`1
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`Civil Action No. 16-453-RGA
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`) J
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`. Caleb Boggs Courthouse
`844 King Street
`Wilmington, Delaware
`Thursday, October 25, 2018
`9:35 a.m.
`Teleconference in Chambers
`
`ACCELERATION BAY, LLC
`Plaintiff,
`
`v.
`ACTIVISION BLIZZARD, INC.,
`Defendant.
`
`BEFORE: THE HONORABLE RICHARD G. ANDREWS, U.S.D.C.J.
`
`APPEARANCES:
`
`PHILIP A. ROVNER, ESQUIRE
`POTTER ANDERSON & CORROON, LLP
`1313 N. Market Street, 6th Floor
`Hercules Building
`Wilmington, Delaware 19899
`-and-
`PAUL ANDRE, ESQUIRE
`LISA KOBIALKA, ESQUIRE
`AARON M. FRANKEL, ESQUIRE
`KRAMER LEVIN NAFTALIS & FRANKEL, LLP
`990 Marsh Road
`Menlo Park, California 94025
`For the Plaintiff
`
`Heather M. Triozzi
`Official Reporter
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 2 of 23 PageID #: 49940
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`APPEARANCES CONTINUED:
`JACK B. BLUMENFELD, ESQUIRE
`MORRIS NICHOLS ARSHT & TUNNELL, LLP
`1201 North Market Street
`Wilmington, Delaware 19899
`-and-
`DAVID P. ENZMINGER, ESQUIRE
`MICHAEL TOMASULO, ESQUIRE
`KATHLEEN B. BARRY, ESQUIRE
`WINSTON & STRAWN, LLP
`333 S. Grand Avenue, 38th Floor
`Los Angeles, California 90071
`-and-
`B. TRENT WEBB, ESQUIRE
`AARON E. HANKEL, ESQUIRE
`SHOOK HARDY & BACON, L.L.P.
`2555 Grand Boulevard
`Kansas City, Missouri 64108-2613
`For the Defendant
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 3 of 23 PageID #: 49941
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`THE COURT: Good morning, this is Judge Andrews
`in Acceleration Bay versus Activision Blizzard. Number
`16-453.
`Who's on the line for plaintiff, please?
`MR. ROVNER: Good morning, Your Honor. It's
`Phil Rovner of Potter Anderson. And with me from Kramer
`Levin is Paul Andre, Lisa Kobialka, and Aaron Frankel.
`THE COURT: All right. Good morning to you all.
`And for Activision?
`MR. BLUMENFELD: Good morning, Your Honor. It's
`Jack Blumenfeld from Morris Nichols. I'm with David
`Enzminger, Kathleen Barry, Mike Tomasulo from Winston &
`Strawn, and Trent Webb from Shook Hardy & Bacon.
`THE COURT: Okay. So good morning to you all,
`
`too.
`
`So there were two things, after I got your
`letters yesterday, that I was interested in hearing about.
`The first one is really for the plaintiff.
`Mr. Andre, in terms of your proof on
`willfulness, what exactly do you have?
`MR. ANDRE: Your Honor, Paul Andre here. We
`have the fact that we provided the defendants notice of the
`patent in March 2015. They had the explicit, you know,
`infringement reason, et cetera.
`And we had a meeting with them to try to
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 4 of 23 PageID #: 49942
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`negotiate a license with them. They basically told us to go
`pound sand, and they continued their conduct, even ramping
`up the conduct, releasing new products, and increasing their
`infringing activity in spite of the fact that they had
`knowledge of the patent and the ongoing lawsuit.
`THE COURT: So is any part of that relating to
`dollars and cents, or I mean, based on what you have -- I
`guess, does any part of your willfulness case depend upon
`you presenting financial numbers of one kind or another?
`MR. ANDRE: Not at all, Your Honor.
`THE COURT: Okay. Thank you.
