Anascape, Ltd v. Microsoft Corp. et al

Filing 368

RESPONSE in Opposition re 356 MOTION for Judgment as a Matter of Law (Renewed), or in the Alternative MOTION for New Trial filed filed by Anascape, Ltd. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F, # 7 Exhibit G, # 8 Exhibit H)(Cawley, Douglas)

Anascape, Ltd v. Microsoft Corp. et al

Doc. 368 Att. 6

Exhibit F

Dockets.Justia.com

Final Pretrial Hearing
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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TEXAS LUFKIN DIVISION ANASCAPE, LTD. VS. MICROSOFT CORP., ET AL | | | | | | | DOCKET 9:06CV158 MAY 1, 2008 9:15 A.M. BEAUMONT, TEXAS

-------------------------------------------------------VOLUME 1 OF 1, PAGES 1 THROUGH 155 REPORTER'S TRANSCRIPT OF FINAL PRETRIAL HEARING BEFORE THE HON. RON CLARK UNITED STATES DISTRICT JUDGE -------------------------------------------------------APPEARANCES: FOR THE PLAINTIFF: DOUGLAS A. CAWLEY ANTHONY MATTHEW GARZA CHRISTOPHER THOR BOVENKAMP JAMIE MOZOLA SHOUSE JASON DODD CASSADY STEVEN CHASE CALLAHAN MCKOOL SMITH - DALLAS 300 CRESCENT COURT SUITE 1200 DALLAS, TEXAS 75201

FOR THE DEFENDANT MICROSOFT CORP.: J. THAD HEARTFIELD LAW OFFICES OF J. THAD HEARTFIELD 2195 DOWLEN ROAD BEAUMONT, TEXAS 77706

Christina L. Bickham, RMR, CRR 409/654-2891

574375d0-9123-4eaa-8d98-595abb1c0100

Final Pretrial Hearing
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1 FOR THE DEFENDANT NINTENDO OF AMERICA, INC.: 2 LAWRENCE LOUIS GERMER CHARLES W. GOEHRINGER, JR. 3 GERMER GERTZ 550 FANNIN 4 SUITE 500 BEAUMONT, TEXAS 77701 5 ROBERT J. GUNTHER, JR. 6 WILMER HALE - NEW YORK 399 PARK AVENUE 7 NEW YORK, NEW YORK 10022 8 JOSEPH S. PRESTA NIXON & VANDERHYE 9 901 N. GLEBE ROAD 11TH FLOOR 10 ARLINGTON, VIRGINIA 22203 11 JAMES S. BLANK LATHAM & WATKINS 12 885 THIRD AVENUE NEW YORK, NEW YORK 10022 13 14 COURT REPORTER: CHRISTINA L. BICKHAM, CRR, RMR 15 FEDERAL OFFICIAL REPORTER 300 WILLOW, SUITE 221 16 BEAUMONT, TEXAS 77701 17 18 19 PROCEEDINGS REPORTED USING COMPUTERIZED STENOTYPE; TRANSCRIPT PRODUCED VIA COMPUTER-AIDED TRANSCRIPTION. 20 21 22 23 24 25

