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`Page 1
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` IN THE UNITED STATES DISTRICT COURT
` FOR THE DISTRICT OF DELAWARE
` - - -
`ACCELERATION BAY LLC, :
` :
` Plaintiff, :
` :
`v. : C.A. NO.16-453 (RGA)
` :
`ACTIVISION BLIZZARD, INC., :
` :
` Defendant. :
` :
`___________________________________
`ACCELERATION BAY LLC :
` :
` Plaintiff, :
` :
`v. :
` : C.A. No. 16-454(RGA)
`ELECTRONIC ARTS INC., :
` :
` Defendant. :
` :
`___________________________________
`ACCELERATION BAY LLC, :
` :
` Plaintiff, :
` :
`v. : C.A. No. 16-455(RGA)
` :
`TAKE-TWO INTERACTIVE SOFTWARE, :
`INC., ROCKSTAR GAMES, INC. and :
`2K SPORTS, INC., :
` :
` Defendants. :
`
` Wilmington, Delaware
` August 31, 2017 at 2:00 p.m.
` TELECONFERENCE
` Ellie Corbett Hannum, Registered Merit Reporter
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`Page 2
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`B E F O R E : S P E C I A L M A S T E R A L L E N M . T E R R E L L
` - - -
`A P P E A R A N C E S :
`
` P O T T E R A N D E R S O N & C O R R O O N
` B Y : J O N A T H A N A . C H O A , E S Q .
` j c h o a @ p o t t e r a n d e r s o n . c o m
` a n d
` K R A M E R L E V I N
` B Y : A A R O N F R A N K E L , E S Q .
` a f r a n k e l @ k r a m e r l e v i n . c o m
` ( N e w Y o r k , N e w Y o r k )
` C o u n s e l f o r P l a i n t i f f
`
` M O R R I S , N I C H O L S , A R S H T & T U N N E L L L L P
` B Y : S T E P H E N J . K R A F T S C H I K , E S Q .
` s k r a f t s c h i k @ m n a t . c o m
` a n d
` W I N S T O N & S T R A W N L L P
` B Y : D A V I D P . E N Z M I N G E R , E S Q .
` d e n z m i n g e r @ w i n s t o n . c o m
` ( M e n l o P a r k , C a l i f o r n i a )
` B Y : M I C H A E L A . T O M A S U L O , E S Q .
` m t o m a s u l o @ w i n s t o n . c o m
`
` ( L o s A n g e l e s , C a l i f o r n i a )
`
` B Y : K A T H L E E N B . B A R R Y , E S Q .
` k b a r r y @ w i n s t o n . c o m
` ( C h i c a g o , I l l i n o i s )
`
` C o u n s e l f o r D e f e n d a n t s
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` SPECIAL MASTER TERRELL: Do the parties
`
`know to whom Ellie should send a bill?
`
` MS. BARRY: If you send it to Steve
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`Kraftschik's attention, the parties will work it out.
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` SPECIAL MASTER TERRELL: Thank you.
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` MR. FRANKEL: That's fine.
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` SPECIAL MASTER TERRELL: Thank you. Or
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`you can just send mine at this stage just to my email at
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`allenmterrell@gmail.com.
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` MS. BARRY: I think my partner has joined
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`the call.
`
` - - -
`
` SPECIAL MASTER TERRELL: Let's start.
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`Thank you all for being available. And this is Allen
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`Terrell, Special Master, in Civil Action No. 16-453, 454
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`and 455. And this is the time to hear Plaintiff's
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`motions filed August 16th to compel and one of
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`Defendants' motions to compel which relates to a
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`framework for expert report.
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` I think I would like to start by just
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`having a roll call. And as you go through the roll call
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`indicate who will be speaking for the parties.
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` Plaintiff, go ahead.
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` MR. CHOA: Good afternoon, Special Master,
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`this is Jonathan Choa from Potter Anderson, with me is
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`Aaron Frankel. He will be arguing the motions on behalf
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`of Acceleration Bay today.
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` SPECIAL MASTER TERRELL: Thank you.
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` MR. ENZMINGER: This is David Enzminger of
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`Winston & Strawn, with me is Michael Tomasulo and
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`Kathleen Barry. Kathleen and I will primarily argue the
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`motions, although Mr. Tomasulo may argue one of them.
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` SPECIAL MASTER TERRELL: Okay.
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` MR. KRAFTSCHIK: This is Stephen
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`Kraftschik from Morris Nichols also on the line.
