1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 JODY A . STEWART , Official Court Reporter 1729 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Norfolk Division ------------------ I/P ENGINE, INC., Plaintiff v. AOL, INC., GOOGLE INC., IAC SEARCH & MEDIA, INC., GANNETT CO., INC., and TARGET CORPORATION, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) CIVIL ACTION NO. 2:11cv512 ------------------ TRANSCRIPT OF TRIAL PROCEEDINGS DAY 10 (Afternoon session) Norfolk, Virginia October 30, 2012 BEFORE: THE HONORABLE RAYMOND A. JACKSON, and a jury United States District Judge Case 2:11-cv-00512-RAJ-TEM Document 764 Filed 10/30/12 Page 1 of 67 PageID# 17314
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JODY A. STEWART, Official Court Reporter
1729
IN THE UNITED STATES DISTRICT COURTFOR THE EASTERN DISTRICT OF VIRGINIA
Norfolk Division
- - - - - - - - - - - - - - - - - -
I/P ENGINE, INC.,
Plaintiff
v.
AOL, INC., GOOGLE INC., IACSEARCH & MEDIA, INC., GANNETTCO., INC., and TARGETCORPORATION,
Defendants.
)))))))))))))
CIVIL ACTION NO.2:11cv512
- - - - - - - - - - - - - - - - - -
TRANSCRIPT OF TRIAL PROCEEDINGS
DAY 10
(Afternoon session)
Norfolk, Virginia
October 30, 2012
BEFORE: THE HONORABLE RAYMOND A. JACKSON, and a juryUnited States District Judge
Case 2:11-cv-00512-RAJ-TEM Document 764 Filed 10/30/12 Page 1 of 67 PageID# 17314
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JODY A. STEWART, Official Court Reporter
1730
APPEARANCES:
CRENSHAW, WARE & MARTIN PLCBy: Donald C. Schultz
W. Ryan SnowCounsel for the United States
ANDDICKSTEIN SHAPIRO LLPBy: Jeffrey K. Sherwood
Frank C. Cimino, JrKenneth W. BrothersLeslie Jacobs, Jr.Dawn Rudenko AlbertCharles J. Monterio, Jr.Counsel for the Plaintiff
KAUFMAN & CANOLES, P.C.By: Stephen Edward Noona
ANDQUINN EMANUEL URQUHART & SULLIVAN LLPBy: David Bilsker
David PerlsonRobert WilsonAntonio Ricardo SistosDavid NelsonCounsel for the Defendants
Case 2:11-cv-00512-RAJ-TEM Document 764 Filed 10/30/12 Page 2 of 67 PageID# 17315
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JODY A. STEWART, Official Court Reporter
1731
I N D E X
PLAINTIFF'SWITNESSES PAGE
NONE
DEFENDANT'SWITNESSES PAGE
KEITH UGONECross-Examination By Mr. Sherwood 1732Redirect Examination By Mr. Wilson 1749
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1732
(Hearing commenced at 2:29 p.m.)
THE COURT: The Court has a question, Mr. Brothers.
MR. BROTHERS: Yes, sir.
THE COURT: I'm trying to figure out a time frame.
Approximately how long do you think the direct examination of
your rebuttal witness, Dr. Carbonell?
MR. BROTHERS: We expect Dr. Carbonell to be
between -- probably about an hour and 45 minutes.
THE COURT: Okay. Thank you.
All right. Bring the jury in.
(Jury in at 2:29 p.m.)
THE COURT: You may be seated. Please let the
record reflect all jurors are now present. Does counsel
agree?
MR. SHERWOOD: Yes, Your Honor.
MR. WILSON: Yes, Your Honor.
THE COURT: You may resume, Mr. Sherwood.
MR. SHERWOOD: Thank you.
CROSS-EXAMINATION (Cont'd)
BY MR. SHERWOOD:
Q. So, Dr. Ugone, before we broke for lunch, I think I was
asking you some questions about Google projecting forward
with the total cost of the 12(d) application fee. Do you
remember that?
A. I do recall our conversation on that, sure.
Case 2:11-cv-00512-RAJ-TEM Document 764 Filed 10/30/12 Page 4 of 67 PageID# 17317
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1733
Q. And it was in the range of $490 million; is that fair?
A. Yeah. What we were talking about that if you did
Dr. Becker's calculation, that added up to 493.1 million from
the hypothetical negotiation or from the date of first
recovery through present.
Q. Right. And so Lycos would have that projection going
forward, as well, wouldn't it? It would know about that,
too?
A. Well, here is where we have to be careful. We have a
disagreement over a form of the license and the nature of the
discussions. My view is, based on everything I've looked at,
is that it would be a lump sum payment. Dr. Becker believes
in a running royalty rate. If you go into that framework,
all I was saying is, is that people would look at payments
over time if you were in that world.
Q. So in that -- with that frame of mind, Lycos would have
the same anticipation about the value of the royalty as
Google, right?
A. I'm missing what your question is because Google's view
would be that, given everything that we looked at, the value
of the license payment would be 3 to $5 million. So you
wouldn't even get to this $493 million calculation because
that wouldn't make sense in light of all the economic
considerations that I've been talking about.
Q. Well, I understand that's your opinion, but before the
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1734
lunch break you told me that Google, following the running
royalty analysis, would have anticipated the full cost of the
royalties over the life of the patents, right?
A. What I was --
Q. Isn't that your testimony?
A. Very similar to that. If one was in that situation, they
wouldn't just look at here's the rate. They would say, well,
what does that add up to over time.
Q. Right. And Lycos would do that, as well, wouldn't it?
A. If you were in a situation where it made sense to do
that, the parties would do that.
Q. And Lycos would have known that Google was going to use
its patented technology in not only AdWords but AdSense for
Search and any other programs like that that came along,
right?
A. Well, if you were in that running royalty rate world, you
would do that calculation, but I have been assuming that the
patents are valid and infringed, in other words, that you
would require a license to use that technology. So I think
that is a yes to your question, that it would be known that
the technology could be at least used on a going forward
basis.
Q. And Lycos would know that irrespective of the structure;
isn't that right?
I'll rephrase the question. Lycos would understand
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1735
Google's anticipated use of its technology, right?
A. They -- the assumption of the hypothetical negotiation is
that Google would need a license to use the technology, yes.
Now, at that point on a going forward basis, Google can
choose to use the technology or not. Remember what
Dr. Becker said --
MR. SHERWOOD: Your Honor, I'd like just an answer
to my question.
THE COURT: Just answer the question, Doctor, and
then --
THE WITNESS: Okay.
THE COURT: Just answer the question.
BY MR. SHERWOOD:
Q. Can you answer the question?
A. If I could have the question again.
MR. SHERWOOD: I'm sorry, Your Honor.
THE COURT: He did answer the question, but then
he --
MR. SHERWOOD: And then he went on. All right.
BY MR. SHERWOOD:
Q. Okay. And Dr. Becker calculated his royalty on the basis
of use, didn't he?
A. He applied an apportionment factor that we've discussed,
but that's how he started with a base, and then he took his
royalty rate, as we've talked about, from those Overture
Case 2:11-cv-00512-RAJ-TEM Document 764 Filed 10/30/12 Page 7 of 67 PageID# 17320
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1736
license agreements.
Q. And the payments varied according to the extent of use,
right?
A. The payment varied according to his mathematical
calculations and the apportionment factors, I'll agree with
that.
Q. Can we have PDX-76, please. So you remember this slide
that Dr. Becker used?
A. I do, yes.
Q. And that was based upon -- the blue numbers were based
upon use, right?
A. The blue numbers were based upon the draft chart.
Q. Right.
A. And adding together the SmartAds, the disabling and the
promotion boxes that we've talked about --
Q. Right.
A. -- and then dividing it by the total.
Q. I'm sorry. And those were what Dr. Becker used to
determine Google's use of the patented invention, right?
A. Apportionment, but as we've talked about, that overstates
it, but that was the calculation he did.
Q. And it varied according to the number? Through 2007, it
varied according to the numbers that were in PX-64, right?
A. Actually, there is a couple of numbers that are missing
because it started out as 7.8 and then 12 point something,
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1737
then it got up to the 15. He didn't show those in his chart,
but if you did the calculation he did, which had too much in
it, you get what's in the blue, yes.
Q. The 7.8 was outside the recovery period, wasn't it,
Doctor?
A. Yes. But that was at the time of the hypothetical
negotiation.
Q. But you understand that the damages are limited to a
certain period of time, don't you?
A. I do. So the calculations would start with the 15.9 in
terms of the calculations. But with the first alleged
implementation of SmartAds, the number from the chart that
Dr. Becker got was 7.8 percent.
Q. And that's outside the recovery period, correct?
A. There is the alleged infringement period, then there's
the recovery period. But back here, the 7.8 is where the
hypothetical negotiation would be.