`All right. So Mr. Enzminger or Mr. Webb, or
`whoever is speaking for the defendant here, you know, your
`letter said, and I'm paraphrasing here, great prejudice,
`unfair prejudice to respond to the case that we thought we
`were responding to, but without the damages component. And
`you know, what I saw and part of the reason we're on the
`phone is because I know I only gave you an extremely brief
`time to think about what you want to do and to submit
`something.
`
`I'm interested in what the specifics are that
`you're talking about because it's not apparent to me that
`there's really that much overlap between -- I mean, it's not
`apparent to me that it really isn't just a case of
`subtraction from what you were planning on both responding
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 5 of 23 PageID #: 49943
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`to and doing. But so what do you have to say about that?
`And can you also tell me who's talking?
`MR. WEBB: This is Trent Webb, and I'm speaking
`on behalf of the --
`THE COURT: Hold on, Mr. Webb. I'm sorry.
`Mr. Webb. Mr. Webb, I'm sorry, something happened to the
`phone at your end.
`Could you start over again?
`MR. WEBB: Sure, Your Honor. Again, Trent Webb
`on behalf of the defendant. Will I be given a chance to
`respond to Mr. Andre's position on willfulness?
`THE COURT: If you think it's worthwhile, but
`first let's hear -- well, why don't we just take care of
`that. What is your response to that?
`MR. WEBB: To the willfulness issue, Your Honor?
`THE COURT: Yeah.
`MR. WEBB: Yeah. I believe the products that
`are released after the 2015 date are not accused of
`infringement in this case. I have to confirm that, but
`that's my belief.
`But the other position with respect to Your
`Honor's question about how this impacts our case, we have
`built our case plan and strategy around the assumption that
`damages and liability would be tried together. That
`includes witness preparation, deposition designations,
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 6 of 23 PageID #: 49944
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`narrative, all that stuff that you typically do for trial
`based around the idea that there's going to be a damages and
`liability case. Based upon the amount of time we had to
`present our case and the assumption that we'd have to deal
`with damages and liability, we made some very important
`decisions in the last month or so about what we would
`present, including our invalidity case based upon prior art,
`including the witnesses that we would call and have time to
`call.
`
`As I'm sure Mr. Andre has done, we have budgeted
`this case down to the minute. And as I mentioned during our
`pretrial conference, we thought it would be very tight. And
`because of that, we made some decisions about what we were
`going to present, what issues we were going to try.
`If damages were not to be in the case, we would
`probably rethink many of those decisions. Specifically, as
`it relates to Your Honor's proposal to bifurcate, it's not
`as easy as severing out half of the case, or a third of the
`case, whatever the case may be. These issues are very
`intertwined.
`
`Issues about the licensing history of the
`patent, the importance of the patent in the industry, the
`fact that the plaintiffs were unable to make sales of the
`patented technology, state of the art, incremental advance
`of the invention over the prior art, and how that all
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 7 of 23 PageID #: 49945
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`applies with respect to damages and liability, it's very
`intertwined. And to try to untangle that and to create a
`new case plan based upon the fact that damages are no longer
`relevant could present a lot of trouble. And just
`logistically, having to go back through all of our
`designations, dealing with new objections to not only
`depositions, but exhibits, I just think that's going to be a
`lot to ask us to do over the course of three days.
`And I'll just remind Your Honor, this is a
`situation that we're in based upon defendant's shifting sand
`on damages and the various theories that have been advanced
`and been stricken by Your Honor. And the most fundamental
`issue, I think we alluded to that in our letter, and I wish
`we would have had more time to brief this, but this is a
`serious question as to whether or not they're entitled to a
`jury trial at all.
`There's ability to support the fact that without
`a claim for damages, it's an injunctive relief case only, a
`bench trial. And so it begs the question as to whether or
`not, if our position as set forth in our briefing is
`accurate and Your Honor believes them, then we may not have
`a jury trial or liability at all.
`I mean, there are a number of issues like that
`that just if, in fact, we're right, and they have no damages
`evidence, and there's no claim for damages left in the case,
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 8 of 23 PageID #: 49946
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`then we think there's probably not a need for a jury trial.
