throbber
UNITED STATES DISTRICT COURT
`DISTRICT OF MINNESOTA
`-----------------------------------------------------------
`M-I Drilling Fluids UK Ltd.,
`File No. 14-4857
`(ADM/HB)
`Plaintiff,
`
`St. Paul, Minnesota
`November 6, 2015
`1:37 p.m.
`DIGITAL RECORDING
`
`vs.
`Dynamic Air Inc.,
`Defendant.
`-----------------------------------------------------------
`-----------------------------------------------------------
`File No. 13-2385
`M-I Drilling Fluids UK Ltd.,
`(ADM/HB)
`Plaintiff,
`
`)))))))))))
`
`)))))))))))
`
`St. Paul, Minnesota
`November 6, 2015
`1:37 p.m.
`DIGITAL RECORDING
`
`vs.
`Dynamic Air Ltda.,
`Defendant.
`-----------------------------------------------------------
`BEFORE THE HONORABLE HILDY BOWBEER
`UNITED STATES DISTRICT COURT MAGISTRATE JUDGE
`(MOTION HEARING)
`
`APPEARANCES
`For the Plaintiff
`(via telephone):
`
`ALSTON & BIRD
`Scott J. Pivnick, ESQ.
`The Atlantic Building
`950 F. Street NW
`Washington, D.C. 20004
`PATTERSON THUENTE CHRISTENSEN
`PEDERSEN, PA
`Eric H. Chadwick, ESQ.
`80 South Eighth Street
`Suite 4800
`Minneapolis, MN 55402
`
`STACI A. HEICHERT, RDR, CRR, CRC
`(612) 664-5105
`
`DYNAMIC AIR INC.
`EXHIBIT 1078
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`For the Defendant
`(via telephone):
`
`Transcriber:
`
`2
`
`CARLSON CASPERS VANDENBURGH
`LINDQUIST & SCHUMAN PA
`Todd S. Werner, ESQ.
`Alan G. Carlson, ESQ.
`225 South Sixth Street
`Suite 4200
`Minneapolis, MN 55402
`STACI A. HEICHERT
`RDR, CRR, CBC, CCP
`1005 U.S. Courthouse
`300 South Fourth Street
`Minneapolis, Minnesota 55415
`
`Proceedings recorded by digital recording; transcript
`produced by computer.
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`P R O C E E D I N G S
`IN OPEN COURT
`THE COURT: All right. We are on the record.
`This is a hearing in the -- in two matters: M-I Drilling
`Fluids UK Limited versus Dynamic Air Limitada, civil matter
`No. 13-2385; and M-I Drilling Fluids versus Dynamic Air
`Inc., civil matter No. 14-4857. And we are here in
`connection with the plaintiff's motion in each case for
`leave to amend its complaint. So let me start by getting
`appearances, please, first on behalf of plaintiff, M-I.
`MR. PIVNICK: Good afternoon, Your Honor. This is
`Scott Pivnick from Alston & Bird on behalf of M-I. And with
`me also is Eric Chadwick from Patterson Thuente.
`THE COURT: All right. Good afternoon. And on
`behalf of Dynamic Air Limitada and Dynamic Air Inc.?
`MR. WERNER: Your Honor, it's Todd Werner and Alan
`Carlson from Carlson Caspers on behalf of Dynamic Air, Inc.
`And I'll also just add that to identify both
`matters, I just want to make it clear that Dynamic Air
`Limitada is not opposing amendment in that case; it's only
`in the Dynamic Air Inc. case that there is a dispute as to
`the proposed amendment.
`THE COURT: Understood. Understood. So I'll
`address that one -- I'll address both of these in just a
`minute. What I thought I would start with, though, just to
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`give you a little more of a sense of where some of the other
`pending matters are at so you've got it for planning
`purposes, with respect to the motions today, I intend to
`rule from the bench so that there would be only a summary
`kind of minute entry type order on that, but I'll explain
`reasons for my rulings on the record once we've had oral
`argument. The -- which isn't to say that oral argument
`couldn't affect my decision, I'm just saying that I think
`with oral argument I'll be able to tell you immediately and
`make a ruling that you won't have to wait around for.