THE COURT: The question was --
MR. SHERWOOD: Your Honor --
THE COURT: -- outside of the.
THE WITNESS: Yes.
BY MR. SHERWOOD:
Q. It's outside the recovery period, right?
A. Yes.
Q. Now, you criticize Dr. Becker's calculation of a royalty
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1738
rate of 3.2 percent, right?
A. That was 3.5.
Q. 3.5 percent, excuse me?
A. Yes.
Q. Is that correct?
A. Yes.
Q. And you understand that that 3.5 percent was based upon
licenses that Overture gave to its '361 patent?
A. Yes. Or three of them at least.
Q. And you also understand that Dr. Frieder testified that
the Overture '361 patent is comparable to the patents-at-suit
in this case?
A. I read that testimony, yes.
Q. And you're not competent to give an opinion about whether
that's accurate or not, are you?
A. Not on the technical side, no.
Q. You don't know whether Dr. Ungar's opinion about that as
opposed to Dr. Frieder's about that, you don't know which one
is right, do you?
A. Well, I was able to have discussions with Dr. Ungar so I
understood kind of his rationale. But I can't evaluate the
accuracy of either of the two of them.
Q. You can't give an opinion about which one of those
opinions is correct?
MR. WILSON: Objection. He has been over this.
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1739
THE COURT: He just answered that.
MR. SHERWOOD: Your Honor, he gives a lengthy
answer.
THE COURT: He just answered it. The last thing he
said was the answer. Do you want to repeat your answer
again, Doctor?
THE WITNESS: Yes. I cannot -- I'm not the
technical person, so I have to leave it up to the two
technical experts.
BY MR. SHERWOOD:
Q. All right. And you know that Google licensed the
Overture patents for its AdWords program, don't you?
MR. WILSON: Your Honor, I object to this line of
questioning. We got a ruling on this.
MR. SHERWOOD: Your Honor, this was within the scope
of direct.
MR. WILSON: This was not in the scope of the
direct, Your Honor.
THE COURT: I'm going to sustain the objection.
BY MR. SHERWOOD:
Q. You know that Lycos licensed the '361 patent, right, the
Overture patent?
A. I --
MR. WILSON: Beyond the scope of direct, Your Honor.
I don't know where it is coming from.
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1740
MR. SHERWOOD: Your Honor --
THE COURT: Yes, sir.
MR. SHERWOOD: -- this relates to his analysis of
Georgia-Pacific factor 12.
THE COURT: And states Georgia-Pacific factor 12?
MR. SHERWOOD: Georgia-Pacific factor 12 is --
portion of the profit or of the selling price that may be
customary in particular business or comparable businesses to
allow for the use of the advancement or analogous invention.
He did an analysis, he said, of all 12 factors. He
criticized Dr. Becker for using Overture licenses, and I'm
entitled to cross-examine him about that.
MR. WILSON: Your Honor, neither Dr. Becker or
Dr. Ugone relied on this agreement, and based on Your Honor's
earlier ruling, those are out.
MR. SHERWOOD: Your Honor.
THE COURT: Wait a minute now. Do you have -- go
back to his expert report. Did he make any comments on that
in his expert report? Did Dr. Becker make any comments on
his expert report.
MR. SHERWOOD: I'm sorry, did he make comments in
his expert report?
THE COURT: Regarding the line of inquiry you are
pursuing right now?
MR. SHERWOOD: He criticized Dr. Becker for --
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1741
THE COURT: He did?
MR. SHERWOOD: Yes. He did it in his direct
testimony, Your Honor. He said he can't rely on the Marchex,
eXact and Interchange agreements.
THE COURT: I will allow limited inquiry on that,
but there is some danger here. So make it quick, make it
short.
MR. SHERWOOD: Okay. Your Honor, may I ask the
question doesn't he understand that Google licensed that
patent?
THE COURT: All right.
BY MR. SHERWOOD:
Q. Don't you understand that Google licensed the Overture
patent?
MR. WILSON: Your Honor, this is a different
question. This is exactly what Your Honor ruled on earlier.
We are moving on to something else.
MR. SHERWOOD: Your Honor.
THE COURT: Hold on a second. Ladies and gentlemen,
I can't settle this across the bench. I've got to get close
up. Stand up for a second.
(Side-bar conference.)
THE COURT: All right. Let's get straight on where
we are, okay. The Court's been ruling to try to avoid
getting the witness too involved in the matter that may be
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1742
beyond his expertise as a forensic economist's technical
matter. That is what is in the back of the Court's mind.
Now, what is it that you were getting ready to ask?
MR. SHERWOOD: Your Honor, Dr. Becker gave an
opinion on direct that was based upon Dr. Frieder's testimony
that the '361 Overture patent is comparable to the
patent-in-suit. You may recall on cross-examination
Dr. Wilson opened the door about the value of the license
that Google took to that patent. Now, I'm not going to ask
that question, but what I am going to do, and what he did on
direct testimony, was he said that the witness testified --
THE COURT: Don't shake your head. The jury is
sitting here looking at what you're doing, Mr. Wilson.
MR. WILSON: I'm sorry.
MR. SHERWOOD: He testified that that patent, the
'361, that the Overture patent was not comparable. He
criticized Dr. Becker's analysis with respect to that. And
what I want to do, Your Honor, is go and cross-examine him
about that. And I can do that not only because they opened
the door with respect to Dr. Becker's testimony, but they
also opened the door with respect to his direct testimony.
THE COURT: Okay. Here's what --
MR. WILSON: Your Honor, if I may respond to that.
This is Robert Wilson. Your Honor, we had the
cross-examination, and the next day we moved to strike any
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1743
testimony regarding the Overture and Google license, and Your
Honor granted that motion. So that's off the table. The
reason that was is because Dr. Becker specifically opined in
his expert report that that was not a comparable license and
he did not include it in his analysis.
Second point is I understand they want to ask about
Lycos and an Overture agreement. That agreement, both of the
experts considered and both of them concluded that that was
also not a comparable license agreement. So we have a
situation here, Your Honor, where he is saying, well, he
criticized the rate. Well, he criticized the rate based on
what Dr. Becker relied on in order to obtain that rate.
THE COURT: No. No. No. The problem I keep having
in this case is the Court rules, and both parties somehow
manage to work their way right back into something that the
Court has previously excluded for some reason or another.
You work your way right back to it again. To the extent the
Court has excluded certain testimony because we found that
the agreements were not comparable, then no matter what he
said, we are not going to get back into it again, just not
going to do it, and the fact that somebody get up here and
inadvertently open the door and say something that is not
licensed, for either party to go back and get back into it
and inadvertently reverse what the Court has said.
Now, you know something? The Court has a real
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1744
concern. You think about it tactically, just how much the
jury is going to remember of this cross-examination,
Mr. Sherwood, on this point. So I think you probably need to
make your point and move on without getting back in here and
let us -- end up developing a problem we have here in talking
about noncomparable agreements and licenses, no matter what
came of these experts about.
So find some other way to deal with this and go on
with this witness. I mean, so I'm going to sustain the
objection. Find something else to deal with and terminate
this cross-examination.
MR. SHERWOOD: Yes, Your Honor.
MR. WILSON: Yes, Your Honor.
THE COURT: And I say that because the Court is able
to measure just how, what you've covered, how far you've
gone, and determine whether fairly you've had an opportunity
to challenge him on the issue, and you certainly have. So we
are start beating a dead horse, colloquially speaking.
MR. SHERWOOD: Your Honor, may I say one thing?
THE COURT: About what?
MR. SHERWOOD: The comparability issue relates to
the fact that it was a settlement, and the Court didn't
strike the testimony. That is not what happened. I read the
transcripts over. The Court said it would take it up later.
All that Dr. Becker said was -- he wasn't going to use the
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1745
value because it was a settlement of litigation. There was
no testimony that the technology wasn't comparable. In fact,
Dr. Frieder said it was, and that is the basis upon which
Dr. Becker --
THE COURT: Let me put it this way, Mr. Sherwood.
It is a possibility that the Court is dead wrong on this
ruling. But the Court is not going back and going to read
the transcript and try to figure it out at this time.
MR. SHERWOOD: I understand.
THE COURT: Just abide by my ruling and let's move
on. You find more fertile ground, let's move on and
terminate this.
MR. SHERWOOD: I understand.
MR. WILSON: Thank you, Your Honor.
(End of side-bar conference.)
BY MR. SHERWOOD:
Q. Can I have the Elmo, please. You looked at all of the
Georgia-Pacific factors, right, Dr. Ugone?
A. Yes.
Q. And including factor 12?
A. Yes.
Q. And, in fact, this is the text of factor 12 in your
report, isn't it?
A. I'm sorry. This is a page out of my Appendix A.
Q. It is a text of factor 12 from your report, right?
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1746
A. Yes.
MR. SHERWOOD: Your Honor, may this be published to
the jury?
THE COURT: Yes, it may.
