1
`
` 3
`
` UNITED STATES DISTRICT COURT
` NORTHERN DISTRICT OF ILLINOIS
` EASTERN DIVISION
`
`TRADING TECHNOLOGIES INTERNATIONAL,)
`INC., )
` )
` Plaintiff, )
` )
` v. ) No. 04 C 5312
` )
`eSPEED, INC., eSPEED INTERNATIONAL,)
`LTD., ECCO LLC, and ECCOWARE, LTD.,) Chicago, Illinois
` ) September 10, 2007
` Defendants. ) 10:00 o'clock a.m.
`
` VOLUME 1-A
` TRIAL TRANSCRIPT OF PROCEEDINGS
` BEFORE THE HONORABLE JAMES B. MORAN, and a JURY
`
`APPEARANCES:
`
`Trading Technologies TRADING TECHNOLOGIES
`International, Inc., by: INTERNATIONAL, INC.,
` MR. STEVEN F. BORSAND
` 222 South Riverside Drive
` Chicago, Illinois 60606
` 312-476-1000
` steve.borsand@
` tradingtechnologies.com
` and
` McDONNELL, BOEHNEN, HULBERT &
` BERGHOFF, LTD.
` MR. PAUL H. BERGHOFF
` MR. S. RICHARD CARDEN
` MR. CHRISTOPHER M. CAVAN
` MR. MICHAEL D. GANNON
` MS. JENNIFER M. KURCZ
` MR. MATTHEW J. SAMPSON
` MR. LEIF R. SIGMOND
` 300 South Wacker Drive
` Chicago, Illinois 60606
` 312-913-0001
` berghoff@mbhb.com
` kurcz@mbhb.com
`
` 1
`
` 2
` 3
` 4
`
` 5
`
` 6
`
` 7
`
` 8
`
` 9
`10
`11
`
`12
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
` 1
`
` 2
`
` 3
`
` 1
`
` 2
`
` 3
`
` 4
`
` 5
`
` 6
`
` 7
`
` 8
`
` 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
` 1
`
` 2
`
` 3
`
` 4
`
` 2
`
` MR. BERGHOFF, OPENING STATEMENT 95
`
` (The following proceedings were had in open court:)
`
` THE COURT: Well, ladies and gentlemen, what
`
`we're going to be doing -- actually, for probably --
`
`well, at this point, we think it's going to be three
`
` 4
`
`eSpeed, Inc., eSpeed WINSTON & STRAWN
`International, Inc., MR. GEORGE C. LOMBARDI
`Ecco LLC, Eccoware, MR. RAYMOND C. PERKINS
`LTD., by: MR. IMRON T. ALY
` MR. KEVIN BANASIK
` MS. ELIZABETH HARTFORD ERICKSON
` MR. ANDREW M. JOHNSTONE
` MS. TRACEY J. ALLEN
` MR. JAMES M. HILMERT
` 35 West Wacker Drive
` Chicago, Illinois 60601
` 312-558-5600
` glombardi@winston.com
` rperkins@winston.com
`
` LAW OFFICES OF
` GARY A. ROSEN, P.C.
` MR. GARY A. ROSEN
` 1831 Chestnut Street, Suite 802
` Philadelphia, Pennsylvania 19103
` 215-972-0600
`
`Rosenthal Collins Group, DOWELL BAKER
`LLC, by: MR. GEOFFREY A. BAKER
` 201 Main Street
` Lafayette, IN 47901
` 765-429-4004
` gabaker@dowellbaker.com
`
`Court Reporter: MS. CAROLYN COX, CSR, RPR, CRR
` Official Court Reporter
` 219 S. Dearborn Street, Suite 1854-B
` Chicago, Illinois 60604
` (312) 435-5639
`
` 4
`
` 5
`
` 6
`
` 7
`
` 8
`
` 9
`
`10
`
`11
`12
`
`13
`
`14
`
`15
`16
`17
`18
`19
`20
`21
`22
`23
`
`24
`
`25
`
` 5
`
` 6
`
` 7
`
` 8
`
` 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`weeks; three days this week and then off Thursday and
`
`Friday because of Rosh Hashanah and then two more weeks
`
`on a patent case. The patents involved in this case
`
`relate to computer software used for electronic trading
`
`of financial instruments such as futures contracts and
`
`commodities.