`I think we have some authority to back that up.
`But separate and apart from that, Your Honor,
`you know, we're being placed in a situation where we have to
`rework our case plan three days before trial due to no fault
`of our own. We have tried to raise these damages issues as
`quickly as we can, and we realize that it's been a burden on
`the Court to have to deal with all these briefs. We wish
`there was a way we could have avoided that.
`Frankly, up until yesterday, we were still
`wrangling with the other side about what the heck they're
`going to put on for their damages case. Having known that
`this was going to be bifurcated well in advance of trial, I
`can tell you that things with our case presentation would
`look a lot different than it does right now three days
`before or four days before we pick a jury.
`THE COURT: So, Mr. Webb, how many lawyers do
`you have working on this case?
`MR. WEBB: Probably around ten, Your Honor.
`THE COURT: Okay. In terms of what you're
`saying about the intertwining of issues, how does -- I take
`it that for -- in the case without damages, are
`non-infringing alternatives relevant?
`MR. WEBB: I don't believe they are, Your Honor.
`THE COURT: Is what the state of the art was
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`prior to, at some point in time, relevant?
`MR. WEBB: I think that's a closer call, Your
`Honor. I can see it a situation where the plaintiffs argue
`their invention is something more than what the prior art
`would provide, and I think Your Honor alluded to that.
`There are ensnarement issues which we realize is a judge
`issue. But unless and until we see what they do during
`their case, I just don't know to what extent state of the
`art is going to come into play.
`I guess that's sort of our major thought. I'm
`sorry, Your Honor.
`THE COURT: No. I'm sorry, Mr. Webb. So I was
`just -- you said that ensnarement which is a word that I
`have heard before.
`Is that an issue that's in the Pretrial Order?
`MR. WEBB: No, it isn't, Your Honor. You may
`recall that this was an issue raised by Mr. Enzminger, and
`we acknowledge this is an issue for Your Honor.
`THE COURT: Okay.
`MR. ENZMINGER: Your Honor, I believe
`ensnarement is in the Pretrial Conference Order.
`THE COURT: All right. I take it this is
`Mr. Enzminger speaking up?
`MR. ENZMINGER: Yes, it was, Your Honor. I
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`apologize.
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`THE COURT: No. It's all right. I just would
`like the record to reflect that.
`MR. WEBB: Your Honor, I hate to interrupt your
`train of thought. I would like to go back to something I
`mentioned earlier.
`THE COURT: Yes.
`MR. WEBB: Yeah. I probably didn't explain this
`well enough, but we're going into trial with, at the time,
`five patents, four accused products, and a whole bunch of
`issues swirling around. We made some judgment calls about
`what to try to put in front of the jury, what not to just
`based, frankly, upon time limitations.
`You know, a lot of witnesses that we considered
`bringing to trial, we decided that we would leave at home
`because we wouldn't have time. Some of the deposition
`designations that we have made, we made decisions based upon
`time and based upon content.
`And, frankly, the invalidity piece, if this were
`to be solely a damages case, or I'm sorry, a liability case,
`Your Honor, we would have reconsidered that decision, not
`just based upon time, but based upon the various issues
`we're talking about now. And I think that, you know, that
`really demonstrates the most significant prejudice to us is
`that we made some decisions based upon the assumption of a
`full-blown trial, and now we're faced with a prospect of
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`having that changed after we've submitted to positions.
`And, again, to just go back to the issue of to
`the extent that this is going to be bifurcated, the question
`still remains as to whether or not the plaintiffs are
`entitled to a jury trial in this.
`THE COURT: All right. Do you have anything to
`say about that, Mr. Andre?
`MR. ANDRE: Yes, Your Honor. This is Paul
`Andre. A couple things.
`One, as I mentioned at the pretrial conference,
`one of my major concerns was they were going to try to show
`noninfringement through invalidity or informal invalidity
`with the state of the art. I think that's been borne out
`here. There's absolutely no overlap that they've shown here
`today or even in their letter between infringement and
`damages.