MR. SHERWOOD: Thank you, Your Honor.
BY MR. SHERWOOD:
Q. And this factor relates to the portion of the profit or
customary price that's used for use of the patented
invention, right?
A. Yes, within the spirit of what you said, it's a way to --
one of the factors that will bring in some additional
considerations, yes.
Q. I mean, I paraphrased it a little bit, right?
A. Yes.
Q. But it was an accurate paraphrase?
A. Yes. This is somehow, when there is like licenses
unrelated to the two parties, sometimes you bring them in
under factor 12. That is how it is commonly used.
Q. Yeah. In fact, it doesn't require that a party have made
a licensing decision based upon a particular agreement,
right?
A. Correct. What it is saying if there is comparable
technologies and comparable reasons why you might want to
look at another license to give you some -- that has some
probative value, you bring it in under factor 12.
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1747
Q. And Dr. Becker did his analysis of royalty rate under
factor 12, didn't he?
A. I believe that is where he put it, yes.
Q. And you didn't do any calculation of the royalty rate of
a customary rate under factor 12, did you?
A. I did not do a royalty rate because I did a royalty
payment, as we discussed.
Q. Your report does not disclose any rates that would be
described by factor 12 as customary in the industry, right?
A. Um, you're talking about customary in the industry. I
did extensively discuss the three licenses that Dr. Becker
was relying upon, I did discuss those in my report.
Q. And he used those licenses to calculate his rates, right?
A. That was the basis for his royalty rate, and obviously I
had differences with him, as I described.
Q. And you didn't use any licenses to calculate a rate?
A. Not a royalty.
Q. Under factor 12, excuse me?
A. Not a royalty rate because my opinion, as I've testified,
is that it is a lump sum payment.
Q. So just to connect a few of the dots here, you testified
that real world factors are very important, but your report
didn't include any of the actual public financial data of
either Lycos or Google, did it?
MR. WILSON: Your Honor, asked and answered, also
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Ugone, K. - Cross (Cont'd)
JODY A. STEWART, Official Court Reporter
1748
mischaracterizing.
THE COURT: Overruled. Go on and ask it.
THE WITNESS: I didn't have their profitability
numbers but I did have testimony from their representative
about the financial difficulties that Lycos was under at the
time, as well as what was in the public press about closing
offices, and so forth, and laying off of 20 percent of the
work force.
BY MR. SHERWOOD:
Q. Isn't it true that Lycos and Google were on fairly equal
footing economically?
A. I don't believe that to be the case, no.
Q. They both had substantial resources, right?
A. I think they were going in different directions, so, yes,
they had resources but they were going in different
directions.
Q. In fact, Terra Lycos, I think we saw, had 1.6 billion
euros at the time, didn't it?
MR. WILSON: That has been asked and answered.
THE COURT: Asked and answered, sustained.
MR. SHERWOOD: Your Honor, I'll pass the witness.
THE COURT: Redirect.
MR. WILSON: Yes, Your Honor.
THE COURT: Within the bounds of the cross.
MR. WILSON: Yes, Your Honor.
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1749
REDIRECT EXAMINATION
BY MR. WILSON:
Q. Good afternoon, Dr. Ugone.
A. Good afternoon.
Q. So Mr. Sherwood asked you quite a few questions about
lump sum versus running royalty. Do you remember those lines
of questions?
A. Yes, I do.
Q. And he showed you some testimony from Lycos's
representative, Mr. Blais, regarding any preference that
Lycos might have had. Do you remember that?
A. Yes, I do.
Q. And he read one particular question and answer into the
record. Do you recall that?
A. Yes, I do.
Q. And he didn't want to show you the next question and
answer. Do you recall that?
MR. SHERWOOD: Objection, Your Honor.
THE COURT: Objection sustained. The Court provided
that he did read it.
MR. WILSON: Let me show you the complete deposition
testimony. If I could get the Elmo set up here.
BY MR. WILSON:
Q. I'm just going to put up a portion of the Blais
testimony, and the question that Mr. Sherwood asked, was:
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1750
"At the time did Lycos have a preference for one of the two
models?" And then there's an objection, and the answer is:
"There were some preferences for a running royalty to create
a revenue stream, but it wasn't strong."
And then the next question and answer: "How about in
2006, do you know if Lycos had any preferences in licensing
out its patents for a lump sum versus a running royalty?"
There's another objection, and then the answer: "I wouldn't
say there was really any preferences." Do you see that?
A. Yes, I do.
Q. And did you consider that deposition testimony in
connection with preparing your opinions?
A. Yes. In fact, I considered all of this, and this is what
I was remembering during your questioning.
Q. And how did that factor into the conclusions you reached
regarding Lycos's preference for a lump sum?
A. Well, just like the representative from Lycos said,
quote, I wouldn't say there was really any preferences, which
I believe is what I testified to.
Q. And you were also asked about Google's preferences for a
lump sum. Do you recall that line of questions?
A. I do.
Q. And you heard Dr. Becker testify at trial in this case,
right?
A. Yes.
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1751
Q. And he testified about Google's preference for a lump
sum. Do you recall that?
A. Yes.
Q. Let me put up that testimony. So this is Dr. Becker's
trial testimony at Page 885, Lines 11 to 13. Do you see that
on the screen?
A. I do.
Q. And I asked Dr. Becker: "And you know that Google has a
preference for lump sum agreements, correct?
"ANSWER: Yes."
Do you recall that testimony?
A. I do recall that testimony, yes.
Q. And how did that compare with your conclusion regarding
Google's preference for a lump sum?
A. I agreed with him on that assessment that Google has a
preference for lump sum payment structure and licensing
agreements.
Q. You were also asked about the Georgia-Pacific factors and
use of the patented technology. Do you recall that?
A. Yes.
Q. Does the lump sum amount that you arrived at in
connection with the hypothetical negotiation, does that take
into account Google's use of the patented technology?
A. Well, it takes into account that they, in a hypothetical
negotiation, that they need a license in order to use the
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1752
technology. That is what the whole hypothetical negotiation
is about.
Q. Okay. And you were also asked many questions about
apportionment of a royalty base. Do you recall that?
A. Yes.
Q. And is there a reason you didn't do an apportionment with
respect to your analysis?
A. Well, there is two reasons: One, the first primary
reason is, is that the parties would have agreed to a lump
sum payment; and then the second reason is all of the
difficulties with the calculation that I pointed out in
Dr. Becker's calculations.
Q. And you were also asked about the basis for your
conclusion that a reasonable royalty in this case would have
been between 3 million to $5 million. Do you recall that?
A. Yes.
Q. And there was a suggestion that somehow you used
something other than the Georgia-Pacific factors for your
testimony today. Do you recall that?
A. I do recall that.
Q. Did you use the Georgia-Pacific factors to arrive at the
3 million to $5 million range for your opinion?
A. Yes, I absolutely used the Georgia-Pacific factors.
Q. And Mr. Sherwood showed you part of your deposition
testimony. Do you recall that?
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JODY A. STEWART, Official Court Reporter
1753
A. I do.
Q. And he didn't want to show you any other part?
MR. SHERWOOD: Your Honor, I object to that.
THE COURT: Objection sustained. Please leave his
comments out, Mr. Wilson, and just direct the question.
MR. WILSON: Yes, Your Honor.
BY MR. WILSON:
Q. Let's put up another portion of your deposition
testimony. Could we please have Page 137. And do you see at
Lines 9 to 13, if we could blow that up. And Ms. Albert
asked you, "What does 3 to $5 million come out of?" Do you
see that?
A. Yes.
Q. And: "Answer. That would be the outcome of the
hypothetical negotiation. That would be the value to Google
for the use of the technology." Do you see that?
A. Yes.
Q. And that was your testimony at your deposition; is that
correct?
A. Yes. And the hypothetical negotiation is Georgia-Pacific
factor 15 which takes into account all of the Georgia-Pacific
factors.
Q. Okay. You were also asked about the cost and effort to
Google to implement the patented technology. Do you recall
that line of questioning?
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1754
A. You may have to remind me on that one.
Q. Sure. So you recall Mr. Sherwood asking you about
whether it would be difficult or not for Google to implement
the patented technology or whether Lycos could help. Do you
recall that question?
A. Yes.
Q. And you were here for Dr. Frieder's testimony in this
case?
A. Yes, I was.
Q. And do you recall him testifying about the implementation
of the patented technology?
A. Yes, I do remember that very vividly, actually.
Q. And if you put on the Elmo again, I would like to put up
Dr. Frieder's testimony. This is Dr. Frieder's testimony at
trial, Page 455 to 456.
THE COURT: What is the question?
MR. WILSON: The question is, do you recall
Dr. Frieder testifying about the implementation of the
technology, and I want to ask the witness whether he
considered that and how that comports with his opinion.
MR. SHERWOOD: Your Honor.
