Leader Technologies Inc. v. Facebook Inc.

Filing 695

Official Transcript of Telephone Conference held on March 23, 2011 before Judge Stark. Court Reporter Brian Gaffigan, Telephone number [phone]. Transcript may be viewed at the court public terminal or purchased through the Court Reporter before the deadline for Release of Transcript Restriction. After that date, it may be obtained through PACER. Redaction Request due 4/25/2011. Redacted Transcript Deadline set for 5/5/2011. Release of Transcript Restriction set for 7/5/2011. (bpg)

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IN THE UNITED STATES DISTRICT COURT
IN AND FOR THE DISTRICT OF DELAWARE

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LEADER TECHNOLOGIES, INC., a
Delaware corporation,

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v.
FACEBOOK INC., a
Delaware corporation,

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Defendant.

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NO. 08-862 (LPS)

- - -

- - BEFORE:

HONORABLE LEONARD P. STARK, U.S.D.C.J.
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APPEARANCES:

POTTER ANDERSON & CORROON, LLP
BY: JONATHAN A. CHOA, ESQ.
and
KING & SPALDING
BY: PAUL J. ANDRE, ESQ.
(Redwood Shores, California)

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CIVIL ACTION

Wilmington, Delaware
Wednesday, March 23, 2011
TELEPHONE CONFERENCE

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:
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Plaintiff,

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- - -

Counsel for Leader Technologies, Inc.
BLANK ROME, LLP
BY: STEVEN L. CAPONI, ESQ.
and
Brian P. Gaffigan
Registered Merit Reporter

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APPEARANCES:

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(Continued)
COOLEY GODWARD KRONISH, LLP
BY: MARK R. WEINSTEIN, ESQ., and
MICHAEL G. RHODES, ESQ.
(Palo Alto, California)

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Counsel for Facebook, Inc.

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- oOo -

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P R O C E E D I N G S

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(REPORTER'S NOTE:

conference was held in chambers, beginning at 2:31 p.m.)

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The following telephone

THE COURT:
Judge Stark.

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Good afternoon, everybody.

This is

Who is there, please?
MR. CHOA:

Good afternoon, your Honor.

This is

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Jonathan Choa from Potter Anderson & Corroon for Leader

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Technologies.

With me is Paul Andre from King & Spalding.

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THE COURT:

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Okay.

MR. CAPONI:

Your Honor, Steve Caponi from Blank

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Rome.

And I have with me Mike Rhodes and Mark Weinstein

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from Cooley for Facebook.

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THE COURT:

All right.

For the record, and I do

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have a court reporter with me, this is our matter of Leader

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Technologies Inc. versus Facebook Inc., our Civil Action No.

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08-862-LPS.

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issue regarding Rule 54(b) that has arisen between the

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parties and as set out in the letter of March 22nd.

The purpose of today's call is to discuss the

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Basically, I view it as essentially Leader

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moving for entry of partial judgment pursuant to Federal

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Rule of Civil Procedure 54(b).

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party, we'll hear from you first.

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MR. ANDRE:

So Leader being the moving

Thank you, your Honor.

This is Paul

Andre for Leader Technologies.

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I think as your Honor is well aware and as the

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parties agree, this is within the Court's discretion to

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certify the jury verdict and the Court's orders of March

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14th under Rule 54(b).

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dictates that these orders stand, the jury verdict should

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be certified.

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liability have been decided in this case.

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issues regarding infringement or validity that remain

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outstanding.

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Judicial economy in this case really

As your Honor is aware, all the issues of
There are no

At this point, if the Federal Circuit Court of

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Appeals were to affirm your Honor's judgments that were

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entered, then this case would be essentially done, thus

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mooting any need to go through unenforceability claims of

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an invalid patent.

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If, on the other hand, the case was remanded

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back for any reason to your Honor's court for further

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proceedings, you could at that point handle the inequitable

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conduct claims with the other issues that would be remanded

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back, thus having the economies weigh very heavily in favor

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of certifying them under 54(b).

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Just from a pure practical matter, if the

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Federal Circuit does remand anything back for your Honor,

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it is highly likely that once those issues will be decided,

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there will be a second appeal nonetheless.

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this now, instead of going through another trial with your

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Honor, which would take several days obviously for the

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trial and another round of post-trial briefing, your Honor

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could be done with this.