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`The strategic calculation we all make at trial
`is something, you know, that's just the business we're in,
`and there's no prejudice from that. The fact that they said
`that they would have maybe pursued invalidity if they would
`have had more time, it kind of tells you maybe the frivolous
`nature of their invalidity defense any way. That should
`have no bearing whatsoever.
`They were prepared to go to trial starting
`Monday on a case of infringement, willful infringement, and
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`damages. If Your Honor, as Your Honor has done, has taken
`damages out of play for that, there's absolutely no reason
`why infringement and willful infringement can't go forward.
`The same witnesses that would have presented with damages or
`without damages will be there. Our same witnesses will be
`there.
`
`And if anything, this goes back to the issue,
`you know, they were complaining about at the pretrial
`conference. We're going to put big numbers up. We're going
`to put these multi-billion numbers of sales, the prejudice
`that was going to cause them.
`And the infringement side of the case, now
`that's gone. They don't have that infringement. This is a
`real clean, focused infringement trial now.
`You look at the claims, as it's construed by
`Your Honor, and you compare that to the infringement
`products, and it's as simple as that. You don't have to
`have a lot of the noise that they are attempting to put in
`with the state of the art and various other things that were
`just a sideshow more than anything else.
`So I think this is an instance where
`bifurcation, given Your Honor's decision on damages, is the
`most judicially economic way of doing it, because if there
`is infringement, then we'll figure out damages. If there's
`not infringement, then it's moot.
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`THE COURT: Okay.
`MR. WEBB: Your Honor, may I respond?
`THE COURT: Yes.
`MR. WEBB: Yeah. So the whole idea about this
`liability case being frivolous is, it's not novel. I'll
`just leave it at that. The fact that this judge -- I mean,
`Mr. Andre is right. We all make decisions going into trial.
`Some decisions are more important than others. Some
`decisions require a whole lot of discussion and weighing
`risks.
`
`And we made those decisions based upon the
`assumption that we had "X" amount of time, and we had to
`pick and choose our battles. We did that. And you know,
`now we're faced living with the decision made based upon an
`assumption that they no longer view valid. So that's the
`problem.
`
`And, frankly, the other thing I'd like to
`mention, Judge, is I think there will be, I'm afraid, a
`number of disputes as to what evidence will be relevant due
`to liability only if we had a bifurcated trial. And I'm
`afraid it will be a fair amount of disruption as we try to
`sort it out. And having been able to do some of this at the
`pretrial, we could have had a much more streamlined case.
`And I'm just afraid it's going to be kind of a case without
`clarity as to where the lines are and what issues Your Honor
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 14 of 23 PageID #: 49952
`14
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`would consider to be relevant for liability or not. And I'm
`sure that there will be a number of buck stops and
`disagreements that, frankly, we would like to have had
`resolved before we show up on Monday.
`So I think, just in terms of the administration
`of this trial and allowing us a chance to regroup and
`rethink how we're going to try this case without damages,
`and what evidence we may want to raise with the Court, and
`get a preview or some ruling on it before we advance it in
`front of a jury, I mean, just logistically this puts us
`in -- you know, legitimately puts us in a bind. And as a
`defendant in a case where they will eventually seek who
`knows how much money, the stakes are pretty high. And we
`think that the more judicious approach and wiser approach is
`to continue trial, give Your Honor a chance to sort through
`these issues, make whatever decision Your Honor is going to
`make, and then we'll know exactly what to try the case and
`be tried with whatever issues remain, if we have a jury
`trial or not. But at least we'll know.
`Because right now the degree of uncertainty just
`to that fundamental issue as to whether or not, you know, to
`give a trial in front of a jury on liability is something
`that's pretty serious, because if Your Honor decides at a
`later date that there should not have been a jury trial, and
`if we, unfortunately, finish second as a result of the
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 15 of 23 PageID #: 49953
`15
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`liability trial, that's going to be a bad situation to be
`in.