THE COURT: Wait. First let him answer the
question, do you recall that? If he doesn't recall it, then
we go back and try to refresh the recollection. Do you
recall it?
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1755
THE WITNESS: Yes, I do.
THE COURT: All right. Now what is the question?
MR. SHERWOOD: Beyond the scope of cross.
MR. WILSON: Your Honor, there was extensive cross
on implementation costs.
THE COURT: Overruled.
MR. WILSON: All right.
BY MR. WILSON:
Q. And at Page 455, Line 21, Dr. Frieder was asked on
cross-examination: "Dr. Frieder, this is a pretty simple
example. Is this how it would work?" Dr. Frieder's answer
is: "That is a simple example so I could illustrate it. It
is very, very difficult to implement this. It takes
significant effort. But I just -- my point was just to
illustrate, to explain how it works. You should not take
away the point that it is an easy thing to do. It is very
difficult." Do you see that?
MR. SHERWOOD: Your Honor --
THE COURT: What was the question?
BY MR. WILSON:
Q. The question is, do you recall that testimony?
A. I do recall that testimony.
THE COURT: Now, look --
MR. WILSON: How does that --
THE COURT: We are not going to use that technique
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1756
anymore now for asking questions. You ask him a question.
We do not read the whole transcript to him, and then ask him
do you remember that. That is not the proper way to go.
Now, ask the last question, and let's move on to something
else.
BY MR. WILSON:
Q. We will move on. How does that comport with your opinion
in this case?
A. That is my understanding, that it takes a lot of effort
to do all the models and the algorithms and the training that
Google does.
Q. Okay. In preparing your expert report -- well, first let
me ask you this. You were asked a lot of questions about
commercial embodiments of the patents-in-suit. Do you recall
that?
A. Yes.
Q. And you reviewed Mr. Kosak's deposition in connection
with preparing your expert report, didn't you?
A. Yes.
Q. And you recall Mr. Kosak testifying about whether
commercial product had ever been made using the technology?
MR. SHERWOOD: Your Honor, object to the leading.
THE COURT: Objection sustained.
BY MR. WILSON:
Q. Did you rely on Dr. Kosak -- Mr. Kosak's deposition
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1757
testimony in forming your opinion regarding commercial
embodiment?
A. I did. It's in my report, yes.
Q. And what did you rely on?
A. Well, his deposition testimony -- if you're asking me
what I remember about his deposition testimony, it was that
there was not a commercialized product that practiced the
claim teachings of the patents-in-suit.
Q. And you were here for Mr. Kosak's testimony at trial,
correct?
A. Yes.
Q. And did you hear him testify on cross --
MR. SHERWOOD: Object to the leading again.
MR. WILSON: Just asking --
THE COURT: As long as your answer doesn't suggest
to him what he did testify to. He testified to what he
recalls.
MR. WILSON: The question was, do you recall
Mr. Kosak testifying about commercial implementation of the
patent-in-suit? Do you recall that?
THE WITNESS: Yes.
BY MR. WILSON:
Q. Okay. And what do you recall regarding that testimony?
A. I recall Mr. Kosak testifying about some attempts to
implement the product, but at least my personal recollection
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1758
was that there was no commercialization of such a product.
Q. And is that -- how does that comport with your opinion
regarding commercial embodiment?
A. That is what I was trying to explain, yes.
Q. You were also asked about your opinion that Lycos faced
serious business difficulties in 2004. Do you recall that
line of testimony?
A. Yes.
Q. And you were directed to Paragraph 74 of your report. Do
you recall that?
A. Yes.
Q. So why don't you get that out.
MR. SHERWOOD: Your Honor, I'm going to object to
any testimony that seeks to elicit from the witness what's in
his report.
MR. WILSON: Well, Your Honor --
THE COURT: Well, you know, we are all talking about
technique here. Let's find out what the question is first.
Let's find out what the question is.
MR. WILSON: All right.
BY MR. WILSON:
Q. You were asked a variety of questions about what you
relied on in connection with reaching your opinion, correct?
A. Yes.
Q. Besides the -- well, what did you rely on in connection
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1759
with forming your opinion regarding Lycos's commercial
success or lack thereof in 2004?
A. Well, there was the deposition testimony of the
representative of Lycos, and there was also research we had
done from financial news web sites that contained information
that I also incorporated into my report, and those are
referenced in that section of my report.
Q. Okay. And so for the deposition testimony, what did you
rely on in connection with your conclusion that Lycos was
having business problems in 2004?
MR. SHERWOOD: Your Honor, I object to this. This
is testimony that is related to no personal knowledge.
THE COURT: Well, the Court, I think, has been over
this. To the extent it is on something the Court has
previously ruled on, we are not going to get to that point.
I quite frankly, Counsel, the Court doesn't know what his
answer is going to be. That is just a precautionary
statement. I made it before.
MR. WILSON: All right. Let me ask another
question, Your Honor.
THE COURT: That would be wise.
MR. WILSON: Thank you.
BY MR. WILSON:
Q. Did you, besides deposition testimony, did you rely on
anything else in connection with your conclusion that Lycos
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1760
was having business difficulties?
A. Yes. There was some, I called them independently
obtained documents. There were some documents we obtained in
our research, yes.
Q. And did you also rely on any opinions of Dr. Becker?
A. With respect to?
Q. In Paragraph 74 of your expert report?
A. The ones I remember -- well, there were some things that
Dr. Becker had in his report, and I think he did talk a
little bit about sort of the prominence of Lycos in the
overall scheme of the companies that Lycos was a part of.
Q. Okay. And the companies that Lycos was a part of in
2004, that was the Terra companies?
A. Yes.
MR. SHERWOOD: Your Honor, I object to the leading
again.
THE COURT: Sustained.
BY MR. WILSON:
Q. And you mentioned publicly available sources in forming
your opinion regarding Lycos's business difficulties. What
did you rely on?
A. Well, there was some financial news, web sites that had
information.
Q. I'd like to put up DX-254.
And if you can take a look at 891379. Do you
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1761
recognize that, Dr. Becker?
A. Keith Ugone, but --
Q. I apologize. Do you recognize this?
A. Yes, I do.
Q. Okay. And what is it?
A. This appears to be the article that I was relying upon,
yes.
MR. SHERWOOD: Your Honor, I don't know if this has
been published to the jury. This is hearsay, object to any
showing it to the jury.
THE COURT: It is not being published to the jury.
Has this document been admitted into evidence?
MR. WILSON: It has not been admitted.
THE COURT: It is not going to be admitted into
evidence.
MR. WILSON: But, Your Honor, he was cross-examined
on --
THE COURT: Listen, he can testify to what he relied
on, but I've said consistently in here, your impeachment
document is not going to be admitted into evidence. This
witness has indicated he relied on this source. He has said
it before. And the fact that you are going over it is
nothing but repetition. He said it before the jury, and he
said it again.
Now let's not keep repeating what he said. We count
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1762
on the jury to remember it. Okay. So let's move on.
MR. WILSON: We will count on it. Thank you, Your
Honor.
BY MR. WILSON:
Q. So, Dr. Ugone, you were also asked about Google's success
in 2004. Do you recall those lines of questions?
A. Yes.
Q. And you were asked specifically about a Google S-1
statement. Do you recall that?
A. Yes.
Q. And we went through some of the pages of that. Did you
rely on any Google SEC filings in connection with reaching
your opinions regarding Google's success?
A. Well, they were part of the documents that I reviewed,
including the S-1 statements.
Q. And did you review -- actually go to some of the
paragraphs that you referred to. So if you go to Page 20 of
your expert report.
A. I'm on Page 20.
Q. And you see Paragraphs 33 of 35?
A. Yes. A lot of that information came from the Google,
what is called their 10(k), which is an annual.
MR. SHERWOOD: I object to this, too. It is really
just asking the witness to read from this report.
THE COURT: Well, I think you can ask the witness a
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1763
question. To the extent the witness does not recall, he
certainly can refresh his recollection by going to the
report. But don't use the report the way you're doing it
now. You can ask him the question. If he doesn't recall
whether he relied on that information in his report, you
clearly can use his report to refresh his recollection.
MR. WILSON: Okay.
BY MR. WILSON:
Q. So just for the purposes of the jury's information, what
is the form 10(k)?
A. It's a filing with the Securities and Exchange Commission
that public companies that are traded on stock exchanges have
to file annually, and it gives, in a sense, the annual
performance of the company so investors that are thinking
about investing in the company know something about the
financial performance of the company.
Q. And did you rely on Google's form 10(k) in forming your
opinions regarding Google's success?
A. Yes, I did get a lot of information from their form
10(k).
Q. Okay. Let's move to the Carl Meyer agreement. You were
asked several questions. You can put your expert report
back. You were asked several questions about your reliance
on Carl Meyer. Do you recall that?
A. I do.
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1764
Q. Okay. And you had testified that you used the Carl Meyer
agreement in one other case involving Google?
