Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 1 of 294 PageID #: 32394
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TYLER DIVISION
`
`1
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`CIVIL ACTION NO.
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`6:12-cv-855-RWS
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`(Lead Consolidated Case)
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`Tyler, Texas
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`January 28, 2016
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`9:06 a.m.
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`VIRNETX INC. AND SCIENCE
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`APPLICATIONS INTERNATIONAL
`
`CORPORATION,
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`Plaintiffs,
`
`VS.
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`APPLE INC.,
`
`Defendant.
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`---------------------------------------------------------
`
`REPORTER'S TRANSCRIPT OF JURY TRIAL, VOLUME 4
`
`BEFORE THE HONORABLE ROBERT W. SCHROEDER III
`
`UNITED STATES DISTRICT JUDGE
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`---------------------------------------------------------
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TYLER DIVISION
`
`1
`
`CIVIL ACTION NO.
`
`6:12-cv-855-RWS
`
`(Lead Consolidated Case)
`
`Tyler, Texas
`
`January 28, 2016
`
`9:06 a.m.
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`VIRNETX INC. AND SCIENCE
`
`APPLICATIONS INTERNATIONAL
`
`CORPORATION,
`
`Plaintiffs,
`
`VS.
`
`APPLE INC.,
`
`Defendant.
`
`---------------------------------------------------------
`
`REPORTER'S TRANSCRIPT OF JURY TRIAL, VOLUME 4
`
`BEFORE THE HONORABLE ROBERT W. SCHROEDER III
`
`UNITED STATES DISTRICT JUDGE
`
`---------------------------------------------------------
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 2 of 294 PageID #: 32395
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`APPEARANCES:
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`COURT REPORTER:
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`2
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`BRENDA HIGHTOWER SMITH, CSR-FCRR
`Official Court Reporter
`Eastern District of Texas
`Texarkana Division
`500 N. State Line Ave, Third Floor
`Texarkana, Texas
`75501
`903.794.1018
`brenda_smith@txed.uscourts.gov
`
`(Proceedings recorded by mechanical stenography,
`transcript produced on CAT system.)
`
`FOR THE PLAINTIFF:
`
`FOR THE DEFENDANT:
`
`BRADLEY W. CALDWELL
`JASON D. CASSADY
`JOHN AUSTIN CURRY
`CALDWELL CASSADY & CURRY
`2101 Cedar Springs Road, Suite 1000
`Dallas, Texas
`75201
`
`T. JOHN WARD, JR.
`WARD, SMITH & HILL, PLLC
`1127 Judson Road, Suite 220
`Longview, Texas
`75601
`
`ROBERT CHRISTOPHER BUNT
`PARKER BUNT & AINSWORTH
`100 East Ferguson, Suite 1114
`Tyler, Texas
`75702
`
`GREGORY S. AROVAS
`ROBERT A. APPLEBY
`JEANNE M. HEFFERNAN
`JOSEPH A. LOY
`LESLIE M. SCHMIDT
`KIRKLAND & ELLIS LLP
`601 Lexington Avenue
`New York, New York
`
`10022
`
`F. CHRISTOPHER MIZZO
`KIRKLAND & ELLIS LLP
`655 Fifteenth Street, N.W.
`Washington, D.C.
`20005
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 3 of 294 PageID #: 32396
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`3
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`AKSHAY S. DEORAS
`KIRKLAND & ELLIS LLP
`555 California Street
`San Francisco, California
`
`94104
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`MICHAEL E. JONES
`JOHN F. BUFE
`ALLEN F. GARDNER
`POTTER MINTON
`110 North College Avenue, Suite 500
`Tyler, Texas
`75702
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`******************************************
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 4 of 294 PageID #: 32397
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`(Open court, all parties present.)
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`COURT SECURITY OFFICER:
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`All rise.
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`THE COURT:
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`Ms. Mayes, have the jury brought
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`4
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`in, please.
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`(Jury in.)
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`THE COURT:
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`Please be seated.
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`Good morning, ladies and gentlemen of the
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`jury.
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`Welcome back.
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`I hope everybody had a pleasant and
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`restful evening last night.
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`When we concluded the day
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`and recessed yesterday, the witness had just completed
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`his direct examination.
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`Ms. Heffernan, you may begin your
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`cross-examination.
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`MS. HEFFERNAN:
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`Thank you, Your Honor.
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`ROY WEINSTEIN, PLAINTIFF'S WITNESS, PREVIOUSLY SWORN
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`BY MS. HEFFERNAN:
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`CROSS-EXAMINATION
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`Q.
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`Now, there's been lots of talk over the last few
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`09:06AM
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`days from VirnetX witnesses about Apple's infringement;
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`and I just want to make something very clear at the
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`outset for the jury.
