`
`1
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
`
`VS.
`
`PACKET INTELLIGENCE LLC
`
` )(
` )(
` )(
` )(
` )(
` )(
` )(
` )(
`NETSCOUT SYSTEMS, INC.
` )(
`TEKTRONIX COMMUNICATIONS, )(
`AND TEKTRONIX TEXAS LLC
` )(
`
` CIVIL DOCKET NO.
` 2:16-CV-230-JRG
`
` MARSHALL, TEXAS
`
` OCTOBER 10, 2017
` 8:36 A.M.
`
`TRANSCRIPT OF JURY TRIAL
`BEFORE THE HONORABLE JUDGE RODNEY GILSTRAP
` UNITED STATES DISTRICT JUDGE
`
`APPEARANCES:
`FOR THE PLAINTIFF:
`
`COURT REPORTER:
`
`Mr. Paul J. Skiermont
`Ms. Sadaf R. Abdullah
`Mr. Steven K. Hartsell
`Mr. Alexander E. Gasser
`Mr. Steve J. Udick
`SKIERMONT DERBY LLP
`2200 Ross Avenue
`Suite 4800W
`Dallas, Texas 75201
`Ms. Shelly Holmes, CSR, TCRR
`Official Court Reporter
`United States District Court
`Eastern District of Texas
`Marshall Division
`100 E. Houston Street
`Marshall, Texas 75670
`(903) 923-7464
`
`(Proceedings recorded by mechanical stenography,
`transcript produced on CAT system.)
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 1
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 2 of 131 PageID #: 16221
`
`2
`
`FOR THE PLAINTIFF:
`
` Mr. William E. Davis, III
` THE DAVIS FIRM, PC
` 213 N. Fredonia Street
` Suite 230
` Longview, Texas 75601
`FOR THE DEFENDANTS: Ms. Melissa Smith
` GILLAM & SMITH
` 303 South Washington Avenue
` Marshall, Texas 75670
` Mr. Eric Kraeutler
` MORGAN LEWIS & BOCKIUS
` 1701 Market Street
` Philadelphia, Pennsylvania 19103
` Mr. Michael Lyons
` Mr. Ahren C. Hsu-Hoffman
` Mr. Michael F. Carr
` Ms. Karon N. Fowler
` Mr. Thomas Y. Nolan
` MORGAN LEWIS & BOCKIUS
` 1400 Page Mill Road
` Palo Alto, California 94304
` Mr. Adam A. Allgood
` MORGAN LEWIS & BOCKIUS
` 1000 Louisiana Street
` Suite 4000
` Houston, Texas 77002
` Mr. Charles E. Phipps
` Mr. Paul D. Lein
` LOCKE LORD LLP
` 2200 Ross Avenue
` Suite 2800
` Dallas, Texas 75201
` Mr. Scott D. Wofsy
` LOCKE LORD, LLP
` 1 Canterbury Green
` 201 Broad Street
` Stamford, Connecticut 06901
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 2
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 3 of 131 PageID #: 16222
`
`3
`
`
`
`P R O C E E D I N G S
`(Jury out.)
`COURT SECURITY OFFICER: All rise.
`THE COURT: Be seated, please.
`Good morning, Counsel.
`I understand, Mr. Skiermont, you'll be
`doing opening statements for Plaintiff; is that correct?
`MR. SKIERMONT: Yes, Your Honor.
`THE COURT: Would you like a warning on
`
`your time?
`
`MR. SKIERMONT: Five minutes, please.
`THE COURT: Okay. And how about opening
`statements for Defendant?
`MR. KRAEUTLER: Eric Kraeutler for the
`Defendants, Your Honor. And I will not need a warning.
`THE COURT: All right. And do I
`understand, Ms. Abdullah, that you are expecting a baby;
`is that correct?
`MS. ABDULLAH: Yes, Your Honor.
