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
20
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
7
bifurcation would be a good idea.
It's nothing
8
we raised with Your Honor, but the more I think
9
about it, the more I think it could accomplish
10
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
20
possibility that there may be support for an
21
invalidity defense based on an invalidity
22
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
2
relevant to an invalidity defense, and there's
3
certainly reason to believe that there may be
4
discoverable evidence, given that there are
5
three newly identified entities by -- newly
6
identified by Leader, that even Leader
7
recognizes at least may have received either an
8
offer of sale or a public demonstration in the
9
relevant time period, and that's mainly Platform
10
Ventures, Tutor Ventures, and Shamrock Security
11
Corporation.
12
I also have the representation
13
from Facebook that they have reason to believe
14
there are three others that may have received
15
similar offers of sale or demonstrations, namely
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Zacks Law Group, SpartaCom, and Sun Management.
17
And while I understand Leader's
18
response at this point is it believes that there
19
were not relevant offers of sale or public
20
demonstrations to those other three, given the
21
way, at least, three admitted new possibilities,
22
the first three I mentioned, have only recently
23
been disclosed and identified by Leader, it's at
24
least possible that there may be something
23
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relevant to be discovered from those latter
2
three as well.
3
And so I am going to permit
4
Facebook to serve limited document requests on
5
all six of those entities and to take limited
6
depositions.
7
exactly what "limited" means, but I can tell you
8
that it's going to be done -- that the parties
9
are to work together to do this as quickly and
10
efficiently as possible, and it is not going to
11
affect the June 28th trial date.
12
I can't, sitting here, tell you
So you're all going to have to
13
start meeting and conferring immediately,
14
attempt to come up with a schedule that gets
15
this additional discovery done as quickly as
16
possible while you're doing all the other things
17
to get this case ready for trial.
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If you can't work out a schedule
19
then I will impose one that will be extremely
20
accelerated because we're going to keep this
21
case on track for the trial of June 28th, 2010.
22
At this time I'm not going to
23
bifurcate, so we're onboard for the trial that
24
will deal with both infringement and invalidity.
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Any -- no further reargument at
2
this point, but have I been clear in what my
3
ruling is today, Ms. Keefe?
4
MS. KEEFE:
You have, Your Honor.
5
The only question I would ask is whether or not,
6
given what the parties find or if it turns out,
7
since these are third parties -- the parties can
8
work together to try to do this quickly, but
9
we're relying on the schedules of third parties.
10
Would Your Honor entertain the
11
possibility of a bifurcation motion -- again not
12
to destroy the June 28th trial for infringement,
13
but regarding the invalidity issues, would Your
14
Honor entertain a bifurcation motion if it
15
becomes necessary?
16
THE COURT:
Certainly I'm not
17
going to preclude that possibility, but if I
18
receive such a motion, I'm going to be heavily
19
influenced in evaluating it by evidence that the
20
parties have both tried very hard, as hard as
21
possible, to see if they can get this all done
22
in time to preserve the fuller trial that is
23
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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