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` SPECIAL MASTER TERRELL: Very good. I
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`have been through all the papers fairly carefully and
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`what I thought might make more sense is why doesn't the
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`Plaintiff go first, cover all the Plaintiff's motions,
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`and if Mr. Frankel wants he can also address the
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`Defendants' motion with regard to the expert report. I
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`will be taking notes and I know you will too so then
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`after that I will let Defendants speak.
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` Mr. Frankel, do you want to proceed?
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` MR. FRANKEL: Yes. Good afternoon,
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`Special Master. I just want to be clear on one point,
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`though, it's my understanding that one of our motions
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`relating to compelling agreements has been deferred until
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`the hearing on the 6th.
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` SPECIAL MASTER TERRELL: That's the one in
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`connection with Sony; that is correct.
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` MR. FRANKEL: Okay. Thank you.
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` So, Special Master, unless there's an
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`order you prefer I address the motions, I will start with
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`the Activision source code issue.
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` SPECIAL MASTER TERRELL: That will be
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`fine.
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` MR. FRANKEL: And I will just pick up
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`where Defendants' brief left off. We submitted a
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`declaration from Andy Jian, who is doing source code
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`review, that's been unrebutted. There has been no
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`declaration committed by Mr. Marks disputing the account,
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`and Defendants certainly have not been shy to submit
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`declarations to you when they thought it was helpful.
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` So it's undisputed that the individual
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`that Activision tasked to supervise the source code
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`review provided a single set of papers for both Call of
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`Duty games. It's undisputed that Mr. Gian, on the last
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`day of the review, spoke to Mr. Marks, confirmed the
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`total number of pages that were remaining and was given a
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`single number for the two games, not two separate counts
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`for the games. And it's undisputed that the source code
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`modules that Mr. Gian identified could have been printed
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`from the source code base of either of the two Call of
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`Duty games.
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` There has been no explanation for why
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`Activision provided just one single set of consecutively
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`numbered papers for both games while intending to apply a
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`separate page count to each of them. All they say in
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`their brief, and this is a quote, is it was as a
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`convenience. I don't even know what that means, but it
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`was certainly very confusing.
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` And the other argument they make in their
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`brief is that their representative wasn't authorized to
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`modify the protective order. I don't even see this as a
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`modification of the protective order, but there was no
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`way for our reviewer to know that he couldn't rely, that
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`he couldn't reasonably rely on the page count and the
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`pages that he was being provided by Activision's
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`representative.
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` In their brief they don't really identify
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`any prejudice. They say that the protective order has
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`page limits to prevent there being too much source code
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`floating around. But in this case, even if our motion is
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`granted and the additional 71 pages of source code are
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`released, it will still only be the 500 pages of source
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`code printed that was authorized under the protective
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`order in the first place. They don't identify any other
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`prejudice or any particular harm from releasing the 71
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`pages of source code that are at issue.
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` And here, particularly where those same
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`pages could have been printed from the other Call of Duty
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`source code base, there's no prejudice whatsoever to
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`Activision, while at the same time taking away about 30
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`percent of the source code that we printed for one of the
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`accused products is very prejudicial to Acceleration Bay.
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`The scheduling order, again, provides for 500 pages
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`between the two Call of Duty games. It also provides for
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`printing additional pages should the need arise.
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` At worst what we have here is a very
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`reasonable misunderstanding given the circumstances. So
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`we would ask that Activision be ordered to produce those
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`pages.
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` Are there any questions I can address
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`before I move on to the next issue?
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` SPECIAL MASTER TERRELL: Is it your
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`understanding that all Activision needs to do is push a
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`button and the pages are printed?
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` MR. FRANKEL: It's even less than that,
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`the pages have already been printed. They just need to
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`email them to us.
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` SPECIAL MASTER TERRELL: Okay. So from
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`your point of view you see no prejudice to the Defendants
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`other than the fact that in their view they have complied
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`with the protective order as to the number of pages and
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`you are not entitled to any more. Is that it?
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` MR. FRANKEL: Correct.
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` SPECIAL MASTER TERRELL: That's what you
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`understand to be the guts of their argument; is that
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`right?
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` MR. FRANKEL: That's correct, Special
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`Master.
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` SPECIAL MASTER TERRELL: And your point is
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`that you read the order as not inconsistent with your
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`request now and that in your view there is no meaningful
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`prejudice in light of a possible misunderstanding. Is
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`that a summary?
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` MR. FRANKEL: That's correct. And just
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`that it's not just the order read in isolation but also
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`reasonably relying on the statements and the conduct of
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`Activision's representative who was supervising the
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`review.
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` SPECIAL MASTER TERRELL: Thank you. Now,
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`while I really thought the easiest thing to do was just
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`let one party speak throughout, it does occur to me this
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`is kind of a separate narrow issue.