`THE COURT: All right. Because of that
`condition, should you need to excuse yourself for any
`reason during the course of the trial, you may simply
`walk behind counsel tables and go in and out that side
`door as you might need to.
`MS. ABDULLAH: Thank you. I appreciate
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 3
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 4 of 131 PageID #: 16223
`
`4
`
`it. I will do my best not to disrupt the proceedings.
`THE COURT: That -- that latitude applies
`to you only. Unless there's somebody else in a similar
`condition that I'm not aware of. Okay.
`MS. ABDULLAH: Thank you.
`THE COURT: All right. Counsel, unless
`either side has something else we need to take up before
`I bring in the jury, we'll bring the jury in and begin
`with opening statements.
`All right. Then bring in the jury,
`
`please.
`
`jury.
`
`COURT SECURITY OFFICER: All rise for the
`
`(Jury in.)
`THE COURT: Good morning, ladies and
`gentlemen. Welcome back. Please have a seat.
`Members of the jury, you'll recall that
`last week we selected and seated you as the jury in this
`case, and I gave you my preliminary instructions. We
`are now prepared and at the proper place to begin with
`opening statements from both Plaintiff and then
`Defendant.
`
`I remind you of all the instructions I
`gave you earlier. That will apply throughout the trial
`until such time as I discharge you from your position as
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 4
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 5 of 131 PageID #: 16224
`
`5
`
`jurors.
`
`With that, we'll now hear opening
`statements beginning with the Plaintiff.
`MR. SKIERMONT: Thank you, Your Honor.
`THE COURT: You may proceed,
`Mr. Skiermont.
`MR. SKIERMONT: Thank you, Your Honor.
`May it please the Court.
`Good morning, ladies and gentlemen.
`My name is Paul Skiermont, and it's my
`great honor to represent Packet Intelligence and present
`our opening statement to the members of the jury and
`this honorable Court.
`This is an important case. It's
`important to the owner of the patents, Packet
`Intelligence, whose owners took a risk to leave their
`businesses and start a new one investing substantial
`resources, time and money, to build their licensing
`business.
`
`And it is important to the inventors of
`the patents, including the first listed inventor, Mr.
`Dietz, who you will hear from today is the first
`witness, and he's in the courtroom.
`Mr. Dietz, if you'll stand up.
`(Witness complies.)
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 5
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 6 of 131 PageID #: 16225
`
`6
`
`
`
`MR. SKIERMONT: And it's also important
`to Mr. Maixner, one of the -- one of the other inventors
`who y'all also will hear from today.
`Mr. Maixner, if you could stand up.
`(Witness complies.)
`MR. SKIERMONT: Thank you.
`The inventors, Mr. Maixner, Mr. Dietz,
`and their co-inventors, did the hard work to create the
`inventions that you'll hear about today. On behalf of
`the entire Packet Intelligence team, we know that your
`service on this jury is a tremendous burden to each of
`you, and we want -- deeply grateful and appreciate your
`service.
`
`In a nutshell, this case is about a big
`corporation that is using property without permission
`that it does not own, and the owner of that property is
`standing up for its rights.
`The property is in your binder. It's the
`three United States patents, Tabs 1, 2, and 3 behind the
`patents. And what I'm holding up are the official
`certified copies of the three United States patents that
`are the same -- other than the cover and the gold seal,
`are the same as the ones that are in your binder.
`The big corporation that is using the
`property without permission is the Defendant in this
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 6
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 7 of 131 PageID #: 16226
`
`7
`
`case, NetScout. And the owner for the -- of the
`property standing up for their rights is the Plaintiff,
`Packet Intelligence.
`Now, before I give you a roadmap of the
`opening statement, I want to introduce you to Packet
`Intelligence.
`In 2008, Mr. Brad Brunell, who's sitting
`at counsel table, and Mr. Phil Vachon, who's in the
`gallery, went into a patent licensing business together
`after having been introduced by a mutual friend. Both
`had been senior executives at two of the world's largest
`and most demanding computer technology companies. Mr.