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`The only thing that has been
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`determined to infringe VirnetX's patents is the version
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`of VPN On Demand that was in iOS 3 through 6, correct?
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`A.
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`Q.
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`09:07AM
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`Yes.
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`So for VOD and iOS 7 and beyond, and for FaceTime
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 5 of 294 PageID #: 32398
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`5
`and iMessage, it's an open question at this point whether
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`Apple infringes or does not infringe VirnetX's patents
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`for those features, correct?
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`A.
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`Q.
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`That's my understanding, yes.
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`And that's something that the jury needs to
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`decide, correct?
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`A.
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`Q.
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`Yes.
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`Now, if the jury decides that VPN On Demand and
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`iOS 7 and beyond does not infringe, then there are no
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`damages for that feature, correct?
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`A.
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`There would be no damages for that feature for
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`that period, yes.
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`Q.
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`And similarly for FaceTime in iOS 3 through 7 and
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`beyond and in Mac OS X, if the jury finds no
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`infringement, then it awards no damages for those units,
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`correct?
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`A.
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`Q.
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`Yes.
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`And for iMessage as well, if the jury finds no
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`infringement, it awards no damages for that, correct?
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`09:08AM
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`A.
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`Q.
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`That's also correct, yes.
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`Now, Mr. Weinstein, you were here yesterday for
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`Dr. Wecker's testimony about his survey, correct?
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`A.
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`Q.
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`I was.
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`Okay.
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`And he -- I'm going to actually put part of
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`09:09AM
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`yesterday's transcript on the document camera.
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 6 of 294 PageID #: 32399
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`6
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`Doctor -- Mr. -- Dr. Wecker was asked:
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`Did
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`Mr. Weinstein participate in assisting you with the
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`questions that were asked in the survey?
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`And he answered:
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`Yes.
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`I was surprised when I heard that.
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`Because
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`when I took your deposition, you said you didn't help him
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`with the questions in his survey, correct?
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`A.
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`Yeah, actually, I was surprised when he said that
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`as well, because I did not assist in the preparation of
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`those questions.
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`I think his -- his recollection on that
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`point was simply mistaken.
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`Q.
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`And yesterday Dr. Wecker was asked, and I wish
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`this weren't -- let's see if I can get this to --
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`Dr. Wecker was asked:
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`And with regard particularly to
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`the discounting questions, did those mainly come from
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`Mr. Weinstein?
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`And he said:
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`I think so.
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`But you didn't talk to him about his
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`discounting questions, correct?
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`A.
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`That's correct.
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`I did not talk to Dr. Wecker
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`until after he had completed his survey.
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`At that point I
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`talked to him.
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`Q.
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`And, in fact, you didn't help Dr. Wecker draft any
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`of the questions or give him any input at all into any of
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`the questions in his survey, correct?
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 7 of 294 PageID #: 32400
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`A.
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`Q.
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`That's correct.
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`Now, Dr. Wecker asked his survey respondents
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`questions about whether they would have bought their
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`iPhone if it didn't include FaceTime and iMessage.
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`Do
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`you recall that?
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`A.
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`Q.
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`I do.
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`And there was a certain percentage of respondents
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`who said, no, they wouldn't have bought their iPhone if
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`it didn't include FaceTime and iMessage, correct?
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`A.
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`Q.
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`I recall that, yes.
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`And then he followed up with those folks and said:
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`Would you have bought your iPhone without FaceTime and
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`iMessage if were sold at a discount.
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`Correct?
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`And that was the discounting
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`09:11AM
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`questions we were just talking about?
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`A.
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`Q.
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`Yes.
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`Now -- yesterday he testified that he asked those
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`questions based on the assumption that FaceTime and
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`iMessage would not be viable without the patented
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`technology, right?
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`A.
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`Q.
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`I recall that, yes.
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`Now, do you agree with me that just because some
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`people said they wouldn't have bought their iPhone if it
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`didn't include FaceTime and iMessage really says nothing
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`at all about whether FaceTime and iMessage drove their
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 8 of 294 PageID #: 32401
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`decision to buy their iPhone in the first place?
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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 don't --
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`Do you agree or disagree?
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`I disagree.
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`Now, FaceTime would not work without a lot of
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`other things, correct?
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`A.
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`Q.
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`Sure.
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`The patented technology doesn't cover all of
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`FaceTime, right?
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`A.
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`Q.
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`That's correct.
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`And you agree that you couldn't use FaceTime
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`without a microphone, right, couldn't have a phone call
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`without a microphone?
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`A.
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`Q.
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`09:12AM
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`That's correct.
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`And FaceTime would not work without a speaker so
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`that you could hear the person you're talking to, right?
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`A.
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`Q.
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`Sure.
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`And you couldn't make a FaceTime video call
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`without having a display so you could see the person
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`you're talking to, right?
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`A.
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`Q.
