Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 1 of 258 PageID #: 33362
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TYLER DIVISION
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`VIRNETX INC. AND SCIENCE * CIVIL ACTION NO. APPLICATIONS
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`INTERNATIONAL * 6:12-cv-855-RWS
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`CORPORATION, * (Lead Consolidated Case)
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` Plaintiffs, *
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`VS. *
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`APPLE INC., * Tyler, Texas
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` * February 2, 2016
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` Defendant. * 8:48 a.m.
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`REPORTER'S TRANSCRIPT OF JURY TRIAL, VOLUME 7
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`BEFORE THE HONORABLE ROBERT W. SCHROEDER III
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`UNITED STATES DISTRICT JUDGE
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TYLER DIVISION
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`VIRNETX INC. AND SCIENCE * CIVIL ACTION NO. APPLICATIONS
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`INTERNATIONAL * 6:12-cv-855-RWS
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`CORPORATION, * (Lead Consolidated Case)
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` Plaintiffs, *
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`VS. *
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`APPLE INC., * Tyler, Texas
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` * February 2, 2016
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` Defendant. * 8:48 a.m.
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`REPORTER'S TRANSCRIPT OF JURY TRIAL, VOLUME 7
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`BEFORE THE HONORABLE ROBERT W. SCHROEDER III
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`UNITED STATES DISTRICT JUDGE
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`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 2 of 258 PageID #: 33363
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`APPEARANCES:
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` COURT REPORTER: BRENDA HIGHTOWER SMITH, CSR-FCRR
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` 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
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`(Proceedings recorded by mechanical stenography, transcript
`produced on CAT system.)
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`FOR THE PLAINTIFF: BRADLEY W. CALDWELL
` JASON D. CASSADY
` JOHN AUSTIN CURRY
` CALDWELL CASSADY & CURRY
` 2101 Cedar Springs Road, Suite 1000
` Dallas, Texas 75201
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` T. JOHN WARD, JR.
` WARD, SMITH & HILL, PLLC
` 1127 Judson Road, Suite 220
` Longview, Texas 75601
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` ROBERT CHRISTOPHER BUNT
` PARKER BUNT & AINSWORTH
` 100 East Ferguson, Suite 1114
` Tyler, Texas 75702
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`FOR THE DEFENDANT: 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
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` 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 444 Filed 02/04/16 Page 3 of 258 PageID #: 33364
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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 444 Filed 02/04/16 Page 4 of 258 PageID #: 33365
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`(Open court, all parties present, jury not present.)
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`COURT SECURITY OFFICER: All rise.
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`THE COURT: Good morning. Please be seated.
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` We have an issue we need to address before we have
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`the jury brought in.
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`MR. CALDWELL: We do, Your Honor. Probably -- Your
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`Honor, simply the issue I raised at the bench, and then we
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`discussed later about doing a corrective instruction. We've
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`talked about a corrective instruction off and on and throughout
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`the matter; and even four or five days ago, Mr. Arovas was
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`saying he's happy to have a corrective instruction. And then
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`we have worked on one.
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` There seems to be a small amount of dispute. We may
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`have e-mailed that to Ms. Rea this morning. I can't remember
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`if we did. But, ultimately, after a fair amount of discussion,
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`we're down to basically two competing proposals.
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` I don't -- do you want me to hand you -- what I have
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`is the e-mail thread, and I don't know if you want to take any
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`argument on it or just sort of see the competing proposals
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`but -- or I can read them.
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`THE COURT: Yeah, sure. You can read them. That's
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`fine.
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`MR. CALDWELL: VirnetX's proposal largely tracks what
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`Judge Davis said in Ericsson versus D-Link when something
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`similar came up. And it says as follows: Yesterday, you heard
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`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 5 of 258 PageID #: 33366
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`some evidence concerning patents owned by Apple. You're
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`instructed to consider that evidence only for the limited
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`purpose for which it was offered; namely, the extent to which
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`those patents bear on issues of apportionment. To avoid any
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`confusion, the mere fact that Apple has patents related to part
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`of the technology of the accused products or features is not a
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`defense to infringement. This is because you can have more
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`than one patent governing an area of technology, but those
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`patents may relate to different aspects of the technology.
