Leader Technologies Inc. v. Facebook Inc.

Filing 207

Official Transcript of Teleconference held on 12-23-09 before Judge Leonard P. Stark. Court Reporter/Transcriber Heather Triozzi. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Redaction Request due 2/3/2010. Redacted Transcript Deadline set for 2/16/2010. Release of Transcript Restriction set for 4/13/2010. (lad)

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

LEADER TECHNOLOGIES,
INC.,
Plaintiff,
v.
FACEBOOK, INC., a
Delaware corporation,
Defendant.

)
)
)
)
) C.A. No. 08-862-JJF-LPS
)
)
)
)
)
)

Wednesday, December 23, 2009
11:00 a.m.
Teleconference
844 King Street
Wilmington, Delaware

BEFORE:

THE HONORABLE LEONARD P. STARK
United States District Court Magistrate

APPEARANCES:

POTTER, ANDERSON & CORROON, LLP
BY: PHILIP A. ROVNER, ESQ.
-andKING & SPAULDING
BY: PAUL ANDRE, ESQ.

Counsel for Plaintiff

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APPEARANCES CONTINUED:

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BLANK ROME, LLP
BY: STEVEN L. CAPONI, ESQ.

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-and6
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COOLEY, GODWARD & KRONISH, LLP
BY: HEIDI L. KEEFE, ESQ.
BY: JEFFREY NORBERG, ESQ.

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Counsel for Defendant
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THE COURT:

Good morning, everyone.

This is Judge Stark.

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Who's there, please?

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MR. CAPONI:

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Honor.

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Good morning, Your

Blank Rome.

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8

For Facebook, it's Steve Caponi from

And also with me, Heidi Keefe and
Jeff Norberg from Cooley Godward.

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THE COURT:

Okay.

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MS. KEEFE:

Good morning, Your

11

Honor.

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MR. NORBERG:

Good morning, Your

Honor.
MR. ROVNER:

Your Honor, for the

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plaintiff, it's Phil Rovner from Potter Anderson,

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and Paul Andre from King & Spalding.

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THE COURT:

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19

Okay.

Good morning to

you all as well.
For the record, this is a

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teleconference to discuss discovery disputes in

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the matter of Leader Technologies Inc. versus

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Facebook, Inc.

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08-862-JJF-LPS.

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It's our Civil Action Number

I have a total of four letters today

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raising several disputes.

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practice in the past, I'm going to move through

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them kind of dispute by dispute.

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And as has been our

I want to start with Leader's

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complaints that or Leader's request that Facebook

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produce the change log document under some

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protection other than the non-source code

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designation.

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And let me start on that issue with

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Leader.

And let me tell you all, I do agree with

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Facebook's reading of Paragraph 8 of the

12

protective order, in that I think that paragraph

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does cover the change log.

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as a document or other thing that contains a

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party's source code or the substance thereof.

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I view the change log

But what I want to hear from Leader

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is whether you have an argument that, for some

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reason at this point in the case, I should amend

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the protective order to require Facebook to

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produce the change log document under some other

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designation.

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And I'll hear first from Leader on
that point, please.
MR. ANDRE:

Your Honor, this is Paul

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Andre.

I'll be arguing for Leader on this issue.

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The reason we're moving on this

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particular issue and not -- we don't believe it's

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source code or substance of source code, because

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it doesn't consist of source code.

6

The change log itself is nothing

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more than a general summary of the changes that

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were made.

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write source code based on the information in the

I mean, in other words, you could not

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change log.

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just bug fixes.

12

And 99 percent of that change log is

In this particular case, there's

13

been more sensitive information that's been

14

produced under the protective order.

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the kind of technical documents in which you

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could write source code from.

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adequate protection in place for source code.

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You know,

So we have

Now, as far as Your Honor's request

19

as to whether we should amend the source code,

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under the protective order, we believe that it is

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unduly burdensome to have us review this document

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as we would review source code.

23

for that.

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Several reasons

One is several hundred pages and you

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need to read this in context with other technical

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documents, and in the context with source code of

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time.

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because our patent issued in 2006, November 2006,

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we're alleging that Facebook is infringing since

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that time.

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So, and the reason being, of course,

Facebook has only given us one

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version of the source code itself as of today and

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would not provide us with versions dating back to

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2006.

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the change log is our only basis for showing that

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the source code as it exists today is

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substantially the same as it existed in 2006 when

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their infringement began.

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So the source code is our only -- I mean,

So as is given, source code

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protection would be prejudicial to Leader because

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the current version of the protective order

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allows Facebook to actually log all of our visits

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to the source code.

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a number of attorneys that can see the source

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code.

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They allow a restriction to

And also, it is something -- they

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have an observer in the room with it and that's

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observing source code.

So it is something that

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would be extremely prejudicial if we cannot go in

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this and look at it from a point of view of

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comparing the change log with the patent with

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technical documents and the source code itself

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when the time calls for that.

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The argument for changing the

7

protective order, as Your Honor requested, is

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unduly burdensome and prejudicial to Leader and

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requires us to treat this as source code.

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THE COURT:

All right.

Let me hear

a response, please, from Facebook.

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MS. KEEFE:

Thank you, Your Honor.

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Your Honor, this is the same level just like

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everyone said in both letters.

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The things that we're talking about,

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this log actually does contain the substance of

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source code, describes the source code that's

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being modified and the reasons there for highly

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sensitive documents.

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Mr. Andre made an interesting

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comment.

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version of the source code.

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not true.

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He said that we've only produced one
That's absolutely

On November 20th, per Leader's

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request, Facebook produced an entire subversion

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database, which includes full copies of the code

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as it existed over time.

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to look at it, but it's been on the stand-alone

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computer.

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They've never been able

It was referenced in our discovery

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responses served December 20th.

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for them to review.

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So it is here

Regarding their comment that it's

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unduly burdensome because they can't review it in

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the context of everything else they need, the

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stand-alone computer that has these logs on it

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also contains a subversion database with all of

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the versions going back as well as the code

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itself and technical documents.

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If there's other things that they

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need in order to be able to do these all in one

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place, you know, I'm sure that we can work on

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accommodating them, because we have the

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production, you know, materials here.

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Similarly, if they need more

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attorneys or want to have times when, you know,

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someone's not in the room, the person in the room

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is only to make sure that there's no copying.

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But I'm sure we can work on something like that.

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But nothing changes the

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overwhelmingly confidential secret nature of

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these materials and our need to make sure that

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there's no inadvertent disclosure.

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what the protective order was meant for,

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stipulated and agreed to.

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So thank you very much.

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THE COURT:

And that's

And just address the

10

suggestion that you've produced even more

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sensitive documents, some type of technical

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documents under E designation that's not as

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protective as source code protection, Ms. Keefe.

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MS. KEEFE:
understand the question.
THE COURT:

I'm not sure I
I'm sorry, Your Honor.
Well, as I understand

17

it, you've produced technical documents that

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relate to the source code, and those are for

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basically attorneys' eyes only.

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understand it, Leader has been allowed to take

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copies of those back to its own, you know,

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counsel's facility.

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But as I

They're not required just to review
them on a stand-alone computer.

So the

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suggestion, as I understand it, is that there are

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things that you've already produced at a lower

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level of designation that are nonetheless more

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commercially sensitive to you and that that is

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somehow inconsistent.

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MS. KEEFE:

It's absolutely not

7

inconsistent.

The material that we've allowed

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them to take back to their offices with them are

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redacted so that those portions that actually

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relate to the source code or contain the source

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code itself have been redacted.

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The materials that they have are

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things that talk at a much higher level about

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certain projects or something of that nature.

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They don't talk specifically about the code and

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what's being changed in the code.

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I think Your Honor can easily

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understand that sometimes it's the changes to the

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code that are the most sensitive things.

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know, you don't want the public necessarily

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knowing about a bug set or something that is

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buggy or what it took to fix it.

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the R & D that goes into figuring out what the

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problems are and what the fixes are is as

You

And sometimes

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sensitive, if not more sensitive, than the code

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itself.

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And so direct to Your Honor's point,

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the only material that they have been able to

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take back to their offices are less sensitive

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than that.

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those documents actually have been redacted.

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9

And the most sensitive portions of

THE COURT:

Okay.

Mr. Andre,

anything you want to say in response?

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MR. ANDRE:

Just Your Honor, we

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don't think that the change log has any sensitive

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information you could actually derive source code

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from.

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what's been changed.

