Google Inc. et al v. Egger et al
Declaration of Thomas B. Walsh, IV in Support of 124 Memorandum in Opposition to Motion to Dismiss filed byGoogle Inc.. (Attachments: # 1 Exhibit A, # 2 Exhibit B - FILED UNDER SEAL, # 3 Exhibit C, # 4 Exhibit D - FILED UNDER SEAL, # 5 Exhibit E, # 6 Exhibit F, # 7 Exhibit G, # 8 Exhibit H, # 9 Exhibit I, # 10 Exhibit J, # 11 Exhibit K - FILED UNDER SEAL, # 12 Exhibit L, # 13 Exhibit M, # 14 Exhibit N, # 15 Exhibit O - FILED UNDER SEAL, # 16 Exhibit P, # 17 Exhibit Q, # 18 Exhibit R - FILED UNDER SEAL, # 19 Exhibit S - FILED UNDER SEAL, # 20 Exhibit T- FILED UNDER SEAL, # 21 Exhibit U - FILED UNDER SEAL, # 22 Exhibit V - FILED UNDER SEAL, # 23 Exhibit W, # 24 Exhibit X, # 25 Exhibit Y, # 26 Exhibit Z, # 27 Exhibit AA, # 28 Exhibit BB - FILED UNDER SEAL, # 29 Exhibit CC - FILED UNDER SEAL, # 30 Exhibit DD - FILED UNDER SEAL, # 31 Exhibit EE - FILED UNDER SEAL, # 32 Exhibit FF - FILED UNDER SEAL, # 33 Exhibit GG, # 34 Exhibit HH - FILED UNDER SEAL, # 35 Exhibit II, # 36 Exhibit JJ, # 37 Exhibit KK - FILED UNDER SEAL, # 38 Exhibit LL - FILED UNDER SEAL, # 39 Exhibit MM, # 40 Exhibit NN, # 41 Exhibit OO, # 42 Exhibit PP - FILED UNDER SEAL)(Related document(s) 124 ) (Walsh, Thomas) (Filed on 7/24/2009)
Google Inc. et al v. Egger et al
Doc. 126 Att. 16
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1 1 2 3 4 5 6 7 8 9 Debtor. 10 11 12 13 14 15 16 17 18 19 20 21 For the Debtor: 22 23 24 25 HENSHAW & CULVERSON BY: JOE D'HOPE, ESQ. APPEARANCES: BEFORE THE HONORABLE ROGER L. EFREMSKY UNITED STATES BANKRUPTCY JUDGE TRANSCRIPT OF PROCEEDINGS a) MOTION TO (I) REOPEN CLOSED CASE PURSUANT TO 11 U.S.C. SECTION 350(b) AND RULE 5010 IN ORDER TO PROTECT AND AUCTION PATENTS HELD IN CUSTODIA LEGIS, (II) TO APPOINT A TRUSTEE, (III) FOR A STATUS CONFERENCE PURSUANT TO SECTION 105(d) TO ARRANGE FOR PROTECTIVE ORDERS AND CONFIRMATION OF THE CONTINUING STAY AND (IV) FOR OTHER RELIEF BY SHERWOOD FINANCE (DELAWARE), LLC b) JOINDER IN MOTION TO REOPEN CASE AND FOR RELATED RELIEF BY IAC SEARCH & MEDIA, INC. / In re: SITE TECHNOLOGIES, INC., Case No. 99-50736-RLE Chapter 11 San Jose, California December 17, 2008 1:11 p.m. UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA (SAN JOSE DIVISION)
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2 1 2 For Sherwood Finance: 3 4 5 6 7 For Google, Inc.: 8 9 10 11 12 13 14 15 16 17 18 19 20 21 For the U.S. Trustee: 22 23 24 25 OFFICE OF THE U.S. TRUSTEE BY: JOHN WESOLOWSKI, ESQ. 280 South First Street San Jose, California 95113 For Software Rights: SCHNADER, HARRISON, SEGAL AND LEWIS BY: GREGORY C. NUTI, ESQ. -andLEE KAPLAN, ESQ. (Appearing Telephonically) One Montgomery Street, #2200 San Francisco, California 94104 For IAC Search & Media: QUINN, EMANUEL, URQUHART, OLIVER AND HEDGES BY: JOSH SOHN, ESQ. -andSCOTT C. SHELLEY, ESQ. (Appearing Telephonically) 50 California Street, 22nd Floor San Francisco, California 94111 BIALSON, BERGEN AND SCHWAB BY: PATRICK M. COSTELLO, ESQ. 2600 El Camino Real #300 Palo Alto, California 94306 LAW OFFICES OF MORRISON AND FOERSTER BY: LARRY ENGEL, ESQ. -andVINCE NOVAK, ESQ. 425 Market Street San Francisco, California 94105 APPEARANCES (CONTINUED):
