Case 1:16-cv-00453-RGA Document 662-1 Filed 04/05/19 Page 1 of 4 PageID #: 51555
`Case 1:16-cv-00453-RGA Document 662-1 Filed 04/05/19 Page 1 of 4 PagelD #: 51555
`
`
`
`
`
`EXHIBIT 1
`EXHIBIT 1
`
`
`
`
`
`
`
`
`
`
`
`
`
`

`

`Case 1:16-cv-00453-RGA Document 662-1 Filed 04/05/19 Page 2 of 4 PageID #: 51556
`3
`1
`
` THE CLERK: All rise.
`
`THE COURT: All right. Good morning. Please be
`
`seated.
`
`This is Acceleration Bay versus Activision
`
`Blizzard. Civil Action Number 16-453.
`
`Good morning, Mr. Rovner.
`
`MR. ROVNER: Good morning, Your Honor. Phil
`
`Rovner from Potter Anderson for plaintiff, Acceleration Bay.
`
`With me from Kramer Levin, Paul Andre.
`
`MR. ANDRE: Good morning, Your Honor.
`
`MR. ROVNER: Lisa Kobialka.
`
`MS. KOBIALKA: Good morning, Your Honor.
`
`MR. ROVNER: And Aaron Frankel.
`
`MR. FRANKEL: Good morning, Your Honor.
`
`THE COURT: All right. Good morning to you all.
`
`Mr. Blumenfeld.
`
`MR. BLUMENFELD: Good morning, Your Honor. Jack
`
`Blumenfeld for Activision Blizzard. And with me are Trent
`
`Webb from Shook Hardy & Bacon, David Enzminger, and Mike
`
`Tomasulo from Winston & Strawn.
`
`Behind them Aaron Hankel from Shook Hardy &
`
`Bacon, and Kathleen Barry from Winston & Strawn.
`
`And in the first row, Omer Salik and Julia
`
`Kazaks, next to him, from Activision.
`
`THE COURT: All right. Well, good morning to
`
`4
`
`08:33:23
`
`08:33:25
`
`08:34:06
`
`08:34:11
`
`you all, too. All right.
`
`So, though I've read portions of the Pretrial
`
`08:32:58
`
`08:33:07
`
`08:33:09
`
`08:33:16
`
`08:33:19
`
`08:33:22
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`08:33:27
`08:33:27 10
`08:33:30 11
`08:33:30 12
`08:33:32 13
`08:33:33 14
`08:33:34 15
`08:33:36 16
`08:33:37 17
`08:33:43 18
`08:33:45 19
`08:33:48 20
`08:33:51 21
`08:33:54 22
`08:33:58 23
`08:34:01 24
`08:34:03 25
`
` IN THE UNITED STATES DISTRICT COURT
`
`FOR THE DISTRICT OF DELAWARE
`
`)
`ACCELERATION BAY, LLC
` )
`
` Plaintiff, )
`
` )
`
` ) Civil Action No. 15-453-RGA
`
`v.
` )
`
` )
`
`ACTIVISION BLIZZARD, INC., )
`
`
` )
` Defendant. )
`
`
`
`
`
`
`
`
`J. Caleb Boggs Courthouse
`844 King Street
`Wilmington, Delaware
`Friday, October 19, 2018
`8:32 a.m.
`Pretrial Hearing
`
`BEFORE: THE HONORABLE RICHARD G. ANDREWS
`
`United States District Court Judge
`
`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, ESQURE
` KRAMER LEVIN NAFTALIS & FRANKEL, LLP
`
`990 Marsh Road
`
`Menlo Park, California 94025
`
`For the Plaintiff
`
`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
`
`APPEARANCES CONTINUED:
`
`1
`
`2
`
`2
`
` 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
`
`Also Present:
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
` Mr. Omar Salik
` Ms. Julia Kazaks
`
`
`08:51:13 15
`08:51:13
`
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`1 of 60 sheets
`
`08:34:38
`
`08:34:15
`
`08:34:19
`
`08:34:24
`
`08:34:29
`
`08:34:35
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`08:34:42
`08:34:45 10
`08:34:48 11
`08:34:52 12
`08:34:57 13
`08:34:59 14
`08:35:04 15
`08:35:08 16
`08:35:12 17
`08:35:15 18
`08:35:18 19
`08:35:22 20
`08:35:24 21
`08:35:30 22
`08:35:31 23
`08:35:35 24
`08:35:38 25
`Page 1 to 4 of 156
`
`Order, including the motions in limine and the body of it,
`
`but I guess the first thing to address is damages.
`
`What are we going to do about that, Mr. Andre?
`
`MR. ANDRE: Your Honor, we're going to be
`
`putting forward a damages case that has three factual bases
`
`that the jury can decide a reasonable royalty.
