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`EXHIBIT 1
`EXHIBIT 1
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`EXHIBIT 1
`EXHIBIT 1
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`Case 1:18-cv-00943-RGA Document 15-1 Filed 09/14/18 Page 2 of 23 PageID #: 173
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`1
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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF NEW YORK
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`- - - - - - - - - - - - - - - X
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`16-CV-01557 (ILG)
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`United States Courthouse
`Brooklyn, New York
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`Thursday, September 29, 2016
`2:30 p.m.
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`:: :: : : : : : : : : : : :
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`ALMONDNET, INC., et al.,
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` Plaintiffs,
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`-against-
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`YAHOO! INC.,
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` Defendant.
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`- - - - - - - - - - - - - - - X
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`TRANSCRIPT OF CIVIL CAUSE FOR MOTION HEARING
`BEFORE THE HONORABLE I. LEO GLASSER
`UNITED STATES SENIOR DISTRICT JUDGE
`
`A P P E A R A N C E S:
`
`For the Plaintiffs: HOFFMAN PATENT FIRM
`7689 East Paradise Lane
`Suite 2
`Scottsdale, Arizon 85260
`BY:LOUIS J. HOFFMAN, ESQ.
`
`
`
`
`
`SUSMAN GODFREY, LLP
`1301 Avenue of the Americas
`32nd Floor
`New York, New York 10019-6023
`BY:IAN B. CROSBY, ESQ., ESQ.
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`Case 1:18-cv-00943-RGA Document 15-1 Filed 09/14/18 Page 3 of 23 PageID #: 174
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`2
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`A P P E A R A N C E S (Cont'd)
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`For the Defendant:
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`QUINN EMANUEL URQUHART & SULLIVAN, LLP
`51 Madison Avenue
`22nd Floor
`New York, New York 10010
`BY:PATRICK D. CURRAN, ESQ.
` CHARLES K. VERHOVEN, ESQ.
` JOHN T. McKEE, ESQ.
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`Court Reporter: Stacy A. Mace, RMR, CRR
` Official Court Reporter
` E-mail: SMaceRPR@gmail.com
`
`P r o c e e d i n g s r e c o r d e d b y c o m p u t e r i z e d s t e n o g r a p h y . T r a n s c r i p t
`p r o d u c e d b y C o m p u t e r - a i d e d T r a n s c r i p t i o n .
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`* * * * *
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`Case 1:18-cv-00943-RGA Document 15-1 Filed 09/14/18 Page 4 of 23 PageID #: 175
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`Proceedings
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`3
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`(In open court.)
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`THE COURTROOM DEPUTY: Civil cause for motion,
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`AlmondNet, Incorporated, et al. versus Yahoo!, Incorporated.
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`MR. CURRAN: Good afternoon, Your Honor.
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`THE COURT: Good afternoon.
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`MR. CURRAN: Patrick Curran from Quinn Emanuel for
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`defendant, Yahoo!. I am here today with Mr. Charles Verhoven
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`and Mr. John McKee.
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`MR. HOFFMAN: My name is Louis Hoffman, Your Honor,
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`from Hoffman Patent Firm for plaintiff, AlmondNet, et al. I
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`have Ian Crosby from Susman Godfrey with me; and in the back
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`Roy Shkedi, who is the chief executive officer of AlmondNet
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`and the inventor.
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`THE COURT: Okay. Since this is your motion --
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`MR. CURRAN: Thank you, Your Honor.
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`THE COURT: -- we will hear you.
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`MR. CURRAN: There were two primary issues raised in
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`the motion to dismiss that relate to two different areas of
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`patent infringement law; direct infringement and indirect
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`infringement. If it's all right with Your Honor, I'll begin
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`with direct infringement first.
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`THE COURT: All right.
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`MR. CURRAN: On the direct infringement issues, we
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`think that AlmondNet's admission on page 1 of their opposition
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`is very instructive and helps narrow down the issues in this
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`4
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`case.
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`On page 1 of their opposition, AlmondNet admits that
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`after the Twombly decision and after the elimination of
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`Form 18, even on their reading that Iqbal and Twombly require
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`that a plaintiff describe the technology at issue; identify
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`the accused products of the infringing activity; and explain,
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`generally, how the accused instrumentalities infringe at least
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`one representative claim. So even on their reading, we still
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`have to know for a specific patent what's the specific product
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`and generally how does it infringe.
