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` 3
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` UNITED STATES DISTRICT COURT
` NORTHERN DISTRICT OF ILLINOIS
` EASTERN DIVISION
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`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
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` MR. BERGHOFF, OPENING STATEMENT 95
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` (The following proceedings were had in open court:)
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` THE COURT: Well, ladies and gentlemen, what
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`we're going to be doing -- actually, for probably --
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`well, at this point, we think it's going to be three
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`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
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`weeks; three days this week and then off Thursday and
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`Friday because of Rosh Hashanah and then two more weeks
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`on a patent case. The patents involved in this case
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`relate to computer software used for electronic trading
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`of financial instruments such as futures contracts and
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`commodities.
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` The disputed actions in this are United
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`States patents number 6,766,304, 6,722,132, and
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`throughout the action, the parties may refer to the
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`patents as the '304 patent or the '132 patent, because
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`those are the last three numbers of each of the patents.
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` The '304 and '132 patents are both entitled
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`click-based trading with intuitive grid display of
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`18 market depth. The inventor's name in the '302 and '132
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`patents are Harris Brumfield, Gary Allen Kemp, II, and
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`Jens-Uwe Schluette. The United States Patent and
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`Trademark Office issued the '304 patent on June -- July
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`20, 2004, and the '132 patent on August 3, 2004.
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` Generally, the patents relate to a computer
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`screen display used by traders when trading on
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`electronic exchanges. The display includes a static
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`1
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`TradeStation v. Trading Technologies
`CBM2015-00161
`Exhibit 1024
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`how the set up works here. This screen behind me -- and
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`it is never ideal however we set the screens up in a
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`courtroom.
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` This screen behind me may be the most
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`comfortable for you to look at, and then this one here
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`maybe, and sometimes I may be pointing to the screen. I
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`think I will walk up to that one when I am going to
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`point, so bear with me.
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` Trading Technologies is a Chicago company.
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`It is located in downtown Chicago. It started in 1994,
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`and it is a classic startup company. It started with
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`just a handful of employees in 1994, and today it has
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`it. It is a program within the whole, but it is not the
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`whole.
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` So, we will be referring to X_Trader
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`sometimes, the big program, and mostly to MD Trader,
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`which is a very important part, in fact we believe the
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`evidence will show the most important part of X_Trader.
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`And MD Trader is the subject of the patents that we are
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`talking about here today.
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` Now, I would be remiss if I didn't introduce
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`you to what I believe the evidence will show is the
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`principal inventor on the patents in suit. There are 3
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`inventors listed, but Mr. Harris Brumfield is the
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`550 employees worldwide. The vast majority of them are
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`principal inventor. He wishes he could be here with you
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`here in Chicago, over 400.
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` It is in the business, as you probably
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`gathered from the questions you were asked in the
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`beginning, of electronic trading software. That is what
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`it does.
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` So, when specialists are looking for
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`software to trade, especially futures, and we will talk
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`a little bit about what that means, Trading Technologies
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`is one of the companies, certainly not the only one, but
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`certainly one of the companies that they would look to
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`to obtain that trading software.
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` And Trading Technologies is the owner of
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`today and sit through the trial, but the specific rules
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`of the case, because he is going to be a witness and
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`will be here testifying in front of you, is he can't be
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`here with us today or through the trial. But you will
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`get a chance to meet Mr. Brumfield.
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` He is, in addition to being a named inventor
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`on the patents in suit, a successful trader, indeed, a
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`very successful trader. And he was, as he will describe
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`for you, very successful in the old days when trading
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`was done live, person-to-person, in what was called the
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`trading floor, that is what it was called, a trading
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`floor of the Chicago Board of Trade, he was very
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`successful at that, trading live. But then the evidence
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`both of the patents that are going to be presented to
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`you that we believe are infringed, the evidence will
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`show they are infringed, and that we believe the
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`evidence will show are perfectly valid.
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` Now, before we leave this screen I want to
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`point out some terminology that will be important as we
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`go through the case, and it is in small -- it is a small
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`picture here, and then the words, X_Trader.
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` X_Trader is -- I will call it the big
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`product, the relevant product, that Trading Technologies
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`sells.
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` MD Trader, and you will hear that name a
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`lot in this trial, that is the other trademark of
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`will show he went cold turkey and gave up his successful
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`floor trading on the Board of Trade to trade
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`electronically with trading software, and that
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`experience led to the invention that is the subject of
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`the 2 patents in this suit.
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` Today, Harris Brumfield is the CEO, chief
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`executive officer, and the principal owner, of Trading
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`Technologies, the owner of the patents. But that was
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`not always the case.
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` When he came up with his idea for the
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`invention he actually partnered with Trading
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`Technologies. Why did he do that? Well, Mr. Brumfield
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`is a trader. He is not someone who is skilled in
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`Trading Technologies for a small portion, a portion of
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`X_Trader.
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` That is the reason I wanted to stop at the
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`screen and point this out, and we will see bigger
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`pictures of this as well. This is MD Trader and it is a
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`subset of X_Trader.