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` That is VirnetX's -- that, as I say is, pretty much
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`tracking what Judge Davis said in the Ericsson case.
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` Apple's proposal is a shortened one of -- that has a
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`lot of the same words you'll obviously recognize. It says you
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`can have more than one patent governing an area of technology,
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`but it may relate to different aspects of that technology. The
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`mere fact that Apple has -- has patents related to part of the
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`technology of the accused features is not necessarily a defense
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`to the fact that someone else may have a patent relating to
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`another part of those features.
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` I don't know how much discussion you want to take on
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`it. I would say we definitely have a problem. We think ours
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`is complete and accurate. But we especially have a problem
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`with the inclusion of the word "necessarily," as Apple has,
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`because we specifically -- in this case there's a motion in
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`limine on arguing that Apple's patents are any sort of defense
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`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 6 of 258 PageID #: 33367
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`to infringement and no expert has presented that they are. So
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`this -- the word "necessarily" actually is like advocating that
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`they can find non-infringement based on Apple's patents.
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`THE COURT: Thank you, Mr. Caldwell.
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`MR. CALDWELL: And I'm -- can I approach and just --
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`I'll give you what I have, which is the -- the e-mail thread,
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`but it has the two competing proposals set out here.
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`THE COURT: Certainly.
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`MS. HEFFERNAN: Actually, Mr. Summers e-mailed that
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`to the Court.
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`MR. CALDWELL: And I mentioned that I thought he may
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`have. Do you just want to read along?
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`THE COURT: Sure.
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` Is this your copy?
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`MR. CALDWELL: It's my copy, but you can have it. It
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`has the two -- the two proposals are inset right there in the
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`front.
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`THE COURT: Ms. Heffernan.
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`MS. HEFFERNAN: Thank you, Your Honor.
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` I think we're sort of putting the court -- the cart
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`before the horse here and whether there needs to be a curative
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`instruction at all.
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` So I would like to put on the ELMO, if I may, the
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`Court's ruling yesterday. The Court said -- was very explicit
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`about what we were permitted to do with these Apple patents.
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`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 7 of 258 PageID #: 33368
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`And we were permitted to do four things: I'm going to let you
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`talk about the technology, what it does, how it was developed,
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`who was involved in it. I want a discussion that there was a
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`patent on it about that long. Okay?
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` And I actually, with Mr. Bakewell, did far less than
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`that. The only thing that I covered with Mr. Bakewell was the
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`fact that Apple has these three patents and, generally
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`speaking, the technology that they relate to.
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` And this is the entirety of the discussion. It
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`ranges, essentially, one page: Are you aware of any specific
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`patents that relate to the accused features in this case?
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` And then he says: What I've done here on this slide
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`is provided examples of patents that relate specifically to
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`FaceTime and iMessage. There's three patents that are on this
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`screen, although there are more than Apple has that relate to
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`FaceTime and iMessage.
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` Question: Can you briefly summarize for the jury,
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`and very briefly, what the '896 and '921 patents relate to?
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` Answer: Yes. So these relate to a push message
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`system. We've heard that term. It's an APNS, another term
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`that we've heard. We've heard the push notification system.
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`These are examples of two patents that relate to that, that
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`Apple has of its own.
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` Follow-up question: And is APNS part of the
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`infrastructure for FaceTime and iMessage?
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`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 8 of 258 PageID #: 33369
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` Answer: Yes, I understand that it is.
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` And that's the only discussion we had about those two
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`patents.
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`Okay. And what's the third patent on this screen?
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` The '311 patent.
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` What does that relate to?
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` Answer: That relates to connection to technology
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`that relates to a connection that's established between users.