So by certifying

There would be no more drain on

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this Court's time.

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determinations as to the validity or whatever other claims

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it would have outstanding.

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The Federal Circuit could make its

If it does come back, then it will come back

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regardless.

So economy is a strong factor in dictating

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54(b) certification is correct, and this case is ripe for

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that type of certification.

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A secondary consideration or a secondary factor

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we should look at are the uncertain legal standards at this

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time.

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conduct issue on an en banc panel, and they're looking at

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several issues as to how you approve inequitable conduct.

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This is the Therasense case.

The Federal Circuit has taken up the inequitable

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So, at this point, the only thing certain about

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inequitable conduct is the legal standard will likely

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change.

If we were to take the case on before that decision

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came down from the en banc court, then whatever decision

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would be made, it would be highly likely that that would be

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based on law that is out of date.

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If we do immediately thereafter or right with

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the Therasense case, it would deprive the parties in the

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case and the Court the opportunity to have some case law

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interpretations, further interpretation of panels of the

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Federal Circuit.

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certifying at this point.

So that is another factor weighing in

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Finally, the last reason to certify at this

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point is the prejudice to Leader by making Leader to go

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forward with a trial at this point.

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this claim of inequitable conduct did not come up in this

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case until the very last minute.

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chance to really do much along this lines.

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a chance to put forth an expert analysis, expert reports of

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any kind.

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measure in one of our expert reports because Facebook put

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forward an expert report along this line, materiality, but

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when they did so, the claim was not in the case, it was

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still pending.

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As your Honor is aware,

Leader did not have a
It didn't have

We addressed, to some degree, a preventive

We also didn't have a chance to file summary

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judgment.

We think if this did go forward, this issue would

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be ripe for summary judgment, saving the parties and the

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Court significant resources in preparing for trial and going

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forward in trial.

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So in looking at all three of these factors, it

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weighs very heavily in favor of 54(b) certification and

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nothing that Facebook put forward in their letter would

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dictate otherwise.

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The case law that they cited is not on point.

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Ortho-McNeil case, for example, is one where validity and

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infringement issues were still outstanding.

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case here.

That is not the

That just reaffirm the fact it was within the

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Court's discretion.

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the District Court's discretion in certifying under 54(b).

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So there is no good reason at this point to go

And, there, the Supreme Court affirmed

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forward to try to find unenforceability of claims that have

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been found to be invalid.

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THE COURT:

Okay.

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MR. ANDRE:

Thank you, your Honor.

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THE COURT:

Thank you.

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Let me hear from

Facebook, please.

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MR. RHODES:

Your Honor, this is Mike Rhodes.

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I'm going to let Mr. Weinstein argue.

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express Ms. Keyes' disappointment she could not attend

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today.

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express our apologies for that.

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She had a family emergency.

THE COURT:
you.

The

I just wanted to

I just wanted to

I hope everything is okay.

Thank

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Mr. Weinstein, you can go ahead.

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MR. WEINSTEIN:

Thank you, Your Honor.

I'll

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address Mr. Andres' points in the order in which he

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presented them which I think tracks what was presented in

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his letter.

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On the judicial economy point, your Honor, I think

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there is a fundamental disconnect here on what Mr. Andre was

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saying.

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bar was to be affirmed, there would be no inequitable conduct

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He is saying, if your Honor's decision on the on-sale

issue because the patent is invalid.

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That is not true.

The reason the inequitable

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conduct claim is ripe and valid is because under Section 285

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of the Patent Act, if there had been inequitable conduct in

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connection with the procurement of the patent, which we

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believe there has been, which is why we pled the claim,

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basically it would be entitled to seek recovery of its

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attorneys fees in connection with the defense of this case.

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The inequitable conduct finding would also, in

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addition, provide an alternative basis, an additional basis

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to affirm your Honor's judgment.

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valid.

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So the claim is completely

And even if the Federal Circuit were to affirm

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the invalidity finding based on the on-sale bar, we still

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have a ripe and valid claim for inequitable conduct based on

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the exceptional case and its recovery fees.

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The second point on judicial economy, your Honor,

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is that there is an extraordinary high degree of overlap

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between the on-sale bar issues that were adjudicated in the

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first trial and which would be the subject of Leader's appeal

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and the inequitable conduct claim.

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pressed to identify any issue that they seek to appeal that is

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more intertwined with inequitable conduct than the on-sale bar

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issue that they seek to appeal.

