EMG Technology, LLC v. Apple, Inc.

Filing 218

NOTICE OF FILING OF OFFICIAL TRANSCRIPT of Hotline Telephonic Conference held on 12/16/2009 before Judge Bush. Court Reporter/Transcriber: Bryn & Associates,Telephone number: 903/712-2273. NOTICE RE REDACTION OF TRANSCRIPTS: The parties have seven (7) business days to file with the Court a Notice of Intent to Request Redaction of this transcript. If no such Notice is filed, the transcript will be made remotely electronically available to the public without redaction after 90 calendar days. The policy is located on our website at www.txed.uscourts.gov Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Redaction Request due 2/18/2010. Redacted Transcript Deadline set for 3/1/2010. Release of Transcript Restriction set for 4/28/2010. (pad, )

1 1 2 3 4 5 6 7 8 9 10 11 12 FOR EMG TECHNOLOGY: 13 14 15 16 FOR EMG TECHNOLOGY: 17 18 19 20 21 22 23 24 25 Proceedings recorded by ECRO; transcript produced by CAT. Bryn & Associates, Inc. [phone] FOR AMERICAN AIRLINES: BY: Mr. Charles Ainsworth Mr. Robert M. Parker Mr. Robert Christopher Bunt PARKER BUNT & AINSWORTH 100 E. Ferguson, Suite 1114 Tyler, TX 75702 [phone] [phone] Fax BY: Mr. Russell J. Genet NIXON PEABODY LLP - CHICAGO 300 S. Riverside Plaza, 16th Floor Chicago, IL 60606 [phone] [phone] Fax BY: Mr. Robert D. Becker Mr. Shawn G. Hansen MANATT PHELPS & PHILLIPS, LLP 1001 Page Mill Road, Bldg. 2 Palo Alto, CA 04304 [phone] [phone] Fax IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS PLANO DIVISION EMG TECHNOLOGY, LLC VS. APPLE, INC. § CAUSE 6:08CV447 § § DECEMBER 16, 2009 § § (Assigned Judge Leonard Davis)

HOTLINE TELEPHONIC CONFERENCE BEFORE THE HONORABLE DON BUSH UNITED STATES MAGISTRATE JUDGE APPEARANCES: FOR APPLE, INC.: BY: Mr. Garland T. Stephens Mr. John R. Lane FISH & RICHARDSON, PC-HOUSTON 1221 McKinney Street, Suite 2800 Houston, TX 77010 [phone] [phone] Fax

2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Bryn & Associates, Inc. [phone] Proceedings .................................. Reporter's Certificate ....................... Page 3 22 INDEX

3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 please? MR. BECKER: G-O-T-T-F-U-R-C-H-T. MR. AINSWORTH: Judge Bush, you have Charles Ainsworth, Chris Bunt and Robert Parker on the line for EMG, the plaintiff. THE COURT: For the plaintiff? MR. AINSWORTH: Yes, sir. THE COURT: Judge Parker, Mr. Ainsworth? MR. AINSWORTH: And Chris Bunt. THE COURT: Well, all three of you are not going to talk, are you? UNIDENTIFIED SPEAKER: We're here. UNIDENTIFIED SPEAKER: No, sir. THE COURT: All right. Who's going to talk? MR. PARKER: We might, Judge, if you let us. MR. HANSEN: And then also on the line, this is Shawn Hansen with Manatt, Phelps & Phillips also representing Bryn & Associates, Inc. [phone] THE COURT: Okay. I've got Mr. Stephens for Apple. Who else is there? MR. BECKER: And Robert Becker from Manatt, Phelps & Phillips for the witness, Mr. Gottfurcht. THE COURT: Robert Becker for the witness. What's the witness' name? MR. BECKER: Grant Gottfurcht. THE COURT: How do you spell that last name,

4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 enough. All right. Now, let me just go over some guidelines. First of all, I'm having this recorded or -- you all have a court reporter in there? UNIDENTIFIED SPEAKER: We do. THE COURT: Okay. Very well. Well, the court reporter is taking this all down, this -UNIDENTIFIED SPEAKER: Well, she's not, Your Honor, because we thought she might need to read back some of the record. But if you'd like, we can have her transcribe the call. THE COURT: Are we recording it? Okay. Well, we're recording it, so that's fine. I don't think I'll have to have anybody read back the record. Okay. So the EMG Technology versus Apple, et al., hotline call, Case No. 68-cv-447, another patent discovery dispute. Bryn & Associates, Inc. [phone] the plaintiff EMG. MR. GENET: And this is Russ Genet. It's G-E-N-E-T. I'm here at the deposition representing one of the other defendants, American Airlines. MR. LANE: We also have John Lane, Fish & Richardson, representing Apple, and Jeff Ritcher, in-house counsel for the deposition. THE COURT: Okay. Well, I think that will be

