[00:00:00] Speaker 03:
Final case for argument is 24-2153, Lyon-Roth Technologies versus Cisco.

[00:00:10] Speaker 03:
So if you've all been sitting here this morning, you got to see what kind of an eclectic docket we have.

[00:00:15] Speaker 03:
And now here comes the contract case.

[00:00:17] Speaker 03:
So Mr. Yim, whenever you're ready.

[00:00:20] Speaker 01:
Thank you, Your Honor.

[00:00:21] Speaker 01:
I may please record.

[00:00:23] Speaker 01:
In many respects, the law is about setting expectations and then assessing whether those expectations have been met.

[00:00:30] Speaker 01:
That is true for contracts, and defenses asserting contracts is particularly true for patent claim language and patent infringement analysis, which is the exclusive jurisdiction of this court.

[00:00:41] Speaker 01:
Now, this appeal presents as a contract case, but it revolves almost entirely around questions of the patent law.

[00:00:48] Speaker 03:
Well, just let me ask you, speaking of patent law, we got a 28-J a while back about the PTAB proceedings.

[00:00:55] Speaker 03:
What's the current status of the PTAB proceedings, and how do they overlap claims at issue here?

[00:01:01] Speaker 01:
Yes, Your Honor.

[00:01:02] Speaker 01:
Leonora has filed for a direct review, and that is still pending.

[00:01:05] Speaker 01:
So it is still a live case in that sense.

[00:01:09] Speaker 03:
OK.

[00:01:11] Speaker 03:
What's the time frame here?

[00:01:13] Speaker 01:
My understanding that was filed in November.

[00:01:16] Speaker 01:
So it is somewhat recent.

[00:01:17] Speaker 01:
And we are awaiting a decision.

[00:01:18] Speaker 03:
But you got a PTAB decision.

[00:01:20] Speaker 03:
You got a decision from the board.

[00:01:22] Speaker 01:
That is correct, from the board.

[00:01:23] Speaker 01:
And we are seeking direct review.

[00:01:24] Speaker 03:
And the board invalidated all the claims?

[00:01:27] Speaker 03:
Are some of the claims that are issued?

[00:01:28] Speaker 01:
The operative claims here, I understand.

[00:01:30] Speaker 01:
Thank you, Your Honor.

[00:01:32] Speaker 03:
What if we see this as a contract case?

[00:01:36] Speaker 01:
That's a very good question, Your Honor.

[00:01:40] Speaker 01:
Implication of your question, I believe, would be that there are citations to Delaware law.

[00:01:46] Speaker 01:
Delaware law is the selected law in the contract.

[00:01:51] Speaker 01:
Unfortunately, Delaware law does not provide much guidance to the court as to how great the scope is of the license grant here.

[00:01:59] Speaker 01:
The problem is that Delaware courts do not engage in patent infringement analysis.

[00:02:05] Speaker 01:
As we refer to in our brief, they also mention that dictionaries are not very helpful.

[00:02:09] Speaker 01:
in analyzing contract language out of context.

[00:02:13] Speaker 01:
And so this court's jurisprudence is very rich in asserting that the context must be considered when analyzing whether infringement exists or what the actual claim limitation is.

[00:02:25] Speaker 01:
So Your Honor, I respectfully submit that Delaware law could function here, but it's not as helpful as this court's own rich jurisprudence on patent infringement analysis.

[00:02:37] Speaker 02:
What, if anything, can you point to that would indicate what the expectations of the parties to this RPX agreement were when they used the language that's at issue here, element or material element?

[00:02:53] Speaker 01:
So according to standard contract interpretation principles, we are limited to the agreement itself.

[00:02:59] Speaker 01:
So the intent of the parties would be objectively revealed in the language of the contract.

[00:03:04] Speaker 01:
And what I would suggest to the court is that if this had been as broad of a scope as Cisco asserts, then there would have been no mention of a material step or element of a claim.

[00:03:17] Speaker 01:
It would have just simply said the inclusion of an RPX licensed product.

[00:03:23] Speaker 01:
So it could just have been, if Cisco made a paperclip, just attaching a paperclip to, I'm sorry, if Intel made a paperclip, attaching it to a Cisco product.

[00:03:33] Speaker 01:
That is not what we are dealing with here.

[00:03:35] Speaker 01:
We are dealing with a specific, the language is, this is Appendix 3, the stipulation which quotes all the relevant language.