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`THE COURT: Am I correct in understanding that the
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`defendant and AlmondNet, I hope I am pronouncing that right,
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`have had discussions about the patent and the claim that you
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`have been infringing it as far back as 2001, 2012, 2013?
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`Am I correct about that?
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`MR. CURRAN: My understanding, Your Honor, is that
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`there have been discussions. I am not sure that they involved
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`all 10 patents, but I know that there have been discussions
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`between the parties.
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`THE COURT: And would I be correct in assuming that
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`those discussions concerned why you are here today, that is
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`the plaintiff believed that you were infringing their patents;
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`and you had discussions about that that have been going on for
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`about 10 or 11 years, roughly?
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`MR. CURRAN: I may have to defer to Mr. Hoffman's
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`understanding here; I believe he has some first-hand knowledge
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`of these. I haven't participated in the discussions, but
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`generally, Your Honor, yes, I agree; there has been discussion
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`about patent infringement.
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`THE COURT: All right. Why do I make that
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`observation?
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`MR. CURRAN: Your Honor, we would not suggest that
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`the lawsuit took Yahoo! by surprise that AlmondNet existed or
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`that these patents existed, but the details of the
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`allegations, or the lack thereof, that was surprising to bring
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`a claim in federal court.
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`THE COURT: Details meaning the details as described
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`in the complaint?
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`MR. CURRAN: Yes, Your Honor.
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`THE COURT: But the complaint notwithstanding, how
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`long have you been involved in this case? You say you do not
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`know the entire history of it.
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`MR. CURRAN: Your Honor, Yahoo! retained outside
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`counsel shortly after the complaint was filed. That's our
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`first involvement.
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`THE COURT: How long ago was that?
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`MR. CURRAN: I believe it would be late April, early
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`May, in that area.
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`THE COURT: 2015?
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`MR. CURRAN: It may have been mid-April in 2016.
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`THE COURT: Well, who were the parties to the
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`discussions that have been going on between the plaintiff and
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`Yahoo! going back, I am just making that observation because
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`that is what I read in the papers --
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`MR. CURRAN: Yes, Your Honor.
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`THE COURT: -- that there have been conversations
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`and discussions about this as far back as 2001, I think was
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`the first date that was made mention of.
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`MR. CURRAN: Your Honor, I --
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`THE COURT: This is by way of -- excuse me.
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`MR. CURRAN: I apologize.
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`THE COURT: This is by way of an observation I am
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`making, which is not specific to this case, although relevant
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`to it, but an observation I am making regarding what this
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`motion is essentially about from a broad point of view:
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`What you are really saying in every case when a
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`12(b)(6) motion is made, what the defendant is saying, we do
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`not know enough about why we are being sued. That is
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`essentially it. We have no idea why we are here, but that is
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`not -- that cannot be true.
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`After discussions between the parties that have been
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`going on for a long time, you must know precisely what it is
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`that you are accused of, what it is that the plaintiff
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`believes you have infringed, what their patent is about, but
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`12(b)(6) motions are made. And 12(b)(6) motions have
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`proliferated beyond belief since Twombly and Iqbal. If you
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`went onto Westlaw, or what used to be Shepard's if you were
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`old enough to know what Shepard's was, and looked at how many
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`cases have cited Twombly and Iqbal, it would be mind boggling,
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`absolutely mind boggling. And one is tempted to infer that
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`Twombly and Iqbal have become ATM machines for lawyers.
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`And Twombly and Iqbal, whatever Twombly and Iqbal
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`mean, whatever the plausible factual statement means and
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`whatever factual means, and whatever a showing means for
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`purposes of Rule 8(a), the point of the matter is, gentlemen,
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`why are you here?
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`You know what it is the defendant claims it patented
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`and what it is they are thinking or alleging that you have
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`infringed. So what these 12(b)(6) motions are all about are
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`designed to put an end to litigation based on a piece of
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`paper, based upon a complaint.
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`If you think that there is a real, legitimate
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`dispute between you, why do you not get on with your discovery
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`and go to trial.
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`You know what it is all about. Why are you here?
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`MR. CURRAN: Your Honor --
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`THE COURT: Having said all that, you are here, and
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`so go ahead and proceed with your motion.
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`MR. CURRAN: Thank you, Your Honor. And to be brief
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`and to cut through to the point that Your Honor is making,
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`there are just a couple basic points that are not in the
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`complaint that were surprising to us, and that is the specific
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`product.