5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Parker. THE COURT: Okay. All right. Go ahead. MR. STEPHENS: So both Misters Gottfurcht have said that they cannot testify to their understanding, for Bryn & Associates, Inc. [phone] So who wants to -- who's upset about what's going on here? MR. STEPHENS: Your Honor, this is Garland Stephens for Apple. We're the ones that set up the call, so I can explain the circumstances. THE COURT: All right. MR. STEPHENS: We've been deposing the inventors on the EMG patent for the last two days. Yesterday it was Elliott Gottfurcht and today it's his son, Grant Gottfurcht. And the plaintiffs have taken a very unusual and extremely aggressive position on privilege, and that is essentially that the inventors cannot testify to their understanding of the patents at all without -THE COURT: Wait a minute. Wait. The inventor cannot testify to their understanding? You mean his understanding? MR. STEPHENS: Yes. I'm sorry. The inventors' understanding. THE COURT: Okay. Yeah. I wouldn't think you could testify to Judge Parker's understanding. MR. STEPHENS: Yes. I did not mean Judge

6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 example, the figures of the patent or the language of the claims of the patent or the descriptions and the specifications of the patent without revealing attorney-client privileged information. And, therefore, have declined to answer, I would say, probably hundreds of questions directed to the patent in the lawsuit. They've also declined to answer on the same grounds any questions about whether or not they have implemented the invention in the patent in suit and also whether or not a particular website that they operate practices the claims of the patent in the lawsuit. That's the primary issue and that is the issue which has wasted many hours of deposition time in the last two days. THE COURT: Well, in my experience with all you patent lawyers is you all waste too much time. MR. STEPHENS: I have a feeling that our clients might agree with you, Your Honor. THE COURT: All right. Well, I don't think -my position among the patent bars is pretty well known. I think most of this stuff is out of hand. Okay. Now -MR. STEPHENS: But there is one other issue, Your Honor. I can either address it after Mr. Becker addresses the first issue or I can tell you about it now. THE COURT: You've given me three issues now, Bryn & Associates, Inc. [phone]

7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Mr. Stephens, not just one. What's the fourth issue? MR. STEPHENS: Okay. The other issue is a assertion of a privilege not to answer questions about the dollar resources available for the plaintiffs. They have raised the issue that they have been unable to implement the invention of the patent in suit because they didn't have enough resources to do it. I asked Mr. Gottfurcht -THE COURT: Okay. Wait a minute. Now, the inventors are not the plaintiffs, correct? MR. STEPHENS: They own -- they own the company, EMG, as I understand it. THE COURT: Well, I mean, how is it owned? MR. STEPHENS: It is -- well, they should speak to that, Your Honor, but it is -THE COURT: Well, wait a minute. Look, I think that's the first thing you'd want to know before you -- how do you know -- I mean, is it like -- is it an LLC, is it a partnership, is it a Texas corporation? When you say they own it, what do you mean? MR. STEPHENS: Well, Your Honor, Mr. Gottfurcht did testify yesterday that he controls the corporation. But, again, I'm -- rather than characterize the record, I'd like them to tell you how it's -- how it's run. THE COURT: Well -Bryn & Associates, Inc. [phone]

8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. STEPHENS: Let me add -THE COURT: How is it relevant? MR. STEPHENS: I'm sorry? THE COURT: How is the last issue as to the -their monetary net worth, how is that relevant to anything in this case? MR. STEPHENS: It's relevant, Your Honor, because they have claimed that they could not implement the invention, despite having about 10 years to do it, because they didn't have the resources to do so. THE COURT: Well, okay. And why is it important? What issue in the case involves implementation? MR. STEPHENS: Well, the issue, for example, is whether or not they were irreparably harmed by any conduct of Apple in this case. They had many years to bring their invention into the world in a physical device or a website before Apple ever introduced any of the products that are accused of infringement in this case. Apparently, they didn't do that, and one of the rationales for not doing it is that they didn't have enough money to do it. There's evidence in the record that Mr. Gottfurcht is extremely wealthy and, therefore, could have done so, but they're refusing to answer any questions about that. THE COURT: Well, how big is this company? Bryn & Associates, Inc. [phone]