`
`First being a cost savings methodology that you
`
`have allowed in the case with Dr. Valerdi and others who
`
`will be talking about the cost-savings basis. This is
`
`largely based on a few other Federal Circuit cases that have
`
`allowed this type of damages model.
`
`We also have a revenue-based model based on the
`
`proper apportionment of the revenue and the profits of the
`
`infringing technology over the relevant time period that the
`
`jury can base a reasonable royalty on.
`
`And we also have a per-unit royalty possibility
`
`that the jury can base a reasonable royalty on as well.
`
`THE COURT: All right. So for example, the per
`
`unit, let's say cost, I don't know, $100 to buy an
`
`Activision software package.
`
`How do you get to a per-unit royalty?
`
`MR. ANDRE: It's actually a per-user royalty
`
`because it's -- when I say per unit, it's per unit per user.
`10/20/2018 02:21:48 PM
`
`

`

`Case 1:16-cv-00453-RGA Document 662-1 Filed 04/05/19 Page 3 of 4 PageID #: 51557
`57
`59
`2013 is one of the most successful video games of all time.
`World of Warcraft was one of the most successful
`video games of all time by 2013. If someone said that,
`Well, you can't use this cross-relevant technology --
`THE COURT: Well, I don't know. Your experts
`have said the current versions don't infringe and presumably
`that no earlier versions infringe; right?
`MR. TOMASULO: The burden is on them to say
`there are no --
`THE COURT: Mr. Tomasulo --
`MR. TOMASULO: I'm sorry.
`THE COURT: -- you know, this is hard enough if
`you won't answer my questions.
`MR. TOMASULO: I'm sorry, Your Honor. Our
`experts will say that all of our versions do not infringe.
`THE COURT: Okay. So presumably, one thing we
`know is they're not going to put on experts that say, No,
`the infringement started in 2007.
`MR. TOMASULO: They have made a claim that
`they're going to argue that prior versions are not
`non-infringing alternatives. They are --
`THE COURT: Well, they can argue that, but they
`can't argue that they're not non-infringing alternatives
`because they don't infringe. I mean, because they do
`infringe. Right?
`
`opinion.
`
`MR. TOMASULO: Well --
`THE COURT: Certainly not an opinion she's
`qualified to give.
`MR. TOMASULO: I don't disagree with that, but
`that's what they're accusing. In other words, where is it
`in any expert report that says that's the first date of
`infringement by -- I mean, they have the burden on this
`issue. They have to advance a first date of infringement.
`It's up to them to say what happened, and they
`haven't done it. But what Dr. Meyer, who is the damages
`expert, she does say that the --
`
`09:50:33 1
`09:50:36 2
`09:50:39 3
`09:50:43 4
`09:50:46 5
`09:50:52 6
`09:51:00 7
`09:51:03 8
`09:51:05 9
`09:51:07 10
`09:51:08 11
`09:51:09 12
`09:51:11 13
`09:51:12 14
`09:51:15 15
`09:51:18 16
`09:51:21 17
`09:51:23 18
`09:51:29 19
`09:51:32 20
`09:51:35 21
`09:51:37 22
`09:51:39 23
`09:51:42 24
`09:51:45 25
`
`games.
`
`But basically when it came to identifying the
`hypothetical negotiation date, they said it was the date
`that the Complaints were filed. We moved to compel --
`THE COURT: Right. Right.
`MR. TOMASULO: -- all that.
`THE COURT: We know that's not the right date.
`MR. TOMASULO: So what we did when we got
`Dr. Meyer's report, one of the things -- I'm sorry,
`Dr. Meyer's report, we looked at it, and Dr. Meyer
`identifies the release dates of what she calls the
`infringing products.
`THE COURT: Right, but that's not actually an
`
`09:48:13 1
`09:48:13 2
`09:48:18 3
`09:48:20 4
`09:48:23 5
`09:48:24 6
`09:48:24 7
`09:48:26 8
`09:48:28 9
`09:48:31 10
`09:48:34 11
`09:48:36 12
`09:48:37 13
`09:48:41 14
`09:48:42 15
`09:48:42 16
`09:48:45 17
`09:48:46 18
`09:48:47 19
`09:48:51 20
`09:48:54 21
`09:48:56 22
`09:48:59 23
`09:49:02 24
`09:49:05 25
`
`58
`THE COURT: Well, so I think -- and I guess
`we're really just talking -- well, we're talking about World
`of Warcraft and Call of Duty. I believe that I've heard
`Mr. Frankel say the first infringement of Call of Duty is
`2014.
`
`09:51:46 1
`09:49:07 1
`09:51:48 2
`09:49:13 2
`09:51:51 3
`09:49:17 3
`09:51:55 4
`09:49:24 4
`09:52:00 5
`09:49:28 5
`09:52:02 6
`09:49:28 6
`And that for the World of Warcraft, it's
`09:52:03 7
`09:49:34 7
`whenever this patch was which might have been 2013.
