Leader Technologies Inc. v. Facebook Inc.

Filing 518

Official Transcript of Teleconference held on 04-27-10 before Judge Leonard P. Stark. Court Reporter/Transcriber Deanna Warner. 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 6/29/2010. Redacted Transcript Deadline set for 7/9/2010. Release of Transcript Restriction set for 9/7/2010. (lad)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF DELAWARE

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___________________________________________________
LEADER TECHNOLOGIES,
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INC., a Delaware
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corporation,
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PLAINTIFF,
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v.
) C.A. No. 08-862 JJF
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FACEBOOK, INC., a
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Delaware corporation,
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DEFENDANT.
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____________________________________________________

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Tuesday, April 27, 2010
4:30 p.m.
Telephone Conference
Chambers of Judge Stark

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844 King Street
Wilmington, Delaware

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BEFORE:
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THE HONORABLE LEONARD P. STARK,
United States District Court Magistrate

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APPEARANCES:
POTTER ANDERSON & CORROON, LLP
BY: PHILIP ROVNER, ESQ.

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-and22
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KING & SPALDING LLP
BY: PAUL ANDRE, ESQ.
BY: JAMES HANNAH, ESQ.

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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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COOLEY, GODWARD & KRONISH, LLP
BY: HEIDI L. KEEFE, ESQ.
BY: MARK WEINSTEIN, ESQ.

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Counsel for Defendant
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THE COURT:
everyone.

Good afternoon,

This is Judge Stark.

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Who's there, please?

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MR. CAPONI:

Good afternoon, Your

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Honor.

Steve Caponi for Blank Rome for Facebook

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as well as Ms. Heidi Keefe for Cooley Godward

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for Facebook.

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MR. ROVNER:

Your Honor, this is

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Phil Rovner from Potter Anderson for plaintiff

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Leader, and with me on the line is Paul Andre

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from King and Spaulding.

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THE COURT:

For the record, this

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is Leader Technology, Inc. Versus Facebook, Inc.

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It is our civil action number 08-862-JJF-LPS,

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and the purpose of today's call is there is

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another discovery dispute between the parties,

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and in particular Facebook is seeking to reopen

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discovery.

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Let me first ask -- of course I've

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read the two letters.

Have there been any

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further developments since these letters were

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filed, Mr. Caponi.

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MR. CAPONI:

No, Your Honor.

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THE COURT:

Mr. Rovner, do you

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agree with that?

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MR. ROVNER:

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THE COURT:

Yes.
Let me tell you where

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we are, and I will certainly give the parties a

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chance to respond to what I have to say.

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It does -- it does appear to me,

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having read the letters, that at least part of

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what is going on is clearly Facebook believes

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that this trial should not take place at the

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date of June 28, 2010, which is the date that

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has been in place for quite a while.

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grant the relief that Facebook seeks would have,

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necessarily, the effect of eliminating that

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trial date.

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And to

I am not going to eliminate that

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trial date.

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trial date, and either Judge Farnan or myself

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will be trying this case on June 28th, 2010.

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That June 28, 2010, date is a firm

Now, it may be, nonetheless, that

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Facebook is entitled to at least some limited

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relief, and that's what I need help from the

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parties on.

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on June 28th, what, if any, relief should the

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Court consider awarding Facebook as a result of

Given that the trial is going to be

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this latest NDA issue?

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So let me hear from the parties on

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that point, and we'll start with Facebook,

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please.

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MS. KEEFE:

Thank you, Your Honor.

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Your Honor, at an absolute

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minimum, to avoid essentially depriving Facebook

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of substantive due process rights to develop its

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own defenses, Facebook needs discovery into

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third parties who we didn't know about before so

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that we can investigate whether those third

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parties received demonstrations of or offers to

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purchase the device that Leader itself contends

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practices the claims of the patent at issue

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before the patent was filed.

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Even one of these demonstrations

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or offers to sell the patented invention more

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than one year before the filing date would

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statutorily bar the patent itself, and Facebook

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deserves to look into those.

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In fact, had these NDAs been

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produced during the ordinary course of discovery

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when discovery was open, this wouldn't have been

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an issue.

We would have been conducting

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discovery into those third parties, able to make

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phone calls, follow them up with subpoenas,

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request for deposition, and court ordered

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processes of discovery.