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`So we know as Yahoo! that we are being accused of
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`patent infringement, but the specific product, the offering
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`that is being accused is not listed for each of the patents,
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`and there are a lot of patents here. 10 patents is an
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`enormous suit by patent infringement standards. If you look
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`at many of the complaints and the cases cited, they are one or
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`two patents.
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`THE COURT: Well, again, forgive me for
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`interrupting, I am just trying to be intelligent about this,
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`as difficult as it may be for me sometimes, but if you really
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`had some doubt as to what is the product, you pick up the
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`phone and say, Mr. Hoffman, what product are you accusing us
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`of, what did we do, and get on with it. And if you think that
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`there was no patent infringed, you think that there is a
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`really good basis for succeeding in a lawsuit before a jury,
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`get on with it.
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`Now, it may be that you will not have as many
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`billable hours , it may be that you will not be able to run up
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`a large fee, but get on with it instead of occupying the time
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`of the Court, me having to now try and dig through 10 patents
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`and to read this material. Will take about six months for me
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`to comprehend it all, to read the claims, compare the claims
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`with the alleged infringement.
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`It is obvious I am not a patent lawyer, very few of
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`us are, but that does not preclude our ability to deal with
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`this, and we will, but the point of the matter is why? What
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`is the point of this?
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`MR. CURRAN: In a patent --
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`THE COURT: You know precisely why you are being
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`sued, and I would suspect you have a pretty good idea of what
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`the product is; or if there is no product, what the conduct
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`was, what your activity was, how you used whatever the
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`Internet facilities are, which may be also the essence of
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`their claim. Why do you not you get on with it?
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`MR. CURRAN: Your Honor, the point is well taken.
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`THE COURT: Well, it is well taken, but what do you
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`do after you concede that it is well taken?
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`MR. CURRAN: We understand Your Honor's perspective.
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`We do think that there are deficiencies in the complaint.
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`THE COURT: Okay.
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`MR. CURRAN: In light of Your Honor's suggestion, I
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`would propose to Mr. Hoffman if we were to see an amended
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`complaint that identified products that had 10 counts, 10
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`counts for 10 patents with products named for each, it would
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`put us very far towards knowing what we're accused of and
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`knowing what proportional discovery would look like in light
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`of those accusations.
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`THE COURT: So do you think that perhaps a little
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`bit of discovery would be useful?
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`MR. CURRAN: I think that going forward we suspect,
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`as many patent infringement cases --
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`THE COURT: Well, maybe Mr. Hoffman can tell you
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`very precisely what product he believes you are infringing.
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`MR. HOFFMAN: Your Honor, if I could --
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`THE COURT: You know, this is a rather unorthodox
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`way of proceeding with this. Normally, I would listen to your
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`argument and I would listen to Mr. Hoffman, and I would give
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`you an opportunity to reply, but why are we here? What is
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`this all about essentially? This incredible amount of paper
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`and memoranda and briefs alleging things that are really not
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`true. You know, why you are here. You know why you are being
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`sued. You have been talking about these problems now for 10
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`or 11 years between you.
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`What is wrong with our system or with lawyers --
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`MR. CURRAN: Your Honor --
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`THE COURT: -- more accurately.
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`MR. CURRAN: I won't take the job of defending
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`lawyers, but if I could just address briefly the complaint.
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`One reason that it matters here is that each of the patent
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`elements is something that uniquely has to be alleged to be
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`present, and there has to be a Rule 11 basis. So we know that
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`the good lawyers on either side, they have a basis, they have
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`a theory for each of the elements; and to start from a square
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`playing field, we need to know the target that they are
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`shooting at, the product, and generally what their theory is,
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`just generally, on how they plan to get there. And that's
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`what we feel we haven't started from. There is a bit of a
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`scavenger hunt with some of the generalized allegations in the
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`complaint, and we just want to know what the existing working
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`theory is and then we'll go from there.
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`THE COURT: Why do you not sit down together and
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`they will tell you?
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`All right. I am sorry. I really should apologize
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`to you. I know that you have spent an awful lot of time and
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`thought preparing for this argument before a federal judge,
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`and here I am frustrating you completely by not letting you
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`utter three sentences, so I apologize. But the point of the
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`matter is to be very real and practical about it. You know,
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`all the criticism one hears about litigation process and
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`lawyering, the kind of acrimony that exists between lawyers,
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`particularly in civil cases, why?
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`Talk to each other. You are accusing me of
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`something that I did, tell me what I did that is wrong. What
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`is the product that you are telling me or believe I infringed?