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`Also correct.
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`And FaceTime would not work without video encoding
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`technology so that you can send video packets over the
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`Internet, right?
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`09:12AM
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`A.
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`Sure.
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 9 of 294 PageID #: 32402
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`9
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`Q.
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`Now, by Mr. Wecker's logic, each and every one of
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`those things is the reason folks bought their iPhone,
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`right?
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`A.
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`Q.
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`No, I can't agree with that.
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`Okay.
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`Now just because a truck wouldn't work
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`without a spark plug doesn't mean that the spark plug is
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`the reason folks bought the truck, right?
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`A.
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`Q.
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`Sure.
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`I'd like to stay on Dr. Wecker's survey for a
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`little bit longer.
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`Dr. Wecker, in all of his
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`questions, asked about FaceTime and iMessage
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`together, right?
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`A.
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`Q.
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`He did.
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`In fact, every single question about FaceTime also
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`asks about iMessage, right?
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`A.
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`Q.
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`That's my recollection, yes.
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`And nothing in Dr. Wecker's survey lets you
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`separate out his results for FaceTime alone; fair?
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`A.
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`Q.
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`09:13AM
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`That's my recollection, yes.
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`And nothing in Dr. Wecker's survey lets you
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`separate out results for iMessage alone; fair?
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`A.
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`Q.
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`Also correct.
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`So if this jury determines that FaceTime doesn't
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`infringe but iMessage does, Dr. Wecker's results for
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`FaceTime and iMessage cannot be used by this jury,
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 10 of 294 PageID #: 32403
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`correct?
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`A.
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`I can't answer that question.
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`That would be for
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`the jury to decide.
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`Q.
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`Now, Dr. Wecker, when he asked consumers about
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`what motivated their purchase, did not ask consumers
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`whether the functionality that's covered by the patents
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`motivated them to buy their device, correct?
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`A.
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`Q.
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`That is true.
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`And similarly, Dr. Wecker did not ask whether
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`09:14AM
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`09:14AM
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`consumers would be willing to buy their device if it did
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`not contain the functionality that's covered by the
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`patents in this case, right?
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`A.
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`Q.
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`Also -- also correct.
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`In fact, Dr. Wecker did not ask a single question
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`09:14AM
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`about the patented technology, correct?
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`A.
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`That is correct.
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`He asked -- he asked about
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`FaceTime and iMessage.
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`Q.
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`And do you agree that it's possible to ask
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`questions about the patented technology?
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`Correct?
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`A.
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`You know, I can't speak to that.
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`I'm not the
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`survey expert here.
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`MS. HEFFERNAN:
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`Okay.
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`Let's play Clip 71.
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`Q.
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`(By Ms. Heffernan) You were deposed in this case,
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`right?
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`A.
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`I was.
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`
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 11 of 294 PageID #: 32404
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`(Video clip playing.)
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`QUESTION:
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`Well, the patents there cover
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`11
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`certain functionalities, right?
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`ANSWER:
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`They do.
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`QUESTION:
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`So you could ask consumers about
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`those functionalities that are covered by the patents,
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`right?
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`possible.
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`ANSWER:
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`Well, that's -- that's -- that's
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`(End of video clip.)
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`Q.
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`(By Ms. Heffernan) Now, you've seen Dr. Jay's work
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`in the past, right?
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`Dr. Jay is Apple's survey expert.
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`A.
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`Q.
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`Yes.
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`The jury hasn't heard from Dr. Jay yet, but they
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`will.
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`09:15AM
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`09:15AM
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`A.
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`I did see Dr. Jay's work in connection with this
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`case, yes.
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`Q.
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`A.
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`And you've seen her work before, too, right?
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`You know, I may have.
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`As I sit here, I don't have
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`a strong recollection one way or another.
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`MS. HEFFERNAN:
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`All right.
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`Let's play Clip
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`72.
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`(Video clip playing.)
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`QUESTION:
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`Do you respect the training and
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`experience that Dr. Jay has in the area of conducting
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 12 of 294 PageID #: 32405
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`surveys?
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`ANSWER:
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`I think she's fine.
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`I've seen her
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`work in the past.
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`(End of video clip.)
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`Q.
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`(By Ms. Heffernan) Now, Dr. Jay, she asked
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`consumers about encryption in FaceTime and iMessage
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`after providing a definition of encryption, correct?
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`A.
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`Q.
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`That's my recollection.
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`And the jury has heard a lot about encryption at
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`this trial already, right?
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`A.
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`Q.
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`The jury has heard a fair amount, as have I, yes.
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`So the jury will hear from Dr. Jay later on; but
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`there is one survey expert in this trial who has asked
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`questions about the patented technology, correct?
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`09:16AM
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`A.
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`Well, if you're talking about Dr. Jay, that's --
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`that's true, yes.
