00:35:54] Speaker 01:
And the making, they talked about construction costs.

[00:35:57] Speaker 01:
You don't dealt with that because the way these were all negotiated with actual parties, including them, is

[00:36:04] Speaker 01:
We start with a 50-50 split of the net profits when costs are out.

[00:36:09] Speaker 01:
If you're going to put up the money to construct, then it may change closer to 40-60, and that's what you don't apply here.

[00:36:16] Speaker 03:
Is your argument convoyed sales?

[00:36:19] Speaker 03:
Is that how you distinguish Western Gecko?

[00:36:22] Speaker 01:
I would say that's one of the things for sure, but in Western GECO, it was an issue where you couldn't say the ship rental was the patented invention.

[00:36:33] Speaker 01:
You needed a ship rental in order to tow the assembly and do the survey, but you couldn't say the ship rental was the patented invention.

[00:36:40] Speaker 01:
Here, making the patented system is a patent right, and so is using the system, which is the software and the algorithm and all of that.

[00:36:51] Speaker 04:
Where in Dr. Ugo's reports do you think he officially supports an argument on convoy sales?

[00:36:58] Speaker 04:
Can you give me a page?

[00:36:59] Speaker 01:
Yes.

[00:36:59] Speaker 01:
Can you find that page while I finish the show?

[00:37:02] Speaker 01:
Thank you.

[00:37:03] Speaker 03:
And I would just note that when I looked at his report, I do see two arguments.

[00:37:08] Speaker 03:
This is a supplemental report, maybe, on convoy sales, but it's only for two of the features of the SBA.

[00:37:17] Speaker 03:
It's not for...

[00:37:19] Speaker 03:
all of the features that are in the patent.

[00:37:22] Speaker 01:
Right, and he went through each feature and he said some of these I would apportion out if forced to, some of these I would say are convoyed sales, some of these have no value outside the patent.

[00:37:33] Speaker 01:
So I think he did it and what they just said, what I heard is

[00:37:38] Speaker 01:
They negotiated for a BSA.

[00:37:41] Speaker 01:
The experts disagreed.

[00:37:45] Speaker 01:
And all of those issues are issues that should have gone to the jury, the disagreement of the expert.

[00:37:50] Speaker 01:
The issue is admissibility, whether the expert opinion should have been admitted, not whether the court agreed with them.

[00:37:57] Speaker 01:
And I would cite to the Apple case, which we cited on our yellow brief at four.

[00:38:03] Speaker 03:
Do you have the kind of broad sale site for Judge Connolly?

[00:38:06] Speaker 01:
Do you have it?

[00:38:09] Speaker 01:
5165 is one place.

[00:38:14] Speaker 05:
What's that?

[00:38:15] Speaker 01:
7565.

[00:38:18] Speaker 02:
Could I ask a question on the 101 issue?

[00:38:26] Speaker 01:
Yes.

[00:38:27] Speaker 02:
So your adversary says on the 101 issue with regard to the 302 patent, to decide whether the claims are asserted or invalid, I should just look at

[00:38:39] Speaker 02:
basically claim 1760 on the 302 or claim three.

[00:38:45] Speaker 02:
I should ignore the dependent claims from the independent claims from which the dependent claims depend.

[00:38:53] Speaker 02:
So if you would, for the purpose of the argument, let's half of the claim, the certain claims in the 302 were held invalid in Texas.

[00:39:06] Speaker 02:
Yes.

[00:39:07] Speaker 02:
Right?

[00:39:08] Speaker 05:
Yes.

[00:39:09] Speaker 02:
So if you look at the way your adversary is looking at this, they're saying, well, the parts of the claim are invalidated in Texas were sort of the structure.

[00:39:19] Speaker 02:
It was the equipment and all that stuff that would be legit, leaving you only with basically transmitting, analyzing, and the rest.

[00:39:30] Speaker 02:
If I'm looking at the 302 claim and validity issue, and I only focus on

[00:39:37] Speaker 02:
16, 17, or 3, it's a very different analysis than if I'm focusing on the entirety of the claim.

[00:39:45] Speaker 01:
Yes, and in here, you know, let me just address Texas.

[00:39:51] Speaker 01:
In Texas, on summary judgment, the district court looked at Kerr-McGee, and that's his basis for finding a conventional.

[00:39:59] Speaker 01:
In this case,

[00:40:00] Speaker 01:
they had asserted Kerr-McGee was an invalidating reference.

[00:40:04] Speaker 01:
Then at trial, they didn't raise it.

