`
` 1
`
` 1 IN THE UNITED STATES DISTRICT COURT
` FOR THE EASTERN DISTRICT OF TEXAS
` 2 TYLER DIVISION
`
` 3
` VIRNETX, INC. )
` 4 DOCKET NO. 6:10cv417
` -vs- )
` 5 Tyler, Texas
` ) 8:49 a.m.
` 6 APPLE, INC. November 5, 2012
`
` 7
` 8 TRANSCRIPT OF TRIAL
` MORNING SESSION
` 9 BEFORE THE HONORABLE LEONARD DAVIS,
` UNITED STATES CHIEF DISTRICT JUDGE, AND A JURY
` 10
`
` 11
`
` 12 A P P E A R A N C E S
`
` 13
`
` 14 FOR THE PLAINTIFFS:
`
` 15
` MR. DOUGLAS CAWLEY
` 16 MR. BRADLEY W. CALDWELL
` MR. JASON D. CASSADY
` 17 MR. JOHN AUSTIN CURRY
` McKOOL SMITH
` 18 300 Crescent Court, Ste. 1500
` Dallas, TX 75201
` 19
`
` 20
`
` 21 COURT REPORTERS: MS. JUDITH WERLINGER
` MS. SHEA SLOAN
` 22 shea_sloan@txed.uscourts.gov
`
` 23
`
` 24 Proceedings taken by Machine Stenotype; transcript was
` produced by a Computer.
` 25
`
`VIRNETX EXHIBIT 2041
`Mangrove v. VirnetX
`Trial IPR2015-01047
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` 1 FOR THE PLAINTIFF:
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` 2 MR. ROBERT M. PARKER
` MR. ROBERT CHRISTOPHER BUNT
` 3 PARKER BUNT & AINSWORTH
` 100 East Ferguson, Ste. 1114
` 4 Tyler, TX 75702
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` 5
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` 6
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` 7
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` 8
` FOR THE DEFENDANT:
` 9
` MR. DANNY L. WILLIAMS
` 10 MR. TERRY D. MORGAN
` MR. RUBEN S. BAINS
` 11 MR. CHRIS CRAVEY
` MR. MATT RODGERS
` 12 MR. DREW KIM
` MR. SCOTT WOLOSON
` 13 WILLIAMS, MORGAN & AMERSON, P.C.
` 10333 Richmond, Ste. 1100
` 14 Houston, TX 77042
`
` 15
` MR. ERIC ALBRITTON
` 16 MR. STEPHEN E. EDWARDS
` MS. DEBRA COLEMAN
` 17 MR. MATTHEW C. HARRIS
` ALBRITTON LAW FIRM
` 18 P.O. Box 2649
` Longview, TX 75606
` 19
`
` 20 MR. JOHN M. DESMARAIS
` MR. MICHAEL P. STADNICK
` 21 DESMARAIS, LLP - NEW YORK
` 230 Park Avenue
` 22 New York, NY 10169
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` 1 P R O C E E D I N G S
` 2 (Jury out.)
` 3 THE COURT: All right. I understand
` 4 there's a matter to take up before the jury comes in; is
` 5 that correct?
` 6 MR. DESMARAIS: Yes, Your Honor.
` 7 Good morning. John Desmarais for Apple.
` 8 Last night, VirnetX disclosed a new document that they
` 9 want to use in their direct testimony of their expert,
` 10 who's going to testify today, Mr. Jones -- or Dr. Jones.
` 11 It's a slide presentation, they say, was
` 12 given by Dr. Kiuchi back in 1996. Turns out VirnetX has
` 13 had this presentation in their possession since May of
` 14 this year, during discovery in this case, and two months
` 15 before they served their validity expert report.
` 16 Yet it's not discussed in their validity
` 17 expert report. Their expert never relied on it, and he
` 18 put forward no opinions about it in his report, and it's
` 19 not on their trial exhibit list.
` 20 So despite having it since May and during
` 21 discovery, they sent it to us for the first time
` 22 Saturday night, two days ago, right before the last day
` 23 of trial at 11:00 p.m.
` 24 I don't understand the set of circumstances that it
` 25 would be appropriate for them to now use that
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` 1 affirmatively with their expert on direct when it's
` 2 not on their exhibit list, wasn't produced in discovery,
` 3 and he didn't rely on it in his expert report.
` 4 More than that, just going to the merits,
` 5 it's not relevant to any issue in the case. As Your
` 6 Honor is well-aware at this point, our invalidity theory
` 7 is anticipation over the Kiuchi publication. And Dr.
` 8 Alexander's entire direct testimony was about what that
` 9 published article discloses.