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`Q.
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`Now regarding your reliance on Dr. Wecker's
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`survey, I want to be clear about something.
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`You have not
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`presented any damages analysis to the jury based on
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`09:16AM
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`Dr. Wecker's survey, correct?
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`A.
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`Q.
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`Not directly, that's true.
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`You haven't done any calculations based on
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`Dr. Wecker's survey, correct?
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`09:16AM
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`A.
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`Nothing that I've presented to this jury, that is
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`correct.
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 13 of 294 PageID #: 32406
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`13
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`Q.
`
`And you're not suggesting to this jury that they
`
`perform some sort of calculation on Dr. Wecker's survey
`
`to arrive at damages in this matter, right?
`
`A.
`
`I have not given that testimony.
`
`That would be up
`
`to the jury.
`
`Q.
`
`Now, on your direct yesterday, you discussed one
`
`of Apple's internal surveys.
`
`Do you recall that?
`
`Generally, yes.
`
`Okay.
`
`Now, you're not suggesting that the
`
`A.
`
`Q.
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`1 2 3 4 5 6 7 8 9
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`09:17AM
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`09:17AM
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`10
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`11
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`percentages in that survey you discussed yesterday, that
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`12
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`in-house survey, that the jury should somehow use those
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`13
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`percentages to calculate damages in this case, right?
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`14
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`09:17AM
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`09:17AM
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`09:18AM
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`A.
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`Q.
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`I don't think I gave that testimony, no.
`
`All right.
`
`Let's take a look at that survey.
`
`MS. HEFFERNAN:
`
`And to do so -- thank you,
`
`Ms. Schmidt.
`
`Your Honor, I apologize, but we're going to
`
`need to -- I request to seal the courtroom for just a
`
`minute or two to discuss the survey, if that's okay with
`
`the Court.
`
`sealed.
`
`THE COURT:
`
`Very well.
`
`The courtroom will be
`
`(Courtroom sealed.)
`
`(Proceedings during this time are included in
`
`
`
`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 14 of 294 PageID #: 32407
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`a separate SEALED volume.)
`
`(Courtroom unsealed.)
`
`Q.
`
`(By Ms. Heffernan) Now, on your direct exam
`
`yesterday, you talked about VirnetX's licenses and its
`
`14
`
`licensing policy.
`
`A.
`
`Q.
`
`Do you recall that?
`
`Yes, I do.
`
`I'm just finding one of your slides.
`
`MS. HEFFERNAN:
`
`Yes.
`
`Q.
`
`(By Ms. Heffernan) Okay.
`
`I've put up on the
`
`document camera the slide that you used yesterday to
`
`talk about VirnetX's licenses and its licensing policy.
`
`Do you see that?
`
`A.
`
`Q.
`
`I do.
`
`And it was your testimony that with the exception
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`1 2 3 4 5 6 7 8 9
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`09:22AM
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`09:23AM
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`16
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`of Microsoft, all of these agreements are consistent with
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`17
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`VirnetX's licensing policy, right?
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`18
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`19
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`A.
`
`Q.
`
`Generally, that's true, yes.
`
`And that each of the rates that we see on this
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`09:23AM
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`20
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`slide is apportioned to reflect the value that VirnetX's
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`21
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`patents contribute to the licensed products, correct?
`
`22
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`23
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`A.
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`Q.
`
`That's fair, yes.
`
`Now, if I understood your testimony correctly, the
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`24
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`SafeNet and SAIC license -- licenses apply a higher
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`09:23AM
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`25
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`royalty rate because the patents reflect a higher
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`
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 15 of 294 PageID #: 32408
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`15
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`percentage of the value in the final product, right?
`
`A.
`
`Q.
`
`They do there, yes.
`
`And along those lines, VirnetX's licensing policy
`
`applies a lower royalty rate when it's applied to a
`
`device with more features in it, correct?
`
`A.
`
`Well, it's been fully apportioned by that time to
`
`account for the presence of other functionality in the
`
`device that's been added by the licensee.
`
`Q.
`
`Now, you testified that the policy captures the
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`1 2 3 4 5 6 7 8 9
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`09:24AM
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`09:24AM
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`value the patents contribute to the licensed products,
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`11
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`right?
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`12
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`13
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`A.
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`Q.
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`I believe so, yes.
`
`Now, just to sort of summarize so the jury
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`14
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`understands how these numbers relate to each other.
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`09:24AM
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`15
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`According to your testimony, VirnetX uses a higher rate
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`16
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`when applied to a product with limited functionality
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`17
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`because the patents themselves reflect a higher
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`18
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`percentage of the value in the final product, right?
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`19
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`20
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`22
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`23
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`24
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`25
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`09:24AM
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`09:24AM
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`That's what you testified --
`
`No.
`
`-- yesterday?