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3 1 2 3 Court Recorder: 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Transcription Service: Jo McCall Electronic Court Recording/Transcribing 2868 E. Clifton Court Gilbert, Arizona 85295 Telephone: (480) 361-3790 NORMA ORTIZ UNITED STATES BANKRUPTCY COURT 280 South First Street San Jose, California 95113 APPEARANCES (CONTINUED):
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4 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 you. THE COURT: All right. Good afternoon. you. December 17, 2008 -oOoTHE CLERK: Item 9, Site Technologies. THE COURT: Appearances, please. I apologize for the delay. MR. ENGEL: Not a problem, Your Honor. Larry Mr. Engel, thank PROCEEDINGS 1:11 p.m.
Engel of Morrison and Foerster for Sherwood Finance. MR. COSTELLO: Good afternoon, Your Honor, Patrick Costello, Bialson, Bergen and Schwab for Google, Inc. MR. SOHN: Good afternoon, Your Honor, Josh Sohn, Quinn, Emanuel, Urquhart, Oliver and Hedges for IAC Search and Media, a Plan beneficiary. MR. NOVAK: Good afternoon, Your Honor, Vince Novak of Morrison and Foerster also for Sherwood Finance. MR. SOHN: And my colleague, Scott Shelley, also representing IAC. He should be participating
telephonically I think. THE COURT: Do we have Mr. Shelley on the phone? MR. SHELLEY: Yes, Your Honor. I'm here, thank
MR. NUTI: Good afternoon, Your Honor, Greg Nuti, Schnader, Harrison, Segal and Lewis, for Software Rights. THE COURT: Nice to see you, Mr. Nuti.
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5 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 MR. D'HOPE: Your Honor, I'm Joe D'Hope. Henshaw and Culvertson. I'm with
I don't represent a party to this
proceeding, but Murray and Murray was counsel for Site Technologies earlier in the bankruptcy. represent anybody now. They don't
We've been asked to assist them and
responded to discovery on various positions on that, and we just want to make it clear so there's no misunderstanding, Murray and Murray is not representing anyone here. They
take no position in this motion as to whether this case should be reopened or how it should proceed. But we do
have a definite interest in getting guidance from the Court in an order as to the proper procedure so that the appropriate privileges can be protected. THE COURT: Okay. MR. D'HOPE: Thank you. THE COURT: Thank you. MR. WESOLOWSKI: John Wesolowski for the U.S. Trustee and interested observer, Your Honor. THE COURT: All right. MR. NUTI: Your Honor, also on the phone is my cocounsel, Lee Kaplan. MR. KAPLAN: Hello, Your Honor. THE COURT: All right. Mr. Kaplan, I think I
signed off on your application, pro hac vice application, this morning.