`Brunell was the general manager for intellectual
`property at Microsoft, and Mr. Vachon worked for Oracle
`and ran the organization, licensing software to large
`telecommunications companies.
`Both chose to leave behind the financial
`security and prestige of their jobs at Microsoft and
`Oracle to take a risk and start their own business.
`They saw a market opportunity to create a
`new business, to use the experience they had gained at
`Microsoft and Oracle in licensing to start their own
`licensing business, and they took the lead.
`While they set out hoping to build a
`successful business, and, of course, make money, another
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 7
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 8 of 131 PageID #: 16227
`
`8
`
`one of their priorities was to be able to spend more
`time with their then young families. That was almost 10
`years ago. The kids are grown. They have remained
`partners in their successful business and are now good
`friends.
`
`In my opening today, I want to cover a
`little bit about U.S. patent laws and the background. I
`want to introduce you to the three patents in the case.
`And I want to preview the witnesses and evidence that
`you will hear during the trial that we think will
`establish three things.
`No. 1, Packet Intelligence, which we'll
`refer to throughout the trial by its abbreviation, PI --
`PI's patents are foundational and have received great
`respect for many years and in many different ways.
`No. 2, we think the evidence at trial
`will show that NetScout is using PI's property without
`permission and in reckless disregard for PA's -- PI's
`property rights.
`And, 3, we think the evidence will show
`that NetScout's excuses for using PI's property without
`permission are not credible.
`As you heard a little bit on the video
`last week from Judge Fogel, patents are property and
`have some similarities to what we normally think of as
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 8
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 9 of 131 PageID #: 16228
`
`9
`
`property, like a house or land or a deed.
`A common analogy is that a patent is like
`a deed. A deed is to real property, and it sets out the
`metes and bounds or boundaries of the land that is
`owned.
`
`We call patents intellectual property.
`And like the deed to -- to a house, the numbered
`paragraphs that appear at the end of each of the three
`patents in your binder, called claims, define the
`boundaries of the intellectual property in the patent
`that has been granted by the United States Government to
`the patent owner for a limited time.
`If you own your -- if you own or rent
`your home, you have rights inside the walls of your
`residence. Someone who doesn't have permission can't
`come into your house. If they do without your
`permission, they would be a trespasser. And if someone
`is trespassing, you can call the police.
`If you own a patent, you have rights to
`the invention described in the claims. And if someone
`is using the patented invention without your permission,
`that's called infringement. But unlike for trespassers,
`you cannot call the police on patent infringers.
`Instead, you can take infringers to Court
`under our patent laws and present your infringement case
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 9
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 10 of 131 PageID #: 16229
`10
`
`to a jury like the eight of you. And that's why we're
`here.
`
`As Judge Fogel explained on the video you
`saw last week, in exchange for creating an invention and
`disclosing it to the world in a published patent, the
`owner of the patent receives some rights from the U.S.
`Government. The -- the patent owner gets to keep all
`others from using the invention described in their
`claims for a period of 20 years from the date they first
`apply for the patent.
`This is the fundamental bargain,
`disclosure of the invention to everyone for the rights
`to the exclusive use to that invention for a limited
`time.
`
`At the end of that limited term, anybody
`who wants to use the inventions disclosed in the patent
`can do so, and they can do so for free. But for that
`20-year patent term, there is a promise, a promise made
`by the U.S. Government to patent owners that the
`invention will be protected for the limited term.
`It was intended that our patent system
`would create the greatest innovative economic engine in
`the world, and it has. In fact, patents are so vital to
`our country, it is the very first article of the U.S.
`Constitution.
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 10
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 11 of 131 PageID #: 16230
`11
`
`Then Secretary of State Thomas Jefferson
`was the first director of the U.S. Patent Board, and,
`indeed, he was the first patent examiner, who you'll
`hear about a little bit in this trial.