` 10 He wasn't reading in outside materials.
` 11 He wasn't combining references. So it's not relevant to
` 12 the issue of whether the Kiuchi publication anticipates
` 13 these patents, whether or not Dr. Kiuchi at some other
` 14 point gave a presentation about his specific
` 15 implementation.
` 16 It's prejudicial. It's not relevant to
` 17 the issues in this case. And it certainly shouldn't be
` 18 allowed to be used in VirnetX' direct case.
` 19 The document is -- on the evidentiary
` 20 issues, it's a hearsay document. It's not authentic.
` 21 There's no proof of it. No witness testified about it.
` 22 So anything the expert said about it would be hearsay
` 23 anyway.
` 24 But more importantly, the speculative
` 25 opinions that Dr. Jones would be offering, we would be
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` 1 hearing for the first time in the rebuttal case here in
` 2 open court, because it's not in his report, and he
` 3 wasn't deposed about it.
` 4 THE COURT: Okay. Thank you.
` 5 Response?
` 6 MR. CALDWELL: Good morning, Your Honor.
` 7 Okay. So a couple of facts to clear up.
` 8 One, it wasn't yesterday as Mr. Desmarais
` 9 said; and, two, when we disclosed it to him, we said
` 10 we'd like to use for cross of his expert.
` 11 So he came up here and gave you an
` 12 argument about use on an affirmative basis with our
` 13 expert. And let me tell you what actually has happened.
` 14 On Friday, we heard Dr. Alexander give
` 15 direct testimony, saying here's what happened at the
` 16 proceedings in San Diego in February of 2006. And he
` 17 said it over and over and over again. Even his slide
` 18 is, here's what Dr. Kiuchi presented at the symposium.
` 19 That was his slide.
` 20 These are the --
` 21 THE COURT: I'm sorry. Here is what he
` 22 presented?
` 23 MR. CALDWELL: Well, this is what
` 24 Dr. Alexander showed on the screen: Dr. Kiuchi
` 25 presented his idea at the symposium. This is one of
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` 1 Dr. Alexander's slides.
` 2 Then he said the Kiuchi proceedings that
` 3 we're going to discuss invalidate the asserted claims.
` 4 He talked about the society, and it's a record of the
` 5 proceedings that happened in '96. It was a symposium.
` 6 February 22-23, '96, in San Diego.
` 7 It's an indication there was a meeting of
` 8 several hundred people, professionals in the field, in
` 9 '96, in San Diego. It's the proceedings we looked at,
` 10 February '96.
` 11 How do these symposiums run? How many
` 12 people go? Who goes? What are the numbers like? Those
` 13 were Mr. Desmarais' questions.
` 14 Several hundred professionals that give
` 15 presentations, present their papers. And even -- then,
` 16 this is -- this is even better.
` 17 Mr. Desmarais cannot let his derivation
` 18 theory go. They've lost it twice. He's filed a motion
` 19 for reconsideration while we're in the middle of this
` 20 trial; and then on Friday, he asks, gee, Dr. Alexander,
` 21 is SAIC, for instance -- knowing that's our inventors
` 22 were -- SAIC, for instance, were they there?
` 23 Oh, yeah. My recollection -- implying
` 24 that Dr. Alexander was there -- my recollection is that
` 25 for this particular conference, SAIC was there.
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` 1 And tell us what you found in the
` 2 presentation by Mr. Kiuchi discussed in San Diego.
` 3 Now, after that happened on Friday
` 4 afternoon -- and, Dr. Alexander, who now purports to be
` 5 talking about nothing more than the published paper of
` 6 Kiuchi, after he testified all about the symposium, we
` 7 go back and we're getting ready.
` 8 And on Saturday night, we're poking
` 9 around to see about attendees at the symposium, and I
` 10 see for the first time this is on the Internet Society
` 11 website. So the website of the Internet Society who put
` 12 on this symposium -- it's right there on the paper --
` 13 they have a website.
` 14 And it says here is the paper that was
` 15 submitted later -- or the paper that was submitted and
` 16 in the books for the conference -- excuse me -- and here
` 17 are the slides Mr. Kiuchi showed.
` 18 We download that PDF, and Mr. Curry sends
` 19 it to Mr. Desmarais on Saturday night, not last night;
` 20 and says, Mr. Desmarais, we wanted you to have a copy of
` 21 this. We intend to use it to cross Dr. Alexander.
` 22 And then this back and forth goes on and
` 23 on. We asked him several times if he ever knew about
` 24 it, and eventually Mr. Desmarais says, no, I never knew
` 25 about it. He asked us if we knew about it or ever had
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` 1 it. And we run searches in all our databases, and what
` 2 we find is one of their buddies from the other case, the
` 3 Mitel matter, had produced it to us.