`With respect to the motions that are pending, I'm
`going to have the order on the motion for jurisdiction
`discovery out this afternoon. And I -- just so you know
`what to expect but you're going to -- the -- it will run 12
`or 13 pages, I think, but just so you know what to expect,
`I'm going to be permitting limited jurisdictional discovery
`on the issue of what Dynamic Air Limitada knew before it
`signed the Petrobras contract, but I'm going to deny
`discovery on the alterego theory. So you'll see that this
`afternoon, and it will go into some length about why I'm
`deciding the way I'm deciding, but I just thought I'd let
`you know that that's where that is headed.
`The orders on the other motions are taking a bit
`longer than I had hoped they would, but just for your
`planning purposes, I'm intending to deny the motion to
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`limit, which is DAI's motion, to limit discovery to certain
`issues and stay discovery as to other issues, but I'm still
`working through the issue of access by DAI to DAL documents
`as well as the request to modify the cross use provision of
`the protective order. If it were only the issue of whether
`to stay or not to stay discovery, the order would have been
`out by now, but I'm still working through that last issue.
`So that will go out next week, but since it is relevant to
`some of the other things that may come up on this call, I
`wanted to let you know that it is my intention not to try to
`phase or limit or compartmentalize discovery in the DAI
`case.
`
`That potentially, then, leads to the question
`of -- that was raised by the letter that I got from
`Mr. Werner either late yesterday, or at least I saw it first
`thing this morning, it may have come in late yesterday,
`we'll get to that by the end of the -- we'll get to that
`before we wrap up this afternoon, but I at least want to
`kind of set the table on what you'll see in the way of
`orders on the other pending motions.
`So with that backdrop -- well, I guess the other
`thing I wanted to try to plant, and I'll circle back to it
`before we wrap up this afternoon, and that is whether it
`would be helpful to try to schedule a regular, say, monthly
`conference call, a monthly status conference call, in this
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`case where issues relating to discovery or otherwise can be
`raised, not as an alternative to meeting and conferring, you
`know, you know me and my soapbox on that, but think about,
`as we proceed with this call, think about whether it would
`be helpful to just have a regular opportunity with an agenda
`prepared in advance for us to get on the phone together each
`month and make sure that things are staying on track and we
`try to minimize the need for formal motion practice.
`So with that by way of introduction, why don't we
`turn to the two motions that are teed up for hearing this
`afternoon. The first one, as Mr. Werner indicated, is
`essentially unopposed, and so I will grant and am granting
`M-I's motion for leave to amend the Complaint against
`Dynamic Air Limitada which is the Complaint in matter No.
`13-2385. I'm granting that in light of the fact that it was
`timely brought. The pleading requirements of the federal
`rules are fairly liberal, and although defendant didn't
`embrace the amendment, it decided not to oppose the motion,
`and I find that there has not been undue delay or dilatory
`motive in bringing the motion now, nor that there is undue
`prejudice. So I am granting the motion to amend the
`complaint in that case.
`With respect to the motion to amend the complaint
`in Case No. 14-4857, my understanding is that certain
`aspects of the proposed amended complaint are unopposed. I
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`won't go through what, it's easier to identify the ones that
`are opposed than the ones that are unopposed, but I
`certainly am granting that motion as to the unopposed
`elements of the proposed amended complaint.
`But my understanding is that DAI is opposing the
`motion to amend with respect to three issues: the proposed
`new claims under 271 -- Section 271(f)(1) and 271(f)(2), as
`well as the proposal to add a complaint -- or to add
`allegations regarding alterego. So those -- those are what
`I would like the parties to focus on. And I will let,
`Mr. Pivnick, I assume you're the one who is going to be
`carrying the lead on the behalf of M-I on those issues?