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` Let me try to give you an example of what I
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`21 mean by that just so I am clear.
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` Microsoft sells you a whole Windows -- now I
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`guess it is called Vista system, maybe that is analogous
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`to X_Trader. It is like the whole software package.
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`creating software and software code. That is not his
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`thing, the evidence will show, but that was Trading
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`Technologies' specialty.
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` So, he partnered with Trading Technologies
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`when he had this idea for the invention and entered into
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`a consulting service arrangement with Trading
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`Technologies, paid them to -- TT paid them to develop
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`the code, software code, according to his
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`specifications, and there was quite a period of time
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`before things worked out.
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` That partnership between TT, the software
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`bid, 33, here is the best offer, 34, here is the next
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`best offer, next best offer all the way to the top of
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`the book. Same thing, best bid, next best bid, next
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`best bid. So when I went to Gary I asked him to build,
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`make this column, the price column static, don't make
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`them dynamic like in my view the whole world looked at
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`it. Like stop that, freeze it, and actually keep the
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`prices -- keep the bids and offers dynamic, let them run
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`up and down here, and I'm sorry, and so then over here
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`was -- we had the order book down there, right, with
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`those three pictures, so we had the grid, we had the
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`order entry, and we had the order book. So this was my
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`version of what I wanted, I turned it into an order
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` A. My banking and finance degree wasn't going to
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`help me much on that.
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` Q. You are not a software engineer?
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` A. No, sir.
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` Q. And was it your intention at this point in your
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`early discussions with Trading Technologies that TT was
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`going to make and sell a product based on your idea?
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` A. Absolutely not.
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` Q. And that includes even a product they were going
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`to sell back to you, is that your intent at this point?
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` A. No.
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` Q. Now, were there any just in general, we'll go --
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`if there are, we'll go through them one by one. Were
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`column and these were eventually again I turned this
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`into one column, but at first I was going to have my
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`working bids over here and my working offers over here.
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`So this one exists down here, the order book.
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` Q. And the working bids and the working offers that
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`you were pointing to, those were the columns with the
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`diagonal lines in them?
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` A. Yes.
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` Q. Now at the time that you drew the drawing that's
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`on the screen there, PTX 1276 and then 1277 in the
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`colorized version, did a product exist?
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` A. No, I never -- no, no product existed.
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`there any downsides, any issues with your idea in the
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`September 1998 drawing?
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` A. Yes. So trying to think through it as a whole
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`again and trying to go through the Nth degree, you weigh
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`-- the project and consulting fee was going to be
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`expensive. Gary told me it was going to be much more
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`expensive than the iceberg solution, but even before I
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`went to Gary, I already -- I just know I mean this is a
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`whole different concept and it was going to cost some
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`good money to actually build it. So thinking through it
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`to the Nth degree -- can I stand up and point again,
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`please? I can talk.
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` Q. Let me put an exhibit up just so we're all on the
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` Q. Was it just this piece of paper at this time?
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` A. Nothing but a piece of paper. I went down and
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`sat with Gary and said, hey, can you build customized
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`software, can you customize and bill me per hour is what
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`we decided on a consulting, very similar to the 85,000
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`on the customized iceberg.
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` Q. Mr. Brumfield, I think you can take your seat for
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`a little bit.
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` Now, you mentioned you talked to Gary, that's
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`10 Gary Kemp from Trading Technologies?
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` A. Yes.
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` Q. And you wanted Trading Technologies to do what
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`with your piece of paper, your drawing?
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`same page. I think that might help. Could we put up
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`PTX 1279. And what does this -- and you may or may not
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`need -- I am not sure you do need to stand up for this
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`one, but you can if you want, Mr. Brumfield.
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` A. I'd love to.
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` Q. Thank you.
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` What does this -- what does this slide represent?
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` A. Okay. This is the concept that I went there.
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`Again, by now we've taken the prices and turned them
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`into one column instead of two columns like you saw on
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`the scratch drawing, and so that's one column. And also
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`the working order column you see is one instead of two,
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`so other than that, it's the same thing. We just
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`can you do this. Technically can you freeze the prices
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`like this and can you do it, and so Gary thought they
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`could do it. So I asked him, can you build -- on a
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`customized basis, on a consulting deal, can you build it
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`for me, I want it completely confidential, completely
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`secret and it's my idea, I don't want it going out in
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`the market, I don't want it going anywhere, in fact I
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`only want a few people at Trading Technologies knowing
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`about it.
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` Q. Why didn't you build the software yourself,
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`25 Mr. Brumfield?
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`consolidated those two columns.
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` Q. And the picture on the right is of the commercial
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`product MD Trader?
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` A. Yes. This is Trading Technologies' product, MD
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`Trader, which conceptually came from my idea. And over
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`here is the inside market, the dynamic bids and offers.
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`Bids, offers are yellow circles, and this is the top
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`line of that grid. And sometimes I wouldn't have the
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`whole depth up. I would just -- sometimes all you
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`needed was the best bid and best offer because that was
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`the market. Going back to the pit, that's the market.
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