[00:03:42] Speaker 01:
It requires that the product from the RPX licensee intel, that it satisfies one or more material elements or steps of a claim of any patent.

[00:03:54] Speaker 01:
And then in the next section of paragraph 6 for the covenant, it repeats that same construction.

[00:04:02] Speaker 01:
the product from the RPX licensee, Intel here, must satisfy an element or step of a claim in any patent against any entity.

[00:04:11] Speaker 01:
So to answer your honor's question, this reveals the intent of the parties, which was narrow.

[00:04:17] Speaker 03:
And you're saying it doesn't satisfy that the Intel processors don't satisfy the material claim element.

[00:04:25] Speaker 03:
But if we're looking at patent law, isn't each claim element by definition material?

[00:04:32] Speaker 01:
To answer your first question, that is correct.

[00:04:35] Speaker 01:
And the second part of your comments, what is material?

[00:04:39] Speaker 01:
Yes, you're correct.

[00:04:40] Speaker 01:
And we did not differentiate between any claim element and a material element in our briefing.

[00:04:46] Speaker 01:
We believe that the district court skipped over the entire claim element analysis by limiting the analysis to just the word processor, and also by only identifying the presence of an intel processor without determining what it does.

[00:05:01] Speaker 01:
We have a functional claim element here at issue.

[00:05:05] Speaker 02:
But I guess I'm still struggling to understand what would allow us to say that the parties to the RPX agreement would not have reasonably understood an Intel processor to satisfy an element of your claim, which expressly requires a processor.

[00:05:28] Speaker 01:
So the operative language in the license grant and the covenant specifically mentions the patent.

[00:05:34] Speaker 01:
So you have to look at the subject patent that we are litigating at this point.

[00:05:40] Speaker 01:
And so if you turn to the next page, Appendix 4, which provides the operative language of the 518 patent, it talks about a processor.

[00:05:49] Speaker 01:
And it's a lengthy description of what the processor must do.

[00:05:52] Speaker 01:
And so that is the functional element that this court has

[00:05:55] Speaker 03:
I guess maybe I'm misunderstanding what your argument is, but the agreement just requires that a portion of the product satisfies one or more material elements, not that the Intel processor alone must satisfy a claim limitation.

[00:06:11] Speaker 03:
Is that your argument?

[00:06:13] Speaker 01:
That is my argument, Your Honor.

[00:06:16] Speaker 01:
I understand your question, and it does actually track the district courts reasoning a bit.

[00:06:22] Speaker 01:
So if I could direct the court's attention to Appendix 722, which is the Magistrate Judge's report and recommendation on Cisco's motion for summary judgment.

[00:06:30] Speaker 01:
And here at the top,

[00:06:34] Speaker 01:
part, the district court candidly admits that it was unsure.

[00:06:39] Speaker 01:
I quote, it bears noting that element in this context is not a precise term.

[00:06:44] Speaker 01:
And then the court went on to discuss one of this court's precedents.

[00:06:49] Speaker 01:
And as we elucidate in the briefing,

[00:06:51] Speaker 01:
There is quite a bit to define what an element of a claim is.

[00:06:55] Speaker 01:
You must look at the modifying language.

[00:06:57] Speaker 01:
You must consider the context of the noun.

[00:07:00] Speaker 01:
You cannot simply sever the noun from all of the adjectives and phrases around it.

[00:07:05] Speaker 01:
And so to answer your question, in the contract, so back on Appendix 3, when it talks about material elements or steps of a claim in any patent or in the covenant that satisfies an element or step

[00:07:19] Speaker 01:
of a claim in any patent, that is a specific reference to this court's patent infringement analysis jurisprudence.

[00:07:32] Speaker 00:
And maybe I'm not understanding the full scope of your argument, but I at least was looking at appendix page 672.

[00:07:41] Speaker 00:
And then there is the combined license, prize, and service definition.

[00:07:48] Speaker 00:
And that just requires satisfies or is alleged by licensure or its affiliates to satisfy one or more material elements.

[00:07:58] Speaker 00:
So I didn't think that it was required to actually satisfy, but there could be coverage under the agreement if there's at least an allegation of satisfying.

[00:08:07] Speaker 01:
Correct, Your Honor.

[00:08:08] Speaker 01:
So that is important to focus on.