`MR. PIVNICK: Correct, Your Honor.
`THE COURT: Okay. Go ahead then.
`MR. PIVNICK: Thank you, Your Honor. And thank
`you for the -- all the lead up to that. That's helpful a
`great deal in planning and things going forward, so we do
`appreciate that guidance.
`As for the I'm going to call it the 14 case, the
`14-4857 case, you are correct that DAI only challenges the
`two 227(f) allegations and the alterego allegations. I'm
`going to focus on those, as you directed. So the statute
`and the case law makes it clear that with good cause, courts
`should freely give leave to amend the complaint when justice
`so requires and that when evaluating good cause, courts
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`generally evaluate whether the moving party acted diligently
`when new evidence is revealed to the moving party in
`discovery. So here, our motion to amend -- well, I will say
`that our -- we did file an amended complaint by the deadline
`that contained all of these same allegations and so DAI was
`on notice of all of these allegations by the deadline that
`wouldn't have required leave. Unfortunately, we neglected
`to include a motion in that, with that filing, but then
`immediately reached out to Dynamic Air the following day to
`get their positions on it, and they had then requested a
`week to decide that, and so we actually filed the motion to
`support as soon as we heard back from them on their
`position. We didn't want to file something without giving
`them a chance to say it.
`So the actual Complaint was filed originally
`within the deadline before we would even have to show good
`cause or seek leave to amend, so we're only here because we,
`again, forgot to attach that motion.
`But regardless, even focussing on the filing on
`the 22nd, it is still timely, and we weren't diligent in
`filing our motion to amend. We don't -- we already -- that
`was the M-I LLC issue, but that license agreement was filed
`and was signed a week before the amendment was made.
`In terms of the 217(f) allegations, as we stated
`in our motion, that claim is based mostly on DAI's provision
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`of individual components that were then put together by DAL
`in Brazil, and we did not know that they were supplying
`those components and what those components were until
`October 13th when DAI produced for the first time
`documentation to support its -- which components were
`supplied.
`
`As for the alterego issue, those claims -- that
`claim arises out of the deposition of James Steele which did
`happen on August 19th but the errata sheet was not actually
`submitted until October 8th, 2015, and the amended complaint
`was then filed or the motion was filed two weeks later.
`Thus, the factual allegations that give rise to the
`complaint were all learned after the filing of the original
`complaint and within two weeks before the filing of our
`motion to amend. So good cause, therefore, exists for all
`the amendments.
`And now turning specifically to the 271 issues of
`substance and DAI's allegations that we have not properly
`pled that and that it would be futile, first, Dynamic Air
`claims that all of the information it produced on
`October 13th was on its website and that we should have
`looked there and to know what they supplied, but a listing
`of products on a website does not indicate that which
`components were actually sold to DAL; it merely provides the
`universe of components that were for sale to everyone. It
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`wasn't until after discovery started that DAI confirmed it
`actually sells components to DAL and did not identify the
`components until after we filed our motion to compel. And,
`again, that was on October 13th, a week before we filed our
`motion to amend.
`And they also complained that we don't identify
`the components that have substantial non-infringing uses,
`but we do that on paragraph 25 of our complaint. And the
`individual components themselves don't necessarily have to
`have substantial non-infringing uses; it's when they are
`combined together that you that have to have that
`non-infringing use.
`And tellingly, they never, in their motion papers,
`deny the underlying factual allegations. They just simply
`try to argue that we should have known these before we filed
`our original complaint because we alleged infringement under
`271(b) and (c). Case law makes it pretty clear, though,
`that 271(b) and (c) are separate and apart causes of action
`from 271(f)(1) and (2). Our allegations under (b) and (c)
`focussed on the provision of some or all of the accused
`system to Dynamic Air and/or Petrobras on the accused ships,
`and it was just that if they had to attach a hose or some
`other component once they were installed, that's a 271(b)
`and (c).