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`And then if you disagree, complete your discovery.
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`We will get a jury picked and go to trial. Save a lot of time
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`and get to the heart of this problem, or rather if it turns
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`12
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`out after you discussed it, maybe you did infringe, you will
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`resolve it amicably.
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`I think it was Learned Hand who once said, "More
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`than terminal illness and death, I most fear being the
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`litigant." There is a lot of truth to that.
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`And by the way, very few people know that Learned
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`Hand's favorite cases were patent cases. I have a book of all
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`of Learned Hand's patent cases, one volume summarized all the
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`patent cases.
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`MR. CURRAN: I did not realize.
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`THE COURT: Yes, very few people did.
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`All right, so where are we? Go ahead. I will
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`listen to you, or would you rather say, Judge, you are right,
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`I will sit down with Mr. Hoffman, I will ask him to tell me
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`what the products are and we will take it from there; we can
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`go on to discovery?
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`MR. CURRAN: Your Honor, we absolutely will discuss
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`with the other side these concerns. On direct infringement,
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`it is going to relate to which product is accused; and the
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`issues on indirect infringement, the theory of indirect
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`infringement, is that Yahoo! itself didn't infringe, but
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`Yahoo! told someone to do it. And to allege that in the
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`Southern District or the Eastern District, you have to say,
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`well, who is the person who was infringing and what did Yahoo!
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`do to tell that person to infringe, and we'd like to see those
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`theories as well.
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`THE COURT: All right, so forgive me, Mr. Hoffman, I
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`know you are standing by silently, but I just want to pursue
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`this in some intelligent, realistic way.
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`If I understand the implications of Iqbal and
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`Twombly, Iqbal and Twombly have had a very pernicious effect
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`upon the litigating process, generally. Iqbal and Twombly
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`discourage discovery. If on the basis of Iqbal and Twombly I
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`should say this piece of paper is inadequate, the complaint
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`does not state a claim, then the argument is or the view is
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`there is no reason for discovery to proceed; or I could say,
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`well, please amend your complaint if there is some reason why
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`it is not adequate, and then you continue churning paper and
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`eventually get to it.
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`So if you think discovery is appropriate, I think
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`you have a meeting with Judge Gold after here. If you think
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`that that is the appropriate way to proceed, you have some
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`problems with what the details are, who you spoke to, proceed
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`with some discovery, and then you could make your appropriate
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`motions there, even one for summary judgment if discovery
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`would indicate that that would be appropriate.
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`Would that be an intelligent thing to do?
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`Mr. Hoffman, would you like to be heard?
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`MR. HOFFMAN: Well, Your Honor, I should say a few
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`remarks, although I do appreciate the sentiment. I do believe
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`Case 1:18-cv-00943-RGA Document 15-1 Filed 09/14/18 Page 15 of 23 PageID #: 186
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`that this was an unnecessary motion. There is no acrimony
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`between counsel and I intend to keep it that way.
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`YOUR HONOR: Well, I am glad to hear it.
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`MR. HOFFMAN: With regard to this specific product,
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`I did want to mention that that issue is not raised in the
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`motion or in the reply; it was raised for the first time five
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`minutes ago.
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`The specific products are listed in the complaint,
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`like, you know, Yahoo! Ad Exchange and Yahoo! Audience Ads,
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`and they are further broken down. The patents are in
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`families, there are five families, and for each of the
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`families, we said, this family is infringed by the following
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`products. So there isn't an issue with products. What the
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`motion was about was whether the allegations were sufficient
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`as to a couple of details in the claim language as to whether
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`we alleged every single element.
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`Suffice it to say, I think we do, and that this is
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`actually a model of what a post-Twombly complaint ought to
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`look like. But I do think that we should get on with it, and
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`I am not sure what benefit there is from repleading. I think
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`it is fairly clear what is being accused and generally why and
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`even specifically why.
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`THE COURT: Well, the defendant does not think it is
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`that clear, and they think a little bit of discovery might be
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`useful.
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`MR. HOFFMAN: Yes, and we also have the obligations
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`to provide more details coming down the road --
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`THE COURT: Right.
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`MR. HOFFMAN: -- soon enough --
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`THE COURT: Right.
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`MR. HOFFMAN: -- so it, I think, makes sense to read
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`Twombly and Iqbal in a patent case consistent with the way the
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`Southern District did.
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`THE COURT: Mr. Hoffman, forgive me.
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`MR. HOFFMAN: Yes, I apologize.