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`The way that the connection is actually made is what I
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`understand this patent relates to.
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` Question: Is that the FaceTime invitation service?
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` Answer: That's what I understand, yes.
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` That was the entirety of the discussion. I didn't
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`even name the inventors on the patents, didn't show any of the
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`figures from the patents. I'm not even sure the jury could see
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`the title of the patents on the demonstrative. That was the
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`entirety of the discussion.
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` So I don't think that there needs to be a curative
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`instruction. We haven't done anything improper with
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`Mr. Bakewell.
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` Now, that said, Apple does not have any objection to
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`a limiting instruction being given along with all of the other
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`final jury instructions that go back to the jury. But to
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`interrupt Mr. Bakewell's, or even at the start of Mr.
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`Bakewell's testimony today, and have a curative instruction to
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`cure something improper that never actually happened would be
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`extremely prejudicial to Apple.
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` And just for a moment, if I might on the Ericsson
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`case, the parties were not talking about a curative instruction
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`in the Ericsson case. The parties were anticipating testimony
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`by an Intel fact witness who himself had patents that were
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`related to the technology at issue in that case.
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` And the parties, in advance of that witness'
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`testimony, discussed with Judge Davis a limiting instruction.
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`And during that witness' testimony, as he began to talk about
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`the patents that were at issue, the Judge said, let me -- let
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`me interrupt for a moment and instructed the jury, gave a
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`limiting instruction. Not a curative instruction. And it was
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`at the start of that witness' testimony.
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` So I think we need to be a little careful about our
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`discussion of Ericsson.
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` All of that said, we really don't have an objection
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`to a limiting instruction. That's something that the parties
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`have discussed. Mr. Arovas has never characterized it as a
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`curative instruction, and there's no need to issue it as a
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`curative instruction.
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` As far as Apple's proposal goes, there is some
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`dispute or debate over the word "necessarily." Apple is happy
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`to remove that word from its instruction.
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`THE COURT: Okay. Thank you, Ms. Heffernan.
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` I -- Mr. Caldwell, short -- short response.
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`MR. CALDWELL: If it's worth showing, I'll show you
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`on the ELMO where Mr. Arovas said, as I said before, we are
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`happy with a corrective instruction.
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` This is part of the series of discussions we've had
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`on this as the trial has progressed. So I didn't -- I didn't
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`make that up.
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` Another issue that you were not shown right before
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`the highlighting that was -- that was shown -- I think you were
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`shown at the bottom of this page and the next page. So Apple
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`has, as we heard last week, lots and lots of patents and lots
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`and lots of patents that relate to the iPhone. I think we've
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`heard the number 500.
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` What I've done here is provided examples that relate
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`specifically to FaceTime and iMessage. There are three patents
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`that are on this screen, although there are more that Apple has
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`that relate to FaceTime and iMessage. So it even referred more
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`to -- to there being others.
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` And I think just as the way the trial has evolved and
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`the conferences have evolved, Apple continuously lobbied for
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`getting to do this by saying they're not -- they don't have a
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`problem with an instruction that would -- that would foster it.
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`THE COURT: Right.
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`MR. CALDWELL: And that's -- that's really our
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`position. We haven't presented you something that's an
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`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 11 of 258 PageID #: 33372
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`improper statement of the law, and you don't have to say you're
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`correcting the witness. It's not about leaning on the scale
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`that way. But it is a proper statement on the law on something
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`that introduces confusion. And kind of like a few days ago
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`when there was a depo transcript that came up and it just sat
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`on the ELMO for like 30 seconds saying that says Cisco.
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` What ends up happening yesterday was we flipped to
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`this slide, and the slide stays up for three minutes while
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`we're asking other questions.
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` And so you're right, the transcript has only a couple
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`Q and A's. And the slide just sat there staring at everybody's
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`face for quite a long time. That's why we think this correct
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`statement of the law is proper.
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`THE COURT: All right. Thank you, Mr. Caldwell.