[00:40:05] Speaker 01:
And right before jury argument, they said, we're dropping Kerr-McGee.

[00:40:09] Speaker 01:
So none of the evidence came in on Kerr-McGee.

[00:40:12] Speaker 01:
And so Kerr-McGee, we can test, has nothing to do with the 101 analysis.

[00:40:17] Speaker 01:
It was a failed experiment.

[00:40:19] Speaker 02:
I understand that.

[00:40:19] Speaker 02:
But what we have is we have a final judgment by district court that invalidates claims 12 and 13.

[00:40:28] Speaker 02:
And once those claims are invalidated, they're gone, you would have no right to assert the right to exclude with regard to those limitations.

[00:40:38] Speaker 01:
As to those claims with nothing else, yes.

[00:40:41] Speaker 02:
And those claims were not in... So if somebody comes along later and says, well, you want to charge someone with infringing claims 16 and 17, the defendant would say, well, I haven't violated the guts of the claim because it was held invalid.

[00:40:59] Speaker 01:
And are we talking 101?

[00:41:01] Speaker 02:
The only remaining part of claims 302 that's legal are the dependent portions.

[00:41:10] Speaker 01:
The basis for the invalidation, so these actually, those claims 1, 12, and 13 were invalidated in Chicago on the basis that the court said, as I read these claims.

[00:41:22] Speaker 01:
I'm talking about the anticipation.

[00:41:25] Speaker 03:
So the question is this.

[00:41:27] Speaker 03:
Does that ruling have any impact on the 101 analysis here?

[00:41:31] Speaker 03:
And what impact would it have?

[00:41:33] Speaker 01:
It would have no analysis.

[00:41:35] Speaker 01:
It would have no impact.

[00:41:36] Speaker 01:
Because the only argument would be, well, that was conventional on the basis of Kermagee, and there is no evidence that Kermagee is conventional.

[00:41:46] Speaker 01:
The court found in Chicago that those were anticipated by Kermagee because those claims did not have automation.

[00:41:54] Speaker 01:
All of these other claims that we're talking about are very different.

[00:41:57] Speaker 01:
No one disputes they have automation.

[00:41:59] Speaker 01:
But the basis for the anticipation holding in Chicago was that she did not find the automation was in those claims.

[00:42:07] Speaker 02:
In Chicago or in Texas?

[00:42:07] Speaker 01:
But was in the dependent claims.

[00:42:09] Speaker 02:
In Chicago or in Texas?

[00:42:10] Speaker 01:
1, 12, and 13 are Chicago.

[00:42:12] Speaker 04:
OK.

[00:42:19] Speaker 04:
Before we sit down, let me ask you one question about represented claims in the 101 analysis.

[00:42:21] Speaker 04:
Yes.

[00:42:24] Speaker 04:
For that patent, yes.

[00:42:47] Speaker 01:
No, in fact, we did the opposite.

[00:42:49] Speaker 01:
And down below, they had argued for representative claims.

[00:42:53] Speaker 01:
We said there was no representative claim, and the district judge did not look at any claim as representative.

[00:43:00] Speaker 01:
So no, those claims, there's never been an agreement or a finding that their claims are representative.

[00:43:06] Speaker 01:
And I would say one other thing on the 101.

[00:43:09] Speaker 01:
The district court's opinion denying the 101 motion, which defendants neglected to attach to their red brief, was a Rule 52C fact finding.

[00:43:19] Speaker 01:
and it made detailed and specific findings of fact under Rule 52C regarding what are conventional methods for blending, regarding how Sonoco's invention improved those conventional methods, and concluding that the claims are directed to specific technical systems and methods that allow a distributor to blend more gasoline than would be possible with PriorArt.

[00:43:41] Speaker 03:
That's a legal finding, right?

[00:43:43] Speaker 03:
Yes.

[00:43:43] Speaker 03:
But whether something's conventional is a fact finding, but whether something is eligible or what the claim is directed to, that's an ultimate legal finding.

[00:43:53] Speaker 01:
Ultimately, yes.

[00:43:53] Speaker 01:
And what I'm saying is they did not even mention his Rule 52C findings, where he had specific factual findings to support his opinion.

[00:44:03] Speaker 01:
So I think all you can do is affirm his 101 denial.

[00:44:09] Speaker 03:
OK, thank you.

[00:44:12] Speaker 03:
Any further questions, Judge Cunningham?

[00:44:15] Speaker 03:
Okay.

[00:44:17] Speaker 00:
Ms.