And this is a simple one-sentence summary

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The second, technical documents that

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have been produced to us, if someone were to have

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those technical documents, you could actually

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write source code pursuant to those technical

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documents.

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They give you that level of detail.
These are mere summaries of what's

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going on.

If you look at the three categories of

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information, the date, the name, the file, and

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the engineer who did the work, those are not

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sensitive at all.

So it's the one-sentence

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summary or maybe two sentences at the time or

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maybe it's just a single sentence written in

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plain English, no source code.

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doesn't have any source code at all in it.
Okay.

The change log

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THE COURT:

Thank you.

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On this request from Leader, I'm

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going to deny Leader's request.

As I indicated

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from the start of the discussion, I agree with

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Facebook's reading of Paragraph 8 of the

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protective order.

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highly confidential source code material anything

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that contained source code or the substance

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thereof.

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The agreement was to treat as

And I am persuaded by Facebook that

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the change log, given that it is a summary, a

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description of the changes to the source code,

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that it does contain either source code or the

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substance thereof.

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I don't, at this point, see any need

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to amend the protective order.

I think that the

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burden that has been noted by Mr. Andre was

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essentially anticipated and agreed upon by the

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parties as the process for dealing with this

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highly sensitive information.

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I do also note, however, that

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Ms. Keefe has represented that her client is

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willing to consider making reasonable

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accommodations sufficient such as perhaps asking

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the individuals from Facebook to leave the room

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at times or to make other materials available

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within that room.

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9

So as to ease some of the burden on
Leader as it's reviewing these materials, and I

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certainly encourage the parties to work to try to

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make any reasonable accommodations like that

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which I think would be entirely consistent with

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the spirit of the protective order, but for the

14

reasons I've given, I'm denying the request for

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any additional relief that Leader has made.

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Let's move on now to the issues

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Facebook's raising in their letters.

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going to break down those issues into three

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parts.

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And I'm

And the first issue, the first part

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goes to these third-party communications.

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communications between Leader and other parties

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in connection with Leader's efforts to raise

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funds, either for an investment in the litigation

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or an investment in itself.

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issues or a number of the requests for production

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that Facebook has put at issue today relate to

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this general topic of third-party communication.

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But a number of the

And I want to see if we can handle

6

all of the third-party communication issues

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together.

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will hear from you first on this category of

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issues, please.

10

And Facebook, as the moving party, I

MS. KEEFE:

Thank you, Your Honor.

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And we agree that that's a good way to break

12

these down, because I think that many of our

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requests, including responses to the

14

interrogatories and document request and some

15

concerns we had about the privilege log all lump

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into the same thing.

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If I could, just very quickly, step

18

back to kind of explain how we got here.

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2007, Leader began a campaign to solicit funding

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for the anticipated patent litigation or for the

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company and recreated a wealth of materials,

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basically marketing materials that it would use

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to try to gain, you know, commercial investments

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in the company or in this litigation.

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Sent those documents to upwards of

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20 different third parties soliciting these

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funds.

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that these documents would hopefully never make

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their way to Facebook by marking them

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confidential and privileged, even though they

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were all being disclosed to third parties.

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that's kind of how we got to where we are.

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They also started a campaign to make sure

So

A result of this long privilege log,

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Your Honor, we think that the Corning case is

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directly on point, and that here in Delaware the

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Court has acknowledged that there is no common

13

interest privilege.

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attorney client or work product issue.

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There's definitely no

But there's further no common

16

interest privilege in documents that are given to

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third parties for the purpose of soliciting

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investment, whether it be in a litigation or in

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the company itself.

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received from third parties show both that it was

21

in litigation or in the company itself.

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And the documents that we've

This issue is actually well resolved

23

enough that after reading Leader's letter, I

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actually went on line and did just a little more

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research to make sure there wasn't some

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distinction drawn by Courts between financing the

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litigation and financing of a company.

4

ABA actually has an ethics opinion, Formal

5

Opinion 00419, which cites to the notion that the

6

question is very common about what a lawyer can

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refer to his client regarding litigation

8

financing companies.

And the

9

And the opinion goes on to say that,

10

in fact, lawyers should advise their clients that

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whatever materials are given to these litigation

12

financing companies may actually waive the

13

privilege.

14

Circuit that have their own formal opinions

15

saying exactly that.

16

and Pennsylvania.

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And there's two things in the Third

And that's both New Jersey

And Delaware does not have an

18

opinion, an ethics opinion that I could find, but

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Delaware has the Corning case that says exactly

20

the same thing.

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We think that all of these

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third-party communications are relevant and that

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there is no common interest privilege, and

24

therefore, they should be produced.

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THE COURT:

Do I need to consider at

2

this point from your perspective whether these

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documents would be admissible?

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is it that they would be admissible at trial?

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MS. KEEFE:

And if I do, how

I think Your Honor

6

absolutely does not have to decide at this point

7

whether or not they would be admissible.

8

standard is whether or not they are discoverable,

9

not whether they are admissible.

10

The

And, in fact, they absolutely are

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discoverable.

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contemplates, a document that may lead to the

13

discovery of admissible evidence.

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They are exactly what discovery

They're definitely -- they

15

absolutely are relevant.

You can see just from

16

examples of Exhibits 1 and 2 that we attached to

17

our letter how highly relevant these documents

18

are.

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president of the plaintiff's company thinks about

20

the time line of his own invention, the validity

21

of his own patent, whether or not it's obvious

22

over prior art that he himself has found and

23

used, you know, to give him an idea of what to

24

patent.

They go directly to what the inventor, the

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If Your Honor wanted to go farther

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than that, I actually do think that these

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documents would be admissible as admissions of

4

party opponents.

5

regarding his own invention would, in fact, be

6

admissible once we got to that stage.

7

An admission by the inventor

But I truly do not believe that that

8

is the relevant question at this point.

9

question is simply whether or not they're

10

discoverable.

11

The

And they are.
THE COURT:

Has Leader at this point

12

provided you the non-disclosure agreements that

13

we discussed in a previous call?

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15
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MS. KEEFE:

Yes.

They absolutely

have.
And in fact, the provision of those

17

non-disclosure agreements led us to most of these

18

documents that were never produced by Leader.

19

Once we received all those NDAs, we actually sent

20

subpoenas out to these third parties that we had

21

never known about or heard of before.

22

And it was through these third

23

parties that we started receiving through some, I

24

should say, of these third parties that we

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started receiving these documents, saw how

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relevant they were.

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either reached out to Leader or Leader reached

4

out to them.

5
6

And some of the parties

I'm not sure which.
That doesn't matter.

But then

became represented by King & Spaulding.

7

And it is in connection with those

8

parties that we are receiving privilege logs

9

claiming a joint interest, or a common defense or

10

some kind of privilege like that.

11

what, you know, brings us to Your Honor.

12

THE COURT:

And that's

If it were the case that

13

Leader was clearly raising or, you know, engaged

14

in these communications clearly just to obtain

15

financing to support this litigation, and if it

16

were the case that Leader took all reasonable

17

steps to keep the contents of those

18

communications confidential as between itself and

19

the parties to whom it was having these

20

communications with, your view, Ms. Keefe, is

21

nonetheless, there is no possibility that any of

22

those communications are protected and

23

privileged, you know, and protected from

24

discovery?

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MS. KEEFE:

That is my position,

2

Your Honor.

3

joint interest, or common joint defense or common

4

interest privilege only arises if you look at the

5

Corning case.

6

legal interests of the two parties are identical,

7

and that they have the exact same legal interests

8

that they're protecting.

9
10
11

And it's my position, because the

Absolutely only arises when the

They must be identical, not similar.
And be legal, not fully commercial.
When a particular plaintiff or

12

defendant approaches a litigation funding

13

company, it's no different from a company

14

approaching a potential purchaser of stock.

15

investor at that time has to take it upon

16

themselves at an arm's length transaction to

17

determine whether or not this potential

18

investment will make them money.

19

The

And so they're going to be at arm's

20

length from each other.

In fact, if anything,

21

their legal interests are diametrically opposed

22

in the beginning with the plaintiff saying,

23

Here's why my case is so perfect and why you

24

should invest in it, because of how much money

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you are going to make.

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investor trying to rip the case apart to make

3

sure that this is, in fact, a valid investment

4

and a good place for them to put their money.

5

And the potential

And so, their legal interests are

6

absolutely not aligned.

In fact, in the

7

beginning, they're absolutely opposite each

8

other.

9

And so, I don't believe there can be

10

any joint interests or common interests in these,

11

and therefore, there is no protection.