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` I think what we'll do on this is I'm just not
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`inclined to interrupt the -- the witness' testimony prior to
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`cross-examination with an instruction along these lines, but I
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`am certainly open to including in the final instructions some
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`instruction along these lines. I do think it's certainly fair,
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`given the events that have transpired; but I'm not -- I'm not
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`inclined to do it at this point.
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` So I don't know if the parties -- if that makes a
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`difference in terms of what the party's proposal is. If we
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`include it in final instructions or if we can -- if the parties
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`will just let me look at the proposals that have been made, and
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`we'll include it in the final instructions.
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`MR. CALDWELL: I don't think it makes a difference --
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`I don't think it makes a difference other than possible
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`context. If it says you just heard from the witness.
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`THE COURT: Sure. Sure.
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`MR. CALDWELL: Substantively, I think our proposal is
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`still applicable.
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`THE COURT: Okay. All right. Very well.
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` Anything further before we have the jury brought in?
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` Oh, I'm sorry, Mr. Arovas.
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`MR. AROVAS: Sorry, Your Honor. And this will take
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`all of about 15 seconds.
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` So I just want to let the Court know that I had made
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`an oral written [sic] of proof on the issue of re-exams. As
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`we're getting to the damages case, there's some additional
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`issues that I did not mention on the record with regard to
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`that. Rather than take the Court's time or delay the jury, my
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`suggestion is I can just file a written offer of proof.
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`THE COURT: Any objection to that -- any objection to
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`that, Mr. Caldwell?
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`point.
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`MR. CALDWELL: On what?
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`THE COURT: Making an offer of proof at a later
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`MR. CALDWELL: Well, I guess on which -- which issue?
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`On just the PTAB or --
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`MR. AROVAS: I'm sorry. Yeah, on the re-exam PTAB.
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`We can file it this morning, and it will just be a written
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`offer of proof. And then I know we're trying to get things
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`moving, and that way I don't take any of the Court's time.
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`MR. CALDWELL: We don't object to it procedurally.
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`We object, of course, to it still coming in.
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`THE COURT: Of course.
`
`MR. AROVAS: Thank you, Your Honor.
`
`THE COURT: All right. Ms. Mayes, let's have the
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`jury brought in.
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`COURT SECURITY OFFICER: All rise for the jury.
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` (Jury in.)
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`THE COURT: Please be seated.
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`14
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` Welcome back, ladies and gentlemen of the jury. I
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`15
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`hope everybody had a good evening last night. Thanks for being
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`here promptly on time so that we can start right at 9:00
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`o'clock.
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`18
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` When we had concluded the day yesterday, Mr. Bakewell
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`had finished his direct examination.
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`Mr. Ward, you may cross-examine the witness.
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`MR. WARD: Thank you, Your Honor.
`
`CHRISTOPHER BAKEWELL, DEFENDANT'S WITNESS, PREVIOUSLY SWORN
`
`CROSS-EXAMINATION
`
`24
`
`BY MR. WARD:
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`
`Q.
`
`Good morning, Mr. Bakewell.
`
`
`
`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 14 of 258 PageID #: 33375
` 14
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` 1
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`A.
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`Good morning, Mr. Ward.
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` 2
`
`Q.
`
`You and I have not met prior to today, have we, sir?
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` 3
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`A.
`
`I don't believe we have.
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` 4
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`Q.
`
`All right. Nice to meet you.
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` 5
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`A.
`
`It's nice to meet you, too.
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` 6
`
`Q.
`
`I want to talk to you about some of the things that you
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` 7
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`discussed during your direct examination by Ms. Heffernan here
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` 8
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`in a minute; but before I do that, I want to talk to you about
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` 9
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`something that was not discussed.
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`10
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`You were present for Dr. Blaze's testimony yesterday, correct?
`
`11
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`A.
`
`Yes.
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`12
`
`Q.
`
`And you've been present throughout the trial?
