1
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
`
`DATATREASURY CORPORATION * Civil Docket No.
` * 2:06-CV-72
`VS. * Marshall, Texas
` *
` * March 17, 2010
`WELLS FARGO & COMPANY, ET AL * 1:30 P.M.
`
`TRANSCRIPT OF JURY TRIAL
`BEFORE THE HONORABLE DAVID FOLSOM
`UNITED STATES DISTRICT JUDGE
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`APPEARANCES:
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`FOR THE PLAINTIFF:
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`MR. NELSON ROACH
`MR. DEREK GILLILAND
`Nix Patterson & Roach
`205 Linda Drive
`Daingerfield, TX 75638
`
`MR. ANTHONY K. BRUSTER
`MR. ROD COOPER
`Nix Patterson & Roach
`5215 North O'Connor Blvd.
`Suite 1900
`Irving, TX 75039
`
`APPEARANCES CONTINUED ON NEXT PAGE:
`
`COURT REPORTERS:
`
`MS. SUSAN SIMMONS, CSR
`MS. SHELLY HOLMES, CSR
`Official Court Reporters
`100 East Houston, Suite 125
`
` Marshall, TX 75670
`903/935-3868
`
`(Proceedings recorded by mechanical stenography,
`transcript produced on CAT system.)
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`Page 1 of 10
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`FIS Exhibit 1007
`
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
`
`DATATREASURY CORPORATION * Civil Docket No.
` * 2:06-CV-72
`VS. * Marshall, Texas
` *
` * March 17, 2010
`WELLS FARGO & COMPANY, ET AL * 1:30 P.M.
`
`TRANSCRIPT OF JURY TRIAL
`BEFORE THE HONORABLE DAVID FOLSOM
`UNITED STATES DISTRICT JUDGE
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`APPEARANCES:
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`12
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`FOR THE PLAINTIFF:
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`MR. NELSON ROACH
`MR. DEREK GILLILAND
`Nix Patterson & Roach
`205 Linda Drive
`Daingerfield, TX 75638
`
`MR. ANTHONY K. BRUSTER
`MR. ROD COOPER
`Nix Patterson & Roach
`5215 North O'Connor Blvd.
`Suite 1900
`Irving, TX 75039
`
`APPEARANCES CONTINUED ON NEXT PAGE:
`
`COURT REPORTERS:
`
`MS. SUSAN SIMMONS, CSR
`MS. SHELLY HOLMES, CSR
`Official Court Reporters
`100 East Houston, Suite 125
`
` Marshall, TX 75670
`903/935-3868
`
`(Proceedings recorded by mechanical stenography,
`transcript produced on CAT system.)
`
`Page 1 of 10
`
`FIS Exhibit 1007
`
`
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`2
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`MR. JOE W. REDDEN, JR.
`MR. MICHAEL RICHARDSON
`Beck Redden & Secrest
`One Houston Center
`1221 McKinney Street
`Suite 4500
`Houston, TX 77010
`
`MR. JOHN T. GUTKOSKI
`Foley & Lardner
`111 Huntington Avenue
`Boston, MA 02199
`
`MR. PHILLIP PHILBIN
`Haynes & Boone
`901 Main Street
`Suite 3100
`Dallas, TX 75202
`
`MR. P. ANTHONY SAMMI
`Skadden, Arps, Slate, Meagher &
` Flom
`Four Times Square
`New York, NY 10036
`
`MR. JAMES CARTER
`MS. JANE JAANG
`Sullivan & Cromwell
`125 Broad Street
`New York, NY 10004
`
`MR. RONALD CLAYTON
`MR. ROBERT FISCHER
`MR. STEPHEN BELISLE
`Fitzpatrick, Cella, Harper &
` Scinto
`1290 Avenue of the Americas
`New York, New York 10104
`
`MR. PRESTON MCGEE
`Flowers Davis
`1021 ESE Loop 323
`Suite 200
`Tyler, TX 75701
`
`APPEARANCES CONTINUED:
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`FOR THE DEFENDANTS:
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`U.S. BANK
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`VIEWPOINTE:
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`THE CLEARING HOUSE:
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`Page 2 of 10
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`3
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` P R O C E E D I N G S
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`COURT SECURITY OFFICER: All rise.
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`(Jury in.)