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and Microsoft have, in fact, settled; is that correct? MR. HEARTFIELD: That is correct. THE COURT: All right. Do one of you want to outline what has been settled? MR. HEARTFIELD: Judge, Anascape and Microsoft have settled all claims with prejudice. Microsoft has taken a license to all patents and pending applications. There is a lump-sum payment that will be made within about 13 days from today. The settlement document has been fully signed by both Anascape and Microsoft. There is going to be a stipulated dismissal filed Monday, May 5th; and we intend to attach the settlement document with all terms at that time. If the court would like to see the settlement agreement in camera, I am prepared to give that to the court. If Nintendo must see it, I can provide it to them under the protective order. THE COURT: Does the settlement agreement -do the amounts paid and cross-licensing and so forth cover all costs of court and attorney's fees? MR. HEARTFIELD: Yes. Yes, your Honor. THE COURT: All right. And let me hear from Anascape, then. Is that your understanding of the agreement? MR. CAWLEY: It is, your Honor.
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(REPORTER'S NOTES ANASCAPE V. MICROSOFT, 9:15 A.M., THURSDAY, 05/01/2008, BEAUMONT, TEXAS, HON. RON CLARK PRESIDING) (OPEN COURT, ALL PARTIES PRESENT) THE COURT: All right. I call Anascape versus Microsoft and Nintendo, Number 9:06cv0158. Is Anascape ready? MR. CAWLEY: Good morning, your Honor. Douglas Cawley for Anascape. THE COURT: Welcome back. MR. CAWLEY: Thank you, your Honor. It's good to be back; and, yes, we're ready. THE COURT: Okay. And is Microsoft ready? MR. HEARTFIELD: Good morning, your Honor. Thad Heartfield for Microsoft, and we are ready. THE COURT: Okay. MR. HEARTFIELD: We do have a settlement to announce. THE COURT: Right. And you might as well stay right there because that will be the first thing I take up. And is Nintendo ready? MR. GUNTHER: Your Honor, Bob Gunther. Nintendo is ready. THE COURT: Okay. I understand that Anascape

THE COURT: Okay. So, this settlement agreement disposes of all of Anascape's claims -- past, present and future -- dealing with the patents in question, whether they were asserted or not, correct? MR. CAWLEY: Yes. THE COURT: Okay. And all possible causes of action, whether they were asserted or not, whether it's under patent or antitrust or tort law, contract law, in other words -MR. CAWLEY: Yes, your Honor. THE COURT: -- it's everything? MR. CAWLEY: It's a complete, global release. THE COURT: Okay. And all possible counterclaims of Microsoft for declarations of invalidity, whether asserted or not, those are also disposed of by this settlement, correct? MR. HEARTFIELD: Yes, your Honor. THE COURT: Okay. In that case I will expect the settlement documents to be filed as you've stated and will consider the cause of action between Anascape and Microsoft to be dismissed. Anything further? I noticed someone was making a comment. Is there something else that needed to be added? MR. CAWLEY: Oh, no. There's nothing

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Christina L. Bickham, RMR, CRR 409/654-2891

574375d0-9123-4eaa-8d98-595abb1c0100

Final Pretrial Hearing
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say "sale"; but it's an exclusive license and transfer of all substantial rights. So, that's license 1; and, in fact -THE COURT: And that's from Anascape -- it's Anascape's patent to Sony, right? MR. GUNTHER: That's correct. That's the '606 patent. It has something to do with multiplaying sheets. Sony apparently infringed that patent. But Mr. Armstrong has admitted in his deposition, as Anascape's representative in this case, that Nintendo does not infringe that patent. So, that's License 1; although, I would frankly call it "Sale 1." That's the sale of the '606 patent to Sony, $10 million. Then the second license, your Honor, is a bulk license of every -- a nonexclusive license of everything else, everything else that Anascape had at that time both in terms of patents and patent applications; and there was no value that was exchanged for that. In fact, your Honor, in that part of the license, the second part of the license, they explicitly agreed -- there was a cross-license of some Sony technology, some three Sony patents; and I think it was 39 patent and patent applications from Anascape. They said we can't value these; and, so, we're not going to have any exchange of money with respect to them at all.
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improper under 408. But even if your Honor doesn't agree with me on 408, on 403, given the incendiary nature of that document, it should be out. And, your Honor, while you're looking at that, let me just say one last thing. Their expert -their damages expert says that this agreement is not instructive of a reasonable royalty in this case. And that goes directly to the 403 point, as well. THE COURT: And I guess that was my last question on that, is why should this come in if your expert is saying it is not instructive? If everyone agrees it is not instructive, what's the point? MR. CAWLEY: Well, I don't think everyone does agree that it's not instructive, your Honor. He considered many factors of which this was only one. But clearly under Georgia-Pacific, there's no question that prior licenses relating to the technology are highly relevant. And their expert considered this agreement. It's all over his report. THE COURT: I guess in my mind that's what's kind of odd, because usually defendant really wants one of these lump-sum relatively small-dollar payments. I mean, $10 million is a lot of money to everybody else in the world but given the amounts that are being asked for in this case -- if defendant was so unfortunate as to
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And, your Honor, to make the cheese more binding, it wasn't just a bulk transfer, a free cross-license of patents. The patent that's involved in this case, in this suit, wasn't even a patent then. It was a patent application. So, your Honor, in terms of Sony, the really problematic thing from our point of view, your Honor -and, now, I recognize I'm getting past your specific 408 question. Butt really problematic thing for us is that that goes in front of the jury. The jury's going to look at it and say, boy, Sony paid them 10 million bucks. You know, these patents must have some value. And why isn't Nintendo doing that? And, your Honor, the unfairness to us in terms of that, the unfair prejudice to us, is that the '606 patent where the $10 million was paid, that has nothing to do with this case; and they're not suing us on it. That's A. And, B, with respect to the patents that are -- that were bulk transferred cross-licensed for free, there is absolutely no nexus that that '700 patent application that was part of that nonexclusive grant of the bulk license had any value to Sony or to anyone; and, in fact, they made that part of the free exchange. So, your Honor, that's why we think it's