`And one fun fact to leave you with about
`patents before I move on to talk about the three patents
`in this case, the first United States patent was Patent
`No. X00001. It was examined by Mr. Jefferson himself,
`and as you can see on your screens, it was signed by
`President George Washington.
`Let's talk about the three patents that
`are in this case that I showed you the certified copies
`of.
`
`What's interesting is that the original
`copy of every patent comes with a cover page that I'm
`displaying on your screens. And what's -- what it says
`that is interesting is right at the top, it says: The
`director of the United States Patent and Trademark
`Office has received an application for a patent for a
`new and useful invention. The title and description of
`the invention are enclosed. The requirements of law
`have been complied with, and it has been determined that
`a patent on the invention shall be granted under the
`law.
`
`That cover page was the cover page to all
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 11
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 12 of 131 PageID #: 16231
`12
`
`three of the United States patents at issue in this
`case. The three patents in the case that are in your
`jury note -- juror notebook are in order. The first one
`is the '725 patent, the second one is the '751 patent,
`and the third one is the '789 patent.
`And we refer to patents, even though
`they -- we are now in the million -- we saw Patent No.
`X1, and we are now into -- in this case, the patents are
`in the six millions. So I'm showing on your screen
`there's three patents in the case, and on the cover of
`the patent, you can see we'll refer to the '725 patent
`as the last three digits of that patent number. And
`I've highlighted for you the inventors of that patent
`and the dates that -- it was filed and the date it was
`issued.
`
`On the right-hand side of this -- on the
`screen, you can see that the '725 patent, there were two
`United States patent examiners, a primary and an
`assistant. And then you will see there are references
`cited on the face of the patent. And let me just take a
`moment to -- to tell you what the references cited is.
`References cited are older patents,
`patents that issued before the application of the
`invention being applied for that are related or relevant
`or precedent somehow for the patent that is being
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 12
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 13 of 131 PageID #: 16232
`13
`
`applied for. There are primarily two sources of the
`references cited, either the applicant can cite previous
`patents in describing their invention and explaining how
`it is an advance over the -- over the previous patents.
`And United States patent examiners, when
`examining patents, search for previous patents that
`might be related to or relevant to the patent they are
`examining to determine if someone else had patented
`these ideas first.
`And so every patent in this case has a
`references cited section. We'll talk a little bit more
`about that later in the opening.
`I turn now to the snapshots of the '751
`patent. You'll see highlighted, again, are the
`inventors and the references cited. And there's a
`different examiner of this patent than there was for the
`'725 patent.
`
`And the '789 patent is now on your
`screen, and you'll see there, there are a number of
`inventors on the '789 patent. You'll notice that Mr.
`Dietz was the first listed inventor on each one. And
`this one also contains references cited document, and
`had a third patent examiner that examined this patent.
`Four patent examiners on three United States patents.
`You'll hear from several witnesses today
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 13
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 14 of 131 PageID #: 16233
`14
`
`who are here to explain the patented invention. At a
`very high level, what you will hear is that the
`invention is directed to fundamental improvements to
`network monitors that analyze traff -- data traffic
`traveling over a network. And the analysis allows
`network operators, like AT&T or Verizon, to make
`critical decisions about the security, performance, and
`cost of their network.
`The inventors, you will hear, came up
`with special techniques for analyzing network data and
`developed a way to track network data based on a user's
`activity. You'll hear that they were the first ones to
`figure out how to track network data in this way. And
`they coined a phrase that they use in their patents
`called "conversational flows" to describe some of these
`special techniques. The details of how are set forth in
`the claims that are at issue in this case, and there are
`two claims from each patent that are at issue in this
`trial.
`
`In the '725 patent, that's Claims 10 and
`17. In the '751, it is Claims 1 and 5. And then the
`'789 patent, it is Claims 19 and 20.