12

THE COURT:

But at a high level,

13

what is happening in those communications is the

14

parties are exploring whether or not the

15

litigation is sufficiently valuable that they

16

want to both partner in some way in hopes, I

17

guess, that they'll make money from it.

18

At that level, aren't their

19

interests at least substantially aligned, that

20

is, they both are hoping to reach the same

21

conclusion that we should work together and

22

invest money in this because we think we'll get

23

more money back in the end?

24

MS. KEEFE:

I actually again

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disagree, Your Honor.

2

necessarily both hoping that this is going to

3

work.

4

I think that they're not

The person who's asking for the

5

investment is absolutely saying I hope this

6

works.

7

has to make a very independent assessment of

8

whether or not this is a good idea.

9

The person who's being asked to invest

And at that point, their interests

10

legally are divergent.

11

money for the investment.

12

determine whether or not this is a good idea.

13

The plaintiff wanting the
Investor trying to

If it is taken to the logical

14

extreme, you could actually argue then that all

15

marketing documents seeking funding for a company

16

buying stock that a lawyer was ever involved in

17

in any way would be privileged because eventually

18

you go high enough up the chain, you're just

19

trying to get people to invest so that something

20

can go forward.

21

bit far, but that's the logical extreme of kind

22

of the way we're arguing.

And I know that's taking it a

23

In this particular case, we know

24

that Leader is trying to explain why it has a

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good case and that the third parties are trying

2

to understand whether or not they want to invest.

3

Their interests are not aligned at that point.

4

They need to make certain whether or

5

not they could be aligned in the future.

6

think perhaps the question would be slightly

7

different after a decision was made to invest,

8

and that's what the joint defense is all about.

9

So I

When you look at people who have

10

decided we do have the same interest, we

11

absolutely are aligned and we both want this

12

patent to be invalidated as a defendant or we

13

both, you know, need to sue on this patent.

14

But that's after the decision is

15

made to come together, to ask in concert.

16

the communications with potential investors have

17

nothing to do with acting in concert.

18

trying to determine whether or not they will ever

19

make an investment and they're opposite each

20

other.

21

THE COURT:

All of

They're

But at a practical

22

level, and maybe you'll say this is irrelevant,

23

but at a practical level, how could somebody

24

entice someone else to invest if they can't

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disclose to them the materials that would allow

2

the potential investor to make that evaluation?

3

Because taking your position to a

4

logical conclusion, nobody can disclose any of

5

the substance without pretty much guaranteeing

6

that it's all going to be revealed in the ensuing

7

litigation.

8

MS. KEEFE:

Your Honor, that's --

9

Your Honor is absolutely correct, but I will tell

10

Your Honor that I've been involved and Mr. Caponi

11

has been involved in counseling companies before

12

mergers in an M & A deal where there's a

13

litigation ongoing.

14

find out, you know, the company trying to

15

acquire -- the company that's involved in

16

litigation wants to know what are the chances of

17

victory?

18

happening?

19

We've done the research to

How is the case going?

What's

And what we have done is we've said,

20

We can't provide you with the documents because

21

those documents will be waived once they're

22

disclosed to a third party.

23

will sit down and talk with you about it, but

24

that's all we can do.

If you'd like, we

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And in fact, some of the documents

2

produced in this case indicated that Andrews

3

Kurth was worried.

4

firm that Leader was using before they hired King

5

& Spaulding.

Andrews Kurth was the law

6

Andrews Kurth actually sent an email

7

to one of the potentials and says, Let's just sit

8

down and talk about this, you know, together in

9

the same room so that we don't have to worry

10

about documents being disclosed.

11

So this issue was acknowledged by

12

one of the lawyers as being a possible problem.

13

And in order to combat it, they decided to sit

14

down and have a meeting where there wouldn't be

15

written materials that wouldn't be disclosed,

16

that would then have to be produced.

17

THE COURT:

But in your view, the

18

substance of that sit down communication is also

19

discoverable.

20

only way you'll get it is through depositions.

I guess, at a practical level, the

21

MS. KEEFE:

22

THE COURT: But it is discoverable;

23
24

Absolutely.

correct, in your view?
MS. KEEFE:

Yes.

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2

THE COURT:

Let me hear from

Mr. Andre on these points, please.

3

MR. ANDRE:

First, Your Honor, with

4

the common interests, these financing companies

5

are very particular in their business nature.

6

They are there to finance litigation.

7

This is not an investment in the

8

company.

This is not investing as an M & A deal

9

as Ms. Keefe is talking about.

10

This is solely towards investing in

11

litigation.

12

in the legal proceedings, and disclosures that

13

are made between the parties are made to

14

facilitate the rendition of legal services.

So

15

this is not solely a commercial enterprise.

This

16

is about a common legal interest.

17

These companies have a best interest

Every effort was made by Leader to

18

protect the privilege nature of this.

19

discussion that Ms. Keefe talked about where

20

Andrews Kurth said, Let's sit down in the room,

21

that was before the NDA was signed.

22

The

Once they get the NDA signed, their

23

attorney stamped confidential on what they wanted

24

to exchange that they believed contained

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privilege information.

2

communication that talks about what they need to

3

do to protect privilege.

4

And they also have the

So the intent of the parties was to

5

protect the privilege.

6

then there's no way these parties can

7

communicate.

8
9

If you take away that,

I disagree wholeheartedly with
Ms. Keefe that they're hoping that the financing

10

is -- hoping this doesn't work.

11

business.

12

litigation.

13

This is their

Their business is to finance

They're hoping it does work.

14

hope they make a lot of money.

15

They

game.

16

This is the end

But even before that, I disagree a

17

hundred percent that this is relevant information

18

that should be discoverable.

19

absolutely no way this would ever be admitted at

20

trial.

21

And there's

I mean, for example, if a company --

22

one of the financing companies believed that our

23

patent was, you know, end all, to be the all

24

greatest thing they've ever seen, there's no way

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2

that's going to get admitted.
Conversely, if they thought it was a

3

bad patent that would not get admitted either,

4

that these are all opinions, it would not lead to

5

admissible evidence, because all that is being

6

discussed here are legal opinions as to the

7

merits of the case.

8

You know, to have a lawyer opine one

9

way or the other about what is -- you know,

10

whether the patent covers is not going to be

11

admissible, should not even be discoverable

12

because there were protections in place to try to

13

prevent that exact case from happening.

14
15
16

THE COURT:

Mr. Andre, what about

statements by the inventor to a third party?
MR. ANDRE:

Well, if there are

17

statements by the inventor, there were any type

18

of admissions.

19

not under the privilege protection.

20

It's possible maybe, but if it's

But the example they use, for

21

example, in their letter where they talk about

22

the obvious reasonable skill in the art to try in

23

2003 and 2004, that's not an admission.

24

patent was filed in 2002.

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We have an invention date going back

2

to at least 1998.

3

that are statements saying after, you know, we

4

filed our patent application.

5

White paper in early 2003.

6

So these are not admissions

We published the

Facebook launched in 2004.

So there

7

are no admissions, these documents they're using.

8

So with respect to party admissions,

9

if they are going to say the admissions are that

10

they think the patent is great, I think Facebook

11

is infringing, that's not going to get in.

12

THE COURT:

So articulate for me,

13

then, what is your view of what types of

14

communications between Leader and these third

15

parties are privileged and stay within the

16

privilege due to the common interest document

17

trend?

18

Because I take it you're not saying

19

that everything you talk to the third parties

20

about is privileged and non-discoverable, but you

21

seem to think a lot of it is.

22
23
24

Can you articulate for me what the
distinction is?
MR. ANDRE:

It's when they are

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conveying the analysis of their attorneys.

2

way this process works is the finance company has

3

their attorneys.

4

The

Leader had its attorneys.

The attorneys want to be able to

5

disclose information to each other, either

6

through the company contact or directly amongst

7

themselves.

8

being communicated in order to facilitate, you

9

know, the discussion and whether or not they are

And if the attorney analysis is

10

going to be vested in this legal proceeding, I

11

believe those are privileged.

12

THE COURT:

So if the inventor is

13

part of these meetings and he or she just starts

14

talking about, Here's how I came up with the

15

idea, you know, on such and such a date I did

16

this, such and such a date I did that, that is

17

not privileged.

That's discoverable.

18

Correct?

19

MR. ANDRE:

If it does not reveal

20

attorney-client communication or work product,

21

yes, that's discoverable, Your Honor, if it's

22

relevant.

But I don't think it's relevant.