get an adverse verdict on liability, they would probably be quite happy to get a 10 million-dollar lump-sum verdict on damages so -MR. CAWLEY: Well, we're going to have to basically explain that away, your Honor. That's absolutely correct. THE COURT: Well, that's what I'm saying is it's an odd -- usually the arguments are going the other way. You're trying to keep it out -- the plaintiffs trying to keep out the lump sum; the defendants are trying to get it in. MR. CAWLEY: That's very true. THE COURT: All right. I am familiar with the Georgia-Pacific factors, obviously, and the Hanson case; and it's not much different than the law on proof of value for almost anything, including condemnation or land. And the cases make it quite clear that we're supposed to be looking at this hypothetical willing buyer, willing seller; and settlements made under the threat of litigation or as part of litigation or that have some other factor in there that really makes them based on something other than a desire to exchange the properties start to become suspect. And it's on a continuum. I mean, clearly if it's in the middle of a lawsuit and the settlement of a lawsuit, those are out.

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Christina L. Bickham, RMR, CRR 409/654-2891

574375d0-9123-4eaa-8d98-595abb1c0100

Final Pretrial Hearing
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The problem I'm having here, as I mentioned before, is that in the sale of patent property, since what you have in a patent is intellectual property right and basically the right to sue somebody and to exclude them, there's always in the background, when someone comes and says, "I want to sell you this," if they're in the business of producing the same kind of product, the threat of litigation. There is just no way to get around it. I don't find that there is enough evidence before me to find that that is Sony's basis. The negotiations went on for some four years. Counsel's quite correct. The documents do have warnings on them and protections on them, but that is probably -- or that, not probably, is the kind of thing that prudent lawyers will probably do. On balance I can't see, though, that there's been a showing that this could not be considered by experts as some indication of what a reasonable royalty would be under the Georgia-Pacific factors. And the fact that defendant's expert has considered it and plaintiff's expert has indicated that perhaps it is less probative -- I think the term he used was "not instructive" -- reduces any possibility of unfair prejudice to defendant by bringing this in. I mean,
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ruling on everything else. And the reason I'm handing those to you is -and, again, I'm not asking for arguments on rehash; but if there is some question -- last night, for example, I found that on one of the rulings either a typo or my mistake had put basically an incomprehensible ruling there in that answer block; and when I proofread it, I realized this doesn't make any sense. Now, as you read through those, I don't really need to know which ones you disagree with. I assume if I ruled against you, you disagree with me. But if there is something there that is just incomprehensible, for example, on the order on plaintiff's motion in limine that I think you already have and then when you get this one, let me know; and we'll deal with it right now. I want to be sure that we're at least clear on the ground rules right now. Now, let's take a look at the objections to exhibits. And I guess I understand that there is a tendency to -- and I don't want to cast any aspersions, and I used to really dislike certain judges when I was younger who were hassling attorneys. That just didn't seem appropriate. But let's take a look at this Trial Exhibit 37, DX 37, which is on page 4 of this defendant's responses chart, at least on my copy of it. So, we have Defendant's Exhibit 37. We have
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you've got plaintiff's expert himself saying this isn't one of the things he relied on. Although, it is one of the things to be considered. And I have to weigh that against the problem of in many of these patent cases there may not be a large number of prior licenses in the general field. The argument as to the $10 million was for another patent, that doesn't make it inadmissible. I think the test is licenses for similar kinds of technology, and that can be brought out in cross-examination. So, for those reasons and -- and admittedly it's a question that with a little more evidence one way or the other might come up with a different ruling. I just don't find that there is enough here to show that this negotiation and this license was the result of threatened litigation, and that's partly on the basis that we would get to the point where almost every negotiation of patent rights has that threat behind it. So, I am going to overrule the defendant's motion in limine on that point. MR. GUNTHER: Thank you, your Honor. THE COURT: And then -- that's the only question I had on defendant's, and what we'll do before you leave is we'll go ahead and get you the printed