`And what I'm putting up on your screen is
`the -- an -- an exemplary claim, the Claim 19 of the
`'789 patent. And you'll notice that there are a lot of
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 14
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 15 of 131 PageID #: 16234
`15
`
`words in that claim, and I'll explain how we're going to
`go through those during the trial a bit later, but the
`important thing for now to -- to understand is that the
`details or the how of how the inventors went about
`classifying network data traffic in this novel way are
`described in these lengthy claims that we will go
`through during the trial.
`Packet Intelligence's, or PI's, patents,
`the evidence presented during trial will reveal that
`those inventions have received industry respect over
`many years in many different ways.
`Mr. Dietz was the first -- the first
`inventor listed. He co-founded a company with three of
`his friends in the late 1980s. And in the mid to --
`from the mid '90s to 2000, Mr. Dietz served as the chief
`technology officer of the company he founded called
`Technically Elite.
`During this time, Mr. Dietz and his team
`of co-inventors worked to develop their invention, filed
`for patent applications, and realized the importance of
`the inventions and what they were doing which was
`tracking user activity. And another way -- word you'll
`hear is "tracking user activity" means tracking the
`applications that a user uses, like the ESPN website or
`Netflix or Skype or another application.
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 15
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 16 of 131 PageID #: 16235
`16
`
`And because of what their inventions were
`about and the work they were doing, they changed their
`name, the company name, from Technically Elite to
`Apptitude, A-p-p, Apptitude.
`In August of 2000, Mr. Dietz and his
`co-founders sold Apptitude to a publically-traded
`company called Hi/Fn, H-i-f-n, for millions of dollars.
`In connection with the purchase, Hi/Fn acquired
`ownership of the then pending patent applications that
`are at issue in this case that Mr. Dietz and his team
`had filed while at Apptitude. Mr. Dietz became vice
`president and chief technology officer of Hi/Fn and
`continued to work on the inventions and filed additional
`patent applications.
`In 2009, he -- they -- I'm sorry, they
`applied for and were granted the three bolded patents
`that are on the timeline on the right-hand side in the
`yellow bold. And they also applied for and received
`patents from other large companies from around the
`world, including receiving patents on their inventions
`in China, Japan, Germany, and Australia.
`In 2009, a company called Exar purchased
`Hi/Fn, and Exar acquired ownership of the patents at
`issue in this case. The evidence at trial will show,
`and you will hear, that Exar ultimately decided to focus
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 16
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 17 of 131 PageID #: 16236
`17
`
`on unrelated technology, and did not have the capability
`or interest in investing the resources to build a
`licensing program for the patents that it acquired from
`Hi/Fn, and that is where Packet Intelligence enters the
`picture.
`
`Mr. Brunell and Mr. Vachon had worked for
`years to find valuable but overlooked intel --
`intellectual property. And when they found Mr. Dietz's
`patent portfolio was not being used by Exar, they
`conducted extensive research to verify the quality of
`the inventors, the quality of the patents, and they
`spent additional time and money researching network
`communication vendors and whether they were using the
`inventions described and claimed in the Dietz patents.
`After their due diligence, they invested
`a considerable amount of their hard earned money to
`purchase the patent portfolio from Exar that -- that are
`at issue in this case.
`The evidence at trial will also
`establish, we believe, that one of the reasons Mr.
`Brunell and Packet Intelligence was confident in the
`value and strength of the patents they were purchasing
`was based on a patent quality metric, in part, called
`forward citation analysis. And let me explain just a
`little bit about what a forward citation is.
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 17
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 18 of 131 PageID #: 16237
`18
`
`As I just mentioned during the patent
`application process, I put up the '751, again, just so
`you can see the references cited.
`During the patent application process,
`both the applicant and examiner -- patent examiner cites
`to previous patents they consider relevant. And those
`appear in this references cited portion of the patent.
`So forward citations means citations that appear in
`later patents filed by other companies who have cited
`the Dietz's patents in their own patent applications,
`either the company cites it or a patent examiner when
`examining a patent filed by another company found the
`Dietz patents and cited it against the application that
`they were examining.