23
24

THE COURT:

And why would that not

be relevant?

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Isn't that --

2

MR. ANDRE:

I guess if he's saying I

3

came up with the idea here, there, I guess that

4

would be.

5

way, depending on the substance of the

6

disclosure.

7
8

I think it could be, let's put it that

And to the extent we have those type
of documents, they have been produced.

9

THE COURT:

From the documents

10

you've produced, can Facebook identify all of the

11

third parties that you've had these discussions

12

with?

13

MR. ANDRE:

Well, all the ones that

14

I believe we can recall.

15

extent there are documents that we had

16

discussions with any of these parties, there was

17

always a NDA disclosed, NDA assigned, and we

18

disclosed with an NDA.

19

I mean, I think to the

There might have been some cold

20

calls, emails that were sent that they may not be

21

able to determine from the NDAs.

22

Now, there were a considerable

23

amount of documents.

We actually produced emails

24

in this case, unlike Facebook who didn't produce

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a single email.

2

of those were the cold call emails to the system.

3
4

And in any of those emails, many

They were kept in the normal course
of business.

5

We did produce those.
So from the document production,

6

they should be able to get all, if not -- or

7

most, if not all, of the third-party financing

8

companies that were contacted by Leader.

9

THE COURT:

And the only exception

10

would be if it was something akin to a cold call,

11

and nobody at Leader has any recollection as to

12

who those third parties are?

13
14

MR. ANDRE:

That's correct, Your

THE COURT:

That is, you've not

Honor.

15
16

expressly excised the names of any third parties

17

that you know were called; correct?

18

MR. ANDRE:

That's correct, Your

19

Honor.

At this point, with regard to these

20

third-party financing companies, I think this

21

is -- to point to a phrase used in Texas, they're

22

drilling in a dry hole.

23

issue about what third parties they're going to

24

contact.

We don't care about this

They subpoenaed over 20 of these third

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parties.

2
3

They are going to take depositions.
They've noticed depositions of individuals.

4

We don't think this will lead to any

5

discoverable, any admissible evidence in this

6

case.

7

privileged communications.

8

protect those.

To the extent this will, there are

9

THE COURT:

We're trying to

And have you produced or

10

logged all of the documents that you exchanged

11

with the third parties that you signed NDAs with,

12

all such documents that relate to the '761

13

patent?

14

all of them?

15
16
17

Have you either produced them or logged

MR. ANDRE:
Honor.

I believe we have, Your

Our privilege log is over 2,000 entries.
And to the extent we've done any

18

documents that had the privilege document

19

communications, we've relogged them.

20

discuss the '761 -- as I said, there may be some

21

documents if we go to dig.

22

If they

You know, our policy here was to

23

produce every single document the company had.

24

It's a small company.

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We just didn't want to have these

2

fights over and over and over again.

3

reason these things came up in the first place.

4

That is the

To the best of our knowledge, we

5

have produced all the documents that discuss the

6

'761 patent.

7

go back and make a further check with the client

8

to make sure they don't have some filed things

9

somewhere else that we didn't believe were

With these third parties, I could

10

relevant, but I think at this point we've logged

11

all the privilege documents.

12

THE COURT:

Well, I think the

13

concern that I'm hearing, at least in part, is

14

you and I have now had some back and forth as to

15

what's relevant, what's not relevant.

16

first you indicated you didn't think an inventor

17

statement about, you know, when he conceived of

18

the idea of the invention, you suggested that

19

might not even be relevant.

20

And at

So I'm trying to put that relevance

21

question aside and just get right to any document

22

relating to the '761 patent, that either Leader

23

sent to the third party or was received back from

24

the third party.

Are you in a position to

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represent that all of those documents have either

2

been produced, or if you think there's privilege,

3

they've at least been logged?

4

MR. ANDRE:

Your Honor, I believe

5

all those documents have been produced in their

6

original form as they were sent back and forth.

7

And I don't mean to be splitting hairs here.

8
9

If we sent a document to a third
party like, for example, we sent an email saying

10

attached is a document that describes "X", then

11

the document itself has been produced.

12

with the attachment may not have been produced.

13

The email

I don't know if we look for those --

14

but all the documents that discuss the '761

15

patent have been produced or logged.

16

through every single document the company had.

17

If it discussed the patent in any way, we

18

produced it or logged it on the privilege log.

We went

19

THE COURT:

Okay.

20

MR. ANDRE:

So I don't want to

21

mislead the Court in any way and say those

22

communications going back and forth have been

23

produced as well, because I can't say with

24

absolute certainty that's the case.

But the

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documents themselves have been.
THE COURT:

All right.

Let me turn

back to Ms. Keefe.
Anything you want to say in response
to what you've heard?
MS. KEEFE:

Just that I don't

7

understand how that can be the case when we

8

received a log from IP Investments, one of the

9

third parties, that shows a series of documents

10

that we've never heard of or seen before.

11

Investments logs a series of documents on the

12

privilege log based on common interests that

13

appear nowhere on Leader's log that we can tell

14

or in Leader's production.

15

So IP

Exhibit 1 and 2, the time line

16

itself in this and this White paper were never

17

produced by Leader, and yet are completely

18

relevant, written by the inventor.

19

don't appear to appear on the privilege log in

20

any way that we can tell and were certainly never

21

produced to us.

22

And also

So I don't understand how that can

23

be the case that they've actually produced these

24

documents or logged them.

If they have logged

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them, I don't understand how.

2

THE COURT:

All right.

Let's see,

3

Mr. Andre, could you respond to that specific

4

example?

5

MR. ANDRE:

Well, in response to IP

6

Investments, they have their own privileged

7

documents that would be on the log that would be

8

separate from Leader's log.

9

common document.

10
11

It won't be just a

They have their own attorneys as
well.

They have their own privilege issues.

12

With respect to those two specific

13

documents she's referring to, I believe they have

14

been logged on our log or they have been

15

produced.

16

single-page documents that are part of like a

17

200-page document that was produced to Facebook.

18

As I said, if it's referring to the

These are documents that are

19

'761, it's either on the log or it's been

20

produced to Facebook, to the extent that Leader

21

kept those documents in the normal course of

22

business.

23
24

And I believe, I can't tell you
exactly a Bates number where those documents were

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produced, but I believe those documents were

2

produced or logged in this case if we still have

3

them.

4

THE COURT:

But you could get that

5

answer, those specific Bates numbers to us pretty

6

quickly; right?

7

MR. ANDRE:

Quickly being relative.

8

Over the holidays I've got a real skeleton crew

9

working.

10

THE COURT:

11

a couple of business days you could?

12

MR. ANDRE:

13

office.

Understood.

Yeah.

But within

I'm out of the

I could get someone in the office.

14

I could try to dig up those Bates

15

numbers of the documents.

16

one page from IP Investment is a page of a much

17

larger document.

18

And it would be the

We'd have to go through needles in

19

the haystack.

20

week, Your Honor.

21

We could try to find that within a

MS. KEEFE:

I am not sure what he's

22

talking about from IP Investments.

The two

23

exhibits I was talking about was the exhibit to

24

my letter, the time line indicating everything

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the inventor thought about when he came up with

2

the idea and what was the prior art; and the

3

White paper, which is about 10 or 12 pages long

4

where the inventor discusses why he thinks his

5

patent is non-obvious.

6

Those are the ones I am talking

7

about that I've never seen produced or logged.

8

In our letter we tried to -- we said, It looks

9

like this is in the privilege log at this entry.

10

And we were told in the responsive letter, That's

11

absolutely not what it is.

12
13

There's no evidence it was ever
produced or logged.

14

THE COURT:

Ms. Keefe, I think we're

15

going to use this example as a test, so let's be

16

as precise as possible.

17

has privilege log of IP Investments Group, but

18

you're talking about two particular documents,

19

either on that log or two other documents that

20

you've attached to your letter?

21

MS. KEEFE:

I see the exhibit that

Two other documents,

22

Exhibit 1, which is Neyer, N-E-Y-E-R 00103

23

produced.

24

THE COURT: And we are talking about

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Exhibit 1 to DI-182, your letter of December

2

21st, 2009.

Okay?

3

MS. KEEFE:

Okay.

Correct.

4

And similarly Exhibit 2 to my letter

5

at Bates labeled N-E-Y-E-R 000208 through

6

N-E-Y-E-R 000218.

7

THE COURT:

Okay.

And Mr. Andre,

8

you understand that the two documents that

9

Ms. Keefe is looking to nowhere, either -- where

10

are they in your production or where are they on

11

your privilege log?