9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. STEPHENS: Well, it was formed just a few weeks before the suit was filed, so I don't think it's very big. It offices in Mr. Gottfurcht's home. Other than that, they have a few documents in Tyler, Texas, and I don't think they have any other physical presence anywhere. THE COURT: All right. Now, let me hear from the -- now, who's going to be speaking on behalf of the inventor? I always go back to one of the cases we had here several years ago. I was reading the deposition of an inventor and they asked the inventor what the patent meant, and his response is, explicative, "I don't know. Some lawyer wrote it," so -- anyway, I think that's frequently what happens in these cases. MR. STEPHENS: Well, Your Honor, let me just add one piece; and that is, I am okay with the assertions of privilege. My concern is that since I've never seen anyone assert a privilege in such a broad way, that sometime between now and trial, they're going to waive that privilege and decide to testify -- have the inventors testify about the meaning of the patents. And that would be grossly unfair because they've refused to answer any of my many questions on that topic. THE COURT: All right. Well, has Judge Davis or Judge Love conducted the claim construction hearing yet? Bryn & Associates, Inc. [phone]

10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. STEPHENS: No, Your Honor. THE COURT: Okay. All right. MR. STEPHENS: But this case has -- this case has been pending for more than a year. It was filed last November. UNIDENTIFIED SPEAKER: Yeah. THE COURT: Okay. MR. PARKER: Your Honor, this is Robert Parker. I would like to speak to the last issue, the net worth issue, if the Court decides to take that up. THE COURT: All right. Let's take up that one last -- I mean, first since I've already heard from Mr. Stephens. What is it, Judge Parker, that you want to add? MR. PARKER: This -- the resources -- this is a limited liability partnership as I understand it. Mr. Grant Gottfurcht is not a partner, but there is a trust that is a partner. They're posing questions to him concerning his net worth and what assets he has. Our objection relates to, number one, relevancy, and number two, a right of privacy concerning his personal finances. It's a little different, Judge, than the privilege typically deal with, but it's treated essentially the same. A person can be compelled to answer those type questions, but only where there's a compelling public interest Bryn & Associates, Inc. [phone]

11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 involved, which I don't see in this case or in a case like this. And that's the basis for our objection. THE COURT: Well, what Mr. Stephens is saying the public interest is that this is a patent that they are saying that they will suffer irreparable harm if the injunction is not granted, and I think that would be within the public interest. And I'm not sure that -- I'm not sure that his net worth necessarily has to come out on the table. I'm going to direct this: The plaintiff can ask Mr. Gottfurcht -- I hope I said that right, I apologize if I didn't -- why didn't he put his own money into the company. And he can say, A, I didn't think that was necessary. B, I'm not going to expose my money in a new venture. C, I don't have the money. And if he says, I don't have the money, you got arguments to the contrary, then you can certainly impeach him at trial, I guess, or impeach him with other evidence. But Mr. Stephens can ask him why he didn't invest his own money, but I'm not going to have him getting into net worth and all that. I don't think that's really relevant. And, I mean, that certainly will come out at trial that this man has an interest, the trust is -- the company is owned by a trust of which he's a -- I guess a beneficiary of the trust as such, maybe even a settler of the trust. You can make those arguments all day long, Bryn & Associates, Inc. [phone]

12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 money? MR. STEPHENS: Well, he owned -- he has either owned a direct interest in or controlled the patent since they issued. And it's that period, Your Honor, leading up until the time that the plaintiff was formed just a month or so before the lawsuit was filed that we're talking about, because that's the period where they had, essentially, an entire decade to develop the invention and failed to do so. MR. BECKER: Your Honor, this is Robert Becker for these witnesses. I'd like to address a few of these points. I don't think that the witnesses have made these Bryn & Associates, Inc. [phone] enough money? MR. STEPHENS: Yes, he did. THE COURT: He personally did not have enough Mr. Stephens, I guess, on the injunction issue. But you -MR. STEPHENS: But, Your Honor, if I may. THE COURT: Yeah. MR. STEPHENS: They also refuse to answer any questions about the assets that the trust, which Judge Parker says is a member of the company, on exactly the same ground. And I don't see how I can impeach Mr. Gottfurcht's claim that he didn't have enough money to develop the application if I can't ask him how much money he did have. THE COURT: Well, has he said he didn't have