`And as it turns out, PI's patents in this
`case appear in the references cited section in hundreds
`of patents issued to major technology companies. The
`three patents-in-suit are cited by leading technology
`companies, and not only just one time or even five
`times. IBM has cited to the patents-in-suit 76 times;
`AT&T, 64; Cisco, 59; Amazon, 22; Microsoft, 21. And you
`can see the forward citations of the other highly
`regarded companies on the slides.
`In addition, last but certainly not
`least, the Defendants in this case, NetScout, Tektronix,
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 18
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 19 of 131 PageID #: 16238
`19
`
`and the companies that NetScout has acquired have also
`filed patent applications that cite to the Dietz
`patents, and those patent applications include those
`filed by Tektronix and companies NetScout acquired like
`Fluke and Network General.
`Now, to be clear, forward citations do
`not establish infringement, and they do not establish
`that the patent is valid. But they do show awareness
`within the industry of the cited patents, and they can
`be a signal that the highly cited patent may be
`foundational or otherwise valuable.
`So what did Packet Intelligence do after
`they acquired the patents? They launched their
`licensing program based on research into companies that
`appeared to be using the patented inventions. To date,
`PI has licensed these patents in this case to two major
`companies in the networking industry.
`In 2000 -- in March of 2014, Huawei
`agreed to pay slightly more than 2.5 percent of relevant
`U.S. revenue for a license to PI's patents. PI had sued
`Huawei for patent infringement in this Court, and before
`the case went to trial, Packet Intelligence granted a
`license to Huawei, meaning they gave Huawei permission
`to use their patented invention, in exchange for Huawei
`paying a 2.5 percent royalty.
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 19
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 20 of 131 PageID #: 16239
`20
`
`You will also hear in March of 2005, Cisco
`agreed to pay millions of dollars to license PI's
`patents. PI had sued Cisco in this court for patent
`infringement. And before the lawsuit ended, before the
`case went to trial, Packet Intelligence granted
`permission to Cisco to use the patented invention in
`exchange for a Cisco payment of millions of dollars.
`And Mr. Brunell will walk through these
`agreements with you and talk more about them when he
`takes the stand today.
`The patents in the United States, the
`worldwide patents in Japan, Germany, Australia, and
`other places, the Apptitude and Hi/Fn acquisitions, the
`forward citations, the licenses by Huawei and Cisco,
`those are all signs of respect and acknowledgement of
`the patents that are in this case and that you're going
`to hear about during trial.
`So that brings us to NetScout. The
`evidence will show that NetScout is generating enormous
`revenue and profits from its use of PI's patented
`property without permission.
`The accused products in this case, there
`are two of them, both of these products are -- were
`originally developed and sold by a company called
`Tektronix. And in 2015, NetScout acquired Tektronix and
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 20
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 21 of 131 PageID #: 16240
`21
`
`acquired the two products you see on the screen.
`On your left is the GeoProbe G10, and
`that's a network monitor. And on the right, it will be
`referred to as the GeoBlade. And so you will hear the
`GeoProbe G10 often referred to as the G10, and the
`GeoBlade is the GeoBlade.
`You're going to hear testimony that
`NetScout's products infringe PI's patents from Dr. Kevin
`Almeroth, who is in Court today. He will testify later
`today. He's an independent expert witness, meaning he's
`not an employee of Packet Intelligence. He doesn't have
`any ax to grind. When he started his infringement
`analysis, he wasn't leaning one way or the other like
`you were asked about during jury selection.
`Dr. Almeroth is a professor at the
`University of California Santa Barbara. He has a
`Bachelor of Science, a Master's, and a Ph.D., in
`computer science, all from Georgia Tech. And he is a --
`an award winning teacher. He will explain all of the
`analysis he conducted and the methodology he employed to
`reach his conclusion and his opinion, that in his expert
`opinion NetScout's two products infringe the six
`asserted claims in this patent.