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For example, in our letter we

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indicated to Your Honor at least one party who

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we've been able to formally contact who we

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didn't know about until after discovery closed

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has indicated that he does have evidence of

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something before the critical date, which we

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would be interested in, but he feels extremely

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uncomfortable and will not give it to us absent

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a subpoena, so we need to be able to issue that

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subpoena.

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This is true of countless third

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parties identified who signed NDAs potentially

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receiving demonstrations and offers for sale

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before 2002.

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2002.

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633 in 2000, 389 in 2001, 438 in

Now, of course, Your Honor, if

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this had been the normal course of discovery, we

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would have identified those that looked like the

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most reasonable companies -- you know, companies

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that would have nothing to do with Leader's

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practice that would look like a company who

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might buy this product, and we would have gone

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down that road, starting with a small number,

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perhaps expanding out depending on what that

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discovery yielded.

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At an absolute minimum at this

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point, Your Honor, we need the ability and the

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right to issue document requests to third

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parties from that NDA list and to follow those

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requests up with deposition notices that can be

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taken.

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frame, we at least have to do that now.

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If we have to take them during this time

Even if Your Honor or Judge Farnan

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thinks that somehow this is not relevant, we

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need to preserve our rights because the Federal

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Circuit may well have felt that these were

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relevant, and that each and every one of them

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could have invalidated the patent.

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THE COURT:

Ms. Keefe, Leader

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represents now that based on the best available

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information -- and I'm going to explore with

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them what the basis is for that, but they say

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there are no more and, I guess, no less than

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fifteen third parties in the relevant time

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period that may have received one of these

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offers or presentations.

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many have you learned of in the recent weeks?

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MS. KEEFE:

Of those fifteen how

Of those fifteen,

there are three that we never heard of.

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Beyond those fifteen, though, are

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informal phone calls, and the court documents

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that were filed in Ohio in the last couple of

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months indicate at least three other parties

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that didn't make their list of fifteen.

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If I can, Your Honor, relying on

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Leader to give us this information is simply not

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fair.

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possible injunctions, shutting down Facebook,

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and has told both this Court and us that it

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intends to use this patent against other people

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in the future.

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information that could destroy its patent or its

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case is not the way the adversarial system was

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set up.

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for ourself and not be forced to take Leader at

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its word.

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Leader is asking for countless dollars of

Relying on Leader to provide the

We deserve the right to explore those

THE COURT:

Well, certainly it's

within the discretion of the Court to require

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you to first pursue discovery, if at all, from

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the three that the plaintiff has now revealed to

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you and see what that yields and then determine

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from there if you really need anything further.

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What are the three new ones that have been

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identified to you by Leader?

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MS. KEEFE:
that exhibit.

I just need to flip to

I apologize.

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While I'm flipping through, Your

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Honor, and getting that information, would we

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also be able to conduct discovery into the other

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third parties that we identified in our letter

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who have indicated to us that they have

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information that they would want to produce only

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under subpoena?

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THE COURT:

Those other three are

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the Zacks Law Group, SpartaCom, and Sun

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Management?

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MS. KEEFE:

Yes, Your Honor.

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THE COURT:

Well, I haven't ruled

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anything yet, but I recognize your request as a

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bare minimum from your perspective.

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MS. KEEFE:

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Sorry, Your Honor.

I

am still flipping through my documents here, and

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I want to make sure to give you the exact, right

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information.

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associates to tell me exactly which one.

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I sent an e-mail to one of my

THE COURT:

That's fine.

You'll

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get a chance to tell me the names as we get a

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little bit further.

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MS. KEEFE:

Here they are, Your

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Honor:

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and Shamrock Security Corporation.

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Platform Venture, LLC; Tutor Ventures,

THE COURT:

Okay.

Let me throw

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something else at you, Ms. Keefe.

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the possibility that we go to trial in June only

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on infringement, and we defer trial on

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invalidity to a later date to allow you to

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pursue the discovery that you're requesting?

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MS. KEEFE:

What about

Your Honor, I haven't

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had a chance to think about it to give you a

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fully informed answer, but my first, gut

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reaction is that that would certainly be

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something that we would like to explore the

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possibility of because certainly that would

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allow us time to conduct discovery into these

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issues.

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And quite frankly, Your Honor, if

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the patent is not infringed, we may save both

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the Court's time and our own time from having to

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do any of that since the issue of validity would

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be moot.