In fact, I would be hard

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We're talking about the same offers for sale,

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the same public demonstrations of Leader2Leader, the same

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witnesses, the same evidence that was presented in the first

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trial.

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So if your Honor were to certify this and then

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we had a second appeal with respect to the inequitable

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conduct claim, we would essentially have two panels of the

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Federal Circuit at different times essentially considering

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the same evidence twice:

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bar and one in the context of the inequitable conduct claim.

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one in the context of the on-sale

Under the Curtiss-Wright case and the Ortho-McNeil

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case, that just doesn't make any sense to put the Court of

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Appeals through that kind of effort.

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with your Honor 's directions at the pretrial conference where

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you told the parties you intended to try the remainder of the

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case prior to any appeal.

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And that is consistent

On the legal standard issue, I think this is

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also a red herring.

The Therasense case has actually been

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pending for some time.

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November.

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some analysis this morning and asked a couple of colleagues

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who were Federal Circuit clerks.

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Circuit gets en banc cases out within six-to-eight months

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after the oral argument.

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Therasense on the oral argument, so it is exceedingly likely

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that by the time your Honor's scheduled court trial here on

Oral arguments were completed in

It's fully briefed.

So in most cases -- I did

In most cases, the Federal

We're already four months into

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inequitable conduct, we would have a decision in the

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Therasense case.

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As a more fundamental matter, just generally the

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parties have to take the law as they find it in any case.

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mean if we stop adjudicating cases because there was a case

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before an appellate court, we would have the situation come

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up all the time.

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I

But I suspect that we're going to have a

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decision.

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at the last six or seven en banc decisions and I couldn't

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find any case in which the Federal Circuit took more than

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seven months to decide the en banc decision after the oral

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argument was completed.

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I mean no one can predict for sure, but I looked

And the third point, your Honor, on prejudice

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that Mr. Andre addresses.

This was not a claim that was

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brought into the case last minute.

Your Honor found that we

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were diligent and found good cause to allow the amendment

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under Rule 16(b) when you allowed leave to amend.

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shortly after Mr. McKibben's deposition.

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We moved

As far as the prejudice goes, I think your Honor

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already answered that question.

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leave to amend when your Honor noted that the evidence here

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is really in Leader's possession.

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In connection with granting

With respect to experts, they did put in
portions of their expert report from Herbsleb on the issue

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of materiality.

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issue of materiality.

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in limine with respect to this claim are all complete.

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don't think there is going to be any prejudice that they can

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cognizably point to with respect to that claim.

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They deposed our expert Mr. Hughes on the
So the discovery and even the motion
So I

I think overall, your Honor, just, there is no

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perfect in certifying this case.

It is just going to create

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essentially a second duplicative and piecemeal appeal which

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is contrary to the purpose of the 54(b).

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Thank you, your Honor.

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THE COURT:

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Mr. Andre, any response?

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MR. ANDRE:

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When we talk about judicial economy, I mean the

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fact of the matter is what Facebook has just articulated is

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a considerable amount of more work for your Honor in this

Okay.

Yes.

Thank you, Mr. Weinstein.

Just very quickly, your Honor.

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court.

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Circuit alleviates that burden on the District Court and

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on your Honor at this time.

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Certification at this point up to the Federal

The idea that the only reason you go after

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inequitable conduct for an invalid patent is attorney fees

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under Section 285 is a real thin reason to engage this Court

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to this level.

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another set of pretrial issues, trial, post-trial briefing.

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And then if the Court did decide that there was inequitable

I mean obviously you have to go through

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conduct, as Facebook would intend, then you would have to

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have another round of motions for attorney fees.

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This is something that is not in the best

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interest of this Court and it doesn't help the Federal

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Circuit at all.

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favor of certification.

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The economies here weigh very heavily in

As far as the prejudice to Leader, the prejudice

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is in the fact that we are, to some degree, a very small

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company and making us go fight the giant Facebook who is

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making billions of dollars a year is not something that is

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-- it is a great delay tactic for Facebook and will take

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months and months and months before we would even get to

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the appeal, maybe even years before we even get to the

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appellate level.

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and would be prejudicial to Leader.

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Thank you.

Obviously, that is in favor of Facebook

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THE COURT:

Okay.

Thank you.