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13 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 Legis. So nothing that's happened here can be sufficient to remove these assets from the estate and our process and what our status conference asked was a scheduling process in this court that can resolve the issues of who acts for this estate. You know, does Mr. Ait have any power or is
everything he's done been a nullity as well as a violation of his duties and the stay and that's our position. Once we know how the estate is going to be represented and spoken for, we can then have alliances with the people that have the money to fight this fight and bring the patents into our estate clearly free of this claim by the plaintiffs in Texas and then we can have them sold and we can get on with life. You know, we're not
interested in punishing people for the wrongdoing, you know, we just want to get the patents. THE COURT: Okay. MR. NUTI: Thank you, Your Honor. counsel has made lots of allegations. Your Honor,
He jumps to the
conclusion that these patents are property of the estate. I think that's an issue that needs to be addressed undoubtedly. I'll just back up for a minute. The genesis
of my client's title to these patents was a pre-petition transfer to Mr. Egger in 1998, ten years ago. Subsequent
to that transaction, Site Tech filed for bankruptcy,
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14 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 disclosed the transaction in the Disclosure Statement, disclosed the transaction in the schedules, that it sold to an insider - I believe it was an insider - these patents. Nobody made an issue of it until now. was confirmed. The Plan
Assets of both the sub, Site Tech/ were
sold on behalf of the Debtor's estate with nobody claiming, wait a minute, the Debtor can't sell those because those are the sub's assets. None of those issues were raised.
The Plan was confirmed; it was consummated; everybody went home. Ten years later, my client is suing Google, Yahoo, AOL, all the rest, for patent infringement, because they own these patents that are Mr. Egger's. Only now do
these defendants say, wait a minute, there may be a problem in title, as a litigation tactic to defend themselves in Texas. They've raised this standing issue on the title in
the patents in the Texas Court, in the Northern District here in front of Judge White, and now this court - all the same issues; this is bankruptcy estate assets; there's a break in the chain of title; they had no standing to sue for patent infringement. So there is no determination yet that this is property of this estate, so I think the first issue is, we have three courts of jurisdiction right now. proper one? Which is the
I didn't suggest that this court shouldn't
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15 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 take it without having a full - everybody having full briefing and have an analysis of what may or may not be the proper court. It's our position Texas is the proper court. All
We litigated this in Texas for the last six months. these binders here are the motions on that. discovery in Texas.
There's been I
There's been depositions in Texas.
don't see how which court decides the issue of the title to the patents would make a difference. So, we're not going to get to the bottom of all the disputed legal issues, all the disputed factual issues, but I think the first issue to decide is, will this court retain jurisdiction or let another court make the initial determination on patents. arguments about that. We can brief that in our
Next, Your Honor, would be the issue
of, okay, if it's in this court, what's the schedule for briefing on finding out who truly owns these patents and what was the effect of the 1998 transaction. Only then we
get a decision on whether these are patents of this bankruptcy estate. Then we can talk about how to sell
them; who's entitled to them; and what rights flow from that. But we can't jump to the conclusion - the Court
shouldn't come to the conclusion that what these people did was wrong or that these were actual assets of the estate because no court has made that determination yet. THE COURT: Yes. When was the action filed in
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31 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 it seems to me - it seems to us that this is the appropriate place for that explanation to take place. MR. ENGEL: And the explanation, Your Honor, that Mr. Kaplan offered which is that, you know, he engaged in avoidable transfers to correct a pre-petition mistake, that is not a legal justification for a fiduciary who's only been a - whose only duty is to the Plan beneficiaries. doesn't have a duty to Mr. Egger. He
His duty is to the Plan I
beneficiaries, which means he has to get them assets.