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`13
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`A.
`
`Yes, I have.
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`14
`
`Q.
`
`And did you hear Dr. Blaze talk about this
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`15
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`FaceTime-over-relay issue, that that was something that would
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`16
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`not infringe the patents?
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`17
`
`A.
`
`I think I know what you're referring to, yes.
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`18
`
`Q.
`
`Okay. And you --
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`19
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`20
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`21
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`22
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`MS. HEFFERNAN: Your Honor, may we approach?
`
`THE COURT: Yes.
`
`(Bench conference.)
`
`THE COURT: Yes, ma'am.
`
`MS. HEFFERNAN: I have a feeling that Mr. Ward is
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`24
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`going to be getting into the costs of the relay, and that is
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`not something that Mr. Bakewell is presenting or relying on.
`
`
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`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 15 of 258 PageID #: 33376
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`None of the fact witnesses or expert witnesses in this trial
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`
`have proposed a non-infringing alternative that Apple would
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` 3
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`implement and rely on and have not presented anything about
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` 4
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`costs. And I have a feeling with the damages expert that's
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` 5
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`exactly where Mr. Ward is headed. There was a discussion of it
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`in his -- in Mr. Bakewell's report because he had to respond to
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` 7
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`the proposal of Mr. Weinstein. But in his report, Mr. Bakewell
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`says that cost of non-infringing alternatives is not a proper
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` 9
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`way to look at damages in this case.
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`MR. WARD: May I respond, Your Honor?
`
`THE COURT: You may.
`
`MR. WARD: You recall this goes back to Mr. Casanova.
`
`THE COURT: I recall.
`
`MR. WARD: I wanted to ask about the cost of that;
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`15
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`and he said, You'll need to talk to our damages expert, I'm not
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`16
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`the guy.
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`17
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` Now, the cost of a non-infringing alternative is
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`18
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`relevant to Georgia-Pacific Factor 9. This is from the Data
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`19
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`Treasury case by Judge Folsom. And the case says, Availability
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`20
`
`of accepting non-infringing alternatives should be considered
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`21
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`as part of a Georgia-Pacific analysis such as with regard to
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`22
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`Factor 9, utility and advantages of the patent property over
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`23
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`old modes or devices, if any.
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`24
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` There's a case for you. I'm not going back into the
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`old trial. I understand the Court's ruling.
`
`
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`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 16 of 258 PageID #: 33377
` 16
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`THE COURT: Right.
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`MR. WARD: This came up in the motion to compel, and
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`there was no dispute. I told you at that time that the cost
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` 4
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`associated with going 100 percent relay, which happened after
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`the verdict which happened in 2013, that they'd adequately
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`disclosed it to us. Never a dispute. And here's the
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`transcript from that -- that hearing where I told Your Honor
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`that.
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`THE COURT: Okay.
`
`MR. WARD: Okay. And so the next thing that
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`happened, we had the bench conference concerning Mr. Casanova;
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`12
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`and they said this is not the appropriate witness. Then they
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`cross-examined Dr. Wecker.
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`14
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` And they said, Who told you that this was not going
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`to be commercially viable without this technology?
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` Does Your Honor recall that -- those questions?
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`17
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`THE COURT: No. Remind me of that again.
`
`MR. WARD: Certainly. This is Mr. Jones
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`cross-examining Dr. Wecker.
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` His question at Page 231: Do you believe that
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`FaceTime can be offered without infringing these patents?
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` Answer: Say that again.
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`23
`
` Question: Do you believe that FaceTime can be
`
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`offered without infringing these patents?
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` This is Mr. Jones.
`
`
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`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 17 of 258 PageID #: 33378
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`THE COURT: Okay.
`
`MR. WARD: Answer: I'm told not. I'm told by Dr.
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` 3
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`Jones that these patents are so essential to the way FaceTime
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` 4
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`operates that without using the patented technology, they
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`simply would not be available on the Apple devices.