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THE COURT:

at this point to be heard on these issues.

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Let me turn to Leader

MR. ANDRE:
Paul Andre.

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Your Honor, this is

I'll be arguing for Leader.
There's a lot of hyperbole and

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double talk being put forth in both Facebook's

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letter and their argument now.

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matter is that they had the opportunity to take

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the depositions of at least two of the three

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parties that they say there was a prior sale to.

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This was Balsam Scientific and Limited.

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subpoenaed them and decided not to take

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discovery when discovery was open.

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The fact of the

They

They also recently filed motions

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pending before Judge Farnan to amend the

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counterclaims in an inequitable conduct

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allegation.

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mirror image allegation to these 102(b)

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allegations.

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sale and public disclosure.

Inequitable conduct allegation is a

They put forth there was a prior

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In that briefing that was filed

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just five days ago, they say, and I quote,

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"Facebook's proposed amendments do not require

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additional discovery and will not delay the

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proceedings."

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When they try to add in

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counterclaims based on the exact, same

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allegations, they tell the Court that no extra

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discovery will be needed and will not delay it.

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They also put forth the fact that

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in November -- ignore the fact that in November

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of last year they went and came to Your Honor to

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amend their pleadings, and they began to add in

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a false marking claim.

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They've taken the position this

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entire case, even up to November last year and

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very recently last week, that Leader does not

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practice the claims of the 761 patent, and

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therefore they're doing false marking.

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been their consistent position throughout the

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entire course of this case.

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That has

Now they're saying, well, the

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Leader to Leader does practice the 761, and a

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prior sale public disclosure would invalidate

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it.

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They're taking the inconsistent

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position -- not inconsistent -- mutually

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exclusive positions even today.

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good-faith dispute.

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try to bifurcate the trial or postpone the trial

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or something along that line.

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produce in this case is every third-party

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communication regarding Leader to Leader and the

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This is not a

This is a dispute merely to

What we did

761 patent.

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Facebook has had the source

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documents for these new allegations for almost a

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year.

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for others.

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of 102(b) regarding prior sale and public use.

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At least a year for some, eight months
They just now added the allegations

We produced to them, as well,

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hundreds, if not thousands, of documents that

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referenced our NDAs and our NDA policy.

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produced NDAs to them early in the case.

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THE COURT:

We even

Mr. Andre, let me

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interrupt you, and let's focus on where we are

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now.

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First, what is the best available
information that allowed you, on April 13th, to

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advise Facebook that there were, at most,

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fifteen third parties that may have received a

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demonstration or offer of sale in the relevant

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time period?

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MR. ANDRE:

The fifteen parties

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based on the documents we produced to them early

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in the case that identified twelve of the

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people.

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recollection of Mr. McKibben, the CEO and

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The other three were based on the

founder of the company.
You notice the three they

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mentioned, those are venture funds, and he was

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trying to get funding for his company.

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document that we have that would indicate a

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public disclosure we provided to them.

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document we have that would indicate an offer

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for sale we provided to them.

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these source documents for years.

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THE COURT:

Every

Every

They've had all

The three new, the

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Platform Venture, Tutor Venture, and Shamrock

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Security Corporation, were ones that

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Mr. McKibben simply did not recall until April

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of this year?

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MR. ANDRE:

There's no

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documentation we have regarding those type of

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communications, and when we were asked to

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provide -- by Your Honor -- to provide them with

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everyone we gave a demonstration to of our

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product during the relevant time period, those

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were the three that were possible within that

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time period, the best of his recollection.

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so we looked through every possible piece of

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document, paper, in the company to try to come

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And

up with these names.

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THE COURT:

And what about the

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other three that defendants think they found out

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about separate and apart from your

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representations, the Zacks Law Group, SpartaCom,

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and Sun Management?

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MR. ANDRE:

Zacks Law Group was

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our long time corporate law firm, and Mr. Zacks

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was on the board of directors and, I believe, a

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shareholder of Leader, and at one time served as

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officer.

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The document they refer to, if you

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look at the actual e-mail, they're dated in

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2003.

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period that we're talking about here.

Those are not within the relevant time
We filed

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the provisional patent in December 2002, and we

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filed the utility application in December 2003.

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The date on both those e-mails are July 2003.

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And if you read those e-mails

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carefully, it's pretty clear he had not been

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beta testing yet.