12

MR. ANDRE:

13

documents.

14

Investments.

15

I understand the two

These are not the documents with IP

different group.

This is with Neyer.

It's a

16

Exhibit 1 is a one-page time line.

17

THE COURT:

Right.

18

MR. ANDRE:

And I do believe that is

19

one page of a much larger document.

20

be on our privilege log.

21

up.

22

That would

We can go and dig that

And Number 2 is the White paper

23

itself.

I believe we could dig that up as well

24

on the log.

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THE COURT:

And Ms. Keefe, yeah,

2

what we're going to do, we're going to play this

3

out as a little bit of a test and see if you

4

either have gotten this material from Leader or

5

where it is on their privilege log.

6

anything from the IP -- what are they called, IP

7

Investments Group log?

8
9

But is there

You know, I'm willing to send
Mr. Keefe's -- I'm sorry, Mr. Andre's staff,

10

forgive me, back with reasonable timing to find a

11

few other documents.

12

the IP log that you'd like them to locate?

13

Are there a few entries on

MS. KEEFE:

There absolutely are.

14

There are communications on that log from

15

Mr. McKibben to Ryan Strong, for example, who's

16

an investor over at IP Investments.

17

at that log, which is attached as Exhibit 16 to

18

our letter.

If you look

19

THE COURT:

Right.

20

MR. ANDRE:

And the entry -- for

21

example, the first, I would say -- I'm sorry,

22

Your Honor.

23

number that makes the most sense.

24

Let me just get you a specific

There's only four pages so we know

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where all these are.

2

MS. KEEFE:

How many?

3

THE COURT:

That's fine.

4

I understand the confusion.

5

say Mr. Keefe -- sorry, forgive me.

6

Yeah.
Let's

Clearly my

mind is a little tired here.

7

Mr. Andre, in addition to the two

8

documents, we've already identified Exhibits 1

9

and 2.

I also want you to identify any

10

communications between, I believe, it's

11

Mr. -- let me get the name correct -- between

12

Mr. McKibben and Mr. Strong.

13

Any of those communications that are

14

listed, and let's say any communication between

15

Mr. McKibben or Mr. Sobdick on the Leader side

16

and Mr. Strong, who I understand would be on the

17

IP Investments Group side.

18

Any of those communications which

19

are logged here on Exhibit 16 to DI-182, I want

20

you to find out and identify where they are on

21

your privilege log or identify where the

22

documents embodying those communications have

23

been produced.

24

Understood, Mr. Andre?

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MR. ANDRE:

2

understand, Your Honor.

3

would be every single document on the privilege

4

log, because all those involve either Jim

5

Sobdick, Ryan Strong or Mike McKibben.

6

of them are emails.

7

THE COURT:

I'm not sure I
That looks like that

Yeah.

And most

It looks like it

8

is all of them, so I'm asking you to do all of

9

them.

10

that.

11

And I will give you sufficient time to do

But you understand what I'm asking

12

you to locate; correct?

13

MR. ANDRE:

I think so, Your Honor.

14

I mean, it sounds a bit -- well, I'll say -- I'll

15

just put it this way:

16

extremely one sided in the fact that, you know,

17

Facebook has not produced a single email in this

18

case, and we are trying to go through now and

19

find out where each of these emails that we

20

produced are on the privilege log, if they are.

21

The discovery burdens are

If not, I guess we have to log them

22

on the privilege log of emails that we don't

23

think are relevant.

24

try to find where on this four-page log if those

But we can go through and

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were produced or logged.
THE COURT:

Right.

And if they've

3

not been produced or logged, then you either need

4

to produce them or log them.

5

And I'm going to give you until

6

January 15th to do that for all of the documents

7

and communications that we've just discussed, and

8

in recognition of certainly that there are

9

holidays coming up.

But let me just say the

10

reason I'm doing this is as a test.

11

You know, I accept the

12

representation, that is, as far as it has gone

13

from you, Mr. Andre, that you believe all

14

documents relating in any way to the '761 patent

15

have either been logged or produced.

16

You indicated it might be helpful to

17

have a chance to double-check that.

18

give you that opportunity.

19

I do want to

And I'm also concerned, because we

20

have at times talked in the language of relevance

21

or even admissibility.

22

obviously, have a substantial dispute as to what

23

is relevant and certainly what would be

24

admissible when it comes to communications with

And the parties,

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2

third-party investment financing groups.
And so before I can really get to

3

the bottom of that issue and determine if any

4

further relief is to be ordered for Facebook on

5

these matters, I think it's fairer and an

6

exercise in my discretion to select a more

7

limited number of documents and communications

8

which have been specifically identified by third

9

parties and just make sure that those documents

10

and communications which we know exist, given

11

they've been disclosed to us by third parties,

12

let's make sure that they are in Leader's

13

production or on Leader's log.

14

And if they are, that might very

15

well be the end of the issue.

16

then we'll need to understand why they're not.

17
18

If they're not,

Have I been clear about what it is
that I'm asking you to do, Mr. Andre?

19

MR. ANDRE:

You have, Your Honor.

20

THE COURT:

Okay.

Ms. Keefe, where

21

does that leave us with respect to the issues

22

raised in your letter?

23

covered at this point?

24

MS. KEEFE:

How much of that is

That resolves -- that

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starts us down the road of resolving all of those

2

issues.

3

remain.

4

I think there's only two issues that

The first is that for a number of

5

the -- it goes to the issue of how the privilege

6

log itself reads and whether or not it contains

7

enough information to establish the privilege

8

that is their burden to show.

9

log entries, there's some names, and we just

For many of the

10

don't know who the names are, if they even are

11

attorneys or employees.

12

Throughout the meet and confer

13

process, Leader's position was that it had no

14

obligation to give us those names.

15

during -- in the letter in opposition to ours

16

that they first for the first time offer that if

17

we identified entries where we didn't know who

18

the people were, that they would look into that

19

and, you know, think about -- giving us those

20

names.

21

I note

I would offer that I think what we

22

need is a key to understand why they believe

23

these documents to be privileged based on who

24

these people are and what they did for Leader at

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the time that the document was created.

2

So if they're willing to give us

3

that key at this point, I think that would

4

resolve that issue.

5

THE COURT:

Mr. Andre.

6

MR. ANDRE:

I'm not sure what she's

7

asking, Your Honor.

8
9

I'll be honest with you.

In our privilege log, we've
identified in every single instance the to and

10

from.

11

designation, the attorneys, where they show that

12

there are attorneys involved in these

13

communications.

14

We've identified with the Esq.

We've gone above and beyond the

15

legal requirements for a privilege log.

16

compare and contrast our privilege log to

17

Facebook, they have only ten entries.

18

percent of those, they don't even have a to and

19

from in those logs.

20

If you

Forty

So there's a little bit of equal

21

dignity argument here, that we, once again, are

22

the -- they're asking for what they're not

23

willing to give.

24

That is over and over again.

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MS. KEEFE:

That's actually --

2

THE COURT:

Mr. Andre, I'm not

3

comparing your log to a log that's not in dispute

4

at this point.

5

I'm only looking at your log.

And it would seem to me that by

6

asserting the privilege, the burden is on you to

7

establish all of the elements of the privilege.

8

And what I understand the complaint to be here is

9

that you've not met your burden in a number of

10

instances in identifying that the individuals,

11

the to and from individuals are within the scope

12

of a privilege, because no one can tell who they

13

were employed by, or if they are attorneys, who

14

they were representing.

15

Is that information that you are

16

offering to provide to Facebook at this time

17

either on a request-by-request basis or some type

18

of key that would just be, as I understand it,

19

basically an index listing all of the names that

20

are on your log and identifying on -- you know,

21

on a single document, Here's who they are

22

employed by?

23

they represented?

24

And if they are attorneys here, who

MR. ANDRE:

Your Honor, we've

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been -- we've informed Facebook on multiple

2

occasions that we've identified everyone who was

3

an attorney.

4

specific instances where they do not know who the

5

individuals are, we will look into determining

6

what relationship they are to the privilege, and

7

where they're employed.

8
9

And to the extent they identified

What they ask for is the role these
people had in the company.

They're asking not

10

only for the employer, but what role they played

11

in the company, what was their position, things

12

of this nature.

13

and not required by law.

14

And that's just overburdensome

THE COURT:

I agree with you on the

15

role.

But I think identifying who the employer

16

is is required and maybe it is that everybody

17

listed is employed by Leader.

18

know, that one blanket representation would take

19

care of it.