`
`No, not quite that way.
`
`I have my testimony in
`
`A.
`
`Q.
`
`A.
`
`mind from yesterday.
`
`But what I would say is that by the
`
`time you get down to the license agreements that are
`
`shown at the bottom of the page from No. 4 on down to
`
`
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 16 of 294 PageID #: 32409
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`16
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`No. 8, the VirnetX rate is both consistent with its
`
`licensing policy that was set forth on that other --
`
`other demonstrative.
`
`And also consistent with the fact
`
`that the rate apportions for the incremental contribution
`
`made by the VirnetX patents.
`
`Q.
`
`I was actually not talking about those rates,
`
`Mr. Weinstein.
`
`I was talking about the SAIC licenses,
`
`the rates in those license agreements.
`
`A.
`
`Q.
`
`Okay.
`
`Those rates are higher because it's your testimony
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`1 2 3 4 5 6 7 8 9
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`09:25AM
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`09:25AM
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`10
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`11
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`that they relate to a larger percentage that the patents
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`cover, contribute to, in a product that has more limited
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`13
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`functionality, right?
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`14
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`15
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`A.
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`Q.
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`09:25AM
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`That's fair.
`
`Okay.
`
`And then we have your testimony on the
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`16
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`other rates, the lower rates.
`
`They're lower because they
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`17
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`capture -- the patents contribute less value to a product
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`18
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`with more functionality, correct?
`
`09:25AM
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`19
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`20
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`21
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`22
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`23
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`A.
`
`Q.
`
`A.
`
`That --
`
`You've got to apportion for that, correct?
`
`The -- the rates apportion for the contribution
`
`made by the VirnetX patents.
`
`Q.
`
`All right.
`
`Now -- but you did not present to the
`
`24
`
`jury any calculations to show how those rates were
`
`09:26AM
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`25
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`allegedly apportioned, correct?
`
`
`
`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 17 of 294 PageID #: 32410
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`17
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`A.
`
`I don't understand that question.
`
`I did present
`
`to the jury the calculations I made that show what the
`
`per-unit rates are with respect to each of those
`
`licenses.
`
`Q.
`
`I'm -- but I'm not talking about your per-unit
`
`translation of these presented -- percentage-based rates.
`
`I'm talking about your testimony that these
`
`percentage-based rates are allegedly apportioned to
`
`capture the value the patents contribute to a product
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`1 2 3 4 5 6 7 8 9
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`09:26AM
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`09:26AM
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`10
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`that has more functionality in it than just the patented
`
`11
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`technology.
`
`You did not show the jury any calculations
`
`12
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`about -- to show the jury how these rates are allegedly
`
`13
`
`apportioned, correct?
`
`09:26AM
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`14
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`15
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`16
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`17
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`18
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`A.
`
`That's not true.
`
`I did show the jury what the
`
`per-unit rates are in connection with each of these
`
`agreements.
`
`And they are apportioned to reflect the
`
`incremental contribution made by the VirnetX patents.
`
`Q.
`
`Sir, I understand that you want to talk about the
`
`19
`
`per-unit translation that you make of these
`
`09:27AM
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`20
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`percentage-based rates; and we'll get to that.
`
`But I'm
`
`21
`
`just talking about the rate, the percentage-based rates
`
`22
`
`themselves.
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`23
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`The 1 percent rate that VirnetX applied in the
`
`24
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`Mitel agreement let's start there.
`
`Okay?
`
`09:27AM
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`25
`
`You with me?
`
`
`
`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 18 of 294 PageID #: 32411
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`18
`
`A.
`
`Q.
`
`I am.
`
`All right.
`
`You did not do any calculation and
`
`present any calculation to this jury to show the jury
`
`that that 1 percent rate is, in fact, apportioned,
`
`correct?
`
`A.
`
`Well, I didn't need to do that calculation.
`
`I had
`
`the testimony of -- of Mr. Larsen on the VirnetX
`
`licensing policy.
`
`I had that document that he presented
`
`which showed the VirnetX licensing policy rates.
`
`And I
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`1 2 3 4 5 6 7 8 9
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`09:27AM
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`09:27AM
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`10
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`11
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`had the actual agreements.
`
`Q.
`
`Okay.
`
`Now Mr. Larsen, he didn't present to the
`
`12
`
`jury any calculation to show that the 1 percent rate or
`
`13
`
`how the 1 percent rate is apportioned, correct?
`
`09:28AM
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`14
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`15
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`16
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`17
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`18
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`A.
`
`Well, his -- the jury heard his testimony
`
`yesterday so --
`
`Q.
`
`A.
`
`Q.
`
`Okay.
`
`-- they would know what he said.
`
`Now, ultimately, it's your opinion that Apple
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`19
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`should pay the same rates that those VoIP companies paid,
`
`09:28AM
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`20
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`right?