` 4 So we found -- and we just told him, in
` 5 the interest of full disclosure, hey, it looks like it
` 6 was in amongst a pile of stuff we got from your buddy
` 7 back in May. So we were completely candid about that.
` 8 Apparently, we've had it in somebody
` 9 else's production they gave to us since May. We put two
` 10 and two together on Saturday night, after Dr. Alexander
` 11 came here and testified about the symposium.
` 12 THE COURT: Okay. Let me see the exhibit
` 13 that's in question, please.
` 14 MR. CALDWELL: I've got it right down
` 15 here.
` 16 MR. DESMARAIS: May I respond to that,
` 17 Your Honor?
` 18 THE COURT: Yes, you may.
` 19 MR. DESMARAIS: First of all, if we look
` 20 at -- if we look at what we heard Mr. Caldwell talk
` 21 about what Dr. Alexander testified to, I have here what
` 22 Dr. Alexander actually said.
` 23 This is the trial testimony from
` 24 Friday -- oops.
` 25 He said: Every year they publish
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` 1 probably tens of thousands of papers that are authored
` 2 by different people. And this is an example of a paper
` 3 that was published by Kiuchi.
` 4 And then on the next page, he says:
` 5 All right. So let's drill down a little bit on what
` 6 exactly is disclosed in this publication from this
` 7 meeting in February of 1996.
` 8 We didn't ask him anything about what was
` 9 in a slide presentation.
` 10 And when you look at Kiuchi, Your Honor,
` 11 the very first page of Kiuchi says the paper is from the
` 12 proceedings of a symposium on network-distributed
` 13 security systems, 1996. This has been an exhibit all
` 14 along. This is the exhibit that's in everyone's expert
` 15 report.
` 16 And then the very next page is the paper
` 17 that was published at the symposium. So the symposium
` 18 has this meeting; they publish papers; then they bind
` 19 them; and then they put them in libraries. Nothing was
` 20 new about that testimony.
` 21 But more importantly, Your Honor,
` 22 Mr. Caldwell is mistaken about another very important
` 23 fact, which was it is true that Saturday night at
` 24 11:00 p.m. when they sent me the presentation and I told
` 25 them I had never seen it before, I asked them where did
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` 1 you get it, and they told me they got it from the other
` 2 case, that Avaya produced it to them back in May. But
` 3 if you actually look at the timeline, not only did Avaya
` 4 produce it to them in May, but yesterday, I got my hands
` 5 on the Avaya invalidity report.
` 6 And this is on May 22 of 2012. And on
` 7 Page 35 is the presentation in the Avaya validity report
` 8 in the other case, and right at -- that's a figure right
` 9 from the presentation slides.
` 10 And at the bottom, it tells you: The
` 11 above image is included in a presentation that, I
` 12 understand, and according to information at this, was
` 13 presented alongside the Kiuchi publication at the 1996
` 14 symposium on network and distributed systems security.
` 15 So maybe Mr. Caldwell didn't know about
` 16 the presentation, but certainly the VirnetX trial team
` 17 knew about it. It's in the validity report that was
` 18 served back in May in -- in the other case, not in this
` 19 case.
` 20 We didn't know about it. This is in the
` 21 other case.
` 22 But more importantly, two months later,
` 23 Dr. Jones, their expert, responded to that report and
` 24 doesn't rely on the presentation. Doesn't say word one
` 25 about the presentation.
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` 1 In July of 2012, two months later,
` 2 Dr. Jones has an entire section responding to
` 3 Stubblebine. That's the Avaya expert responding to
` 4 Stubblebine and Kiuchi. And the only thing he relies on
` 5 in the entire response is the printed publication.
` 6 Now they're here in court -- and by the
` 7 way, what he says in that report -- I compared it
` 8 yesterday -- is word-for-word what he said in our
` 9 report.
` 10 So their expert's response to learning
` 11 about this presentation was to ignore it and to serve
` 12 two expert reports in July, rendering no opinions on it.
` 13 Now they want to come in here and have him get on the
` 14 stand and render for the first time new opinions about
` 15 what that presentation discloses, opinions we've never
` 16 heard before, opinions that weren't in his expert
` 17 report.
` 18 And the document, despite them having it
` 19 and despite it being in the validity reports, isn't on
` 20 their trial exhibit list.
` 21 And all -- the whole issue is a sideshow,
` 22 because the issue for this jury is what does the printed
` 23 publication that we're relying on disclose.