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saw a demonstration and it looked like Leader.

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That wasn't the case, if you look at Exhibits

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Seven and Eight of their brief.

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Law Firm, there's nothing there.

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He offered to beta test.

He

So the Zacks

The SpartaCom was not something we

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were demonstrating things to.

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company Leader was looking to acquire.

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an acquisition of Leader, not them acquiring our

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product.

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produced to Facebook talk about Leader

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purchasing that company, not the other way

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around.

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product.

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That was a
That was

The NDAs we have with SpartaCom we

There was no demonstration of our
That was quite the opposite actually.
And then with respect to the

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Sunrise Community that they mention, there is an

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NDA with them.

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the time period of that, if you look at the

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e-mails once again, are in the 2003 time period,

We produced an NDA to them, but

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which are not the relevant time period for any

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of those claims.

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they're complete red herrings.

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Those three they name are --

THE COURT:

And what about the

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suggestion that I bifurcate validity from

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infringement?

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that at this point, Mr. Andre?

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What would be wrong with doing

MR. ANDRE:
Your Honor.

It would kill Leader,

This is -- Leader has leveraged the

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entire company to go to trial, and to have to go

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to trial twice as it were, to go through a

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one-trial process, go back into discovery phase,

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go through another trial process, would be

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absolutely devastating to Leader.

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It would be extremely prejudicial

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to have to bring our witnesses back, to have two

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juries make this decision.

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prejudicial in the fact that a different jury

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would hear the validity case.

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bring experts back in for tutorial purposes to

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educate the jury again.

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It would be

We would have to

It would have a very dire

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consequence on this company that is fragile.

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The way it is with the cost incurred by the

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amount of discovery we've been forced to deal

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with on the third party front -- sixty-four

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subpoenas, untold third-party subpoenas.

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They've gone after third-party

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finance companies that have absolutely no

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relevance in this case.

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numerous third parties in this case, and to have

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this issue come up when at no time did they ever

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raise this issue of on-sale bar or public

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They're going after

disclosure.

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They had the source documents for

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a year.

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out any portion of the trial at this point would

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be just devastating to this small company.

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They never raised it, so to bifurcate

THE COURT:

And given that the

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three new companies that you've identified were

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ones for which your client has no documentation

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but your client now has a belief received a

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demonstration or an offer of sale in the

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relevant time period, doesn't it necessarily

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follow from that that the defendant should be

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entitled to some third-party discovery directly

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from those entities to determine, to flesh out

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the record given that otherwise all we have is

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the recollection of your client, which by your

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own admission and understandably, isn't perfect?

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MR. ANDRE:

Your Honor, in our

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meet-and-confer, what I offered was if they

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limited discovery to something reasonable and

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agreed that it would not affect the trial date,

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go forth and conquer.

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there's no there there, as it were.

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We're very confident that

But that wasn't what they wanted.

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That the whole purpose of all of this, this

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eleventh hour 102(b) defense for on-sale bar and

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public use is a complete opposite of their false

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marking claim, is nothing more than a mechanism

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to try to stay the trial or bifurcate it out.

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If they want to take some limited

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discovery, we have no problem with that, and

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that's what we told them during the

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meet-and-confer last week.

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But open-ended discovery, taking

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hundreds of depositions again, trying to push

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out the trial date or bifurcate the trial date,

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which would have extreme prejudice on us, would

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devastate the company.

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THE COURT:

Ms. Keefe, anything

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you want to say in response?

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MS. KEEFE:

Quite a few things,

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Your Honor, but I'll limit it to two.

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The first thing is that

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Mr. Andre's suggestion was that we simply take

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document discovery, that they wouldn't oppose us

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seeking documents, but the original NDAs that

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are from this original time frame all have

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document destruction clauses.

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If Your Honor looks to

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Exhibit Three of their letter, one of the early

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NDAs, paragraph three indicates that those

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parties will either return the document or

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destroy it.

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do what we needed, nor would it potentially

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reveal oral offers for sale that might also have

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happened.

Simple document discovery would not

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Further, Your Honor, we think that

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Leader's claim of prejudice based on what would

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amount to a small extension, potentially, of the

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trial on validity is of its own making.

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documents were late-produced, even though they

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were requested in the very beginning of the

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case.