`
`271(f) really focuses on the provision of
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`individual components to DAL for DAL then to put together in
`Brazil. So they are two separate both legal and factual
`allegations, and again, the factual basis for that did not
`occur until they provided us with those documents on
`October 13th.
`THE COURT: Do you anticipate there would be a
`difference in the scope of discovery with the addition of
`the 271(f), if I were to permit the addition of the 271(f)
`claims, would that change the scope of what's relevant for
`discovery purposes vis-à-vis what was already in the
`complaint?
`
`MR. PIVNICK: It's doubtful because under (b) and
`(c) we would have sought this same information. We would
`still want to know what individual components were supplied
`to DAL to see if that could be an independent basis under
`(b) and (c). You know, and (f)(1) and (2) don't necessarily
`require any kind of intent, whereas that is required under
`(b) and (c) arguably, so it's almost even a smaller subset,
`but I don't foresee it expanding because of the addition of
`(f)(1) and (2).
`THE COURT: With respect to (f)(2), they argue
`that there's just the most conclusory statement that there
`are no substantial non-infringing uses, and you've indicated
`that what matters is when they're in combination, but are
`you alleging that they were sold in that combination? I
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`mean, in that combined infringing from by DAI as opposed to
`components being sold one at a time and then combined by
`DAL?
`
`MR. PIVNICK: Yeah, I think they were -- we
`understand it, at least, and this is part of our motion to
`compel, but they supplied we'll say ten components to DAL
`and then DAL ten took those ten components and put them
`together and that combination therefore does not have a
`substantial non-infringing use.
`THE COURT: Right. But I guess what I'm trying to
`get at is are you -- do you contend that one or more of the
`individual components sold by DAI had no substantial
`non-infringing use?
`MR. PIVNICK: We believe that, Your Honor, yes.
`THE COURT: Okay. Even -- even setting aside the
`form in which they were combined?
`MR. PIVNICK: Correct.
`THE COURT: Okay. And -- all right. But in your
`complaint you allege only the kind of the bottom line that
`there were no substantial non-infringing uses. Were there
`other specific facts alleged in the proposed amended
`complaint that bolster that kind of bottom line allegation?
`MR. PIVNICK: Well, Your Honor, I don't think it
`matters, because, you know, the case law is pretty clear
`that we only have to provide a short and plain statement of
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`our claim, not an exposition of our entire legal argument.
`That's the U.S. Supreme Court in Skinner v. Switzer. We
`identified the components that we say are combined and then
`that those -- those components combined don't have
`substantial non-infringing uses. If there happen to be one
`or two of those that by themselves have non-infringing use,
`I don't think that matters for pleading purposes. We aren't
`required under Iqbal or Twombly or any other cases to lay
`out every single fact that supports our legal claim. We
`simply have to set forth the factual and legal arguments in
`a plain and -- short and plain statement of what they are.
`What they're required -- seem to be demanding is that we
`have to prove our entire case in the pleading stage, and
`that's just not what the case law requires.
`THE COURT: Okay. All right. Anything else on
`the 271(f)(1) and (f)(2) arguments or do you want to move to
`the alterego?
`MR. PIVNICK: I -- I don't -- I think that's about
`it. I would just point out the one that is the case law
`that they support -- they cite to really does not support
`them. The Zoltek case they cite to is actually a cite to a
`footnote in a dissent, not the actual holding of the case,
`and in addition, intoxification case, completely in
`opposite, doesn't deal with 271(f), and that one had just a
`bare bones, you know, basically reciting the statute and
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`nothing more, and that's why that was thrown out, whereas
`here, we have set forth the factual allegations that support
`our claim.
`
`So now I will now turn to the alterego. As I
`stated at the beginning, the alterego allegations are based
`upon information learned from the documents produced by DAI
`in discovery as well as the deposition of James Steele for
`which we just got the errata for that on October 28th.