`
`THE COURT: Mr. Webb, when you say that not
`having damages would raise evidentiary issues, can you give
`me an example of what you have in mind?
`MR. WEBB: Certainly, Your Honor. At least with
`respect to the licensing history and the problems the
`invention developed itself, we think it's relevant to
`damages that no other company was interested in this
`technology. Separate and apart from whether they evaluated
`"X" dollars or "Y" dollars, the fact is the evidence is that
`no company had any interest in acquiring these patents. We
`think it's relevant to whether or not the technology that is
`covered by the patents is relevant and needed in the
`industry or whether it was something that the inventors did
`and was so isolated and, frankly, obsolete that no one
`needed it anymore.
`THE COURT: So --
`MR. WEBB: I do think that's relevant to -- I'm
`sorry. Go ahead, Your Honor.
`THE COURT: No. No. That sounded to me like
`you were saying, so this is something that's -- because you
`were saying this is relevant to damages. I'm sure it's
`relevant to damages, but I was waiting for you to get to
`like you want to put in licensing history because you think
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 16 of 23 PageID #: 49954
`16
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`that's relevant to something else.
`MR. WEBB: Your Honor, they contend that we're
`using this technology that was developed back in the '90s to
`solve a very specific problem. I think it's relevant that
`no other company was interested in these patents, not just
`the dollar value or the valuation of patents, but the
`technology on its own. Because the technology that's being
`alleged to be covered by the patents is not relevant to
`current technology, and that goes to our technology and the
`fact that we do something entirely different than what the
`patents purportedly cover.
`THE COURT: So --
`MR. WEBB: We think it is probative of that
`
`fact.
`
`THE COURT: So you want to put in that people
`didn't want to take a license to this patent to prove you
`don't infringe?
`MR. WEBB: Not exactly, Your Honor.
`THE COURT: We think that's relevant because the
`way we use our technology in a modern construct with modern
`equipment, modern technology has nothing to do with the
`problem that the inventors allegedly solved. And we think
`the fact that the industry agreed with us, it had no
`interest in these patents, it's probative with the fact that
`the type of modern architecture that we use is not covered
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 17 of 23 PageID #: 49955
`17
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`by the patents.
`Separate and apart from whether the technology
`was worth a dollar, or a million dollars, or a billion
`dollars, the fact that this technology was -- this is at
`least probative of the fact that no one else in the industry
`needed it or used it.
`THE COURT: Yeah. So, yeah, that sounds like a
`damages issue. I don't see how it's an issue to
`infringement or willfulness.
`Do you have something else in mind as an
`
`example?
`
`MR. WEBB: Well, the other thing, Your Honor, is
`the Sony license which is corollary to that, obviously, and
`the fact that Sony had the right to use it and didn't use
`it. Again, it's probative of the fact that the way modern
`gaming works, it doesn't use the technology that the
`plaintiffs claims or to the patent.
`And I think it's one of many facts that I think
`tends to show that there's a good reason why we don't
`infringe. It's because we don't need this technology, and
`the industry has agreed with us.
`THE COURT: Okay. All right. Well, I'm --
`MR. ENZMINGER: Your Honor, this is David
`Enzminger. If I may, also?
`THE COURT: Okay.
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 18 of 23 PageID #: 49956
`18
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`MR. ENZMINGER: You know, our client is being
`accused of willful infringement. A couple of things with
`respect to that.
`First, all of the conduct that Mr. Andre
`identified is post-filing. The notice he referred to was
`the filing of the Complaint. At no time have we had a
`settlement agreement where they have been willing to settle
`this case for damages less than the type of damages that
`they have been submitting in their serial damages theories.
`The fact that they went out into the industry
`and tried to license or tried to sell this technology
`multiple times to dozens of companies, and everyone who
`looked at it concluded the patents were so narrow as to be
`valueless, it is some evidence of our lack of willfulness
`and not paying hundreds of millions of dollars for
`technology that was so narrow that everyone else who looked
`at it concluded it was completely valueless. I think it
`goes to willfulness.