We're only here because they

These

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late-produced these documents and now are

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choosing to rely on them and attempt to use them

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as a shield rather than letting us explore

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whether or not there are also sword qualities to

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these documents.

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I believe, actually, that

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bifurcation would be a good idea.

It's nothing

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we raised with Your Honor, but the more I think

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about it, the more I think it could accomplish

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exactly what all parties need, which is to allow

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the trial date to stick for infringement and

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then to allow this discovery to proceed into the

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late-produced documents and then only go to

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validity to the extent that it's necessary.

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THE COURT:

Okay.

Thank you for

that argument.
Here's what we're going to do.

I

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do think that Facebook is entitled to take some

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limited additional discovery with respect to the

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possibility that there may be support for an

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invalidity defense based on an invalidity

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defense based on an on-sale or an offer for sale

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or a demonstration in the relevant time period.

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And I base that conclusion --

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certainly I think such evidence would be

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relevant to an invalidity defense, and there's

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certainly reason to believe that there may be

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discoverable evidence, given that there are

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three newly identified entities by -- newly

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identified by Leader, that even Leader

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recognizes at least may have received either an

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offer of sale or a public demonstration in the

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relevant time period, and that's mainly Platform

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Ventures, Tutor Ventures, and Shamrock Security

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Corporation.

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I also have the representation

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from Facebook that they have reason to believe

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there are three others that may have received

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similar offers of sale or demonstrations, namely

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Zacks Law Group, SpartaCom, and Sun Management.

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And while I understand Leader's

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response at this point is it believes that there

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were not relevant offers of sale or public

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demonstrations to those other three, given the

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way, at least, three admitted new possibilities,

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the first three I mentioned, have only recently

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been disclosed and identified by Leader, it's at

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least possible that there may be something

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relevant to be discovered from those latter

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three as well.

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And so I am going to permit

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Facebook to serve limited document requests on

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all six of those entities and to take limited

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depositions.

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exactly what "limited" means, but I can tell you

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that it's going to be done -- that the parties

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are to work together to do this as quickly and

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efficiently as possible, and it is not going to

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affect the June 28th trial date.

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I can't, sitting here, tell you

So you're all going to have to

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start meeting and conferring immediately,

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attempt to come up with a schedule that gets

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this additional discovery done as quickly as

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possible while you're doing all the other things

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to get this case ready for trial.

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If you can't work out a schedule

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then I will impose one that will be extremely

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accelerated because we're going to keep this

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case on track for the trial of June 28th, 2010.

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At this time I'm not going to

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bifurcate, so we're onboard for the trial that

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will deal with both infringement and invalidity.

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Any -- no further reargument at

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this point, but have I been clear in what my

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ruling is today, Ms. Keefe?

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MS. KEEFE:

You have, Your Honor.

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The only question I would ask is whether or not,

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given what the parties find or if it turns out,

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since these are third parties -- the parties can

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work together to try to do this quickly, but

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we're relying on the schedules of third parties.

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Would Your Honor entertain the

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possibility of a bifurcation motion -- again not

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to destroy the June 28th trial for infringement,

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but regarding the invalidity issues, would Your

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Honor entertain a bifurcation motion if it

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becomes necessary?

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THE COURT:

Certainly I'm not

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going to preclude that possibility, but if I

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receive such a motion, I'm going to be heavily

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influenced in evaluating it by evidence that the

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parties have both tried very hard, as hard as

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possible, to see if they can get this all done

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in time to preserve the fuller trial that is

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currently scheduled for June 28th.

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Anything else, Ms. Keefe?

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MS. KEEFE:

Not that I can think

of right now, Your Honor.

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THE COURT:

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And Mr. Andre?

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MR. ANDRE:

Thank you, Your Honor.

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THE COURT:

Thank you all for your

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Okay.

time.
(Proceeding ended at 5:00 p.m.)

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C E R T I F I C A T I O N

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I, DEANNA WARNER, Professional

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Reporter, certify that the foregoing is a true and

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accurate transcript of the foregoing proceeding.

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I further certify that I am neither

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attorney nor counsel for, nor related to nor employed

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by any of the parties to the action in which this

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proceeding was taken; further, that I am not a

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relative or employee of any attorney or counsel

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employed in this case, nor am I financially

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interested in this action.

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________________________________

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DEANNA WARNER

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Professional Reporter and Notary Public

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