`
` The disputed actions in this are United
`
`States patents number 6,766,304, 6,722,132, and
`
`throughout the action, the parties may refer to the
`
`patents as the '304 patent or the '132 patent, because
`
`those are the last three numbers of each of the patents.
`
` The '304 and '132 patents are both entitled
`
`click-based trading with intuitive grid display of
`
`18 market depth. The inventor's name in the '302 and '132
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`patents are Harris Brumfield, Gary Allen Kemp, II, and
`
`Jens-Uwe Schluette. The United States Patent and
`
`Trademark Office issued the '304 patent on June -- July
`
`20, 2004, and the '132 patent on August 3, 2004.
`
` Generally, the patents relate to a computer
`
`screen display used by traders when trading on
`
`electronic exchanges. The display includes a static
`
`
`
`UnsignedUnsignedUnsignedUnsigned
`
`
`
`
`
`
`
`Page 1 - 4Page 1 - 4Page 1 - 4Page 1 - 4
`
`
`
`
`
`1
`
`TradeStation v. Trading Technologies
`CBM2015-00161
`Exhibit 1024
`
`

`

` 97
`
` 99
`
` 1
`
` 2
`
` 3
`
` 4
`
` 5
`
` 6
`
` 7
`
` 8
`
` 9
`
`10
`
`11
`
`12
`
`13
`
`how the set up works here. This screen behind me -- and
`
`it is never ideal however we set the screens up in a
`
`courtroom.
`
` This screen behind me may be the most
`
`comfortable for you to look at, and then this one here
`
`maybe, and sometimes I may be pointing to the screen. I
`
`think I will walk up to that one when I am going to
`
`point, so bear with me.
`
` Trading Technologies is a Chicago company.
`
`It is located in downtown Chicago. It started in 1994,
`
`and it is a classic startup company. It started with
`
`just a handful of employees in 1994, and today it has
`
` 1
`
` 2
`
` 3
`
` 4
`
` 5
`
` 6
`
` 7
`
` 8
`
` 9
`
`10
`
`11
`
`12
`
`it. It is a program within the whole, but it is not the
`
`whole.
`
` So, we will be referring to X_Trader
`
`sometimes, the big program, and mostly to MD Trader,
`
`which is a very important part, in fact we believe the
`
`evidence will show the most important part of X_Trader.
`
`And MD Trader is the subject of the patents that we are
`
`talking about here today.
`
` Now, I would be remiss if I didn't introduce
`
`you to what I believe the evidence will show is the
`
`principal inventor on the patents in suit. There are 3
`
`inventors listed, but Mr. Harris Brumfield is the
`
`550 employees worldwide. The vast majority of them are
`
`principal inventor. He wishes he could be here with you
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`here in Chicago, over 400.
`
` It is in the business, as you probably
`
`gathered from the questions you were asked in the
`
`beginning, of electronic trading software. That is what
`
`it does.
`
` So, when specialists are looking for
`
`software to trade, especially futures, and we will talk
`
`a little bit about what that means, Trading Technologies
`
`is one of the companies, certainly not the only one, but
`
`certainly one of the companies that they would look to
`
`to obtain that trading software.
`
` And Trading Technologies is the owner of
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`today and sit through the trial, but the specific rules
`
`of the case, because he is going to be a witness and
`
`will be here testifying in front of you, is he can't be
`
`here with us today or through the trial. But you will
`
`get a chance to meet Mr. Brumfield.
`
` He is, in addition to being a named inventor
`
`on the patents in suit, a successful trader, indeed, a
`
`very successful trader. And he was, as he will describe
`
`for you, very successful in the old days when trading
`
`was done live, person-to-person, in what was called the
`
`trading floor, that is what it was called, a trading
`
`floor of the Chicago Board of Trade, he was very
`
` 98
`
` 100
`
`successful at that, trading live. But then the evidence
`
` 1
`
` 2
`
` 3
`
` 4
`
` 5
`
` 6
`
` 7
`
` 8
`
` 9
`
`10
`
`11
`
`12
`
`13
`
`both of the patents that are going to be presented to
`
`you that we believe are infringed, the evidence will
`
`show they are infringed, and that we believe the
`
`evidence will show are perfectly valid.