13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 assertions at all. They have talked about funding of the LLC, they have talked about and were ready and willing to talk about the income of the LLC and the operations of the LLC. The questions that they refused to answer were point blank, what is your net worth? THE COURT: Okay. Well, they're not going to have to answer that question. MR. STEPHENS: Your Honor, what about the trust? I also asked how much -- what assets are contained in the trust, and they refused to answer those questions on the same ground. THE COURT: I don't think it's relevant. I mean, it's just -- it's a limited liability corporation. I mean, you can argue all day long that, hey, folks, this company was just formed a couple of days before this suit was filed. He's not -- he doesn't even have an office in a mobile home anywhere, he's just living out of his house. And you can call him all kinds of names you want, but I don't think that -- what the worth of the trust is is really relevant to anything. Mr. Stephens, there's -- you know, there's a lot of ways you can handle that argument. You can -- you can make those jurors believe that this company is no more than a -- I guess, what do you all call them out there in deep east Texas, trails? You can make that argument all day long. You don't Bryn & Associates, Inc. [phone]

14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 this? MR. BECKER: No, they had -- that's a very good question. They had help. They came up with and conceived of Bryn & Associates, Inc. [phone] need to know his financial worth. And if he didn't -MR. STEPHENS: Okay, Your Honor. THE COURT: If he didn't want to put his own money, you can ask him that. Why don't you put your own money or assets into the development of this patent? He can tell you why he didn't. That's a fair question. You can make that argument all day long, so -MR. STEPHENS: Understood, Your Honor. THE COURT: Okay. So what next problem do we have to overcome? MR. BECKER: So, Your Honor, this is Robert Becker again for the witnesses. The other objections were relating to instructions not to answer or just the witness not answering based on attorney-client privilege. Certainly we think that the assertion of privilege is appropriate. This is a rather unusual case where the two witnesses that are being deposed or have been deposed the last two days are not experts in the field. They're rather unsophisticated when it comes to the technology and certainly unsophisticated with respect to the patents, so they're -THE COURT: What did they do, just stumble into

15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 various inventions and then went out to experts in the field to help them develop those inventions and sought attorneys to help them capture the inventions on paper and filed and prosecute patent application. The particular witness that's here today, there's been no -- nothing established that he's even read these patents before in his entire life. And the questions that are being asked of him are, what do the claims mean, which we -THE COURT: Okay. Wait a minute. Wait a minute. You're going to make that argument to the jury that this man is -- the company's prosecuting these patents, but the fella who owns the -- I guess does he still hold the patents or does the company hold the patents? MR. BECKER: The LLC company holds the patents. THE COURT: Okay. He assigned them? MR. BECKER: Yes. THE COURT: Okay. He assigned the -- now, you keep saying LLP. LLC, isn't it? MR. BECKER: It's an LLC. THE COURT: C? MR. BECKER: Like in Charlie. THE COURT: Charlie. Okay. Lima, Lima, Charlie. All right. Well -MR. BECKER: All right. So to finish that Bryn & Associates, Inc. [phone]

16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 thought, Your Honor, that -- what the problem is, is that for the most part, any understanding that he has, which is very limited is based on the advice that he got from his attorney. He has answered questions. It's inaccurate to say he won't answer any questions. He's gone over some figures. He's told about how he came up with the invention, those sorts of things. But the questions on claim meaning, for example, which I think are inappropriate under Local Rule 2-5 right now, and on what the meaning of the patent is, the document that he didn't write and only knows about based on legal advice, he's saying that he doesn't have anything to respond other than to divulge his attorney's advice on the subject. THE COURT: Well, I think that Mr. Stephens can ask him what his understanding of how the patent is practiced. If he says, I have no clue other than what some attorney's told me, then he can tell you that and then he can tell that to the jury. MR. STEPHENS: Your Honor, that's exactly what's happened. This is Garland Stephens. And I'm okay with that, as long as they're going to be stuck with that. What I don't want and what I'm very fearful will happen is that this story is going to change between now and trial. THE COURT: You guys worry about too many things that never happen, so, you know -Bryn & Associates, Inc. [phone]

17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. STEPHENS: And these are the inventors, Your Honor, saying that they don't understand the patents except the -- what the lawyers told them about. THE COURT: I think that -- I think that's a wonderful argument for you, Mr. Stephens. Well, you got his response. He doesn't -- he doesn't understand other than what some lawyer has told him, and he -MR. STEPHENS: Okay. All right. I'm just -I'm just concerned that -THE COURT: Well, if you -- if you get an alternative answer sometime from him, and he's testified under oath, I guess you can refer to the U.S. Attorney's Office for perjury, can't you? MR. STEPHENS: That's a good point, Your Honor. THE COURT: Well, I mean, I don't take perjury very lightly in any kind of a setting. So he's told you, I guess what you're saying is, that he doesn't understand other than what some lawyer's told him. So you can't go any further than that. I mean, I think there could be some -- you know, this is kind of a gray area where lawyers sit around and write the patents and then try to claim some sort of a privilege when they're putting the patents at issue. I think there's a lot of areas and grounds for labor there. But at this preliminary juncture he's told you what he knows about it, Bryn & Associates, Inc. [phone]