`09:52:05 8
`09:49:38 8
`MR. TOMASULO: What they're not willing to say
`09:52:10 9
`09:49:40 9
`is that the earlier versions are non-infringing. In other
`09:52:13 10
`09:49:43 10
`words, they won't say when the first date of infringement
`09:52:14 11
`09:49:45 11
`is. That's the issue.
`09:52:15 12
`09:49:46 12
`They want to move the date of first infringement
`09:52:19 13
`09:49:48 13
`because they want to choose their hypothetical negotiation
`09:52:23 14
`09:49:51 14
`date as opposed to doing an analysis of what actual event is
`09:52:25 15
`09:49:56 15
`the supposed first date of infringement. In other words, we
`09:52:30 16
`09:49:59 16
`were not infringing, then we started infringing.
`09:52:37 17
`09:50:02 17
`Well, if that's the date, then the things that
`09:52:43 18
`09:50:04 18
`we were doing before -- these games have a long history.
`09:52:47 19
`09:50:07 19
`THE COURT: Well, I guess what I'm wondering is:
`09:52:52 20
`09:50:09 20
`What difference does it make, because you're not throwing
`09:52:56 21
`09:50:11 21
`out anticipation or obviousness? So who cares whether you
`09:53:00 22
`09:50:15 22
`have a product in 2004 that, you know, did the same thing?
`09:53:01 23
`09:50:25 23
`MR. TOMASULO: Well, because their entire
`09:53:03 24
`09:50:27 24
`damages case is premised on the idea that there's no way to
`09:50:30 25
`09:53:05 25
`design around these patents. So the Call of Duty version of
`15 of 60 sheets
`Page 57 to 60 of 156
`
`60
`There are a lot of different things that go into
`whether something is a non-infringing alternative. But they
`can't argue, yeah, the date that infringement began is 2013,
`and oh, yeah, your earlier product also infringed.
`MR. TOMASULO: Well, that would be helpful to
`know that they can't do that.
`THE COURT: Right.
`MR. FRANKEL: Well, Activision's experts have
`not offered any analysis of any earlier versions of the
`game.
`
`THE COURT: Right. Regardless of what their
`experts say, you can't argue, yeah, the first infringement
`date is 2013. And, yeah, it was infringing before then.
`That's part of what you've got to pick. You've
`got to pick a date where you say what came before is not
`infringing, and you know, but at this point, and patch
`number nine, you know, that's a good -- you know, that's an
`easy to understand, yeah, this patch has the infringing
`technology.
`And presumably then they can say, Well, so we
`could have just not introduced the patch and still made a
`zillion dollars selling whatever it was we were selling
`before the patch; right?
`MR. ANDRE: Your Honor, let me see if I can make
`this a little clearer, and the reason being is because the
`10/20/2018 02:21:48 PM
`
`

`

`09:53:08 1
`09:53:14 2
`09:53:16 3
`09:53:18 4
`09:53:19 5
`09:53:21 6
`09:53:25 7
`09:53:30 8
`09:53:32 9
`09:53:35 10
`09:53:38 11
`09:53:42 12
`09:53:45 13
`09:53:45 14
`09:53:46 15
`09:53:48 16
`09:53:52 17
`09:53:52 18
`09:53:55 19
`09:53:57 20
`09:54:00 21
`09:54:03 22
`09:54:08 23
`09:54:10 24
`09:54:13 25
`
`Case 1:16-cv-00453-RGA Document 662-1 Filed 04/05/19 Page 4 of 4 PageID #: 51558
`61
`63
`games change every year. So, for example, I'll use Call of
`Duty. That's a good example. We're accusing the Black Ops
`3 and the Advanced Warfare game.
`THE COURT: Okay.
`MR. ANDRE: So that wasn't around in 2007.
`Those games were not. We have to base our infringement case
`on when we gave notice for damages. So we gave notice with
`filing a claim in 2015.
`So we had to go after products that were being
`sold in 2015. We can't go back and get damages from
`products sold in 2007 because we didn't give notice back
`then. And we've already had that discussion. You and I had
`the discussion --
`THE COURT: Right.
`MR. ANDRE: -- and we acquiesced to that. So --
`THE COURT: You volunteered, but that's a
`
`didn't get discovery on it. We're not alleging they
`infringed, so we're not going to get up there and say that
`those products infringe or don't infringe. We're not going
`to say either way.
`We're going to take the affirmative position
`that these newer games since 2015 do infringe, and our
`experts, two of our experts say there's non-infringing
`alternatives. They say based on the functionality in the
`games they looked at, there is no viable non-infringing
`alternative to the technology that's in these patents.