`
`21
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`22
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`A.
`
`Q.
`
`Yes, that's fair.
`
`And by "VoIP," that's Voice over IP, right?
`
`23
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`That's what that stands for?
`
`24
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`25
`
`A.
`
`Q.
`
`09:28AM
`
`Correct.
`
`And the companies that I'm referring to when I say
`
`
`
`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 19 of 294 PageID #: 32412
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`19
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`VoIP are Aastra, right?
`
`A.
`
`Q.
`
`A.
`
`Q.
`
`A.
`
`Q.
`
`A.
`
`Q.
`
`A.
`
`Correct.
`
`Mitel?
`
`Yes.
`
`NEC?
`
`Correct.
`
`Siemens?
`
`Also correct.
`
`And Avaya, right?
`
`Yes.
`
`With the asterisk for Avaya that there's a
`
`grant back of licenses as well.
`
`Q.
`
`Now, but the Apple devices in this case are far
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`1 2 3 4 5 6 7 8 9
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`10
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`11
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`12
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`09:28AM
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`09:28AM
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`14
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`more complex than a VoIP phone, right?
`
`09:29AM
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`15
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`16
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`A.
`
`Q.
`
`Sure.
`
`And just in case the jury is wondering what the
`
`17
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`heck a VoIP phone is, I brought one in.
`
`This is -- this
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`18
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`is the phone that -- the type of phone that's licensed
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`19
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`under the VoIP agreements, right?
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`09:29AM
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`09:29AM
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`24
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`25
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`A.
`
`Q.
`
`A.
`
`Q.
`
`A.
`
`Q.
`
`That's fair.
`
`Okay.
`
`And this is -- this is a desk phone, right?
`
`It is.
`
`It sits on a desk.
`
`And it's mostly used by businesses, right?
`
`That's fair.
`
`Okay.
`
`And this is a phone -- it's called a VoIP
`
`
`
`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 20 of 294 PageID #: 32413
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`20
`phone because it sends its voice data over the Internet,
`
`right?
`
`A.
`
`Q.
`
`A.
`
`Q.
`
`A.
`
`Q.
`
`Correct.
`
`But it plugs into the wall, right?
`
`It is.
`
`Yeah.
`
`It's not something --
`
`Or into the ground.
`
`But it's plugged in.
`
`It's not something you can put in your pocket and
`
`walk around with, right?
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`1 2 3 4 5 6 7 8 9
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`09:29AM
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`09:29AM
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`10
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`11
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`A.
`
`Q.
`
`Absolutely not.
`
`And it's got a few features on it, like it's got
`
`12
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`voicemail, it's got a contacts list, call forwarding.
`
`13
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`But essentially it's a phone, right?
`
`09:30AM
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`09:30AM
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`24
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`A.
`
`That's fair.
`
`MS. HEFFERNAN:
`
`Let's go to Weinstein DX1.
`
`Q.
`
`(By Ms. Heffernan) Now, I've created a
`
`demonstrative for the jury to help illustrate some of
`
`the differences between a VoIP phone, like the ones
`
`Mitel and Avaya sell, and an Apple iPhone.
`
`And so this
`
`is going to scroll through all the types of features
`
`that an iPhone includes, right?
`
`Many, many, many more
`
`features than a VoIP includes, right?
`
`A.
`
`Q.
`
`That's true.
`
`So really apart from the fact that both types of
`
`09:30AM
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`25
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`phones, both types of devices send voice data over the
`
`
`
`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 21 of 294 PageID #: 32414
`
`21
`Internet, a VoIP phone is quite unlike an iPhone, right?
`
`A.
`
`Well, no.
`
`They both -- they both send secure
`
`communications from one end to the other.
`
`In that sense,
`
`they have a very similar function.
`
`But it is true, as shown by your slide here,
`
`that -- that the -- that the smartphone on the right, the
`
`Apple phone, has far more features than the -- than the
`
`VoIP phone, which, of course, is why I apportioned down
`
`to just the IP phones.
`
`Q.
`
`Well, I would like to talk about that, actually.
`
`MS. HEFFERNAN:
`
`Let's go to the ELMO again.
`
`Q.
`
`(By Ms. Heffernan) So it's your testimony that
`
`this 1 -- I'm going to use the 1 percent example again.
`
`It's your testimony that this 1 percent rate is already
`
`apportioned to reflect the contribution of the patents
`
`to the VoIP phone, right?
`
`A.
`
`Q.
`
`Correct.
`
`So 1 percent is apportioned to account for the
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`09:31AM
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`09:31AM
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`09:31AM
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`19
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`contribution of the patented technology, a way of
`
`09:31AM
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`20
`
`establishing a secure communication link, in this phone,
`
`21
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`right?
`
`22
`
`23
`
`24
`
`A.