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` Mr. Frankel, would you prefer just to let
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`the Defendant respond on this particular motion now?
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` MR. FRANKEL: Whatever the Special Master
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`prefers.
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` SPECIAL MASTER TERRELL: It's also up to
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`Defendant. I want to make it's easier for the parties.
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` Do the Defendants want to respond on this
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`motion right now?
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` MS. BARRY: Special Master, we are happy
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`to do what you prefer. If it's easier for you to hear
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`our response now, that's fine too.
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` SPECIAL MASTER TERRELL: Let's do that
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`because it seems to me it's a very narrow question.
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` MS. BARRY: So if I may start with the
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`issue of the prejudice. We obviously disagree that there
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`is no prejudice. The protective order specifically
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`limited the production to 250 pages per game. There was
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`a reason that it was a per-game limitation and not 500
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`pages as Plaintiff contends. And it is a significant
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`prejudice to require us to produce 30 percent more pages
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`for this one game, and it certainly wasn't contemplated
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`by the protective order.
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` As to Mr. Frankel's comments that our
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`representative somehow misled the Plaintiff's reviewer,
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`obviously we dispute those. There was certainly no basis
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`or suggestion that the Plaintiff should be relying on any
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`statements made by the person supervising the review.
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`Although, again, we dispute that he made any statements
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`that are consistent with what Plaintiff has said here.
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` So, again, we don't think there is any
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`misunderstanding. We think it was on Plaintiff to file
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`the protective order. And the reason the protective
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`order is strictly limited to 250 pages per game is
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`because there was recognition that it would be difficult
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`and prejudicial if there was more source code produced.
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` And so we would say there is prejudice in
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`this circumstance.
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` SPECIAL MASTER TERRELL: All right. Good.
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`I appreciate your concise statement. I think I have it.
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` So let me ask Mr. Frankel to move on to
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`the next motion.
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` MR. FRANKEL: Okay. Special Master, I
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`take it you are interested in not receiving reply
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`comments as we go through the argument or you will let us
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`know if you are?
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` SPECIAL MASTER TERRELL: I am, but I also
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`am very happy if you feel compelled to make a short
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`reply, you can. I do think that the papers are
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`consistent with what I've heard so far so I'm not sure I
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`need it, but go ahead if you have something.
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` MR. FRANKEL: Well, I will just move on to
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`the next issue.
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` SPECIAL MASTER TERRELL: I appreciate
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`that. Go ahead.
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` MR. FRANKEL: So next, Special Master, is
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`the issue of Defendants' responses to several
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`interrogatories. The first one is Interrogatory No. 2,
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`which is directed to non-infringing alternatives.
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` SPECIAL MASTER TERRELL: Yes.
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` MR. FRANKEL: If it would be helpful, I
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`can give a brief summary of what a non-infringing
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`alternative is in the patent context or if you feel
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`comfortable I will just move on.
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` SPECIAL MASTER TERRELL: I feel
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`comfortable. I think your brief made that quite clear.
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` MR. FRANKEL: Thank you, Special Master.
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` So the first point of contention is that
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`Defendants state in their papers that there's a dispute
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`on the standard of proof, but it's clear that the
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`Plaintiff has the ultimate burden of proof on damages,
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`but the only caselaw that either side has cited on the
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`issue of who bears the burden of proof as to
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`non-infringing alternatives is the party asserting that
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`there's a non-infringing alternative and in this case
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`it's the Defendants. We cited a number of cases in our
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`briefing. And Defendants don't like that conclusion, but
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`they haven't cited any authorities to the contrary.
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` They also haven't challenged the cases
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`that we cited that a non-infringing alternative has to be
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`technically viable and economically feasible. That's
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`part of the burden of showing that there is an
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`alternative is that it would work and that it would work
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`in a way that's economical. Otherwise, it would have no
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`relevance to the damages analysis.
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` So if there's a theoretical non-infringing
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`alternative available to Defendants, but it would cost
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`them $10 billion to implement it, then that would have no
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`relevance to the licensing negotiations because it
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`wouldn't make any sense to implement that non-infringing
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`alternative.
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` SPECIAL MASTER TERRELL: But what I read
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`so far I think, as I read the discovery responses by
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`Defendants, they have made responses to Interrogatory 2,
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`but in summary it seems that your view is that it's
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`simply insufficient. It's not complete enough. But you
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`don't dispute that they have made substantive responses?
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` MR. FRANKEL: Well, "substantive" I would
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`take issue with. I mean, they purport to have identified
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`three non-infringing alternatives.
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` SPECIAL MASTER TERRELL: Right.