20

In which case, you

I have one other question for you,

21

Mr. Andre.

With respect to the recipients of

22

documents, have you only listed as recipients

23

individuals who are named on the face of the

24

document or have you more broadly listed as

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recipients everyone that the company knows

2

received the document?

3

MR. ANDRE:

It's everyone in the

4

company that knows who has been given a document.

5

We're -- from the face of the document, you can

6

determine obviously who received the document, to

7

some degree.

8
9

To the extent the company recalls
specifically sending it to others, we will

10

identify those instances.

11

our client.

12

who they sent it to, if they sent it to anyone

13

else.

14

And we've talked to

In most cases, they can't remember

They believe they only sent it to

15

the recipients.

16

that they did, we will put this on the log as

17

well.

18

To the extent we can determine

And we have been thus far.
THE COURT:

Ms. Keefe, it sounds to

19

me like you have a representation from Mr. Andre

20

that he will work with you to give you additional

21

information on an entry-by-entry basis if you

22

identify entries that you don't feel you have

23

enough information on.

24

It sounds to me like that should be

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satisfactory, but am I missing something?

2

MS. KEEFE:

I very much appreciate

3

that.

4

know there are a number of places where they've

5

listed that a person is an attorney, but they

6

don't -- they never volunteered to confirm for us

7

who that attorney was representing at that time.

8

And as long as that's included, so that -- you

9

know, because, obviously, you can have people who

10

are attorneys who aren't practicing law or aren't

11

representing a party at the time.

12

The only thing I would want clarified is I

As long as that is part of the

13

information that I can request, that will satisfy

14

everything that I need right now.

15

THE COURT:

Mr. Andre.

16

MR. ANDRE:

I'm not sure what she's

17

asking, once again.

But if she's saying who the

18

attorney is representing is all she asked for, we

19

can reprovide that.

20

attorneys in every case on the privilege log.

We've identified the

21

THE COURT:

Okay.

Fine.

22

Well, I'm going to order that this

23

communication or this, excuse me, conversation

24

continue between the parties.

And if Facebook,

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in good faith, believes it can't figure out

2

whether or not the elements of privilege have

3

been properly asserted on Leader's privilege log,

4

then Facebook can identify the entries for which

5

it wants more information.

6

provide the reasonable additional information

7

that we've discussed here.

8
9
10

And Leader will

And that will take care of the
privilege log issue.

I think there is one final

issue in your letter, Ms. Keefe.

11

MS. KEEFE:

Yes.

12

THE COURT:

Do you want to address

13

that now at this point?

14

MS. KEEFE:

The final issue, Your

15

Honor, resolves around the production, Leader's

16

production of the product and the source code

17

behind that product or the product that they

18

claim practices the invention claimed in the '761

19

patent.

20

If Your Honor will recall, we've

21

actually been in front of you once before on the

22

issue of how Leader's own product practices the

23

patent.

24

while you understood the relevance to the issue

And at the time, Your Honor said that

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of injunctive relief, lost profits, possibly to

2

other damages type issues, Your Honor said that

3

the burden should be on us to do the

4

investigation, provided that we had access to the

5

products and the source code.

6

Immediately thereafter, we then did

7

a request for production to Leader for the

8

products and the source code that supports that

9

product, so that we could conduct our own

10

analysis of whether or not we believe that Leader

11

can make a claim that it is our competitor, or

12

that it deserves injunctive relief or that it

13

deserves lost profits.

14

Leader to demonstrate that its own product

15

practices the claims of the patent.

16

All which would require

And we've been thwarted.

Leader has

17

said that they refuse to produce the product or

18

the source code.

19

some nefarious purpose for forcing them to a

20

product to product or infringement contention,

21

which is obviously not the case.

22

They've stated that we have

They've indicated that they're going

23

to use the product to support their allegations.

24

They deserve an injunction.

And to support

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things like lost profits, we deserve a chance to

2

investigate that ourselves.

3

product and the code to do that.

4

And we need the

If they would prefer to not produce

5

the product and the code, and they would prefer

6

to not rely in any way on the product and the

7

code at trial, I'm fine with that, too.

8

they're going to rely on the product and the

9

code, then I deserve the right to look at it, as

But if

10

Your Honor indicated back in September, product

11

to product.

12

THE COURT:

If you were given access

13

to the product as an initial matter, why would

14

you also need the code?

15

MS. KEEFE:

Well, I think for the

16

exact same reasons that Leader insisted that it

17

needed our code.

18

to both forward-facing elements and

19

backward-facing elements.

20

that the user can see by using it, but also to

21

how the code is using itself to transform, or

22

track information or anything of that nature.

23
24

The claims of their patent go

In other words, things

So all of the same reasons that
Leader needed to see our code to make the

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assessment of whether or not the claims cover our

2

product are the same exact reasons that we need

3

to see their code and their product to assess

4

whether or not their arguments that their product

5

is covered by their claims have merit.

6

THE COURT:

All right.

Mr. Andre,

7

let's turn to you and start with any chance that

8

you're willing to agree not to rely in any way on

9

the product or code at trial?

10

MR. ANDRE:

Your Honor, we will not

11

be relying on our source code at trial.

12

not be provided in evidence and it will not be a

13

part of what we present at trial.

14

It will

The product itself is a -- it's a

15

service we provide.

16

approximately ten times more documents, technical

17

documents about how the functionality of our

18

product works than they produced to us, even

19

though we're the patentee and they're the

20

defendant.

21

And we provided to Facebook

THE COURT:

But you will be or at

22

least are reserving the right to rely on your own

23

product as part of your trial presentation?

24

MR. ANDRE:

What we will -- what we

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will be presenting and what we will ask Judge

2

Farnan for is an injunction based on the fact

3

that they are competitors in the marketplace.

4

These are market competitors.

5

We do not want to get into a

6

situation as Facebook has tried on multiple

7

occasions to do to have us have to prove our own

8

product infringes our own patent.

9

ridiculous.

10

That is

This is all they're trying to do is

11

a product-by-product comparison saying their

12

product looks different than our product.

13

not the issue.

14
15

The issue here is:
product look like our patent?

16
17

THE COURT:

That's

Does their
That's the issue.

What is your theory by

which you are competitors?

18

MR. ANDRE: We are competitors,

19

because they take sells away from us in the

20

marketplace.

21

marketplace for enterprise systems that use

22

social networking.

23

giving away for free what we're trying to sell,

24

because they make their money on targeted

We offer competing products in the

Essentially, Facebook is

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advertising.

2

THE COURT:

So focusing just on the

3

product then, what's the argument against

4

producing to Facebook fully functioning copies of

5

your product?

6

placing it at interest.

7

MR. ANDRE:

It seems that you're clearly

8

per se.

9

We don't sell a product,

Like you don't send us a check and we

send you a product.

10

What we do is we provide a service.

11

We keep that service in place.

12

ton of documentary evidence of how that service

13

functions.

14

And we've given a

We've produced everything to them

15

already that describes how our product is

16

functioning and how our service is provided.

17
18

MS. KEEFE:
can't use it.

But, Your Honor, we

We don't have a membership.

19

THE COURT:

Ms. Keefe, please.

20

will give you a chance.

21

MS. KEEFE:

I apologize.

22

THE COURT:

I'm talking to

23

Mr. Andre at this point.

24

I

Mr. Andre, do you --

the issue as to whether or not Leader is a

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competitor with Facebook is in dispute.

2

agree with that?

3
4

MR. ANDRE:
dispute, Your Honor.

5

Do you

I believe it will be in

Yes.

THE COURT:

And do you agree that

6

Facebook is entitled to make the best possible

7

case to support the position that you're not

8

competitors?

9

MR. ANDRE:

Your Honor, of course,

10

any party can make their best case in any

11

contested legal element.

12

THE COURT:

Of course.
And so your position is

13

that simply by providing technical documents

14

without access to your product and without access

15

to your source code is a sufficient basis, is

16

fair enough for -- as a basis for Facebook to

17

make the argument that you're not a competitor?

18

I guess that's your position.

19

MR. ANDRE:

20

competitor or not, it's our burden.

21

that.

22

Your Honor, if they're a
I will say

And our burden is to show that they

23

are competitors in the marketplace.

We plan on

24

doing that using our documents that we put

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forward and provided them already.

2

If we cannot meet that burden, then

3

it's on us.

4

competitor in that circumstance if we can't meet

5

our burden.