plaintiff's objection about failure to timely identify or produce as required; and the response is that it was provided in defendant's identification of prior art pursuant to 35 USC, Section 282. I'd be interested to know which attorney came up with that. I mean, who is the attorney who actually came up with that response? Okay. You'll take responsibility? MR. BLANK: I'll take responsibility. THE COURT: All right. MR. BLANK: I'll also blame it on the Microsoft attorneys who aren't here anymore. THE COURT: All right. MR. BLANK: I'll take joint responsibility on that one. THE COURT: Let me -- I don't know if you have read the Local Rules or not, but we're not the only district that has them -- or read any of the cases that talk about the reasoning for the Local Rules. But the whole reason we have the requirement for infringement contentions and invalidity contentions is 35 USC, Section 282, with about a 30-day notice before trial, as you can imagine, would be literally impossible. I mean, I don't -- you know, you must have sat through this case long enough to understand that there's just no way if everybody -- if they had dumped all their stuff on you

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Christina L. Bickham, RMR, CRR 409/654-2891

574375d0-9123-4eaa-8d98-595abb1c0100

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word, your Honor, is that it seems to imply some kind of intent, that it seems to require that you somehow get a designer who testifies, Yeah, well, it was my intention that it do certain things. THE COURT: Okay. MR. CAWLEY: I know that's not required by the law, and it's not required in the claim. This is an apparatus claim. And the testimony that your Honor will hear in the trial is that game designers, the people who write the software, the actual game themselves, need to have a controller that is capable of doing a wide variety of things so that they can use that essentially as a tool to design their games. And they may use all of the tools that comes in that controller toolbox, and they may choose not to. What Nintendo is trying to do here is trying to say, Well, wait a minute. Unless you can go find a game where a designer has chosen to use the capability that we provide people in our controllers, then you don't show infringement. But the answer is the controller is capable of what the controller is capable -- of what it's capable of whether or not there is any proof that it actually got used that way. The proof is in the controller itself, in the apparatus. It's not a method claim; it's an apparatus claim.
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go ahead and -- because I may not have time and may not have the cases in front of me. Let me go ahead and state for the record my basis for the decision. I'm looking at the Microprocessor Enhancement Corporation versus Texas Instruments case. That was decided April 1 of 2008, and it dealt with a somewhat similar issue and talked about the IPXL Holdings case and pointed out the problem of a claim being invalid for indefiniteness on the grounds that the claim impermissibly mixes two distinct classes of patentable subject matter and that, therefore, they are insolubly ambiguous. And in that particular case, there was claim 1 which was a method claim and claim 7 which was an apparatus claim. They point out that there was no ambiguity in that case in claim 1 because it was clearly limited to practicing the method. And, similarly, claim 7, the apparatus claim, doesn't cover both an apparatus and a method. And it referred back to the Halliburton case that I mentioned, Halliburton Energy Services versus M-I LLC at 514 F.3d 1244, page 1255, Fed Circuit 2008, where the court said that an apparatus claim is not necessarily indefinite for using functional language. And where you get into trouble, the court is saying, is where functional language fails to provide a
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THE COURT: All right. MR. PRESTA: Which would be fine with us, your Honor. If the word "capability" was in the claim, we wouldn't have a dispute. The problem is they have to live with the way the claim is drafted. That's just the point we would make. They want to insert words into the claim. All we want the court to do is be true to the words as they are. So, it's true we don't really have a claim construction for that because we want the words just to be construed the way they read without inserting words -- without inserting extra words. The plaintiff would like to insert words into it, and we just want it to read as is. THE COURT: The words mean exactly what you say they mean and nothing more and nothing less. I think that was the "Red Queen." MR. PRESTA: And, your Honor, again, we truly are bringing these issues up only because we think they are going to come up at trial. And whether your Honor feels the need to rule on them now, we think it was our duty least at to give you a heads up on these issues. And that's the real goal, is to give you a heads up. THE COURT: All right. Well, to save some time at trial since the dispute comes out, I'm going to