`
` Now, before we leave this screen I want to
`
`point out some terminology that will be important as we
`
`go through the case, and it is in small -- it is a small
`
`picture here, and then the words, X_Trader.
`
` X_Trader is -- I will call it the big
`
`product, the relevant product, that Trading Technologies
`
`sells.
`
` MD Trader, and you will hear that name a
`
`lot in this trial, that is the other trademark of
`
` 1
`
` 2
`
` 3
`
` 4
`
` 5
`
` 6
`
` 7
`
` 8
`
` 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`will show he went cold turkey and gave up his successful
`
`floor trading on the Board of Trade to trade
`
`electronically with trading software, and that
`
`experience led to the invention that is the subject of
`
`the 2 patents in this suit.
`
` Today, Harris Brumfield is the CEO, chief
`
`executive officer, and the principal owner, of Trading
`
`Technologies, the owner of the patents. But that was
`
`not always the case.
`
` When he came up with his idea for the
`
`invention he actually partnered with Trading
`
`Technologies. Why did he do that? Well, Mr. Brumfield
`
`is a trader. He is not someone who is skilled in
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`Trading Technologies for a small portion, a portion of
`
`X_Trader.
`
` That is the reason I wanted to stop at the
`
`screen and point this out, and we will see bigger
`
`pictures of this as well. This is MD Trader and it is a
`
`subset of X_Trader.
`
` Let me try to give you an example of what I
`
`21 mean by that just so I am clear.
`
`22
`
`23
`
`24
`
` Microsoft sells you a whole Windows -- now I
`
`guess it is called Vista system, maybe that is analogous
`
`to X_Trader. It is like the whole software package.
`
`25 Whereas MD Trader, maybe that is Microsoft Word, that is
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`creating software and software code. That is not his
`
`thing, the evidence will show, but that was Trading
`
`Technologies' specialty.
`
` So, he partnered with Trading Technologies
`
`when he had this idea for the invention and entered into
`
`a consulting service arrangement with Trading
`
`Technologies, paid them to -- TT paid them to develop
`
`the code, software code, according to his
`
`specifications, and there was quite a period of time
`
`before things worked out.
`
` That partnership between TT, the software
`
`
`
`UnsignedUnsignedUnsignedUnsigned
`
`
`
`
`
`
`
`Page 97 - 100Page 97 - 100Page 97 - 100Page 97 - 100
`
`
`
`
`
`2
`
`

`

` 694
`
` 696
`
` 1
`
` 2
`
` 3
`
` 4
`
` 5
`
` 6
`
` 7
`
` 8
`
` 9
`
`10
`
`11
`
`12
`
`bid, 33, here is the best offer, 34, here is the next
`
`best offer, next best offer all the way to the top of
`
`the book. Same thing, best bid, next best bid, next
`
`best bid. So when I went to Gary I asked him to build,
`
`make this column, the price column static, don't make
`
`them dynamic like in my view the whole world looked at
`
`it. Like stop that, freeze it, and actually keep the
`
`prices -- keep the bids and offers dynamic, let them run
`
`up and down here, and I'm sorry, and so then over here
`
`was -- we had the order book down there, right, with
`
`those three pictures, so we had the grid, we had the
`
`order entry, and we had the order book. So this was my
`
`version of what I wanted, I turned it into an order
`
` 1
`
` 2
`
` 3
`
` 4
`
` 5
`
` 6
`
` 7
`
` 8
`
` 9
`
`10
`
`11
`
`12
`
`13
`
` A. My banking and finance degree wasn't going to
`
`help me much on that.
`
` Q. You are not a software engineer?
`
` A. No, sir.
`
` Q. And was it your intention at this point in your
`
`early discussions with Trading Technologies that TT was
`
`going to make and sell a product based on your idea?
`
` A. Absolutely not.
`
` Q. And that includes even a product they were going
`
`to sell back to you, is that your intent at this point?
`
` A. No.