18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 if -THE COURT: I don't know. I'm not here to give you advice. I stopped -MR. STEPHENS: Okay. THE COURT: I stopped practicing law seven years ago, and it's a misdemeanor for me to practice law, so -- and, you know, there are many days where I think I made the wrong decision, but for right now I'm stuck with it, so -- anyway, I can't give you advice, because I'm not getting paid $650 an hour either. So where do we go from here? What's the next problem we have? MR. STEPHENS: Well, I think that's the only problem, Your Honor. I just, once again, would ask you to tell the plaintiffs that if they're going to take this position on the deposition -THE COURT: I'm not telling anybody anything. I have made my ruling, and he's testified under oath, and I don't think there's anything else I can say about it. I take testifying under oath a very serious and solemn responsibility. All right. Now, somebody said also there's questions about whether the patent's been implemented and does Bryn & Associates, Inc. [phone] which evidently is nothing, which personally I don't think will sell very well to a jury, but -MR. STEPHENS: Well, your Honor, what do I do

19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the web -- does some website practice the patent? What's that all about? MR. STEPHENS: Okay, Your Honor. They're very closely related. They've also taken the position that they cannot -- the inventors, that is, cannot testify about whether they have ever implemented their invention, because to do so would reveal attorney-client privilege. And further, they've taken the position that they can't testify about whether they believe Apple infringes because to do so would violate attorney-client privilege. THE COURT: Well, I think you can ask him -here's the way we used to do it, and I -- maybe I'm digressing -- give a little advice. Outside anything your lawyers may have told you, do you have any personal knowledge that there's infringement? If he says no, then he's answered your question. Then it throws on the lawyers. MR. STEPHENS: And, of course, I've done that, Your Honor, and that's been the answer, that they have no understanding other than what the lawyers have told them. THE COURT: All right. Well, that's, you know -- that's great. MR. STEPHENS: I don't know how they brought the lawsuit, but -THE COURT: Well, you know, you can argue that Bryn & Associates, Inc. [phone]

20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 all day long. I guess you all haven't filed your motions yet. You can argue that in front of a jury. But it's nothing but an attorney-driven lawsuit, and we have the testimony to support it. I'm sure you've never been guilty of that on the other side either, have you? MR. STEPHENS: Well, Your Honor, I mostly do defense work, so that's an easy one for me. THE COURT: Okay. All right. Well -- and then that would go along with -- and some website? Now, what is the -- which website are we talking about? MR. STEPHENS: This is a website that the company EMG operated that they have variously taken the position does not implement all the elements of any claim, and that's in their 3-1 pleading. And then at other times have said that it does reflect the elements of the claims. But then the inventors when asked -- and these are the people who are responsible for building and operating the website. When they were asked about whether or not it practices the claims of the patents, they said they can't testify on that without revealing attorney-client privilege, because the only understanding they have about whether the website reflects or practices the elements of the claims they got from their lawyers. THE COURT: Okay. Well, did you ask him if there's any nonlawyer in the whole world that could offer an Bryn & Associates, Inc. [phone]

21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 opinion as to whether or not the patents implemented by -- or practiced on the website, did you ask him that question? MR. STEPHENS: I did not ask them whether there was anybody in the whole world. I did ask them whether they had anything they could say they didn't hear from a lawyer, and they said no. THE COURT: Well, you might ask them if somebody else other than a lawyer knows what's going on here, and he might be able to tell you. MR. PARKER: Judge, you're getting close to committing a misdemeanor. THE COURT: We're just trying to short circuit all this inquiry. Well, I tell you, Judge Parker, this really goes back to my being a professor of trial tactics at SMU. I'm a visiting professor and direct the program there. So I'm really now in my professorial mode, not in my judicial mode. So if you'll excuse me for that, I won't say anymore. Okay. I think that satisfies -MR. STEPHENS: Yes. Thank you very much, Your Honor. We appreciate it. THE COURT: All right. UNIDENTIFIED SPEAKER: Thank you. THE COURT: You all take care. Have a good day. UNIDENTIFIED SPEAKER: Thank you, Your Honor. Bryn & Associates, Inc. [phone]

22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Bryn & Associates, Inc. [phone] /s/ LISA A. TRASLAVINA-KERR, CSR January 21, 2010 I certify that the foregoing is a correct transcript from the record of proceedings in the above-entitled matter.