`Dynamic Air tries to argue that because Judge Montgomery
`already ruled in the 13 case that our alterego theory should
`be dismissed somehow should have some influence on the case
`here just does not make any kind of legal or factual sense.
`That involved a different case, a different complaint, and
`different factual allegations. It has no precedential or
`persuasive effect on this case. The allegations we made are
`based upon an actual deposition that has occurred and are
`based in documents that have been produced and that the
`facts support our allegations.
`Now, they argue that we've not specifically tied
`the factual allegations to a specific recitation of case
`law. I would say, you know, to begin, such a matching game
`is not required. We need to plead the facts that support
`our legal claim. But regardless, you know, the facts do
`match up with the case law that they point to. We included
`allegations that support our alterego in numerous
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`paragraphs, in 18, 21, 22, 42, and 43, and then repeated
`those allegations in each of the counts, so, you know, in an
`additional ten paragraphs. DAI is only focussed on one
`paragraph, 18, and it ignores the others. But those
`allegations support the conclusion that Dynamic Air Inc.
`does not -- I'm sorry, that Dynamic Air Limited does not
`observe corporate formalities, has a fund siphoned by a
`parent, has non-functioning officers, does not maintain
`corporate records, and exists merely as a façade for the
`individual dealings of Dynamic Air Inc. Those are, you
`know, five or six of the eight factors set forth in the case
`law.
`
`So those allegations go kind of to the first part
`of the alterego test, the piercing the corporate veil test,
`but we also included in our complaint the second part which
`is the injustice or fundamental unfairness aspect where we
`describe how Dynamic Air Limited, as claimed, is not subject
`to the Court's jurisdiction and so may escape liability for
`its infringing activities in the U.S. and basically DAI and
`DAL would get off scot-free. So we've addressed both
`aspects of the test. They are based upon facts, not mere
`supposition. And they are clearly laid out in the amended
`complaint. And as I showed, we have been diligent in doing
`so. And so therefore, we would request that you grant both
`the addition of the 271(f)(1) and (2) allegations, as well
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`as the alterego allegations.
`And I'll just touch briefly on the scheduling
`order amendment issue. It's pretty straightforward. You
`know, if you grant the amendment, of course, we would need
`to supplement our infringement contentions to add
`allegations under these, and so we would ask for 14 days to
`do that, and then Dynamic Air would have 30 days in
`response, just like they would under the regular scheduling
`order.
`
`THE COURT: Just one other follow-up question on
`alterego. Are there -- are there differences in the facts
`you plead in the proposed amended complaint in the -- what
`we're calling the 14 case from the facts upon which you are
`basing your opposition to the -- to DAL's motion to dismiss
`for lack of jurisdiction in the 13 case?
`MR. PIVNICK: Well, Your Honor, I'll be honest
`that I have not sat down and compared them, but I doubt
`there's much difference because it would both -- they are
`both based upon the Jim Steele declaration -- deposition and
`the documents that they produced.
`THE COURT: Okay.
`MR. PIVNICK: So, again, you know, I cannot,
`sitting here today, tell you that the tests are exactly the
`same either, but I think the facts underlying it are the
`same, whether these folks support it on the DAI side, of
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`course.
`
`THE COURT: Okay. All right. Thank you. Who is
`going to be arguing on behalf of the defendant?
`MR. WERNER: Todd Werner, Your Honor.
`THE COURT: Go ahead.
`MR. WERNER: Might I begin? Your Honor, so
`turning to the motion to amend from DAI.
`THE COURT: You know, Mr. Werner, could you get a
`little closer to your phone? Or actually I will -- yeah,
`I've got my volume up about as far as I can -- as I can put
`it. If you could get a little closer to the phone or amp up
`the volume on your speakerphone, we're having a little
`trouble picking it up clearly on the recording.