` 24 In the four corners of that printed
` 25 publication, these patents are either valid or invalid.
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` 1 What Dr. Kiuchi might have said in a presentation has no
` 2 bearing on whether that publication invalidates these
` 3 patents. We shouldn't be hearing these opinions on the
` 4 last day of trial. It's unfair and it's prejudicial.
` 5 MR. CALDWELL: Your Honor, Mr. Desmarais
` 6 continues to misrepresent what I've even just told you a
` 7 few minutes ago.
` 8 I would like to use to it cross their
` 9 expert, and I really am really, really bothered by the
` 10 suggestion that I have somehow lied to you. As soon as
` 11 he stands up here, he says, let me tell what you
` 12 Dr. Alexander really said on Friday.
` 13 I'm reading from the trial transcript,
` 14 those eight or nine pages that I quoted where he talks
` 15 about what was presented at the symposium. And here's
` 16 the point; here's why I want to do it.
` 17 Candidly, I think there's a problem with
` 18 the Kiuchi paper, a problem, an aspect of it where it
` 19 would not work. And there are contents -- there's one
` 20 content in particular, but basically two slides out of
` 21 the presentation I want to show. One is a drawing; two
` 22 is a uncertain message content that differs from what's
` 23 written in the paper.
` 24 And I think the significance of that is,
` 25 what was written in the paper very well could be
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` 1 inoperable, and he comes and shows a different message
` 2 content in his slide.
` 3 And you know what, I'm not asking Your
` 4 Honor to let us give the slides to Dr. Jones in the
` 5 rebuttal case and have him put forward some sort of
` 6 affirmative new opinion. I just would like to cross Dr.
` 7 Alexander on how he got up here and talked about the
` 8 symposium and what was presented, and in particular, in
` 9 view of his entirely gratuitous statement that, oh, SAIC
` 10 was there, I mean that's just --
` 11 THE COURT: All right. Objection is
` 12 overruled.
` 13 Anything else before we bring the jury
` 14 in?
` 15 MR. CASSADY: Your Honor, just one small
` 16 procedural matter. I will be very quick, Your Honor.
` 17 I know the Court has a predilection to having live
` 18 witnesses called, if they're here; but in this
` 19 situation, given the amount of time that's left in the
` 20 case, I think the parties are in agreement that there's
` 21 a short two minutes for Kendall Larsen that the parties
` 22 would like to play, whether in their case or in ours.
` 23 And neither party objects, and I wanted
` 24 to make sure, before one of us got up and asked to play
` 25 the depo, you weren't going to have a problem with that,
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` 1 Your Honor.
` 2 THE COURT: All right. As long as both
` 3 sides agree.
` 4 MR. CASSADY: Thank you, Your Honor.
` 5 THE COURT: All right. Bring the jury
` 6 in, please.
` 7 COURT SECURITY OFFICER: All rise for the
` 8 jury.
` 9 (Jury in.)
` 10 THE COURT: Please be seated.
` 11 All right. Good morning, Ladies and
` 12 Gentlemen of the Jury. Hope you had a good, restful
` 13 weekend and got some sleep and all rested up and ready
` 14 to go.
` 15 We should finish the testimony today, as
` 16 I told you. So we'll get started.
` 17 Mr. Caldwell, you may proceed.
` 18 MR. CALDWELL: Thank you, Your Honor.
` 19 PETER ALEXANDER, Ph.D., DEFENDANT'S WITNESS, PREVIOUSLY
` 20 SWORN
` 21 CROSS-EXAMINATION
` 22 BY MR. CALDWELL:
` 23 Q. Dr. Alexander, good morning.
` 24 A. Good morning.
` 25 Q. I am the attorney for VirnetX. I don't
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` 1 believe we have met.
` 2 A. No, I don't believe so.
` 3 Q. Well, it's good to meet you.
` 4 Just to clear up in case there was any sort of
` 5 confusion on Friday -- I mean, obviously we finished
` 6 your direct testimony.
` 7 And you understand that VirnetX has not yet
` 8 had a chance to cross-examine you and challenge your
` 9 opinions yet, correct?
` 10 A. That's right.
` 11 Q. Now, in case there's a wrong impression left,
` 12 you are not here as an independent expert, correct?
` 13 A. Well, I am an independent expert, but I am
` 14 retained by Apple.
` 15 Q. And paid?
` 16 A. Of course.
` 17 Q. Okay. You're not court-appointed or something
` 18 of that ilk, correct?
` 19 A. Could you repeat that?
` 20 Q. You are not here as a court-appointed expert?
` 21 A. Oh, no. No.