mean, the choice is does Mr. Egger and therefore SRA the troll that he created a week after they closed this case, do they get this windfall or is the value of this set of patents going to belong to the Plan beneficiaries? it's as simple as that. And so here what you have is Mr. Ait whose legal duty is to the Plan beneficiaries exclusively in accordance with the Plan and in accordance with law, siding with the adversaries, hiring their lawyer, you know, doing transfers to Mr. Egger. I mean how can he justify that? I mean
MR. KAPLAN: Well, actually, Your Honor, let me return to what Mr. Nuti said at the beginning, and of course Mr. Ait explained this too as people who attended the deposition know, Mr. Ait said, you know, we sold other assets that funded this bankruptcy, as Mr. Nuti pointed out. Nobody complained about that at the time. Everyone
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32 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 got paid, and it's under the same theory and announcements of who owned what and who did what. the time. Nobody complained at
Mr. Ait said, and he explained all of the post-
confirmation activities as being nothing more than confirming what he did originally. to Daniel Egger for $100,000. We sold these patents
We did it because we needed
the money at the time to keep the company going. The exact same kinds of legal theories underpin the assets that remained in the bankrupt that Site Technologies, the parent, sold and that funded payment to all these creditors. So I'm listening to people having
their cake - seeking to have their cake and eat it too after the fact, and I guess what I would say is, every one of these arguments has been available to defendants, and all I can tell you is they have breached the bankruptcy law fairly extensively in the reply brief they filed in response to our brief that discussed the doctrine such as after-acquired title. So all I can say is I don't think defendants were caught napping anywhere in the Eastern District of Texas. I think that if they've read all this, they're just hoping that somewhere else they can argue about things that happened in 2005 or 2008 and make that into a jury argument to overturn the res judicata that applies in the bankruptcy. And all this is already briefed. We have a
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33 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 competent court that they chose to raise this issue in and we briefed it fully after discovery. So frankly, I can
fight a three-front war if forced to do so, but I regard it as vexatious litigation. THE COURT: Excuse me. Ms. Barnill, can you hang
on for another ten minutes or do you want to take a break? Okay. All right. Go ahead.
MR. ENGEL: Your Honor, just briefly, and I appreciate your patience. This is a very important matter
for the beneficiaries, and again Mr. Kaplan is mixing up the parties because the Plan beneficiaries are not in Texas. The question I would ask Mr. Ait if I had an
opportunity to, which I haven't, is a simple basic one, which is, if Mr. Egger and Mr. Ait were so confident that their transfer worked from the parent that didn't own the patents to Mr. Egger in '98, why did they do all this secret mysterious stuff after the Plan was confirmed, after the case was closed? I mean, these are not normal things.
You look at the docket in this case, and there are rules by the way that Mr. Kaplan isn't paying any attention to as well as the language of the Plan itself, which wasn't being obeyed, that there's nothing - the case is closed; there's nothing. If Mr. Ait wanted to do an honest thing, he would have come to this court in 2005 and he would have come to
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34 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 this court in 2007, some other time, and said, you know, hey, I think I need instructions because there's this issue. The fact is that no one said anything until we had
figured this out the hard way by digging into the documents out of the Federal Depository. with any of this. They hid it. They didn't come forward And an honest person
doesn't hide things.
A Plan fiduciary doesn't hide things.
He comes to the court and he reopens the case and he lays the issues in front of them, and the fact that they didn't do that is an admission of wrongdoing. THE COURT: Okay. Anything else, Mr. Nuti?
MR. KAPLAN: Yes, Your Honor, if I can respond. Number one, there's no mystery to any of this. provided in discovery. It was all
Number two, we were the ones who
were surprised by the motion and had to go to the Bankruptcy Court to get the documents that demonstrated that all this was disclosed at the time, something that defendants, had they followed the Rule 11 obligations, probably should have done at the beginning. If there's a question for Mr. Ait as to why he did these things, I can provide one of the answers that was given, which is, I didn't want anybody to come back and sue over the other things we did that everybody agreed to and helped to fund the bankruptcy in getting the creditors paid. He said, look - I mean Mr. Ait knew nothing of
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35 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 started. today. THE COURT: I understand. Mr. Nuti? MR. NUTI: Your Honor, I'll come back to where I We're not going to get to the bottom of this this. He was selling real estate in 2008 when the
defendants filed their motion and at some point around then, they had called him up and leaned on him and scared the dickens out of him really, and he just said look, I sold, you know, on behalf of the company. patents to Daniel Egger. I sold these
We were trying to raise money.