6

And Facebook will not be a

What they're trying to do is say

7

that not only do we have to prove that they're

8

competitors, but that somehow the products are

9

identical or that we had to prove infringement of

10

our own patent.

11

Circuit has set forward in the test.

12

That's not what the Federal

They say if they're a market

13

competitor, our patent gives us a right to

14

exclude them from the market.

15

irreparable harm issue.

16

That's an

That's the only issue they bring us

17

up on.

Are we competitors for the issue of

18

irreparable harm?

19

documents we've provided them already and the

20

documents we produced in this case and the

21

testimonial evidence and whatever -- anything

22

else we put forward in this case, we will fail

23

our burden.

24

the documents we've put forward.

If we can't prove it with the

But we believe we can prove it with

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If they can show in any way that

2

we're not competitors, that's not their burden.

3

The burden is on us.

4

THE COURT:

But they have made out

5

representations that they can show that you're

6

not competitors, if only they have access to your

7

product and your source code.

8

make of that?

9

MR. ANDRE:

So what am I to

Well, the only purpose

10

they would -- what they're really saying is not

11

that we're not competitors, what they are saying

12

is that we don't practice our invention, that we

13

do not have a -- they're going to go in and try

14

to put in evidence that our product is not

15

infringing our patent.

16

That is not a competitor basis.

17

That's not how you determine if one party is a

18

competitor of the other party.

19

look different.

20

by our patent or not can be determined by the

21

documents we've produced and the testimony that

22

we're willing to give.

23
24

The products will

Whether our product is covered

This is not a case where they're
accusing us of infringing their patent, and

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therefore, they get a look at our product in that

2

level.

3

is that we're not competitors.

This is a case where all they're saying

4

Well, if they can prove that in the

5

market -- in the marketplace, that's where the

6

determination is.

That's what the Federal

7

Circuit has said.

That is what courts have said

8

throughout the country is a marketplace

9

determination.

10

If we can't prove we're competitors

11

in the marketplace, then we will not be able to

12

achieve the first prong of the four-part test for

13

getting to injunction.

14

obviously an equitable issue that Judge Farnan

15

will decide.

16

This is an issue where --

I think at this point in the case,

17

there's absolutely no reason to open up our

18

source code, which is very sensitive to us, to

19

Facebook, especially in light of the fact that

20

we've produced ten times the documents about our

21

product than they've produced to us.

22

THE COURT:

23
24

All right.

Ms. Keefe,

you may go ahead at this point.
MS. KEEFE:

Thank you, Your Honor.

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Not much to add.

2

They've told -- they've represented

3

to us and the Court that they do practice their

4

patent.

5

patent number.

6

that the product is patented by the '761 patent.

7

They've marked their product with the
All of their documentation says

And they use that in order to try to

8

establish that we're a competitor.

One factor in

9

determining competition is whether or not you

10

know both products practice the same claim.

11

That's one way that you can be a competitor.

12

Regardless of whose burden it is to

13

establish competition, we still deserve the right

14

to be able to challenge the fact of competition.

15

And one of the things we need to investigate is

16

what their product does.

17

without a membership to this service.

18

even use the product right now.

19

THE COURT:

And we can't do that
We can't

Well, is that what you

20

mean by your request for a fully functioning

21

version of the product?

22

includes some type of membership, I take it?

Fully functioning

23

MS. KEEFE:

I believe so, yes.

24

THE COURT:

Okay.

All right.

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Well, I'm prepared to rule on this

2

one.

And having weighed the competing arguments,

3

I am persuaded that Facebook is entitled to some

4

relief on this issue, and specifically I am going

5

to order that Leader provide fully functioning

6

copies of the Leader to Leader, and I guess

7

Leader to Leader Enterprise social networking

8

products.

9

I'm looking specifically at

10

Facebook's Request for Production Number 65 and

11

66, which are attached as Exhibit 18 to Docket

12

Entry 182.

13

So with respect to 65 and 66, I'm

14

overruling Leader's objections and I'm granting

15

the motion to compel of Facebook.

16

that while the burden of proving competition in

17

connection with the request for an injunction and

18

other types of damages or damages relief, while

19

that burden is on Leader, a defendant here,

20

Facebook, has a right to defend itself, not

21

solely by arguing that the plaintiff has failed

22

to meet its burden, but also by, if it can,

23

proactively proving that the two companies, in

24

this case, are not competitors.

I do believe

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And I think that Facebook is

2

entitled to access fully functioning access to

3

the product that is the basis for the contention

4

of Leader that the companies are competitors.

5

Facebook's entitled to access to that product to

6

determine if it may have a basis for arguing

7

through the product that the two companies are

8

not competitors.

9

At this point, I'm denying the

10

request for relief under Production Request

11

Number 67, which seeks a copy of the complete

12

source code for Leader to Leader.

13

fairly well the back and forth over many weeks or

14

months and phone calls that we had which led

15

ultimately to the production of the entire source

16

code of Facebook to Leader.

17

I do recall

And it may turn out that Facebook

18

will persuade me that they need access to the

19

entirety of Leader's source code.

20

Facebook has not yet even had access to a fully

21

functioning version of the product, seeing as I'm

22

sure Leader will view the source code as the most

23

important commercial property, and seeing as I

24

think, I would want a very strong showing before

But seeing as

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I'm going to provide access to the source code

2

just as I required when Leader was seeking

3

Facebook's source code, I just don't think that

4

showing has or can be made at this point given

5

that Facebook has not even had a moment to access

6

fully functioning access to the product to the

7

Leader product.

8

So that's my ruling on that issue.

9

We should talk about the timing for

10

when Leader can provide the fully functioning

11

product.

12

to suggest a date by which you could do this?

13

Mr. Andre, given the holidays, you want

MR. ANDRE:

Your Honor, I will

14

endeavor to do all the issues you brought up by

15

January 15th, if that's acceptable.

16

THE COURT:

17
18
19

That is acceptable.

So

you'll do that by January 15th.
I believe that addresses all the
issues raised in the letters.

20

Is that correct, Ms. Keefe?

21

MS. KEEFE:

22
23
24

It does, Your Honor.

had one other question, if you don't mind.
THE COURT:

Just one second.

Mr. Andre, were there any other issues in the

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letters that you think have not been addressed?

2
3

MR. ANDRE:

No, Your Honor.

I think

everything has been addressed.

4

THE COURT:

Okay.

Ms. Keefe.

5

MS. KEEFE:

The simple question, I

6

think Your Honor still has two motions pending

7

before Your Honor, and I just wanted to know if

8

we could anticipate a ruling on those or a

9

hearing if you needed one.

10
11

THE COURT:

The answer is, yes, I'm

going to rule on those motions right now.

12

MS. KEEFE:

Thank you.

13

THE COURT:

Okay.

So the two

14

pending motions are Facebook's motion to stay

15

pending re-examination and Facebook's motion for

16

leave to amend its responsive pleading to add a

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counterclaim for false marking.

18

to give you my rulings on both of those motions

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right now.

And I am going

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First, on the motion to stay pending

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re-examination, I am denying Facebook's motion to

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stay.

23

the conclusion of a pending ex parte and inter

24

parte's re-examinations by the PTO of Leader's

Facebook, as we know, seeks a stay until

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'761 patent, which is the sole patent-in-suit.

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In reviewing the parties' papers, I

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note that both sides recognize that the issue of

4

whether to grant such a stay is a matter within

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the Court's discretion.

6

I agree with that.

I do not agree with Facebook's

7

suggestion that this Court routinely stays

8

litigation pending re-examinations.

9

fact specific, of course, and always requires the

10

Each case is

careful exercise of discretion.

11

And I also note, I think it was

12

Leader, put in the record some commentary or

13

study that suggests actually in this district, we

14

have a relatively low rate of granting these

15

stays.

16

grant such a stay.

17

But in any case, it's not routine to

Turning to the specific factors that

18

need to be considered, I find that the factors

19

weigh decidedly against staying this case pending

20

the re-examination.

21

true that the stay could eventually simplify

22

issues that are pending, in this case, I think

23

it's very unlikely that granting a stay would

24

lead to an ultimate resolution of all the

First, while it might be

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disputes between the parties.
As I understand it, Claim 17, which

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has been asserted here by Leader, is not even

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part of the re-examination.

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PTO, of course, only deals with issues of

6

validity during the re-examination.

7

deal with issues such as infringement, damages,

8

and injunctive relief.

9

And moreover, the

It does not

And so unless the outcome of the

10

re-examination were to cancel all of the asserted

11

claims that are in re-examination, there will

12

still be things left for this Court to do with

13

respect to those claims that emerge from the

14

re-examination.