A. Yes.
Q. Okay. And did you consider whether the Carl Meyer
agreement was comparable to the hypothetical negotiation in
this case?
A. Yes.
Q. What did you do?
A. Well, with respect to the technical aspects of the Carl
Meyer patents, I was relying on the testimony of Dr. Ungar.
Q. And did you rely on the economic framework of the Carl
Meyer agreement in connection with your analysis of the
hypothetical negotiation here?
MR. SHERWOOD: Your Honor, I believe this is
cumulative. He's covered that.
THE COURT: I will sustain the objection to the
extent that the Court believes it is leading.
MR. WILSON: Sorry?
THE COURT: The Court believes the question is
leading.
MR. WILSON: Okay, Your Honor.
BY MR. WILSON:
Q. How, if at all, did you rely on the Carl Meyer agreement
with respect to your analysis of the hypothetical negotiation
and the result of that negotiation?
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Ugone, K. - Redirect
JODY A. STEWART, Official Court Reporter
1765
A. Okay. So it's really a two-part analysis. Once Dr.
Ungar gave me input there was a comparable technology to the
patents-in-suit, then I looked at the economics of that
purchase agreement and saw that Google had purchased those
patents, the Carl Meyer patents for a lump sum amount of
$3.55 million.
Q. Okay. And you also -- there was some questions about
whether or not the Carl Meyer agreement was an arm's length
transaction. Do you recall that?
A. Yes.
Q. And do you recall Dr. Becker testified about that issue
at his deposition?
A. Yes.
Q. And what do you recall regarding Dr. Becker's testimony
regarding whether the Carl Meyer agreement was arm's length?
A. In his deposition he agreed that it was an arm's length
negotiation.
Q. Okay. And did that factor into your opinion regarding
the use of the Carl Meyer agreement in the context of the
hypothetical negotiation?
A. Well, it meant that two parties had -- it is called an
arm's length, so it meant that two parties had negotiated and
that was the outcome of the negotiations. So that was the
value both parties put on that license agreement.
Q. You were also asked about the charts from the draft
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JODY A. STEWART, Official Court Reporter
1766
revenue force document that Dr. Becker relied on. Do you
recall those lines of questions?
A. I do.
Q. And you were asked about the deposition of Nick Fox, who
was on the revenue force team at Google. Do you recall those
questions?
A. Yes, I do.
Q. And you reviewed Nick Fox's deposition in connection with
forming your opinions?
A. Yes.
Q. And that was plaintiff's deposition of Google employee,
correct?
A. Yes.
MR. SHERWOOD: Object to the leading, Your Honor.
THE COURT: Sustained.
BY MR. WILSON:
Q. Do you recall a single question that plaintiff's counsel
asked Mr. Fox about the draft revenue force document that
Dr. Becker relied on?
MR. SHERWOOD: Object to the leading, Your Honor.
MR. WILSON: I'm asking --
THE COURT: What is the question?
MR. WILSON: The question is does he recall a single
question that plaintiff's counsel asked Mr. Fox about the
draft revenue force agreement?
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JODY A. STEWART, Official Court Reporter
1767
THE COURT: Can you answer that?
THE WITNESS: Yes, sir, I can answer it this way,
that I don't recall any questions at all dealing with the
chart that Dr. Becker was relying upon.
BY MR. WILSON:
Q. Okay. And did that surprise you in your review of
Mr. Fox's deposition?
THE COURT: Don't answer that. That is
argumentative, calls for speculation.
MR. WILSON: I'll move on.
THE COURT: I'll give you about four more minutes.
MR. WILSON: Your Honor, I'm just about done.
BY MR. WILSON:
Q. You were also asked a line of questions about Google's
services agreements. Do you recall that?
A. Yes.
Q. And I/P Engine doesn't have a services agreement with
Google, right?
A. That's correct.
Q. It doesn't operate a search engine, correct?
MR. SHERWOOD: Object to the leading, Your Honor.
THE COURT: Sustained.
BY MR. WILSON:
Q. Is there a difference between the services agreement and
the patent license?
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JODY A. STEWART, Official Court Reporter
1768
A. Yes.
Q. What is that?
A. Well, Google's providing services to the companies that
enter into these arrangements with them, and it has to do
with the advertising that are on the various web sites and
which ones there is access to, which is different from a
patent license agreement where someone is getting a license
to use the technology that is in a patent.
Q. And what is the result of the hypothetical negotiation?
A. The hypothetical negotiation deals with a patent license
agreement.
MR. WILSON: No further questions, Your Honor.
THE COURT: Step down. May he be permanently
excused, gentlemen?
MR. WILSON: I believe so, Your Honor.
MR. SHERWOOD: Yes, Your Honor.
THE COURT: Dr. Ugone, thank you. You may be
permanently excused.
(Witness excused.)
THE COURT: Next.
MR. NELSON: Your Honor, I have the proffer that
we've discussed in the past for you.
THE COURT: All right.
MR. NELSON: We will file this, as well, Your Honor.
THE COURT: You can just simply file it, take into
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JODY A. STEWART, Official Court Reporter
1769
the Court's consideration, you can file it. The Court will
read it.
MR. NELSON: Thank you, Your Honor.
THE COURT: All right.
MR. NELSON: At that point, though, we rest, Your
Honor. That is all the evidence we have right now.
THE COURT: Okay. Thank you.
Ladies and gentlemen, the defendants have rested in
this case. I need just a few minutes with counsel before I
determine exactly when you will be able to depart. All rise.
(Jury out at 3:13 p.m.)
THE COURT: Second thought. Maybe I should have
done it at side bar. You may have a seat. The Court wanted
to determine, Mr. Brothers, Mr. Sherwood, whether there was
anything else you wanted to do before this jury before we
went out of here?
MR. BROTHERS: Not with the jury, Your Honor. I
think that the jury can be dismissed for the day. We have
our Rule 50 motion, which I think we can take up, and then
Dr. Carbonell needs to leave now to make his 3:30 conference.
THE COURT: That is fine.
MR. BROTHERS: Thank you, Your Honor.
THE COURT: Okay. Then we will just bring them back
in. I also understand there are some issues regarding some
exhibits, which is next, with Dr. Carbonell. We will take
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JODY A. STEWART, Official Court Reporter
1770
that up, too.
MR. BROTHERS: Yes, Your Honor.
(Jury in at 3:14 p.m.)
THE COURT: You may be seated. We are just going to
wait.
Let the record reflect all jurors have returned to
the courtroom. Does counsel agree?
MR. SHERWOOD: Yes, Your Honor.
MR. NELSON: Agreed, Your Honor.
THE COURT: All right. Ladies and gentlemen, this
concludes the live testimony that you will receive today.
The Court and counsel have a number of things we need to
review that do not require that you be here. So what we are
going to do, we are going to excuse you for the day. I want
you to come back tomorrow morning at 10:00. We will start
with the live witness testimony.
Remember the precaution that the Court has given you
regarding discussing the case. Be safe and we'll see you in
the morning at 10:00 a.m. You might want to get here about
9:45 so we are ready to go. All rise.
(Jury out at 3:16 p.m.)
THE COURT: You may be seated. I'm going to ask
that counsel file your proffer on laches, ask the clerk to
file it in the record.
MR. NELSON: Okay, Your Honor. I appreciate it.
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JODY A. STEWART, Official Court Reporter
1771
THE COURT: Okay. Now, Mr. Brothers, what matters
are there that you wish to take up?
MR. BROTHERS: First of all, some good news for the
Court. I believe we have resolved all the objections that
defendants had with regard to Dr. Carbonell's slides, so we
won't have to take that up.
A ray of light.
THE COURT: I'm shocked.
MR. BROTHERS: I thought that might please the
Court. You know, after a couple weeks maybe we can begin to
all get along together. I'm not holding my breath, however.
At this point plaintiffs wish to make a Rule 50
motion with regard to the case that defendants have
submitted, specifically with regard to defendant's invalidity
and laches case.
As the Court knows, that under Rule 50, JMOL may be
granted when a party has been fully heard on the issue, there
is no legally sufficient evidentiary basis for the jury to
find in that issue. With regard to the invalidity defense,
we believe that defendants cannot satisfy this clear and
convincing burden regarding proof of either anticipation or
obviousness, or another defense that was pled, of which no
evidence has been submitted, and that relates to the lack of
written description.
With regard to anticipation, Dr. Ungar asserted two
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JODY A. STEWART, Official Court Reporter
1772
prior art references; the Bowman and the Culliss references.
To show a claim is invalid for anticipation, that single
prior art reference must expressly or inherently disclose
each claim limitation.
With regard to Bowman, defendants have not proved by
clear and convincing evidence that Bowman disclosed the
content, combining and filtering of both the '420 and the
'664 patents. In fact, Dr. Ungar admitted that Bowman ranks
and that filtering itself does not appear in the Bowman
patent and that he said ranking and filtering are different.