`We're going to take depositions. They can go in
`and say, yeah, but hey, we had a game in 2004. And our
`experts will say, To the extent your game in 2004 was using
`this multi-player, you know, networking that's described in
`the patents, that's not a viable non-infringing alternative.
`That's all we're going to say.
`So if they want to go in there and try to say
`that their 2004 games were non-infringing alternatives, I
`mean, they're actually saying the 2015 games were
`non-infringing alternatives.
`So I don't know what it's going to get them, but
`they can make that argument. We don't want to take the
`position affirmatively, one way or another, because we just
`don't know.
`I think that's the best I can try to clarify
`64
`
`09:55:19 1
`09:55:22 2
`09:55:25 3
`09:55:28 4
`09:55:29 5
`09:55:32 6
`09:55:36 7
`09:55:38 8
`09:55:41 9
`09:55:45 10
`09:55:48 11
`09:55:51 12
`09:55:56 13
`09:56:01 14
`09:56:05 15
`09:56:10 16
`09:56:11 17
`09:56:13 18
`09:56:19 19
`09:56:22 20
`09:56:22 21
`09:56:27 22
`09:56:27 23
`09:56:29 24
`09:56:29 25
`
`different --
`
`MR. ANDRE: I did volunteer that, and that's
`something -- so from that perspective, that's where there's
`a little bit of a conflict. They're saying they want us to
`take a position as to when the infringement began.
`So when the infringement began of Black Ops 3
`and Advanced Warfare was when those products were released.
`You can't have infringement beginning of those two games
`before that.
`
`62
`09:54:14 1
`Now, the other previous Call of Duty games may
`09:54:17 2
`or may not have infringed. They're not accused in this
`09:54:19 3
`case. We're not going to say they infringed in this case
`09:54:22 4
`because we can't.
`09:54:22 5
`But we're also not going to say they don't
`09:54:25 6
`infringe. We don't think the affirmative position is they
`09:54:27 7
`do not infringe. We're just saying they're not accused of
`09:54:30 8
`infringement in this case because they're not versions that
`09:54:32 9
`are being sold after we gave notice.
`09:54:34 10
`So that's kind of the conflict, I think, or
`09:54:37 11
`maybe the disconnect that I'm hearing any way because
`09:54:40 12
`defendants want us to go back and say 2004 is not
`09:54:44 13
`infringing. Well, we don't know if it's infringing or not.
`09:54:46 14
`But I know one thing, we can't go back and get
`09:54:48 15
`damages back then because we didn't give notice until 2015.
`09:54:53 16
`So what discovery we took was what was being sold in 2015
`09:54:55 17
`on. That's the discovery they gave us, and that's the
`09:54:57 18
`discovery we took.
`09:54:58 19
`In this case, we can affirmatively say those
`09:55:01 20
`products that were on sale as of March 2015, which are the
`09:55:05 21
`ones Mr. Frankel is talking about, those versions went on
`09:55:10 22
`sale the dates Mr. Frankel gave. So that's what we're
`09:55:13 23
`talking about here.
`09:55:14 24
`They want us to take a different position saying
`09:55:16 25
`that, yeah, before that they didn't infringe. Well, we
`10/20/2018 02:21:48 PM
`
`09:56:33 1
`09:56:36 2
`09:56:36 3
`09:56:39 4
`09:56:42 5
`09:56:45 6
`09:56:49 7
`09:56:54 8
`09:56:56 9
`09:56:58 10
`09:57:00 11
`09:57:01 12
`09:57:02 13
`09:57:04 14
`09:57:07 15
`09:57:12 16
`09:57:15 17
`09:57:18 18
`09:57:21 19
`09:57:23 20
`09:57:26 21
`09:57:30 22
`09:57:32 23
`09:57:38 24
`09:57:44 25
`Page 61 to 64 of 156
`
`that. I hope that does help a little bit.
`THE COURT: All right.
`MR. FRANKEL: And Your Honor, just Activision
`has the burden of production to come forward with
`non-infringing alternatives, and their experts have not
`looked at the older games that are not at issue in this case
`and said, They don't infringe for this specific reason. So
`that's not an opinion that they should be presenting at
`trial.
`
`THE COURT: Okay.
`MR. TOMASULO: May I just briefly --
`THE COURT: Yes.
`MR. TOMASULO: -- respond? So we've been trying
`to get this information as to what is the date of first
`infringement, and it is simply incorrect that there's
`different versions of World of Warcraft that all of a sudden
`there was one that didn't exist in 2013. World of Warcraft
`has been a continuous operation, and as you correctly
`described it, it's a series of patches or updates.
`But it's not like there was some event that
`happened in 2013 that made it substantially different in its
`functionality. We identified these early.
`THE COURT: But so what I heard a moment ago is,
`say, Black Ops was not a version that existed before 2013.
`It was some other version. I don't know, you know, so that
`16 of 60 sheets
`
`