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` MR. FRANKEL: I will jump to why we take
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`issue with what's in their responses.
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` SPECIAL MASTER TERRELL: Go ahead.
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` MR. FRANKEL: You know, our concern is --
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`and both parties have raised concerns like this at
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`various points in the case -- that we really need to know
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`now or we needed to know some time ago what exactly it
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`was that they were proposing to do so that it could be
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`taken into account for the expert reports which are due
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`three weeks from tomorrow.
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` And I would also like to point out that we
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`had a prior motion to compel that we filed in June and we
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`had argument on the motion in July where we moved to
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`compel Defendants to produce any documents relating to
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`their non-infringing alternatives, and they declined to
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`do so. So we are particularly concerned that they might
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`be attempting to introduce new evidence of a
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`non-infringing alternative when we should have had that
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`disclosure during fact discovery so that we could address
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`it as a factual matter.
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` Now, in this case -- in each of the cases
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`there are a number of different accused products, and
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`they all have complicated and different network
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`architectures that were built up over a period of years.
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`They have a physical infrastructure with the servers,
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`there's the software that's being reused from version to
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`version. And to modify it to become non-infringing would
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`be a very significant and substantial undertaking. It's
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`not just a question of flipping a switch.
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` So what we need -- to understand what the
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`proposed non-infringing alternative is, we need to know
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`what Defendants would propose changing in each of their
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`games and how long it would take and how they would do it
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`and how much it would cost. That's what a non-infringing
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`alternative is. And we don't have any disclosures of
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`that.
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` Turning to the reasons why Defendants put
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`in their brief they weren't able to give us those
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`responses. The first thing they said was we served our
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`request -- and this is their words at the very end of
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`discovery. Just to be clear, we served that
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`interrogatory three months ago. And Defendants seem to
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`be taking the position that everything we did during the
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`discovery period, discovery source code depositions we
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`wanted in June they said it was already too late in the
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`case to provide, but when we get to their invalidity
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`disclosures, which were very late and plainly violated
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`the scheduling order, they say it's no harm and it's no
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`foul, it wasn't too late. So that's very inconsistent.
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` Defendants also say they can't disclose
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`specifically a non-infringing alternative because they
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`don't understand our infringement case. Well, we have
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`given them our infringement contentions. We told them
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`what our theories are and the evidence that we are
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`relying on, and that isn't changing.
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` So based on that, those contentions, they
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`either have alternatives or they don't have alternatives.
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`If they are unable to understand our infringement case
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`and they can't come up with any alternatives, then they
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`should say so. But if they do think they have
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`alternatives, they need to provide them with the
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`requisite specificity so we can respond to them.
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` The first non-infringing alternative that
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`they propose is just a non-infringement argument. They
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`say that because of the date of the hypothetical
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`negotiation, the same products don't infringe. So that's
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`not an alternative. I mean, you can't say that there's
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`an accused product and if it's found to infringe, we will
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`just use the same product. I mean, that's just a legal
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`theory of infringement.
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` If they don't have any details or evidence
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`that they are going to put forth on that issue and it's
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`just going to be the bald legal claim, then that's fine,
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`but they shouldn't be allowed to come up with some new
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`theory or say they are going to tweak something or
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`incorporate something from an old game that actually
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`doesn't infringe and here is why. So that's why they
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`haven't given anything but a legal theory for the first
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`one.
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` For their second theory they talked about
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`using a client server architecture, but that's just a
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`non-infringement argument, because they already say for
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`many of these games that they are using a client server
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`architecture. So we think that they infringe and we are
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`going to explain why, but we don't understand what it is
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`that they propose to do that's actually any different.
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`So it's not a non-infringing alternative to say that they
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`don't think that the product infringes in the first
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`place. They make some reference to disavowal, but that
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`doesn't have any connection to the claim construction
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`positions that the parties have advanced in the case.
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` They say that they could change to a
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`network structure where m is less than 3, but, again,
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`what does that mean? We don't know how they would modify
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`the network, how they would modify the servers they are
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`using, how they would change the software, how long it
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`would take. These are very complicated systems, and
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`making changes like that would be very expensive and
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`time-consuming if it was even possible. But they haven't
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`told us what they are going to do.
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` Now, if this -- if all they are going to
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`say later on in the case is we could just use a client
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`server architecture or we could just make m equals 2, and
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`they are not going to give any testimony about how long
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`it takes and how much it costs and they are not going to
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`give any details, then that's fine. They should be held
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`to that. And that's going to be insufficient for them to
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`prove their case, and that's what our experts are going
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`to say, that they just haven't disclosed anything. But
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`they shouldn't be permitted to sandbag us later in the
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`case with a much more detailed and nuanced description of
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`some non-infringing alternative.