Likewise, with regard to Culliss, there is no
evidence, clear and convincing evidence that Culliss
discloses the content, combining the filtering limitations in
the asserted claims. Culliss considered, was considered or
rejected by the patent office, and Dr. Ungar admitted that
under his view, Culliss does not invalidate the asserted
claims.
With regard to obviousness, Ungar, Dr. Ungar failed
to set forth sufficient clear and convincing evidence to
show, consistent with -- as regarded by Federal Circuit
precedent, they must prove by clear and convincing evidence
that a person of ordinary skill of art in the field of the
invention, who knew the prior art at the time, would have
come up with the invention disclosed by the asserted claims.
And Dr. Ungar never connected up the pieces of prior art that
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JODY A. STEWART, Official Court Reporter
1773
were identified. He put up the five, the Lascara, the Rose
patents. He never explained how those used in combination
with each other rendered the asserted patents obvious.
Instead, he went and just referenced it and said, oh, it's
obvious. Obviousness requires a combination. So there is no
evidence, let alone any clear and convincing evidence, that
those combination of either Fab, Rose, Webhound, even in
conjunction with Bowman and Culliss, render the claims'
obviousness.
He also admitted that he had not tested the asserted
obvious combinations or any asserted obvious combinations to
get the same results of the patents-in-suit. And the Federal
Circuit requires that before something can be found obvious,
there must be testing to show that the alleged obvious
combinations result in the same teachings and the same effect
of the asserted claims. And in the absence of such evidence,
we believe JMOL is appropriate.
With regard to defendant's pled defense of lack of
written description, defendants have provided absolutely no
evidence to support that affirmative defense. They pled it
and they have abandoned it here at trial.
I also believe that JMOL is appropriate because
Dr. Ungar failed to follow the Court's claim construction
ruling in six aspects, and because he failed to follow the
Court's claim construction ruling, his testimony is
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JODY A. STEWART, Official Court Reporter
1774
inappropriate. First, with regard to scanning a network, his
testimony was contrary to the Court's claim construction. He
interpreted scanning a network to essentially mean spidering,
which this Court said was not that interpretation.
And although he was careful not to use the term
"spidering," he admitted during his testimony he had no other
opinions for scanning a network that did not include what
spidering was because that is all he disclosed in his report.
He said in his testimony, all it could be is
scanning of information on the Internet, which is the same
thing as spidering. Dr. Ungar testified, his construction of
collaborative feedback data, it was inconsistent with this
Court's claim construction. He improperly read in the mind
pools limitation of other nonasserted claims to try and
interpret and limit the meaning of collaborative feedback
data. Mind pools were a different embodiment in the claims
not asserted in this case. And Dr. Ungar's repeated
references to mind pools in trying to interpret collaborative
feedback data was inappropriate.
Likewise, he attempted to read in claims with
respect to wires, which are, again, claims not asserted in
this case. And limitations and embodiments relating to wires
to limit and interpret collaborative feedback data is
contrary to the Court's claim construction.
With respect to the claims of the '664 patent,
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JODY A. STEWART, Official Court Reporter
1775
Dr. Ungar improperly imported the collaborative feedback data
limitation of the '420 patent into the '664. In fact,
Dr. Ungar admitted that under his interpretation of the '664
patent, as he was attempting to import that collaborative
feedback data limitation, it would exclude the preferred
embodiment of the '664 patent, and that is contrary to
Federal Circuit law.
Dr. Ungar's evidence that he offered, his testimony
were an improper attempt to reargue claim construction, and
based upon that his testimony with respect to invalidity,
quite frankly, as well as noninfringement, has suffused his
entire testimony, and we believe that judgment as a matter of
law against defendants is appropriate on that.
Finally, the last claim construction was Dr. Ungar's
attempt to improperly interpret the preamble as a limitation.
This Court repeatedly ruled the preamble is not a limitation.
The jury was permitted to hear some evidence which the Court
later struck. Dr. Ungar's testimony that the preamble is a
limitation, substantive limitation is inconsistent with this
Court's claim construction and contrary to Federal Circuit
case law.
We also move, with regard to the laches, affirmative
defense. To prevail on laches defendants must show that
plaintiff delayed in a reasonable and excusable time in
filing suit, and that the delay resulted in material
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JODY A. STEWART, Official Court Reporter
1776
prejudice to the defendant.
And as this Court knows, the plaintiff's delay in
filing suit is measured from the time that the patentee knew
or reasonably should have known of the defendant's alleged
infringement.
The reasonableness of delay must be judged based
upon the patentee's knowledge at the time of the delay, and
there is no evidence that the defendants offered that I/P
Engine or Lycos, for that matter, knew or should have known
that Google's system infringed more -- they had that
knowledge more than six years prior to the date of filing
suit.
The one document the defendants introduced into
evidence, Plaintiff's Exhibit 176, which was referenced by
Mr. Alferness, that was a document the plaintiffs had -- I'm
sorry, the defendants had previously identified as a
laches-related document. It is from July 2005.
Mr. Alferness disavowed that document. He said that it
contained inaccurate description of Google's AdWords system
and that one could not rely upon that document to understand
how the system worked. Thus, there is no evidence whatsoever
to support the laches affirmative defense. That fact in and
of itself is fatal.
But defendants must also show, even if there was
evidence that Lycos knew or should have known prior to
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JODY A. STEWART, Official Court Reporter
1777
September 15th, 2005, that Google was infringing, defendants
must also show that the delay resulted in economic or
evidentiary prejudice. There has been no showing on either
point.
There is no showing that Google or any of the other
defendants had any monetary losses that could have been
prevented by an earlier suit, because that loss must be
caused by a change in the economic position with the alleged
infringer during the period of delay. Not only was there no
period of delay, the evidence is that Google would have been
done doing what it was doing all along. So there is
absolutely no evidence of economic prejudice on the record.
Likewise, there is no evidence of evidentiary prejudice such
as the death of a key witness or other loss of evidence.
Finally, again moves for judgment as a matter of law
on the damages testimony that it has just heard from
Dr. Ugone. Dr. Ugone testified that his -- at deposition
that his 3 to 5 million, that number was based on his
yardstick or his comparable result, a method that this Court
has excluded.
With regard to the specific data points, there is
the same in October or -- yeah, October 2004 of Lycos to the
Korean Company, Daum. Dr. Ungar acknowledged that was not in
his Georgia-Pacific chart, and it is not. It cannot be found
in his Appendix A identifying that as a Georgia-Pacific
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JODY A. STEWART, Official Court Reporter
1778
factor. So that testimony can and should be disregarded. It
was used solely as the data point for a comparable or a
yardstick.
With regard to the Meyer agreement, there was no
allegation of infringement to Google as a result and no
evidence of use by Google, and as a result using that as
comparable agreement is improper under Georgia-Pacific. Even
if the technology may be comparable, the facts were
completely different.
With regard to the $3.2 million purchase price of
the patents in 2011, that is legally irrelevant as a matter
of law. It is undisputed that Lycos made no inquiry into
Google's infringement at the time of the sale, and the sale
price does not equal under the statute a measure of damages
because under Section 284 damages are measured by the use,
i.e., of infringers of the patents. For example, if the
patents had been inherited or purchased at bankruptcy for a
hundred dollars, that is absolutely not probative of the
value of those patents.
The proper measure of damages under the law are the
defendant's infringing uses. And for those reasons we
believe that judgment as a matter of law under Rule 50 is
appropriate. Thank you.
THE COURT: Thank you.
MR. NELSON: Thank you, Your Honor. So let me take
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JODY A. STEWART, Official Court Reporter
1779
them in the order it was addressed. I believe initially
there was, with respect to the anticipation references, there
was a motion regarding Bowman and Culliss saying there could
be no anticipation as a matter of law.
With respect to Bowman, I believe there were two
arguments. He said that there was no testimony that Bowman
does filtering because the word "filtering" never appeared.
Last I checked, that's not the law. The words don't have to
appear in the reference for there to be -- for it to have the
disclosure.
In fact, Dr. Ungar testified at length why filtering
was, in fact, disclosed in Bowman. Among many other things,
there is a thresholding described where there is a ranking
value that is determined for the particular item, and there
is a threshold set. And if it's below that threshold, it is
not displayed. If it is above that threshold, it is. It
might sound familiar because that's exactly what they are
using infringement in the case with the LTD score. So Dr.
Ungar explained that at length. He explained a number of
other things where a set of n is shown. So you only take the
top values, which would be filtering as well.
In terms of the content, again, Your Honor, he's
testified at -- he testified at length why it does, in fact,
disclose content filtering. Some of the examples are
descriptions in the Bowman reference where there is matching
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JODY A. STEWART, Official Court Reporter
1780
of the query terms to terms that appear in the item and the
score is adjusted based upon that. Therefore -- and what he
testified is that function is a content-based function
because it takes a comparison of the query to words content
of the item and adjusts the score accordingly.