[00:08:11] Speaker 01:
And to direct your attention in response to that concern, I would direct you to Appendix 203, which is Leonora's opposition to the motion for summary judgment in the first case, which is a part of the record of this case.

[00:08:31] Speaker 01:
And here, in the middle,

[00:08:34] Speaker 01:
We wrote, Leonor's infringement theory is not and has never been that these claim annotations are satisfied by hardware.

[00:08:40] Speaker 01:
i.e.

[00:08:41] Speaker 01:
the Intel processor alone.

[00:08:43] Speaker 01:
And then further, we wrote, Leonora has consistently maintained that the claim terms at issue are satisfied only by the running of Cisco software on the general purpose Intel processors.

[00:08:54] Speaker 01:
So you are correct in pointing to the combined license and product service definition as incorporating allegations, but that has never been Leonora's allegation that the naked hardware alone satisfies a claim limitation in the patent.

[00:09:11] Speaker 02:
But you do point to the licensed Intel processor as satisfying the processor.

[00:09:19] Speaker 02:
portion component subclaim of the claim element in your claim.

[00:09:24] Speaker 01:
I would agree with your question except for the part of the predicate which Leonor disputes that the Intel processor is licensed.

[00:09:31] Speaker 01:
Leonor does point to the hardware as part of what should be considered in comparing the properly construed claims to the Q's device.

[00:09:39] Speaker 01:
That would infringe if it ran the Cisco software, but as sold by Intel,

[00:09:43] Speaker 01:
It does not have that software and is not licensed.

[00:09:46] Speaker 01:
It cannot perform the functions as recited in the 518 certified claims.

[00:09:51] Speaker 02:
So it's just a chip standing in the world.

[00:09:53] Speaker 02:
It's unlicensed.

[00:09:54] Speaker 02:
But as soon as they put the software on it to do what your patent requires, then it's licensed?

[00:10:00] Speaker 01:
That would not be licensed because Cisco is not a licensee.

[00:10:03] Speaker 01:
Intel is the licensee.

[00:10:05] Speaker 01:
So as sold by Intel as a supplier to Cisco, Intel's chips were not licensed.

[00:10:11] Speaker 01:
And they do not.

[00:10:13] Speaker 02:
But Intel could put the software on it.

[00:10:15] Speaker 01:
Yes.

[00:10:16] Speaker 01:
If Intel did it, that would be a licensed product.

[00:10:23] Speaker 01:
If there are no further questions at this time, I will reserve the rest of my time for rebuttal.

[00:10:26] Speaker 03:
Thank you.

[00:10:39] Speaker 04:
May I proceed, Your Honor?

[00:10:40] Speaker 04:
Good morning.

[00:10:41] Speaker 04:
May it please the court, Mark Fleming from WilmerHale together with Heath Brooks on behalf of Cisco.

[00:10:46] Speaker 04:
This is most assuredly a contract case.

[00:10:49] Speaker 04:
Leonra made a deal.

[00:10:50] Speaker 04:
It was paid for its IP.

[00:10:52] Speaker 04:
It's now trying to get more money for the same rights.

[00:10:54] Speaker 04:
Chief Judge Gilstrap and Judge Payne recognize that, and this court should too.

[00:10:58] Speaker 04:
I would say, Judge Cunningham, to the question you raised about combined licensed products and services, that provision is critical.

[00:11:05] Speaker 04:
And Leonora's position, I may be mispronouncing the plaintiff's name, and I apologize if I'm unclear.

[00:11:11] Speaker 04:
I don't speak Irish Gaelic, so I don't know the right way to say it.

[00:11:14] Speaker 04:
But it would essentially nullify that provision in the contract.

[00:11:19] Speaker 04:
The whole reason for this provision

[00:11:21] Speaker 04:
is to cover the situation where Intel sells a general purpose chip, a processor, to a customer like Cisco and Cisco then as a covered third party, which is stipulated, combines the processor with other technology like its software.

[00:11:36] Speaker 04:
Leonora didn't have to agree to that provision.

[00:11:38] Speaker 04:
Plenty of licenses don't have a provision like that.

[00:11:40] Speaker 04:
But they agreed to it and I assume they were well compensated for it.

[00:11:43] Speaker 04:
Yet under their reading they can sap that contractual provision of all its meaning simply by drafting patent claims that modify the processor with additional functional language and suddenly the processor is no longer a claim element.