`
`Correct.
`
`That's -- that's the VirnetX licensing
`
`policy.
`
`Q.
`
`Okay.
`
`Now, but the Apple phone, we've just
`
`09:32AM
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`25
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`established, has many, many, many more features than that
`
`
`
`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 22 of 294 PageID #: 32415
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`22
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`phone we just saw, right?
`
`A.
`
`Q.
`
`It does.
`
`And you didn't do any further apportionment to
`
`account for the contribution of the patented technology
`
`in an iPhone which has many, many more features than a
`
`VoIP phone, "yes" or "no," sir?
`
`A.
`
`The answer to that is I did do further
`
`apportionments.
`
`So there should be no confusion about
`
`that point.
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`1 2 3 4 5 6 7 8 9
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`09:32AM
`
`09:32AM
`
`10
`
`Q.
`
`And I think what you're referring to as you did
`
`11
`
`your translation of your percentage-based rates into
`
`12
`
`per-unit rates -- is that what we're talking about, sir?
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`09:32AM
`
`09:32AM
`
`A.
`
`No.
`
`We're talking about more than that.
`
`We're
`
`talking about the fact that when I calculated my per-unit
`
`rates I limited my calculation to -- to the rates
`
`associated -- the royalties received in connection with
`
`IP phones.
`
`And by doing that, I apportioned out for all
`
`of those incredible features that you showed on the
`
`screen scrolling down in connection with the Apple phone.
`
`So I actually made that apportionment.
`
`Q.
`
`You didn't present any calculations regarding
`
`22
`
`that apportionment to the jury, right?
`
`23
`
`24
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`25
`
`09:33AM
`
`A.
`
`I absolutely did.
`
`Those were my calculations.
`
`I
`
`apportioned down using royalties received solely for IP
`
`phones, which means I apportioned out for all of those
`
`
`
`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 23 of 294 PageID #: 32416
`
`additional features that are contained on the Apple
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`23
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`phone.
`
`DX2.
`
`MS. HEFFERNAN:
`
`Now, let's go to Weinstein
`
`Q.
`
`(By Ms. Heffernan) Now I'm showing on this screen
`
`some other products that VirnetX licensed.
`
`They're
`
`products that are covered by the Microsoft license.
`
`Do you see that?
`
`(No response.)
`
`Sir?
`
`Yes, I do.
`
`I do.
`
`On the left.
`
`I was just
`
`A.
`
`Q.
`
`A.
`
`looking.
`
`Thank you.
`
`Q.
`
`So on the left we've got the Microsoft Windows
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`09:33AM
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`09:33AM
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`phone.
`
`Microsoft sells smartphones, right?
`
`09:33AM
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`15
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`16
`
`A.
`
`Q.
`
`They do.
`
`And beneath it, we've got the Microsoft Surface,
`
`17
`
`which is a tablet, right?
`
`18
`
`19
`
`A.
`
`Q.
`
`Also true, yes.
`
`And those, you would agree, are much more like an
`
`09:34AM
`
`20
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`iPhone and an iPad than a Mitel VoIP phone, right?
`
`21
`
`22
`
`A.
`
`Q.
`
`Sure.
`
`I would agree with that.
`
`Now, at one point you calculated what the
`
`23
`
`effective percentage rate would have been for the
`
`24
`
`Microsoft agreement, right?
`
`09:34AM
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`25
`
`A.
`
`I did.
`
`
`
`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 24 of 294 PageID #: 32417
`
`24
`And you determined that it was .24 percent, right?
`
`Yeah.
`
`I have the .19 percent in mind.
`
`I'm not
`
`Q.
`
`A.
`
`sure what the .24 percent represents.
`
`It's possible I
`
`had such a calculation, but I believe the calculation I
`
`used is .19.
`
`Q.
`
`Okay.
`
`Sorry.
`
`I misspoke.
`
`It was lower than .24.
`
`MS. HEFFERNAN:
`
`Can we see the ELMO.
`
`Q.
`
`(By Ms. Heffernan) So in this -- on this slide --
`
`MS. HEFFERNAN:
`
`And can I have a marker?
`
`Q.
`
`(By Ms. Heffernan) So I just want to include that
`
`on this slide.
`
`It was your testimony that the Microsoft
`
`percentage-based rate was .19?
`
`A.
`
`It's 0.19, but it doesn't belong on this slide.
`
`It belongs on the other slide, which is where I put it.
`
`Q.
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`That's -- but that's -- 0.19, that's in cents,
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`right?
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`A.
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`Q.
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`A.
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`Q.
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`A.
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`Q.
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`Yeah.
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`That's why I put --
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`That's your per unit.
`
`That's why it doesn't belong on this slide.
`
`Right.
`
`It's not a royalty rate.