So for those reasons, the -- there is no merit to a
judgment as a matter of law on the Bowman reference.
As to the Culliss reference, the only thing that I
heard was the idea that it didn't disclose content filtering.
In fact, it does, and Dr. Ungar explained at length why it
does disclose content-based filtering. In fact, the tables
that he referenced in Bowman that are updated with apparently
what plaintiff agrees is feedback data are initialized with
content data based upon, among other things, that he
testified, the frequency of the terms in the articles that
are being indexed. Therefore, that is a disclosure of the
content-based filtering with a combination of collaborative
filtering.
Now, there was some testimony that he didn't apply
the Court's claim construction. That is not actually what
occurred. He testified at length in both in direct and under
cross-examination that he applied exactly the Court's claim
construction to the prior art when he was doing his
anticipation analysis. There was some testimony as to
whether he was applying the construction as Dr. Frieder
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JODY A. STEWART, Official Court Reporter
1781
applied them for purposes of infringement analysis, which, of
course, is entirely appropriate.
He applied the constructions, he applied the
appropriate clear and convincing evidence standard -- I
believe Your Honor heard that testimony -- and said that I am
looking at the prior art and applying the same analysis that
Dr. Frieder did for purposes of his infringement analysis.
So to suggest that he did not apply the claim
constructions and did not agree that these anticipated, under
the plaintiff's application of those to the accused products,
is simply incorrect. That testimony is very clear in the
record.
Now, as to obviousness, there were several
statements with respect to obviousness, that there was no
combination that was referenced. In fact, that is not
correct. What Dr. Ungar did first and foremost was to
address the Graham factors, which is, of course, the most
important factors of the obviousness analysis and show how
the claims, the asserted claims in this case were obvious in
light of those Graham factors.
He addressed KSR, and he talked about the specific
combinations that were -- he showed the disclosure in the
prior art, and, for example, there was some cross-examination
that with the Webhound reference, for example, that that did
not show filtering with respect to the query. And Dr. Ungar
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JODY A. STEWART, Official Court Reporter
1782
stated very clearly that when he combined that with the
Bowman reference, which plaintiff does not dispute, that that
shows filtering with respect to the query. You have
obviousness for that, and he did that with respect to a
number of other combinations. If you want me to, I can go
through all those at length, Your Honor, but those would be
some examples.
Now, as to -- there was some statement as to the law
that testing of the combination is required. That's not the
law. I'm not sure what case they're referring to, but the
law is, as I just said, is the Graham v. John Deere case, the
KSR case, and he's addressed both of those standards. So I'm
not actually sure what I/PE's counsel is talking about with
respect to that additional requirement.
Now, as to written description, we are not pursuing
a written description offense. So unlike the IP's argument
with respect to doctrine of equivalents, we can take that out
of the case right now, Your Honor.
With respect to then -- I'm not sure exactly what we
are talking about in the motion with respect to the claim
construction. I don't know if that was intended to be an
additional support for the anticipation or obviousness or
what it was. But let me just address the claim constructions
one by one.
So with respect to scanning and network, IP's
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JODY A. STEWART, Official Court Reporter
1783
counsel said that Dr. Ungar did not apply the Court's claim
construction. That is incorrect. He put the Court's claim
construction up. He testified under the Court's claim
construction, and for about 45 minutes on cross-examination
he testified about the scanning/network limitation under the
Court's claim construction.
In fact, it was on cross-examination where I/PE's
counsel put up something that was not the Court's claim
construction in an attempt to cross-examine him on that. In
terms of this notion that spidering is what he said, scanning
a network limitation was, the word "spidering" never came out
of his mouth. So I'm not sure where that comes from. He
applied the Court's claim construction, and there is no basis
for that.
To the collaborative feedback element, again, he put
up the Court's claim construction. He applied the Court's
claim construction. As to the statements that he imported
limitations from the embodiments, as Your Honor knows, there
were several side bars and several discussions. There was
never a statement made by Dr. Ungar that the construction was
limited by the embodiments, rather, they're illustrative
examples of the patents. He was very clear on that. So
there was no limiting instruction that said, yes, these are
limited to mind pools.
So he applied the Court's claim construction. As to
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JODY A. STEWART, Official Court Reporter
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wires, I'm not even sure what they are talking about, Your
Honor, so it becomes a little bit difficult to address. I
would challenge them to find anywhere in Dr. Ungar's
testimony where he referenced wires with respect to the
collaborative feedback element and said that they were
limited to wires. They were not. The only time wires came
up was a discussion in the invalidity section responding to
plaintiff's suggestion that the patent office had already
considered various things, and there was a discussion of the
final office action and the notice for allowance which showed
that the patent office focused on the element of wires. But
there was no testimony that the Court's collaborative
feedback claim construction was limited to wires, and, in
fact, he applied the Court's claim construction.
As to the '664, the testimony that I/P's counsel
referenced doesn't apply to the collaborative feedback
element, it wasn't even in reference to the collaborative
feedback element. There was some testimony that the
noninfringement argument that was being made and the way the
claim was applied may not be shown in embodiments in the
patent. And the testimony was that neither experts's
application was.
So, again, he applied the Court's claim
construction, and there is no evidence that he didn't. In
terms of the preamble not being a limitation, as you know,
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JODY A. STEWART, Official Court Reporter
1785
Your Honor, you kept -- policed that very carefully. There
was no noninfringement argument made to that regard. In
fact, the only testimony and the only box checking has been
on plaintiff's side with respect to that. So this is not --
certainly not a factor in the invalidity case, which is what
I believe the motion was directed to.
With that, Your Honor, I believe that deals with the
invalidity stuff. With your permission, I would like to have
one of my colleagues, Mr. Sohn, address the laches motion, if
Your Honor is okay with that?
THE COURT: That is fine. I will say this before
you start your arguing. You can go on and argue it but the
Court is not going to rule certainly on -- the Court is not
going to rule on any of these motions this afternoon. The
Court wants an opportunity to address these motions, plus the
Court wants an opportunity to read your submission on laches.
So you'll have to get my decision on all of these things
tomorrow morning.
The Court needs time to digest some of these
documents. So I'll hear your argument on laches, though.
MR. SOHN: Okay. Thank you, Your Honor. As I
understand it, plaintiff has made two arguments for why they
deserve judgment as a matter of law on laches. First, they
argued that there is no evidence this suit was delayed for
more than six years after they knew or should have known of
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JODY A. STEWART, Official Court Reporter
1786
the infringement. I understand that they are raising that
argument to say there is no presumption of laches. It was
simply delayed -- there is a presumption of laches.
Secondly, they argue there is no affirmative
evidence of prejudice that defendants have put into the
record. We respectfully submit that both these arguments are
fraud. Let me speak to the presumption first. So the
presumption of laches arises if there's delays more than six
years after the actual or constructive notice, and the
Federal Circuit is very clear that published inscriptions of
the allegedly infringing technology or technology similar to
the allegedly infringing technology are sufficient for
constructive notice.
Now, plaintiff referenced there has been a July 2005
blog post by Google put into evidence, Plaintiff's Exhibit
Number 176, and this describes quality score in exactly the
same terms that it was described in plaintiff's own
complaint. I'll just very briefly quote from that document.
It says, quote, the quality score is simply a new name for
the predicted CTR, which is determined based on the CTR of
your keyword, the relevance of your ad text, the historical
keyword performance and other relevancy factors." So what
Google is saying in this blog post is quality score is based
on ad text to relevance and CTR, and, Your Honor, that is
exactly how they described quality score when this complaint
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JODY A. STEWART, Official Court Reporter
1787
was ultimately filed in September 2011, more than six years
after that blog post is published, and I'll just very briefly
quote from Paragraph 43 of their complaint. It says,
"Google's search advertising systems filter advertisers by
using a quality score, which is a combination of an
advertisement content relevant to a search query, e.g., the
relevance of the keyword and the matched advertisement to the
search query and click-through rate from prior users relative
to that advertisement, e.g., the historical click-through
rate of the keyword and the matched advertisement."
So this 2005 disclosure prestages the same
infringement allegations plaintiff made in his complaint.
Therefore, the complaint could have been filed as early as
2005.
Now, plaintiff's counsel alleged that Mr. Alferness
disavowed Plaintiff's Exhibit 176, his blog post. Well, Your
Honor, certainly Google does not believe that the
descriptions in its blog post are a technically accurate
depiction of how the system works. The point is that being
near the allegations of other systems that plaintiff made in
his complaint.
So plaintiff was on notice of its infringement
allegations as early as July 2005 because the quality score
was described in July 2005, the same way plaintiff described
it more than six years later.
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JODY A. STEWART, Official Court Reporter
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So for that reason, Your Honor, we submit that the
delay was more than six years, the laches presumption does
apply. So, of course, once the presumption applies, it is
plaintiff that bears the burden of rebutting either the
unreasonable delay upon laches or the prejudice part of
laches.