`Also, it's one thing to say that this patent is
`just -- you know, you look at the claims. You look at the
`products. But the plaintiff is going to come in and argue
`that this was foundational technology, that there's no way
`you can do video games without this technology. And the
`fact is there were hundreds of video games before these
`patents were conceived, hundreds after. None of them used
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 19 of 23 PageID #: 49957
`19
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`this technology.
`And to come in and to make that argument that
`these are foundational, important patents for the video game
`industry, while at the same time preventing the defense from
`putting on evidence that these are narrow, valueless -- and
`I realize valueless goes to damages, but the scope of the
`patent is enormously important here because what the
`plaintiff is doing is they are demanding hundreds of
`millions of dollars on a theory that these are critical
`patents. The fact is the structures and architectures that
`were developed by the video game industry decades before
`these patents are important to defining their scope. It's
`not just a question of what their value is.
`And when we make decisions for trial, you know,
`we can look at, you know, do we put on a robust prior art
`case, or do we show the narrowness of the patents through
`these other factors and non-infringing alternatives. So you
`know, proceeding to trial on liability only while allowing
`the plaintiff to claim that these are important patents
`hamstrings the defense in a way that is just fundamentally
`unfair.
`
`MR. ANDRE: Your Honor, this is Paul Andre. Can
`I just briefly respond to Mr. Enzminger?
`THE COURT: In a moment, Mr. Andre. Let me just
`make a note to myself here.
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 20 of 23 PageID #: 49958
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`Sure. Okay. Go ahead, Mr. Andre.
`MR. ANDRE: Yeah. I just want to point out,
`Your Honor, that the scope of the patents are defined by the
`Court, not by the defendants or the plaintiff in this case.
`And so the fact that they're going to try to say that the
`patents are narrow, or we would say they're broad -- which
`is not true, we're not going to say they're broad -- we're
`going to look at the Court's claim construction and apply
`that to the claims to determine the scope of the claims.
`And what I have been hearing on today's call and
`what I forewarned at the pretrial conference was this is
`really just them trying to change the scope of the claims
`through the prior art. You know, they've dropped
`invalidity. They talk about the technology being old
`technology, or very narrow technology, or whatever they want
`to call it, but they challenged these patents, as you know,
`and IPRs over 20 times unsuccessfully.
`And now they're trying to back door in this type
`of state of the art or something I can't -- I don't know
`what they're talking about to be candid with you when they
`talk about how the Sony license is relevant to infringement.
`I see none whatsoever.
`But my main comment was on the scope of the
`patents. Your Honor determines the scope of the patents.
`We will abide by that scope, and that's what we plan to do.
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 21 of 23 PageID #: 49959
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`THE COURT: Okay. All right.
`So is there anything else anybody wants to say?
`MR. ANDRE: Nothing from plaintiff.
`MR. TOMASULO: If I could make one observation?
`THE COURT: And I'm sorry. Who is this?
`MR. TOMASULO: This is Mike Tomasulo for the
`defendant, Your Honor.
`THE COURT: Okay. All right. That's what I was
`
`looking for.
`
`Yeah, Mr. Tomasulo.
`MR. TOMASULO: The case makes it clear that the
`bifurcation is something that can cause problems and is only
`for exceptional cases. And one of the things that they look
`at is they talk about the prejudice to the witnesses or to
`the Court system.
`And in the case for Activision, we have our
`engineers. And the client asked me to point this out. Our
`engineers are incredibly busy. If we were to have a trial
`that was unnecessary because you find that there's summary
`judgment, for instance, then those engineers wouldn't have
`needed to come to a trial.
`If they have to go to a second trial, the second
`trial is not likely to be any shorter than the first trial
`given the fact that there will be a requirement to discuss
`the nature and the extent of the supposed infringement and
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`Case 1:16-cv-00453-RGA Document 625 Filed 11/15/18 Page 22 of 23 PageID #: 49960
`22
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`how that relates to damages. Those engineers will be