[00:44:17] Speaker 03:
Fiorella, I will restore your rebuttal time.

[00:44:24] Speaker 00:
Thank you, Your Honor.

[00:44:25] Speaker 03:
That's three minutes.

[00:44:26] Speaker 00:
So on 101, I think actually along the lines of the discussion we were just having, our point with highlighting the anticipation finding was simply to show

[00:44:35] Speaker 00:
that if you're looking at what the heart or focus of claim three, for example, let's take that.

[00:44:41] Speaker 00:
Claim three of the 302 patent.

[00:44:43] Speaker 00:
What's the heart and focus of that claim?

[00:44:45] Speaker 00:
It can't be stuff that was already found to be in the prior art, findings that Sunoco never challenged.

[00:44:50] Speaker 00:
So our point was to help the court understand or help look at what is the focus of the claim.

[00:44:57] Speaker 00:
It's not going to be the tank of butane, the tank of gasoline, the physical system structures.

[00:45:03] Speaker 00:
And then what I heard Mr. Kevil just say is the reason why the claim... But you agree that it could be the other steps.

[00:45:10] Speaker 03:
on this structure, right?

[00:45:12] Speaker 00:
Completely agree.

[00:45:13] Speaker 00:
And actually what I think Mr. Kevill just said makes our point, which is what he identified the difference was is automation.

[00:45:20] Speaker 00:
He said claim three was not invalid for, you know, as anticipated by Care McGee because it adds automation.

[00:45:28] Speaker 00:
But automation, this court has consistently said, is not enough to transform

[00:45:33] Speaker 00:
a otherwise abstract idea into a non-abstract one.

[00:45:36] Speaker 03:
Judge Andrews said it's not just automation.

[00:45:39] Speaker 03:
And that could have been shorthand there, that automation reference.

[00:45:42] Speaker 00:
Agreed.

[00:45:42] Speaker 03:
But he said there were all sorts of things and advantages and distinctions from the prior that results from the way in which that claim performs this automated method.

[00:45:52] Speaker 00:
Yes, Your Honor, I completely agree.

[00:45:53] Speaker 00:
That's what Judge Andrews said.

[00:45:55] Speaker 00:
that's not in the claims.

[00:45:56] Speaker 00:
Respectfully, we walked through in our brief where neither of the two advantages that are certainly described in the specification, they're just not in the claims.

[00:46:04] Speaker 00:
And that's what makes this case more along the lines of the charge point and Accenture type cases, where you might have an invention in the specification, but it's just not claimed in that way.

[00:46:14] Speaker 00:
And so that's why we believe that although Judge Andrew's discussion on these things

[00:46:21] Speaker 00:
Had they actually been in the claims, we'd be having a different discussion.

[00:46:25] Speaker 00:
And on that point, I just want to point out one.

[00:46:28] Speaker 00:
It's the continuous control.

[00:46:30] Speaker 00:
I just wanted to point out one thing in the appendix that I think makes the point of why the continuous control aspect is not in the claims.

[00:46:38] Speaker 00:
Sanoco came back in their brief and said the continuous control aspect is found in the process control unit.

[00:46:45] Speaker 00:
That is the thing in the claims that gives you this concept of continuously controlling the blend ratio.

[00:46:51] Speaker 00:
Two points.

[00:46:52] Speaker 00:
First, process control unit is only in the 302 claims.

[00:46:56] Speaker 00:
It's not in the 629 claims.

[00:46:58] Speaker 00:
So we can't be looking at that specifically for the 629 claims.

[00:47:01] Speaker 00:
But second, and more importantly, at A172 in the 302 patent, column 7, line 61 to column 8, line 6, the patent specifically says the vapor pressure need not be measured continuously.

[00:47:16] Speaker 00:
In fact, you can measure it every 6 to 15 minutes.

[00:47:20] Speaker 00:
And then it goes on to say, whenever such measurements are made, the process control unit receives the measurements, recalculates the ratio, and does the blending.

[00:47:30] Speaker 00:
So the specification is clear that process control unit is not limited to this continuous control aspect.

[00:47:36] Speaker 00:
And that's the only thing that they've pointed out could possibly confer this benefit into the plate.

[00:47:44] Speaker 03:
Any questions?

[00:47:45] Speaker 03:
If you have any questions, Judge Cunningham.

[00:47:48] Speaker 03:
Okay, thank you very much.

[00:47:50] Speaker 03:
We appreciate argument made by both counsel today.

[00:47:53] Speaker 03:
The case is submitted on the briefs.