Now, plaintiff didn't say anything in their
presentation about the unreasonable delay prong, and we
respectfully submit that there is no evidence of a valid
excuse that's been raised to excuse the six plus year delay.
As the prejudice prong, plaintiff said that defendants
haven't affirmatively introduced their own evidence of
prejudice.
Well, Your Honor, that has it backwards. Once the
presumption applies, it's plaintiff's burden to come forward
with evidence that defendants have not suffered prejudice,
and they haven't done so. There has been no evidence that
defendant lacked prejudice. That being the case, as we
referred to earlier, defendants are submitting a proffer,
proffer of evidence showing that the memories have faded,
documents have been lost, and therefore we do believe that
defendants have affirmatively shown prejudice.
However, on the down side, it is not the defendants'
burden. It is plaintiff's burden to rebut the prejudice, and
they have absolutely failed to do so.
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JODY A. STEWART, Official Court Reporter
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So for all those reasons, Your Honor, we
respectfully submit that laches certainly does apply.
THE COURT: Let me ask you a hypothetical question.
Let's assume hypothetically if the Court believes that the
presumption had not arisen of laches, such that the plaintiff
would be required to rebut it, what evidence of any would you
cite? You said you have -- you made a reference to loss --
memory loss or something else. What evidence would you cite
if you were in that position showing prejudice to the
defendant by virtue of the delay?
MR. SOHN: So the evidence in our proffer, I will be
happy to run through some of the specifics.
THE COURT: It is already in your transcripts?
MR. SOHN: It is in the proffer that we submitted to
the Court. I'd be happy to run through it.
THE COURT: The Court will read it. The Court will
read what you have submitted.
MR. SOHN: Thank you, Your Honor.
THE COURT: All right, gentlemen. Here is where we
stand here.
MR. NELSON: Do you want Mr. Wilson to address the
damages? It's not really a defense, Your Honor.
THE COURT: Oh, okay.
MR. WILSON: They made some arguments, Your Honor.
I'm happy to address them. I can be brief.
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JODY A. STEWART, Official Court Reporter
1790
THE COURT: All right. Go on.
MR. WILSON: So, Your Honor, the first argument that
Mr. Brothers made relates to the 3 to $5 million and the
proxy yardstick method. I think we've been over that with
regard to Dr. Ugone's testimony. In fact, I pointed him to
additional portion, the earlier portion of his deposition
where he testified that the 3 to $5 million comes from his
evaluation of the hypothetical negotiation. They had crossed
on that point. That is not a basis for judgment as a matter
of law.
It is clear from his report and his presentation
where he evaluated each one of the Georgia-Pacific factors,
and that he did testify that the 3 to 5 million came from his
evaluation of hypothetical negotiation.
The second point that plaintiffs seem to make is
they criticize each of the main transactions that Dr. Ugone
relied on in comparing to Dr. Becker's analysis, and those
are the Daum transaction, the Meyer agreement and the 2011
sale, as you heard.
Plaintiff has this exactly opposite. They turn
everything upside down. Their damages expert comes in and
relies on agreements that don't involve the patents-in-suit,
they are after the date of the hypothetical negotiation, and
they don't involve any of the parties in suit.
Dr. Ugone's reliance on these transactions relate
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JODY A. STEWART, Official Court Reporter
1791
to, for instance, in the Daum transaction in 2004, that
involved the patents-in-suit. The Carl Meyer transaction,
that is a licensed -- or a purchase of comparable technology
that involves Google, one of the parties in suit.
And similarly, the 2011 transaction involves, again,
the patents-in-suit and the purchase and sale agreement. So
that's exactly what the Federal Circuit says that experts
should be relying on in reference to licenses or purchase
transactions that are pulled out that go beyond the scope of
the parties and the patents that are involved in the case.
So, you know, more than being just not a basis for JMOL on
their part, it actually revealed the fundamental flau really
with their entire damages analysis.
And then finally, we keep hearing this idea that
somehow the reasonable royalty must be sufficient to
compensate the patentee for the alleged infringer's use.
And, you know, we look at the statute language, and what
plaintiffs seem to be arguing and implying to the jury is
that if you don't have a running royalty, if it's not
directly tied to a running royalty format, then that is not
tied to use.
And we heard a lot of cross-examination today with
Dr. Ugone, and he dealt with those questions, but it's clear
that as a matter of law you don't have to have a running
royalty as a reasonable royalty. A lump sum is equally
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JODY A. STEWART, Official Court Reporter
1792
acknowledged by the Federal Circuit. It is well recognized
as an alternative, and lump sums and running royalties stand
side by side as potential frameworks for the reasonable
royalty. Most recent case on that that I can think of is
LaserDynamics and I believe also Unilock addresses that, but,
anyway, it is a fundamental point that goes way beyond those
cases.
THE COURT: Thank you. You're not back again for
more argument, are you?
MR. NELSON: No, no more argument, but at this point
in time I'm renewing our Rule 50(a) motions that we argued to
you last week, I believe it was Wednesday, Your Honor. We
have made a written submission to Your Honor so you have
that. If you would like any more argument on any of those, I
am perfectly happy to address those now.
THE COURT: You don't need to do that. You made a
written submission on it, so you have given me plenty to
digest.
MR. NELSON: Thank you, Your Honor.
MR. BROTHERS: Thank you, Your Honor. We responded
verbally to their Rule 50(a) motion last week. This morning
they filed essentially the same thing. You require written
response?
THE COURT: I don't require written response. I
think we recall where you went.
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JODY A. STEWART, Official Court Reporter
1793
MR. BROTHERS: Thank you, Your Honor.
THE COURT: Okay. In terms of where we are going to
be going tomorrow, the Court's anticipating that we may get
to the closing arguments tomorrow in this case. So you
should prepare in that sense, because we are estimating, if I
make it to the lunchtime with completion of the testimony, we
will take probably about an hour, won't take me no more than
an hour, to go through these jury instructions, and sometime
tomorrow afternoon we will get to closing arguments in this
case. That is what the Court anticipates. That may not
happen. But be prepared in case we say we are going to do
it.
MR. NELSON: So on that point, Your Honor, I don't
think we have discussed yet the length.
THE COURT: Well, I'm sure you are going to get to
that. I'm here so let me hear.
MR. NELSON: Well, it is just a question, Your
Honor.
THE COURT: Okay. The Court would anticipate -- I
think I gave each party something like an hour in the
beginning, and an hour for closing is probably enough. I
will caution you the jury stops listening after about 30
minutes anyway, but you have an hour. I think an hour is
enough.
MR. NELSON: That is --
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JODY A. STEWART, Official Court Reporter
1794
THE COURT: You divide your time by an hour. We
will try doing that. But certainly the Court will not get to
the jury with any instructions tomorrow. We are not going to
do that. And what we are going to try to do, I don't want to
waste a day, but I do not want to split up the arguments,
either. We are not going to split the arguments. So we are
going to try to work it out so the arguments are on the same
day.
MR. NELSON: Okay. Thank you, Your Honor.
THE COURT: We will see how efficiently we can be
tomorrow.
MR. BROTHERS: Two points on that, Your Honor.
First, we, of course, will have rebuttal, carrying the burden
of proof. I want to make sure that we understand we will
have some time to respond after the defendant's closing for
our rebuttal.
THE COURT: Well, I said we are not -- the Court is
not going to deprive anybody of any entitlement regarding
argument. You divide your time any way you want to divide
your time.
MR. BROTHERS: All right. And the second point
is -- this was not something I raised with opposing counsel,
but with respect to the exchange of slides for closing, I
think under the pretrial order we are supposed to exchange
them at 7:00 p.m. tonight if we are doing closing tomorrow.
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JODY A. STEWART, Official Court Reporter
1795
I would propose that we exchange an hour before closing
instead of tonight, if there is no objection.
THE COURT: I don't know what time you are going to
get before closing, but you can certainly start thinking
about it.
MR. BROTHERS: Sure.
THE COURT: It all depends on how the time works out
tomorrow on this case. If we finish, we break before lunch,
I'm send them out early to lunch, and we will try to work it.
I just don't know. We will adjust it as we go along.
MR. BROTHERS: That is fine. Thank you, Your Honor.
THE COURT: All right. Thank you. Recess Court
till tomorrow morning at 10:00.
(Hearing adjourned at 3:54 p.m.)
CERTIFICATION
I certify that the foregoing is a correct transcript
from the record of proceedings in the above-entitled matter.
X_________________/s/_____________________x
Jody A. Stewart
X______10/30/2012________x
Date
Case 2:11-cv-00512-RAJ-TEM Document 764 Filed 10/30/12 Page 67 of 67 PageID# 17380
I/P Engine, Inc. v. AOL, Inc. et al, Docket No. 2:11-cv-00512 (E.D. Va. Sept 15, 2011), Court Docket