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`THE COURT: I am trying to avoid this Twombly/Iqbal
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`Rule 8, to what extent Rule 8 really still has any
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`significance as it was intended, to provide a short and brief
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`statement of what is the dispute. In fact, I am trying to
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`avoid that.
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`MR. HOFFMAN: I should ask if Your Honor has any
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`questions that would help on this motion in writing an opinion
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`or anything like that.
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`THE COURT: I do not have any questions. At least
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`for purposes of our discussion, I do not have any questions.
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`I would assume, what I have said, I assume that
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`Yahoo! has a pretty good idea of what it is they are being
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`sued for. And so this complaint, it seems to me, makes very
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`little sense. If it is just a matter of not knowing what
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`products were infringed or some other detail that you think
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`the complaint is not sufficiently clear about, then a little
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`discovery or a little discussion would put an end to that, you
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`deal with that and set it down for trial or make whatever
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`motion you think is appropriate at that point. But I just do
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`not see any point in spending the amount of time and effort
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`that this complaint requires. It is not furthering this
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`litigation. It is not going to put an end to this litigation
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`regardless of what I do with this complaint.
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`MR. CURRAN: Your Honor, we would remain open to a
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`productive discussion with AlmondNet. If I might ask, Your
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`Honor, if it would be acceptable to proceed in this way:
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`Might we have that discussion, adjourn the motion,
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`and then let Your Honor know by letter if we have been able to
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`resolve these issues?
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`THE COURT: Sure. By all means.
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`MR. CURRAN: I would hope that -- I take counsel's
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`point that there is no acrimony. I would like to keep it that
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`way. We don't agree with the characterization of the motion,
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`but I hope that we could agree on identifying specific
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`products and resolving some issues in this complaint; and if
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`we could, perhaps this would all go away with a letter.
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`THE COURT: And, Mr. Hoffman, with all due respect
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`to you, you may believe that you have said it all; the
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`defendant may have some questions about it.
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`MR. HOFFMAN: It's clear they don't understand
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`certain things, so I would be happy to help.
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`THE COURT: So it may be they are right; it may be
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`that they were not identified clearly enough. I do not know.
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`I did not go through it. So sit down and talk about it.
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`MR. CURRAN: Yes, Your Honor.
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`THE COURT: And resolve this matter. I mean, you
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`have been at this now, you have not been, but the parties have
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`been involved with this for nearly twelve years. You should
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`know what it is all about. So this pleading is what Twombly
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`and Iqbal has created. If we did not have Twombly and Iqbal,
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`would this motion be made? I do not think so. I think you
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`would have what Rule 8 very clearly and specifically requires,
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`a short statement of the facts to justify the belief that the
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`plaintiff is entitled to relief. Period. But Twombly and
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`Iqbal and judge Justice Kennedy's concurring opinion that the
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`justice or the district judge can use his common sense and his
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`experience, is that an element of determining these motions?
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`It makes no sense.
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`I will tell you what would be helpful for a district
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`court judge, I think any district court judge who is not an
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`engineer or an experienced patent lawyer, to explain this very
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`technical language in language that a layman could understand
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`or provide a glossary to a complaint or an answer or your
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`brief the language, the technical language of the complaint.
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`It is challenging for somebody who is not a computer expert or
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`has had an enormous amount of experience with the way the
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`Internet functions and what a lot of these terms mean.
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`So I hope I am furthering this dispute between you
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`in some meaningful and intelligent way, rather than spend
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`weeks dealing with whether there is or is not enough
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`information in the complaint.
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`MR. HOFFMAN: I think your remarks will be very
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`helpful going forward, Your Honor.
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`MR. CURRAN: Absolutely. Thank you, Your Honor.
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`THE COURT: All right.
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`I think you have an appointment with Judge Gold
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`immediately thereafter. I think of the question is whether
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`discovery should go forward.
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`I chatted with Judge Gold earlier this afternoon,
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`and I said, Judge, I understand you have a discovery issue. I
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`could not decide it on the bench today, but if at some future
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`time I say, well, this complaint does not satisfy Twombly and
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`Iqbal, then is discovery appropriate? What is it that you
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`should do now without me knowing or you knowing whether the
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`complaint does or does not pass muster of Twombly and all of
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`that?
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`I tried to cut across that by the discussion I am
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`having with you here today. Eventually, you will get to
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`discovery one way or another. So why do you not get on with
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`it now, get on with this complaint?