`MR. WERNER: Can you hear me now, Your Honor?
`THE COURT: Much better. Thank you.
`MR. WERNER: The fact of the matter here is that
`not once until the very night of the deadline did we ever
`even hear about any plans to move to amend. That night they
`unilaterally filed an amended complaint. And it wasn't them
`that brought up the issue, it was DAI that brought up the
`issue the next day and said, wait a second, you need to file
`a motion, you never even told us about this, we've never
`heard of a plan to file a motion. So the simple fact of the
`matter is, there was no meet and confer. There was no
`motion filed within the timeframe. That occurred after the
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`deadline. And so we are in the Rule 16 analysis requiring
`good cause, and in that analysis, prejudice is not required
`in order to deny the motion. Rather, they must show good
`cause, even in the absence of prejudice, they must show good
`cause for the delay in advancing these claims.
`And Mr. Pivnick has mentioned a number of times
`that the 2013 case was a different case. It was a different
`case. But it involved the exact same parties and the exact
`same activities and the exact same claims, so it's a
`different case, but that's really form over substance. The
`reality is, this is effectively the third complaint they're
`trying to file against Dynamic Air Inc. In that first
`complaint they did advance -- a 2013 complaint that was
`dismissed, they advanced alterego allegations. The Court
`rejected those arguments, and when they re-filed against DAI
`in 2014, M-I chose not to try and fight that battle again
`and dropped those claims.
`Setting aside many of their broad allegations
`about a lack of separateness between the two entities, they
`suggest that they discovered many new facts at the
`deposition of Jim Steele. First of all, that deposition was
`in August, you know, about two months before, if not more,
`before they ever tried to do anything about amending their
`claims in this case.
`Second of all, the new facts that they supposedly
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`learned at that deposition are nowhere near sufficient to
`put us in a different position from when the Court rejected
`the alterego theory in the first case. They allege that DAI
`has a 51 percent ownership and that it provided start-up
`capital. Those are not facts anywhere near the level
`necessary to show that there is an alterego situation. And
`I would emphasize, they need to do more than raise the mere
`possibility of an alterego in order to advance their case.
`They have to advance plausible allegations, and they have to
`provide some actual factual allegations in support of their
`conclusions to satisfy their -- the standard.
`The only other real allegation they have is that
`many corporate functions require approval of DAI. They
`don't expound upon what they mean by that. Presumably
`they're referring to the Articles of Organization that
`they've previously submitted to the Court. Those were,
`notably, the 21st edition of those Articles of Organization
`confirming that Limitada does, in fact, maintain the proper
`corporate documents. And the fact of the matter is, I don't
`think there's a company that doesn't have shareholders that
`have the right to control certain things that the company
`does or vote on certain things that the company does,
`especially one that's not publically traded and is a smaller
`corporation like Limitada.
`So, again, the new allegations don't rise anywhere
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`near the level of alterego and certainly don't differentiate
`the facts now compared to the facts that were before the
`Court the first time around. So we don't believe that these
`new facts justify the delay, and if they were going to
`advance this theory, they should have done it at the outset
`and we would have been done with it then. There's no reason
`to revisit it now.
`Turning to the good cause standard for the 271(f)
`claim, I think we should probably take a step back because
`I'm not sure I have the same understanding of these claims
`as Mr. Pivnick offered the Court. First, under 271(f)(2),
`the statute expressly requires a component to be especially
`made or especially adapted for use in the invention. That's
`virtually identical to 271 I don't remember if it's (b) or
`(c), the contributory infringement, but that's almost the
`exact same language. I think it is the exact same language.
`I just don't know any difference between the requirement for
`contributory infringement and 271(f)(2). The reality is,
`they have to show a component that lacks substantial
`non-infringing uses. It's not the assembly of components
`thereafter. There's a separate statute for that, and that's
`271(f)(1). And that statute, I believe Mr. Pivnick
`suggested did not require intent, but it expressly requires
`that the manufacturer actively induce the combination of
`components outside the United States in a manner that would
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`infringe. So it does require some intent by its own
`language.