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Well, as I said, I view this as a motion under

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Rule 54(b) by Leader, a motion for entry of partial judgment.

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And I'm going to grant Leader's motion.

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I do think that this is a discretionary decision,

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and I think it's fully justified under the circumstances

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present here, applying the rule as it is written.

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The rule, of course, states that the Court may
direct entry of a final judgment as to one or more but fewer

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than all claims or parties only if the Court expressly

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determines that there is no just reason for delay.

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Of course, here, it's undisputed that there

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is nothing left to do with respect to infringement or

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invalidity.

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unenforceability of the patent due to inequitable conduct.

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All that is left is Facebook's counterclaim for

I note that the Facebook false marking counter-

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claim is technically still out there, but Facebook has

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stated in its letter that that will be dropped, so the only

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remaining issue is the unenforceability of a patent that has

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been found to be invalid.

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If we were to proceed in the manner that

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Facebook wants, there would be significant delay here for

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which there is no just reason.

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delay would have to be at least six months, and perhaps

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much longer.

By my calculation, the

And I get to that calculation first because

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possibly somebody may want discovery.

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plaintiff would want a chance to move for summary judgment.

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We've heard that the

Just getting on my calender, which I can tell

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you is pretty full, for a two-day bench trial would take us,

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at best case, into the summer.

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all want to file post-trial briefs following the trial.

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absolute best case would get an opinion out to you maybe by

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the end of September.

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might well be a motion for attorney fees to follow that.

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I'm quite sure you would
So

And then today, I'm hearing there

So we are talking about quite a significant
delay if this motion today were to be denied.
And as I said, I don't see any just reason

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for any further delay in getting this case to the Federal

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Circuit if that is where either party wishes to take it

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consistent with their rights.

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Obviously, quite a lot has been done and decided

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in this court, so I imagine one or both sides sees numerous

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potential grounds for appeal.

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prejudice to Facebook from deferring determination on the

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inequitable conduct counterclaim.

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I don't see any significant

I do agree with plaintiff that judicial

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efficiency will be best served by sending this case up to

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the Federal Circuit now.

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If the judgment down here is upheld on appeal, I
hear Facebook that they're saying that they may well

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nonetheless try to pursue their inequitable conduct

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counterclaims, but I think it would be at best largely moot,

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but certainly it's not an issue that is greatly pressing to

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determine the unenforceability or enforceability of a patent

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that has been found to be invalid.

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And, of course, contrary, if the judgment of

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this court is not upheld on appeal, then it's almost certain

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the Court here will have to have another trial or at least

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certainly additional proceedings and it will be far more

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efficient to deal with the inequitable conduct counterclaim

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in a context of those subsequent proceedings.

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While not a big factor, I have also considered

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the possibility that inequitable conduct law may be in flux.

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Possibly through the Therasense en banc decision, the legal

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standards may be changing.

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I had an opportunity to review the earlier

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comments that I made I believe at the second pretrial

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conference which Facebook called out in its letter.

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it's true that I said something to the effect that I

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intended at that time to try the remainder of the case

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prior to an appeal, but I can tell you, frankly, what I was

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focused on at that time was what would happen if Leader

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prevailed at the trial.

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in that context.

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Mr. Andre at the first pretrial conference in that context

And

It seems to me that the issue arose

I think the issue was first raised by

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and then in the subsequent letters the parties wrote to me

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between the first and the second pretrial conference.

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issue seemed to me mostly framed as what happens with

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respect to issues like willfulness and damages and also

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inequitable conduct if Leader were to prevail at the first

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trial.

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what I had primarily in mind.

And so when I expressed my intent, that was at least

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The

So for those reasons, I am going to grant the
request to enter a partial judgment pursuant to Rule 54(b).

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I'm directing that the parties meet and confer

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and submit to me a proposed form of judgment by this Friday,

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March 25th so that I can enter something and let you all

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move on, if that is what your intent is to do.

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I don't want anymore argument, but I want to
make sure I've been clear.

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Are there any questions, Mr. Andre?

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MR. ANDRE:

No.

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THE COURT:

And Mr. Weinstein?

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MR. WEINSTEIN:

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THE COURT:

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Thank you, your Honor.

No, your Honor.

Okay.

Thank you all very much.

Good-bye.

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(The attorneys respond, "Thank you, your Honor.")

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(Telephone conference ends at 2:50 p.m.)

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