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`THE COURT: Be seated. You may continue
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`your cross-examination.
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`MR. REDDEN: Thank you, Your
`
`Honor.
`
` CLAUDIO BALLARD, PLAINTIFF'S WITNESS, PREVIOUSLY
`
`SWORN
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`CROSS-EXAMINATION (CONTINUED)
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`BY MR. REDDEN:
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`Q.
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`A.
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`Good afternoon, Mr. Ballard.
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`Good afternoon.
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`MR. REDDEN: I'd like to pull up again
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`Plaintiff's Exhibit 1662-5273 if we could, Derek.
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`Q.
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`(By Mr. Redden) Do you recall we discussed
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`this before lunch, Mr. Ballard?
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`A.
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`Q.
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`you.
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`Yes, I do.
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`And I just wanted to clarify one thing with
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`The top of this picture depicts the hub; is
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`that correct?
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`A.
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`Q.
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`Yes.
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`And is it true that all three computers were
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`plugged into that one hub?
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`Page 3 of 10
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`A.
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`Q.
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`Yes, they are.
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`Okay. And that's the way you had your
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`prototype set up that you told us about?
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`A.
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`Q.
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`Yes.
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`All right. Thank you, sir.
`
`MR. REDDEN: That's all on that one.
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`Q.
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`(By Mr. Redden) Now, let me talk to you a
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`little bit about your invention. You're not claiming to
`
`have invented the scanner, are you?
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`A.
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`Q.
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`No.
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`You're not claiming to have invented scanning
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`a check, are you?
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`A.
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`Q.
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`No.
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`That was invented before your patent
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`application, correct?
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`A.
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`Q.
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`I'm sure it was.
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`Okay. You've heard references in the
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`courtroom to these big IBM 3890 scanners. Recall that?
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`A.
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`Q.
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`Yes.
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`All right. Certainly you didn't invent a
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`machine like that that can scan thousands of checks,
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`correct?
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`A.
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`Q.
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`No.
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`And we heard about the subsystem ID number
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`that the 3890 machine sprays on the back of the check.
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`Page 4 of 10
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`You were in the courtroom when Dr. Smith
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`talked about that?
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`A.
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`Q.
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`Yes, I was.
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`That's that two-digit number that identifies
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`which particular machine the check was processed by?
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`A.
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`Q.
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`A.
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`Q.
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`Yes.
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`Now, you didn't invent that number, did you?
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`No.
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`And those IBM 3890 machines have been spraying
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`those numbers on the backs of checks for decades before
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`you filed your patent application, correct?
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`A.
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`Q.
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`I believe so.
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`You're not claiming to have invented
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`encryption, are you?
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`A.
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`Q.
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`correct?
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`A.
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`Q.
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`No, not at all.
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`Encryption has been around for a long time,
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`Yes.
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`The jury's all heard how the military
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`encrypted and decoded things in World War II, for
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`example?
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`A.
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`Q.
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`Absolutely, yes.
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`Okay. What about using encryption to encrypt
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`a check? You didn't invent that idea, did you?
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`A.
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`No.
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`Page 5 of 10
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`Q.
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`In fact, you would agree with me, wouldn't
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`you, that back when you filed your invention that anyone
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`that understands computer science would have known how
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`to encrypt an image?
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`A.
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`Q.
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`I would say that's accurate.
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`How about computer networks? We've heard
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`about local area networks connecting computers. You
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`didn't invent that concept, did you?
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`A.
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`Q.
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`A.
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`Q.
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`Not at all.
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`Or wide area networks?
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`No.
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`Or using one of those networks to transmit a
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`check image?
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`A.
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`Q.
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`No.
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`Okay. And you're not claiming to be the first
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`one to come up with the idea of having banks use check
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`images instead of paper checks to process?
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`A.
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`No.
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`MR. REDDEN: Can we pull up Defendant's
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`Exhibit 16, please.
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`Q.
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`(By Mr. Redden) This is your '988 patent,
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`Mr. Ballard. Would you go to Page 3 and take a look at
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`Figure 1. Do you recognize this figure from your
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`patent, sir?
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`A.
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`Yes, I do.
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`Page 6 of 10
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`Q.
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`All right. And there is an intermediate tier
`
`on here, correct?
`
`A.
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`Q.
`
`A.
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`Q.