15

That's the first factor.

The second

16

factor deals essentially with the timing of when

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the stay was sought.

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And this factors also, in the

19

circumstances of this case, disfavors a stay.

20

the time that the motion for stay was filed,

21

paper discovery was largely completed.

22

At

We were on the eve of depositions.

23

Now, of course, a couple of months, I think, have

24

gone on further since when the motion was filed.

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Claim construction at this point is

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imminent.

But most important with respect to the

3

timing issue is that this is a fast track

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litigation by agreement.

5

This case was set from the beginning

6

for a trial in June 2010, which was a period of

7

only approximately 19 months from the filing of

8

the complaint.

9

only have the parties expended substantial time

And as the parties well know, not

10

and other resources in litigating this case

11

vigorously over the last 13 months, but the

12

Court, too, has spent much time and resources

13

resolving discovery disputes, among other things,

14

and making every effort to keep this case on

15

track on the fast track towards a trial in June

16

of next year.

17

The final factor is whether the stay

18

would unduly prejudice the non-moving party,

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Leader, and I accept the representation.

20

sufficient evidence in the record to accept that

21

representation, for purposes of this motion, that

22

there would be undue prejudice to Leader, as

23

we've already discussed in another context today.

24

I find

Leader asserts that it is a

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competitor of Facebook.

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further that delay would decimate the market for

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Leader's Leader to Leader product, and further

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represents that Leader will likely cease to exist

5

if this case is stayed pending re-examination as

6

the much larger and successful competitor,

7

Facebook, essentially allegedly gives away the

8

technology that Leader allegedly owns and is

9

trying to sell.

10

And Leader asserts

In this regard, it's notable, I

11

think, that none of us have any idea how long

12

this stay that's requested would last.

13

likely to be at least two and as many as five or

14

six years.

15

would last.

16

It's

But we don't know exactly how long it

And given that, it's also quite

17

possible that the delay could create evidentiary

18

problems for Leader due to faded memories and

19

that sort of thing, if and when the case were to

20

come back to this Court some years down the road.

21

And finally, I perceive no clear

22

hardship or inequity to Facebook if the stay is

23

denied.

24

denying Facebook's motion to stay and will issue

And, therefore, for those reasons, I am

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an order to that effect after this call.
Next, and finally, I want to deal

3

with Facebook's motion for leave to amend the

4

responsive pleading to add a counter claim for

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false marking.

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I am going to grant this motion.

7

Facebook's theory is that Leader marked the

8

Leader to Leader product with the '761 patent

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designation without having a reasonable belief

10

that this product was covered by its patent,

11

because Facebook alleges that Leader undertook no

12

analysis at all to support such a reasonable

13

belief prior to marking.

14

As both parties note, Federal Rule

15

of Civil Procedure 15(a) embodies a liberal

16

policy to allow amendment of pleadings, and I

17

find having reviewed the papers that none of the

18

reasons that are usually given for denying leave

19

to amend, none of those reasons are present here.

20

First, I find no evidence that

21

Facebook has engaged in undue delay, bad faith or

22

exercised dilatory motive with respect to the

23

filing seeking leave to amend.

24

Leader -- Facebook sought leave in a timely

I find that

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fashion after comments were made by Leader's

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litigation counsel and after a response to an

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interrogatory, which seemed to Facebook to

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provide a basis for its proposed counterclaim.

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And even if Facebook's intent is to

6

delay, the Court is not going to let Facebook use

7

its counterclaims as a basis for delay.

8

told the parties many times, I'm trying to keep

9

this case on the fast track to the June trial

10

date.

11

As I've

And I intend to continue to make those

efforts.

12

It's also worth noting that the

13

scheduling order contemplated and permitted

14

motions for leave to amend to be filed up until

15

November 20th.

16

that I'm dealing with now was filed by Facebook

17

approximately a month prior to that deadline.

18

And the motion for leave to amend

I also find there have been no

19

repeated failures to cure deficiencies through

20

amendments.

21

amendment to a pleading by Facebook.

22

This is the first requested

Next, I find no undue prejudice to

23

Leader from granting the relief that I'm granting

24

today to Facebook.

I am going to allow for

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expedited targeted discovery.

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If the parties find it necessary,

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though, I'm anticipating that any discovery on

4

this new counterclaim will be very limited given

5

that almost all, if not all, of what Leader needs

6

to support the reasonable belief that its Leader

7

to Leader product is covered by the patent,

8

almost all, if not all, of that evidence I would

9

imagine is within the control of Leader itself.

10

And, also, Facebook has represented

11

that it has already and had already through

12

October served most, if not all, of the discovery

13

it thought it would need with respect to the

14

proposed counterclaim.

15

Next, I note that the proposed

16

amendment would not be futile in reaching that

17

conclusion.

18

standard to the proposed counterclaim.

19

I applied the motion to dismiss

And taking Facebook's allegations as

20

true, I find that they do adequately allege all

21

of the elements of a false marking claim under

22

Title 35 United States Code Section 292(a).

23
24

Specifically Facebook alleges that
Leader has marked its Leader to Leader product

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with the patent designation since November 2006,

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and Facebook alleges that Leader lacked any

3

reasonable belief that its Leader to Leader

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product actually practices the invention of the

5

'761 patent, because it's alleged Leader

6

undertook no analysis prior to making that

7

designation.

8

amendment is not futile.

9

So I find that the proposed

And finally, I just want to say that

10

in exercising my discretion in this manner, to

11

allow the proposed amendment, I'm exercising it

12

in just the same way I'm exercising my discretion

13

to deny the stay.

14

is most efficient for the parties, for the Court,

15

and what provides for the proper economy to all

16

relevant institutions is to keep this entire

17

dispute between the parties here in this Court

18

where it has been pending now for some time where

19

the parties and the Courts have engaged in a lot

20

of work.

21

And that my view is that what

And there's certainly no sense, it

22

would seem to me, in encouraging Facebook to

23

pursue a false marking claim in another suit,

24

particularly if it were to do so in another

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district.

2

exercised my discretion and will be granting the

3

motion for leave to file the response, the

4

amended responsive pleading, Exhibit A.

5

So, for all those reasons, I've

We will issue an order on this

6

effect that I am granting Facebook's motion for

7

leave to amend.

8

deemed to be filed as the responsive pleading.

Exhibit A to the motion will be

9

And as I mentioned, I will provide

10

some time for limited discovery related to this

11

counterclaim, to the extent it's necessary.

12

I'm directing the parties to meet and confer and

13

to submit to the Court no later than January 15th

14

a proposed plan for limited supplemental

15

discovery related to the counterclaim that we

16

have just added.

17

And

The relief that is the proposed

18

discovery plan should not in any way impact other

19

dates in the scheduling order.

20

say, also, again, I've already said I expect

21

there to be relatively little discovery necessary

22

for either side.

23

opening the door to a full-blown

24

product-by-product comparison, though I do

I should just

I'll add, I don't believe I'm

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anticipate it will be likely that Leader will

2

have to describe the process by which it came to

3

form the reasonable belief that Leader to Leader

4

practices the patent.

5

But I am, in the first instance,

6

going to leave it to the parties to discuss and

7

hopefully come to agreement as to precisely what

8

limited discovery will be necessary with respect

9

to this counterclaim.

10

I don't want to hear any argument on

11

either of the motions I've just ruled on, and I

12

will get an order out.

13

else that needs to be addressed at this time,

14

Mr. Andre?

15

But is there anything

MR. ANDRE:

No, thank you, Your

17

THE COURT:

And Ms. Keefe?

18

MS. KEEFE:

No, thank you, Your

THE COURT:

Okay.

16

19

Honor.

Honor.

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21

Happy Holidays to all of you.

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24

Thank you and

(Everyone said, Happy Holidays, Your
Honor.)
(Teleconference concluded at 12:28

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p.m.)

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State of Delaware

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)
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New Castle County

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CERTIFICATE OF REPORTER

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I, Heather M. Triozzi, Registered

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Professional Reporter, Certified Shorthand

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Reporter, and Notary Public, do hereby certify

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that the foregoing record, Pages 1 to 78

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inclusive, is a true and accurate transcript of

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my stenographic notes taken on December 23, 2009,

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in the above-captioned matter.

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IN WITNESS WHEREOF, I have hereunto

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set my hand and seal this 30th day of December,

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2009, at Wilmington.

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Heather M. Triozzi, RPR, CSR
Cert. No. 184-PS

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