And he said and I feel that anything I can do to stand up and make it clear that that is what happened in 1998 is what I should do. I owe that to all the people who were That's
involved with the company as well as Mr. Egger.
just a matter of business ethics and what is right. So the idea that Mr. Ait has somehow done something terrible to defraud the beneficiaries of the Plan is precisely 180 degrees wrong. that. And he's testified to
If people had questions they wanted to ask him, the
Morrison and Foerster, the Quinn Emanuel, and Fish and Richardson firms were there to ask those questions. And he
was quite competently examined and thoroughly examined in his deposition. THE COURT: All right. Thank you, Mr. Kaplan.
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36 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 MR. NUTI: I think Your Honor now appreciates we have three - we have one dispute basically in three different courts right now. THE COURT: Right. MR. NUTI: Eastern District of Texas, Northern District and before Your Honor. I think the very first
decision the Court needs to make is who is best to decide this issue. Is it here? Are we going to leave it in the Only after
Eastern District of Texas or somewhere else.
that decision is made can we then decide what else to do. THE COURT: All right. The Court has jurisdiction If it's not an
only if this is an asset of the estate.
asset of the estate, this Court doesn't have jurisdiction over this. And I may be reading through things that Mr.
Engel is getting at and maybe I'm just dull and this is my way of articulating it. You seem to be concerned, Mr.
Engel, that there might be things that the Bankruptcy Court who deals with these issues, compliance with the Plan, certain equitable issues that the Bankruptcy Court would be more familiar with than a District Court judge. necessarily disagree with you on that. I can see that with one of the defenses that if in fact the parent didn't have - didn't own the patents at the time they sold them, and as Mr. Kaplan says - and I have no reason to doubt it - that Mr. Ait maybe out of I don't
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37 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 ignorance assuming that when he was trying to clean things up after the fact, maybe didn't have standing to do what he did, one; two, didn't appreciate that if he did have standing, the manner in which he went about it with all the best intentions, may not have been appropriate and may have been a nullity. In that to the extent the District Court might have to look at what transpired, especially post-petition or post-confirmation, will the District Court get it, because if the Court's going to rely upon some of those things, and if Mr. Engel is correct either that Mr. Ait didn't - assuming they need it, because it's a possibility that the parent corporation as far as I know had owned the patents, I don't know the answer for sure, but I'm just saying, if they did, it's not an issue. But if they
didn't, then when they tried to clean it up after the fact because it was the right thing to do as Mr. Kaplan says, either again Mr. Ait may not have had standing, may not have gone about it in the best manner, may have needed to come back to this court, I'm not so sure that the District Court in Texas can't look at those issues and deal with it. I think at this juncture, what I'm inclined to do is, put this off for further status conference. I'd
like to see what - even if the court in Texas, if they grant the motion, I think Mr. Engel will be happy. If the
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38 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 court doesn't grant it there, then some of these issues can be - if they haven't been raised and there's a dispute by Mr. Kaplan and Mr. Engel whether they have or haven't, or at least adequately been raised, they can then be raised in the District Court action. Also, there may be a motion --
MR. ENGEL: That District Court or the THE COURT: In the Texas Court action. saying it may come up; it may not. I'm just
But my point at this
time - what I'm inclined to do is simply continue this without taking any action until early April to see if there's a ruling out of Texas and/or what happens with the California District Court action. I'm just not at this
juncture, based on this record, because really all I have is what Mr. Engel has put before me, he raises some interesting arguments, not only the Custodia Legis argument, but the issue that on this after-acquired title, the defense that's being put forth, that if they didn't have title, was this an executory contract. And by terms
of the confirmed Plan, if it wasn't specifically assumed, it was rejected, and then there would have been a requirement for the damaged party, apparently the whoever held the patents at that point or the party who thought they bought them would have had to file a claim within I think 30 days of the effective date of the Plan. MR. ENGEL: Right.
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