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`You have some question about what is missing,
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`provide it, tell him. He does not know what the product is,
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`tell him. If he does not know what the claim is, I have a
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`feeling that Quinn Emanuel has pretty good idea what all of
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`this is about.
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`So what time is your deal with Judge Gold?
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`MR. CURRAN: I believe 3:30.
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`MR. HOFFMAN: It was set at 3:30. He said it was
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`after we were done with you.
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`THE COURT: Do you want to chat about anything else
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`off the record?
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`MR. Verhoven: Good afternoon, Your Honor. Charles
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`Verhoven for Yahoo! as well.
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`Counsel and I were discussing, and this is something
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`we are going to address with the Magistrate Judge, but there
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`is 10 patents asserted, and one of the things that happens
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`nowadays on the pleadings stage at the early stage is dealing
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`with a patent eligibility under the Supreme Court's Alice
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`decision. And the decision has statistically had a major
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`effect on patent litigation, and I think some statistics that
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`I saw, for example, Your Honor, is that 67 percent of
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`Section 101 motions have been granted after Alice came down.
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`And we broached this, and I will get to my question
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`if you just bear with me, Your Honor, but what I have proposed
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`to the other side and we are going to think about is it makes
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`a lot of sense, I think, to have that issue resolved, not
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`staying discovery, Your Honor, I am not suggesting that, but
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`early because it's decided on the patent. You don't take
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`discovery on it, and because there is 10 patents, Your Honor,
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`if five of them are ineligible under this Supreme Court
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`precedent, then the scope of discovery will be dramatically
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`altered. And counsel for AlmondNet obviously can tell you
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`their views, but I think it would be a good way to proceed in
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`parallel with early discovery.
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`And the other thing is because there are 10 patents,
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`my thought would be maybe we should off-load it to the
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`Magistrate Judge to do a report and recommendation to Your
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`Honor on them because we intend to move on almost all of them,
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`if not all of them, Your Honor, and we believe that there are
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`some serious issues. And I don't want to argue the merits
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`because we haven't provided notice and they deserve an
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`opportunity to see it in papers, but we believe it's a very
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`serious motion and would result in a significant narrowing of
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`the case where both sides would save a lot of money on
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`discovery.
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`MR. CROSBY: Well, Your Honor, of course, we are
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`very much in favor of anything that will make the case
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`efficient and streamlined. I should note that the timing of
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`when a 101 motion gets brought is entirely up to the
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`defendants, and this case has been on file since March of this
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`year. The 101 patentable subject matter issue was front and
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`center in the discussions between the parties that preceded
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`this lawsuit. And so, we encourage them to bring their
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`motion. We don't think anything should be delayed because of
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`it. It's already, I think, a late time for them to be
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`bringing it if they do indeed view it as a threshold issue.
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`And so, we would hope that it would get resolved as
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`expeditiously as possible; and we would prefer that Your Honor
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`do it because if you refer it to the magistrate and it goes
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`against us, you will certainly be seeing it again.
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`THE COURT: I really have very little to contribute
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`to that. Counsel does not oppose to you making the motion.
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`He just does not think it has any merit.
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`MR. Verhoven: Well, Your Honor, there are 10
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`patents, and the reason we didn't make it earlier is because
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`we wanted to talk to Your Honor about it. Because there are
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`10 patents, we didn't want to file 10 motions. We didn't want
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`to bury the Court with paper.
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`My suggestion would be that we extend the page
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`limits to 50 pages for opening, 50 pages for reply, or excuse
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`me, for opposition and 25 for reply because there will be
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`multiple patents that we are addressing, Your Honor, but if we
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`could at least do that, we can file a motion and do it
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`promptly, Your Honor.
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`MR. CROSBY: This is asking for extensions of page
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`limits for the first time when we are here having a hearing on
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`another motion. There are procedures that this court has for
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`these things. We can also have a phone call off line and
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`discuss what we think are appropriate briefing limits. I'd
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`love to have that conversation with Mr. Verhoven and his
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`colleagues. I have great respect for them; I've had cases
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`against them in the past.
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`THE COURT: Gentlemen, why do we not sit down and go
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`off the record.
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`(Off the record.)
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`(Matter adjourned.)
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`*
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`*
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`*
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`*
`
`*
`
`I certify that the foregoing is a correct transcript from the
`record of proceedings in the above-entitled matter.
`
` October 17, 2016
` /s/ Stacy A. Mace
`_________________________________ ________________
` STACY A. MACE
` DATE
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