[00:11:58] Speaker 04:
There's nothing in the word element that requires giving this license such a commercially unreasonable interpretation

[00:12:04] Speaker 04:
where the licensor can evade the license just through clever drafting of patent claims.

[00:12:08] Speaker 04:
Element is a broad term.

[00:12:10] Speaker 04:
It just means a constituent part.

[00:12:11] Speaker 04:
It means that in plain English, and it means it in patent law.

[00:12:15] Speaker 04:
As the court said in Corning Glass, it's the same as a limitation.

[00:12:19] Speaker 04:
It's simply a series of limiting words or phrases in a patent claim.

[00:12:23] Speaker 04:
And if Intel, as a licensee under this agreement, sells a product that reads on or is accused to read on a series of limiting words or phrases in a claim, which a processor is, then it is licensed and Cisco, as a covered third party, may then combine it with other technology.

[00:12:43] Speaker 04:
And that is both licensed, as a combined licensed product and service, and subject to the covenant not to sue.

[00:12:49] Speaker 02:
So unless the court has any questions, we would respect them.

[00:12:54] Speaker 02:
said definitively how one identifies what a claim element is and does this case require us to do that?

[00:13:01] Speaker 04:
It does not require you to do it as a matter of patent law, Judge Stark, because this is a contract case.

[00:13:06] Speaker 04:
Fundamentally, you are interpreting under Delaware law what the parties have done.

[00:13:09] Speaker 02:
Have we ever done it as a matter of patent law?

[00:13:12] Speaker 04:
Neither side has cited a case to you where that has been done because I think no party has ever attempted to make an argument like this, that the word element should be

[00:13:21] Speaker 04:
I mean it's not a statutory term or anything like that.

[00:13:24] Speaker 04:
It's a word that is used generally as a very broad term to summarize a set of words or phrases in a claim.

[00:13:32] Speaker 04:
Sometimes it can be very short as the court in Salazar referred to the phrase a microprocessor as an element.

[00:13:38] Speaker 04:
Sometimes it can be very long.

[00:13:40] Speaker 04:
It all depends on frankly the infringement or the invalidity positions that are submitted to the court.

[00:13:45] Speaker 04:
But this isn't an infringement case.

[00:13:46] Speaker 04:
It's not an invalidity case.

[00:13:48] Speaker 04:
And there's nothing in any of the cases that anyone has found that suggests that element has anything more than the very broad definition that this court in passing in Corning Glass said was the same as a limitation.

[00:14:00] Speaker 04:
I don't think the court needs to decide it as a matter of patent law.

[00:14:03] Speaker 04:
You're just interpreting this contract.

[00:14:05] Speaker 04:
But if you felt that you wanted to say it, I think the right answer is an element of a claim is simply a series of limiting words or phrases in the claim, which is the language directly from Corning Glass.

[00:14:18] Speaker 03:
Thank you.

[00:14:19] Speaker 04:
Thank you very much, Your Honor.

[00:14:32] Speaker 01:
Your Honor, I would begin by responding to my colleagues' suggestions about the intent of intel in this agreement.

[00:14:41] Speaker 01:
And I would remind the court that even under Delaware law, the subjective intent of the parties is irrelevant.

[00:14:46] Speaker 01:
in determining the rights under contract.

[00:14:48] Speaker 01:
It is an objective standard that looks at the four corners of the document.

[00:14:52] Speaker 01:
And in this case, Intel did not even draft the language.

[00:14:54] Speaker 01:
It was by RPX.

[00:14:56] Speaker 01:
So we don't even know what Intel thought, and it is frankly irrelevant.

[00:15:00] Speaker 01:
So to the point, my colleague did mention the Salazar versus AT&T case, which we found most helpful in providing guidance to the court as to how to properly analyze what the

[00:15:13] Speaker 01:
the limitation is of a claim element in a patent claim.

[00:15:17] Speaker 01:
And here, it was very clear that the claim element, and I'm quoting from page 14 of our reply brief, that a claim element is a processor that is required to have all the subsequent recited characteristics.

[00:15:30] Speaker 01:
It is not simply a naked processor, which is exactly what Cisco urges the court to hold here.

[00:15:40] Speaker 01:
Unless the court has any further questions,

[00:15:42] Speaker 03:
Thank you for your time.