` 22 Q. Okay. Now, you talked a little bit about
` 23 certain aspects of your background going back maybe into
` 24 the '80s and '70s, and I just want to make sure you're
` 25 not meaning to suggest or imply that you are some sort
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` 1 of an Internet pioneer. Correct?
` 2 A. No. I think I've made that clear. I mean, I
` 3 came to the Internet 20 years after the beginnings,
` 4 around 1969.
` 5 Q. And you were not involved in standardizing
` 6 TCP-IP or DNS, correct?
` 7 A. No. I was building products.
` 8 Q. You do this quite a lot, testifying in patent
` 9 cases, right?
` 10 A. I have, yes.
` 11 Q. Yes. I mean, you've been in probably 40
` 12 cases. Is that about right?
` 13 A. I don't know. It could be that many.
` 14 Q. All right. Now, by the time of your
` 15 deposition, had you ever talked to Defendant's other
` 16 expert, Dr. Kelly?
` 17 A. No, not at all.
` 18 Q. And you didn't know him outside the patent
` 19 litigation context, correct?
` 20 A. No. I might have seen his name, but I've
` 21 never met him.
` 22 Q. All right. Now, over the weekend, did you
` 23 have an opportunity to read your testimony from Friday?
` 24 A. No, I did not.
` 25 Q. Based on what you remember, is there anything
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` 1 you regret saying or want to change?
` 2 A. No. I think it's clear. I think it's --
` 3 Q. Okay.
` 4 A. -- something is being misunderstood, but I
` 5 thought it was clear.
` 6 Q. Okay. Now, will you agree with us -- there
` 7 seems to be a little bit of dispute on this -- will you
` 8 agree with us that a person, a technical person does not
` 9 need to be a patent attorney or have formal training in
` 10 patents in order to read and understand a patent?
` 11 A. Well, that's my understanding of the role of a
` 12 person of ordinary skill.
` 13 Q. Okay. So is that, yes, you agree with the
` 14 statement?
` 15 A. That's a yes.
` 16 Q. All right. And Apple employs persons of
` 17 ordinary skill in the art, right?
` 18 A. Apple's employees?
` 19 Q. Yeah, Apple employs.
` 20 A. Well, I don't know. They have a lot of
` 21 employees.
` 22 Q. In your deposition, you testified that Apple
` 23 would employ persons of ordinary skill in the art,
` 24 right?
` 25 A. Well, you said Apple employees, so, you know,
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` 1 I'm sure they have people who are technical, who are at
` 2 least qualified as persons of ordinary skill for these
` 3 patents.
` 4 Q. Now, Dr. Alexander, if you worked at Apple and
` 5 you worked on the VPN On Demand or FaceTime products,
` 6 would you have bothered to read VirnetX' patents?
` 7 A. I don't know. I -- I don't think people who
` 8 develop software go around reading patents. They get
` 9 advice from the administration probably.
` 10 Q. All right. Dr. Alexander, were you here when
` 11 Dr. Jones testified?
` 12 A. I'm sorry. Doctor who?
` 13 Q. Dr. Jones?
` 14 A. Oh, yes.
` 15 Q. You were. You watched his presentation,
` 16 correct?
` 17 A. Yes.
` 18 Q. And he did not discuss invalidity last week,
` 19 right?
` 20 A. That's correct.
` 21 Q. Now, you recall that Dr. Jones said he might
` 22 come back later in the case, if Apple decides to assert
` 23 invalidity.
` 24 Do you remember that?
` 25 A. Yes. I just assumed he was coming back, so...
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` 1 Q. Now, why is it that Dr. Jones would not have
` 2 been addressing validity back then in VirnetX's case?
` 3 A. Oh, I think it's -- it's a rebuttal to my
` 4 testimony --
` 5 Q. Right.
` 6 A. -- for the invalidity aspects of this case.
` 7 Q. I agree with that, and that's because the
` 8 company that's hired you has the burden of proof on
` 9 invalidity. Correct?
` 10 A. That's correct.
` 11 Q. What does that mean?
` 12 A. Well, it means with clear and convincing
` 13 evidence, it has to be established that the patents are
` 14 anticipated or obvious in view of prior art, and
` 15 that's -- that's what's being discussed in my testimony
` 16 so far.
` 17 Q. And, Dr. Alexander, after patents are awarded
` 18 by the United States Patent & Trademark Office, they are
` 19 presumed valid, correct?
` 20 A. Yes, they are.
` 21 Q. Do you understand the presumption of validity?
` 22 A. Well, yes.
` 23 Q. But you'll agree with me, you just didn't
` 24 concern yourself with the presumption of vali