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clear-cut indication of the scope of the subject matter embraced by the claim and, thus, can be indefinite. And they're referring back there to claim 7. In this particular case we're looking at claim 19. It's quite clearly an apparatus claim, "a hand operated controller." And those second and third elements discuss that it is capable of doing something. It is not a method claim as to how it is used; it is talking about the controller itself capable of "providing outputs at least in part controlling objects." And since everyone agrees that I don't have to try to re-construe it so that I redefine the words "providing outputs at least in part controlling objects and navigating a viewpoint" -- everyone seems to understand what that all means -- other than the scope, I will state for the record that in this court's view based on my review of those cases and based upon the specification itself which talks about it and the claim language itself, it seems fairly clear that those are -that 19 reads on a -- or describes an apparatus that can do these things. If that provides some clarity, I would -well, not "if" it provides clarity. I would -- you know, that's going to be my ruling on that. Is there

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574375d0-9123-4eaa-8d98-595abb1c0100

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important book and it is just difficult for me to find it. Anything else, Mr. Germer? MR. GERMER: Yes, sir, one other fairly small point but we just -- we can't work out an agreement. You said in your order that if there is someone that is necessary to the plaintiff's case, one of our people, that we're to make them available. We've done that as to one of the witnesses they have asked for. We're going to have a technical person available for them in their case on Wednesday. But we do have a dispute about Howard Cheng. And you may recall the court has said that the plaintiffs can go into the fact that -MR. CAWLEY: We give up. We'll abandon our request for Mr. Cheng in our case-in-chief. THE COURT: Okay. MR. CAWLEY: But we do understand you are going to have Mr. Ikeda available for -MR. GERMER: We'll have Mr. Ikeda available on Wednesday. That's what y'all told me, Wednesday or Thursday. But we'll have him Wednesday if you want him. MR. CAWLEY: I think that's appropriate. Thank you. THE COURT: Okay, good. MR. GERMER: Thank you.
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THE COURT: Nothing else? All right. In that case you are excused. I will see you, then, on Monday. As in the past, please be sure that Ms. Chen has the cell phone number of someone on each side who can be contacted in case something comes up so we can get ahold of you, you know, locally and every other way. And if some dispute starts to arise, if you'll let her know, it gives me a chance to get prepared so you actually get something close to a considered ruling rather than just a quick shot from the hip. That would seem to be better to give me a chance to actually think about it before I rule. All right. In that case you are excused, and the court is in recess. (Proceedings concluded, 2:19 p.m.) COURT REPORTER'S CERTIFICATION I HEREBY CERTIFY THAT ON THIS DATE, MAY 2, 2008, THE FOREGOING IS A CORRECT TRANSCRIPT FROM THE RECORD OF PROCEEDINGS.

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Christina L. Bickham, RMR, CRR 409/654-2891

574375d0-9123-4eaa-8d98-595abb1c0100