`
`Now, turning to what new evidence they have on
`those issues, it essentially boils down to some brochures
`that we produced in October. But the reality is, in 2014,
`they filed a complaint accusing our client of contributory
`infringement for the sale of components. Presumably they
`had a basis for that allegation when they made it. They
`haven't withdrawn it. We still don't know what that
`allegation is. At no point in this case, up to this very
`moment, have we ever been told a single component that lacks
`substantial non-infringing uses.
`Now, turning to the combination of components
`abroad which is really what these 271(f) torts were created
`for is to address the same contributory and induced
`infringement claims that typically happen in the U.S. and
`apply that law to when the assembly of a component into the
`infringing devices occurs abroad, and when we look at the
`assembly, well, they had the same facts that they're relying
`upon now, apparently, when they filed their 2014 complaint,
`because in that Complaint they alleged that that DAI
`instructed people, third parties, including Limitada, to
`combine their components according to DAI instructions to
`form the accused systems. So that's the same allegations
`they're advancing under their new 270(f) -- 271(f)(1) claim.
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`So we're just not sure what new information they really
`gained through discovery. We do not believe these brochures
`have changed the landscape. Instead, they're being used as
`an excuse for the belated claims.
`And I'd also note that throughout the course of
`both the first and the second litigation, M-I Drilling has
`relied upon the content of the Dynamic Air website. They
`suggested that the website identifies Limitada as a
`international sales office, and I believe there's some other
`points on which they've referenced the website. So they've
`been on the website ever since the first case. And all of
`these components are displayed on that website. So this
`shouldn't have been new information to them in any event
`because they were on our website and it's right on our --
`these components are right on our website.
`Now, turning to the futility issue, they have to,
`as I said before, advance a plausible, a plausible, theory
`in support of their claims, not merely conclusory
`allegations. Here, we believe that really all we have are
`conclusory allegations.
`Returning back to the alterego analysis, again,
`the Court already rejected the theory once, and we don't
`believe there's any new facts here that warrant revisiting
`the issue. But it's not our case law. It is M-I's case law
`that M-I has cited identifying eight factors that are
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`considered in the alterego analysis, and I'll walk through
`those. The first one is insufficient capitalization.
`There's no allegations about insufficient capitalization.
`And, in fact, there has been discovery that has occurred in
`this case. M-I has financial information about Limitada.
`So the absence of such allegations is notable. There isn't
`any evidence of insufficient capitalization. There's
`evidence otherwise.
`The second factor is failure to observe corporate
`formalities. There's no allegations that we're aware of in
`the amended complaint on that issue.
`The third factor, the payment of dividends. We're
`not aware of any allegations on that issue.
`The fourth factor is insolvency. There's no
`allegations of insolvency, and, again, they have our
`financial statements so they would be able to make these
`allegations if there was.
`The fifth factor is siphoning of funds. There's
`no allegations there. They did make allegations of
`commingling which they have based on financial statements,
`financial statements that provide a separate accounting of
`each subsidiary's financial situation and in no way, shape,
`or form provides any indication that any bank accounts have
`ever been commingled. And there's been other evidence in
`this case that there are -- the bank accounts are separately
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`maintained for the companies; that they also filed separate
`tax returns.
`Turning to the sixth factor, nonfunctioning
`officers, again, no allegations on that.
`Turning to the seventh factor, the maintenance of
`corporate records, no allegations on that. And as I've
`mentioned, we have at least 21 Articles of Organization that
`have been filed with the Brazilian government related to
`Limitada.
`
`And the last one is that is whether the company,
`the subsidiary, merely exists as a façade, and I think that
`the facts here are quite clear that is not the case, and, in
`fact, M-I Drilling initially filed a comp

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