`
` Q. Now, were there any just in general, we'll go --
`
`if there are, we'll go through them one by one. Were
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`column and these were eventually again I turned this
`
`into one column, but at first I was going to have my
`
`working bids over here and my working offers over here.
`
`So this one exists down here, the order book.
`
` Q. And the working bids and the working offers that
`
`you were pointing to, those were the columns with the
`
`diagonal lines in them?
`
` A. Yes.
`
` Q. Now at the time that you drew the drawing that's
`
`on the screen there, PTX 1276 and then 1277 in the
`
`colorized version, did a product exist?
`
` A. No, I never -- no, no product existed.
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`there any downsides, any issues with your idea in the
`
`September 1998 drawing?
`
` A. Yes. So trying to think through it as a whole
`
`again and trying to go through the Nth degree, you weigh
`
`-- the project and consulting fee was going to be
`
`expensive. Gary told me it was going to be much more
`
`expensive than the iceberg solution, but even before I
`
`went to Gary, I already -- I just know I mean this is a
`
`whole different concept and it was going to cost some
`
`good money to actually build it. So thinking through it
`
`to the Nth degree -- can I stand up and point again,
`
`please? I can talk.
`
` 695
`
` 697
`
` Q. Let me put an exhibit up just so we're all on the
`
` 1
`
` 2
`
` 3
`
` 4
`
` 5
`
` 6
`
` 7
`
` 8
`
` 9
`
` Q. Was it just this piece of paper at this time?
`
` A. Nothing but a piece of paper. I went down and
`
`sat with Gary and said, hey, can you build customized
`
`software, can you customize and bill me per hour is what
`
`we decided on a consulting, very similar to the 85,000
`
`on the customized iceberg.
`
` Q. Mr. Brumfield, I think you can take your seat for
`
`a little bit.
`
` Now, you mentioned you talked to Gary, that's
`
`10 Gary Kemp from Trading Technologies?
`
` A. Yes.
`
` Q. And you wanted Trading Technologies to do what
`
`with your piece of paper, your drawing?
`
` 1
`
` 2
`
` 3
`
` 4
`
` 5
`
` 6
`
` 7
`
` 8
`
` 9
`
`10
`
`11
`
`12
`
`13
`
`same page. I think that might help. Could we put up
`
`PTX 1279. And what does this -- and you may or may not
`
`need -- I am not sure you do need to stand up for this
`
`one, but you can if you want, Mr. Brumfield.
`
` A. I'd love to.
`
` Q. Thank you.
`
` What does this -- what does this slide represent?
`
` A. Okay. This is the concept that I went there.
`
`Again, by now we've taken the prices and turned them
`
`into one column instead of two columns like you saw on
`
`the scratch drawing, and so that's one column. And also
`
`the working order column you see is one instead of two,
`
`11
`
`12
`
`13
`
`14
`
` A. I wanted them to commence -- first, I asked them
`
`so other than that, it's the same thing. We just
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`can you do this. Technically can you freeze the prices
`
`like this and can you do it, and so Gary thought they
`
`could do it. So I asked him, can you build -- on a
`
`customized basis, on a consulting deal, can you build it
`
`for me, I want it completely confidential, completely
`
`secret and it's my idea, I don't want it going out in
`
`the market, I don't want it going anywhere, in fact I
`
`only want a few people at Trading Technologies knowing
`
`about it.
`
` Q. Why didn't you build the software yourself,
`
`25 Mr. Brumfield?
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`consolidated those two columns.
`
` Q. And the picture on the right is of the commercial
`
`product MD Trader?
`
` A. Yes. This is Trading Technologies' product, MD
`
`Trader, which conceptually came from my idea. And over
`
`here is the inside market, the dynamic bids and offers.
`
`Bids, offers are yellow circles, and this is the top
`
`line of that grid. And sometimes I wouldn't have the
`
`whole depth up. I would just -- sometimes all you
`
`needed was the best bid and best offer because that was
`
`the market. Going back to the pit, that's the market.
`
`
`
`UnsignedUnsignedUnsignedUnsigned
`
`
`
`
`
`
`
`Page 694 - 697Page 694 - 697Page 694 - 697Page 694 - 697
`
`
`
`
`
`3
`
`