`So what did Dr. Almeroth do to determine
`that those product -- products infringe? During a
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 21
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 22 of 131 PageID #: 16241
`22
`
`process known as pre-trial discovery, Packet
`Intelligence and Dr. Almeroth were able to gain access
`to NetScout's highly confidential internal company
`documents, including the source code or the computer
`instructions that run the two accused products and make
`them do what they do.
`He was able to review those documents,
`the internal ones. He was able to review the marketing
`documents that the Defendants use to sell their
`products. I mentioned the source code. And he was also
`able to review the testimony of witnesses from
`depositions that the Packet Intelligence attorneys took
`during discovery.
`What -- and Judge Gilstrap talked a
`little bit about a deposition last week. But as a
`reminder, what a deposition is, is both parties get the
`opportunity to cross-examine the other side's witnesses
`under oath. And it is videotaped and transcribed, like
`these -- like the proceedings here are transcribed
`verbatim word-for-word by the talented court reporter in
`this courtroom. And based on the transcripts of those
`depositions, Mr. Almeroth was able to read how the
`NetScout engineers and other employees describe the
`operation of their infringing products.
`And Dr. Almeroth will testify that the
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 22
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 23 of 131 PageID #: 16242
`23
`
`evidence establishes all the things he looked at that I
`just described that NetScout's products contain and use
`each one of those little paragraphs of each of the
`asserted claims in the patents.
`THE COURT: Five minutes remaining.
`MR. SKIERMONT: Thank you, Your Honor.
`To give you a sense of that infringement
`analysis, what Dr. Almeroth will do, as you see on the
`right-hand side of the slide, he's going to break up the
`elements of Claim 19, for example, into kind of bite
`size pieces and on the left side he's going to explain
`the evidence that was produced in this case in the form
`of documents and witnesses to explain infringement.
`You'll also hear that the sales and
`profits of the GeoProbe and G10 (sic) have been
`enormous. From the time damages start in this case
`through trial, NetScout's revenue on the accused
`products exceeds $400 million, and their gross profit
`approaches $225 million.
`Let's talk about NetScout's excuses.
`First, NetScout may -- may tell you there's no
`infringement at all. They hired a consultant,
`Mr. Waldbusser, and we think that when you're able to
`observe and compare the methods that Dr. Almeroth used
`and Mr. Waldbusser's methods, that you will find that
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 23
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 24 of 131 PageID #: 16243
`24
`
`Dr. Almeroth's testimony is more credible. And as Judge
`Gilstrap will tell you, it will be up to you, after you
`see all the evidence and hear the testimony of those two
`experts, to decide who you think is more credible.
`And importantly, remember, that the
`burden of proof for infringement on Packet Intelligence
`is the preponderance of the evidence or more likely than
`not, the Scales of Justice tip slightly in favor of
`infringement.
`
`Second -- and we think that will be more
`than satisfied after you hear Dr. Almeroth.
`Second, NetScout will say, well, if you
`don't like our non-infringement excuse, then all three
`of PI's patents are invalid. NetScout's burden of proof
`on invalidity, recall, is higher than Packet
`Intelligence's burden of proving infringement.
`To prove invalidity, they must prove by
`clear and convincing evidence, meaning that you must
`have an abiding conviction that the patents are invalid
`after you hear all the evidence in this case. We don't
`think they will be able to satisfy that burden.
`NetScout is going to assert that Mr.
`Dietz and his team allegedly got the idea for their
`invention from an industry working group called the RMON
`Working Group, and you'll hear a lot about that during
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`
`EX 1068 Page 24
`
`
`
`Case 2:16-cv-00230-JRG Document 244 Filed 10/17/17 Page 25 of 131 PageID #: 16244
`25
`
`the trial, but you're going to hear from Mr. Dietz
`himself. And you're going to hear from the other
`inventors, and you're going to hear from othe