`
`Yes.
`
`Would this be the intermediate tier?
`
`Yes, it is.
`
`Okay. And you envisioned that intermediate
`
`tier as a collection point for data from a number of
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`subsystems from different places, correct?
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`A.
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`Q.
`
`That's one way of doing it.
`
`And your idea was that data transmission was
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`expensive in the 1990s and would be more economical to
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`have this intermediate holding location for the data,
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`correct?
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`A.
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`Q.
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`Yes.
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`So the value of the intermediate tier was to
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`save on transmission costs?
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`A.
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`Q.
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`In that particular version, yes.
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`And your idea, even back in the 1990s, was
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`that eventually the intermediate site concept would just
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`go away and you would have direct connectivity between
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`the remote sites and the central repository, correct?
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`A.
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`Q.
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`Yes.
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`It simply wasn't economically feasible in
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`those days, right?
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`A.
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`Yes.
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`Page 7 of 10
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`8
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`Q.
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`Okay. And since the 1990s, when you
`
`envisioned the economic need for this intermediate tier,
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`electronic transmission costs have come way down,
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`haven't they?
`
`A.
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`Q.
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`Yes, they have.
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`And now that those costs have come down,
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`there's not much economic value in the three-tier
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`system, is there?
`
`A.
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`Well, again, it depends on where you want to
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`10
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`put the second tier. Sometimes you could merge the
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`11
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`second tier and the first tier and wind up with a
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`12
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`two-tier. But, yes, generally speaking, bandwidth costs
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`13
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`certainly are the driver.
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`14
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`Q.
`
`Thinking back, you told the jury about your
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`15
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`data processing operation there in New York. Do you
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`remember that?
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`A.
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`Q.
`
`Yes.
`
`And I think you said that in 2002 DataTreasury
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`was evicted from that office space for non-payment of
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`rent, correct?
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`A.
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`Q.
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`center?
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`A.
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`Q.
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`Yes, it was.
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`Now, did DataTreasury ever build a new data
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`No.
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`Does DataTreasury do any check or other
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`Page 8 of 10
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`9
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`document processing with your patented technology today?
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`A.
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`Q.
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`Not that I'm aware of, no.
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`Since 2002, has DataTreasury received any
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`revenue for performing check or document imaging
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`processing services with your patented technology?
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`A.
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`Well, in 2002 we were still doing business
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`with Signature Bank. And we had outsourced or had
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`access to a data center where we had our servers there,
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`but we no longer had our own data center at that time.
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`Q.
`
`A.
`
`Q.
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`A.
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`Are you still doing that?
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`No.
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`When did you last do that?
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`I'm not sure. It might have been 2003 or '04.
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`I'm not sure.
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`Q.
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`Okay. So since that ended in 2003 or 2004,
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`has the company generated any revenue from imaging
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`services?
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`A.
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`Q.
`
`A.
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`Q.
`
`A.
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`Q.
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`No.
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`And how many employees do you have today?
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`I believe two.
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`And one is an administrative assistant?
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`Correct.
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`All right. Today, if I understood your
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`testimony, basically the company's business consists of
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`litigation?
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`Page 9 of 10
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`A.
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`It consists of enforcing our patent rights.
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`If that means litigation, then that's what it is, yes.
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`Q.
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`Okay. And you told the jury about these
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`various license agreements, and they were shown, several
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`of them, up there on the screen. Do you recall that?
`
`A.
`
`Q.
`
`Yes.
`
`And the vast majority of those were entered
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`into to settle -- by companies to settle lawsuits,
`
`correct?
`
`A.
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`Q.
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`Yes.
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`And I think you also told us that the lawsuits
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`have not been limited to banks?
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`A.
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`Q.
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`Correct.
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`Now, you understand that U.S. Bank has refused
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`to pay DataTreasury a licensing fee?
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`A.
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`Q.
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`A.
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`Q.
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`I do, yes.
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`That's why we're here today, correct?
`
`Yes.
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`All right. And you also would acknowledge
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`that a number of other banks have refused to pay
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`DataTreasury licensing fees, correct, sir?
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`A.
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`Q.
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`Yes.
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`And those banks are also awaiting their day to
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`have a jury trial on that subject, correct?
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`A.
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`Yes, as are we.
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`Page 10 of 10
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