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` And then the third one that they propose
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`is this RapNet system that we don't know anything about.
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`We don't have any disclosure of what it is. They have
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`never produced any documents about RapNet. In their
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`opposition brief they said that they might be providing a
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`supplemental response to explain what that theory is, but
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`it's too late. I mean, reports are due in three weeks at
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`this point.
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` This was one of the subjects of our motion
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`to compel was to get any documents their were going to be
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`relying on for non-infringing alternatives. That was
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`months ago. They resisted producing the documents, and
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`they shouldn't be allowed to add that new evidence into
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`the case now. It's highly prejudicial.
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` Are there any questions I can address on
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`that interrogatory?
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` SPECIAL MASTER TERRELL: What's the latest
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`interrogatory supplemental response that you have
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`received on Interrogatory 2?
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` MR. FRANKEL: We have not received any
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`supplemental responses on Interrogatory No. 2.
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` SPECIAL MASTER TERRELL: Okay.
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` MR. ENZMINGER: In fairness, I believe it
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`was only due July 27th.
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` SPECIAL MASTER TERRELL: Okay. That's
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`fine.
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` Go on now to Interrogatory 4, I think.
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` MR. FRANKEL: Okay. On the issue of
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`damages, when you look at Defendants' interrogatory
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`response and you take out the objections and the legal
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`arguments, which are fine, I mean they are entitled to
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`assert them, everything that they contend and disclose
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`consists of six bullet points. They referenced the Sony
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`license. So we understand that's something they are
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`going to rely on as part of their damages case. Then
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`they make a vague reference to Boeing's efforts to
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`license, but they don't identify any specific deposition
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`testimony or documents or explain how that relates to
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`damages, but at least that's some meaningful universe
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`that they are talking about.
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` But, then, it's really downhill from
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`there. Their third bullet point just talks about
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`Defendants' and industry's established practices, but we
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`don't have any idea of what those practices are or what
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`evidence they are possibly going to rely on at trial to
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`support those practices. So that's not something that we
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`can address in our damages report, which is due in three
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`weeks.
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` Then they say that there's little evidence
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`that patents drive sales. Well, based on what? We have
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`no idea of what that argument means and what evidence
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`they would rely on to support it.
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` Then there's a one-line reference to
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`non-infringing alternatives. And we have already talked
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`about how they haven't provided any disclosure of any
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`specific non-infringing alternative, let alone how much
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`it would cost or how long it would take, which are key
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`considerations for the damages analysis.
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` And then they say that they might refer to
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`the nature of the claims. Well, again, what's the nature
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`of the claims, and in what way does that relate to
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`damages?
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` In contrast, our damages interrogatory
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`response identifies for each Defendant over 100 specific
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`documents that we are relying on, deposition testimony,
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`the precise theories. We have given a fair disclosure of
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`what our damages case is going to look like, and we don't
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`have that for Defendants. If that's all -- if they have
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`identified in their rog response the arguments they are
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`going to make and the evidence they are going to rely on,
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`that's fine, but, again, they should be held to that
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`response.
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` And if they are going to be raising
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`additional arguments in evidence, then we should have had
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`it a long time ago so that we can address it in our
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`expert reports.
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` Any questions I can address on this issue?
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` SPECIAL MASTER TERRELL: I don't think so,
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`go ahead.
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` MR. FRANKEL: For interrogatories 7, 8,
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`and 10, these relate to non-infringement arguments that
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`Defendants may be raising. And, again, outside of
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`objections, Defendants just identify a handful of
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`high-level arguments. If that's all that their experts
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`are going to say, then that's okay. But if they are
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`going to be raising particular non-infringement
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`arguments, if they are going to be pointing to specific
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`source code modules as proving non-infringement, we are
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`entitled to that disclosure. We are entitled to a
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`disclosure commensurate with the disclosures we have
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`given on the infringement side.
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` They have just given us a couple of pages
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`of conclusory arguments. They point out in their brief
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`that they reference some Rule 11 letters that they sent
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`over a year ago. And I understand that those are
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`incorporated, but if they are going to be limited to
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`those arguments, that's okay. If not, we should have had
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`a fair disclosure of the evidence that they are going to
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`be relying on. They don't identify any specific
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`deposition testimony or source code.
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` Defendants say in their brief that they
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`can prove non-infringement by showing only a single
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`limitation that isn't infringed and that Plaintiff has
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`the burden of proof. I agree with them on both of those
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`points, but that's not the discovery standard. That
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`doesn't mean that they are relieved of their obligation
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`to