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`I'm talking about the fact that at some time in
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`09:34AM
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`the past you calculated an effective percentage-based
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`24
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`royalty rate for the Microsoft agreement, correct, sir?
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`A.
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`You know, I -- I don't recall doing that.
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`I do
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 25 of 294 PageID #: 32418
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`25
`recall the 0.19, which is on the slide where it belongs.
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`MS. HEFFERNAN:
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`Your Honor --
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`A.
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`That doesn't mean I didn't do it.
`
`I just can't
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`say.
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`Q.
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`(By Ms. Heffernan) Sorry.
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`I didn't mean to
`
`interrupt you, Mr. Weinstein.
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`MS. HEFFERNAN:
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`May we approach, Your Honor?
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`THE COURT:
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`You may.
`
`(Bench conference.)
`
`THE COURT:
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`Yes, ma'am.
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`MS. HEFFERNAN:
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`So during the first trial --
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`THE COURT:
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`Yeah.
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`MS. HEFFERNAN:
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`-- the '417 trial,
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`Mr. Weinstein used percentage-based rates at that
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`trial --
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`THE COURT:
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`Uh-huh.
`
`MS. HEFFERNAN:
`
`-- and he did do a per-unit --
`
`or an effective royalty rate calculation on the Microsoft
`
`agreement and came up with a .24 percent effective
`
`royalty rate.
`
`We've discussed not going into, you know, the
`
`damages calculation in that trial; but I do now need to
`
`impeach him on that point because he has testified
`
`inconsistently.
`
`MR. CASSADY:
`
`Your Honor, she has literally
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 26 of 294 PageID #: 32419
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`26
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`blown open three motions in limine in her cross.
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`THE COURT:
`
`Well, I haven't heard any
`
`objection from you, Mr. Cassady.
`
`MR. CASSADY:
`
`Your Honor -- because it's an
`
`open-the-door issue.
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`THE REPORTER:
`
`I can't hear you.
`
`MR. CASSADY:
`
`It's an open-the-door issue,
`
`Your Honor.
`
`All I'm saying is she's talking about
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`percentages of the product prices, and I can't talk about
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`the product price.
`
`So all I'm saying, Your Honor, is
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`she -- I don't understand why she needs to go into these
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`percentages.
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`It's irrelevant, and she's misleading the
`
`jury in regards to this percentage.
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`But if she's going to continue to go
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`forward -- .24 percent on Apple's products is a lot more
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`money that we're asking for here; and if she's opening
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`that door to that stuff, we don't -- we're not --
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`THE COURT:
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`You want to change your damages
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`model based on her cross-examination?
`
`MR. CASSADY:
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`No, Your Honor.
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`It's not a
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`damages model change.
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`It's showing that he's saying it's
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`apportioned.
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`He should be able to show the jury that
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`it's apportioned.
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`And she's using the royalty rates to
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`say that he didn't apportion.
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`And if he used those
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 27 of 294 PageID #: 32420
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`27
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`royalty rates, the number would be higher.
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`It's not a
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`damage model, Your Honor.
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`THE COURT:
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`Well, I'm going to let her go.
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`I'm going to give you a little latitude.
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`It
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`is cross-examination.
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`You know, Ms. Heffernan, be
`
`careful not to open the door here.
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`Okay?
`
`MS. HEFFERNAN:
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`And with regard to that, Your
`
`Honor, we moved out -- to keep out these percentage-based
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`rates for that very reason, and they were allowed to
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`present them.
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`They're the ones who are presenting the --
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`presenting the percentage-based rates --
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`THE COURT:
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`All right.
`
`MS. HEFFERNAN:
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`-- and claiming that they're
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`apportioned.
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`And I've got -- now that they've done it,
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`I've got to cross him on it.
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`MR. CASSADY:
`
`Your Honor, I don't have any
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`problem with her -- if she wants to show the .24 percent
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`to Mr. Weinstein, but she shouldn't be talking about the
`
`fact that he testified in a prior trial about this.
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`That's going to lead to the jury understanding there was
`
`a prior damage finding.
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`So, as long as it's just about the .24, I
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`don't have any objection.
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`That's fine.
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`MR. AROVAS:
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`We could just say it's prior
`
`testimony.
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`Case 6:12-cv-00855-RWS Document 438 Filed 02/04/16 Page 28 of 294 PageID #: 32421
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`THE COURT:
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`Prior testimony.
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`That's fine.
`
`28
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`Hold on a second.
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`MS. HEFFERNAN:
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`Yes.
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`THE COURT:
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`I want to follow up with something
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`else.
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`Mr. Ward?
`
`Mr. Ward?
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`MR. WARD:
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`Yes, Your Honor.
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`THE COURT:
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`I'm thinking about our discussion
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`in chambers earlier.
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`I just want to follow up on
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`something.
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`When d
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