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` 6
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` And -- question: And again, to make sure we're both
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` 7
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`on the same page, Dr. Mark Jones is the Plaintiff's expert in
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`this case, right?
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` He asked the same thing with respect to iMessage.
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`10
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` And Dr. Jones told you that iMessage wouldn't be a
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`11
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`viable product without the patented technology, right, sir?
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`12
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` Correct.
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`13
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` And he relies upon that.
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`14
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`THE COURT: Right. Okay.
`
`MR. WARD: And Mr. Weinstein also offers
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`technology -- offers testimony about this when talking about
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`the Georgia-Pacific analysis.
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`18
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`THE COURT: I'm not trying to cut you off, Mr. Ward;
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`19
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`but what -- exactly where are you going? We're not going to
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`cost, right? We're not talking about the cost.
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`21
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`MR. WARD: Well, yes, sir. It goes to what did Apple
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`22
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`spend during the time that it went to what everyone agrees did
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`23
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`not infringe. And the witness will say it cost $50 million for
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`24
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`that nine -- six-to-nine-month period. That's what it cost to
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`not infringe. He also gave an estimate for what it would cost
`
`
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`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 18 of 258 PageID #: 33379
` 18
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`per month if they switched to 100 percent relay.
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` 2
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`THE COURT: And we're talking about in the old case,
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` 3
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`right?
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` 4
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`MR. WARD: No, sir, nothing to do with the old case.
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` 5
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`This is now.
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`THE COURT: In his -- in his report, he -- he's got
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`that in his report.
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` 9
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`MR. WARD: Absolutely. And in his deposition.
`
`THE COURT: Okay.
`
`MR. WARD: And I can get his report and show you page
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`11
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`and line if the Court -- I don't think there's any dispute that
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`12
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`he says that.
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`13
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`14
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`THE COURT: Okay.
`
`MS. HEFFERNAN: May I be heard, Your Honor?
`
`THE COURT: You may.
`
`MS. HEFFERNAN: With Dr. Wecker on direct, they asked
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`17
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`him why do you talk about just FaceTime and iMessage, you know,
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`18
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`instead of the patented technology.
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`19
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` And I'm paraphrasing. I don't have the --
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`20
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`21
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`me.
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`24
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`THE COURT: Sure.
`
`MS. HEFFERNAN: I don't have the record in front of
`
`THE COURT: Sure.
`
`MS. HEFFERNAN: And he said he was relying on Dr.
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`25
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`Jones for this notion that FaceTime and iMessage would not be
`
`
`
`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 19 of 258 PageID #: 33380
` 19
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` 1
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`viable without the patented technology and specifically that
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`would be commercially viable without the patented technology.
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` 3
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` Now, Mr. Jones did cross him on that; but they opened
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` 4
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`the door for that -- with him. And they're not allowed to open
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` 5
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`the door and walk through it.
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` 6
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`THE COURT: Let me see that -- do we have that
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` 7
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`transcript, Ms. Heffernan? Can you get that?
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` 8
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` 9
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`MS. HEFFERNAN: I can get that, yes.
`
`THE COURT: Why don't you get that. And I might let
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`10
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`the jury go back into the jury room because I want to look at
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`11
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`that before we go forward.
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`12
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`MR. WARD: The entire Wecker direct and cross is
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`13
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`right here.
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`14
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`MS. HEFFERNAN: It looks like that's just the
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`15
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`cross-examination.
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`18
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`20
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`MR. WARD: Oh, I'm sorry.
`
`THE COURT: Let's get the direct.
`
`MS. HEFFERNAN: Okay.
`
`(Open court.)
`
`THE COURT: Ladies and gentlemen of the jury, I know
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`21
`
`it's awfully early in the morning to stop the proceedings but
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`22
`
`I'm -- I'm going to have to consider an evidentiary matter that
`
`23
`
`has been raised and it's probably better that we do that
`
`24
`
`outside your presence. So we're going to take a short recess,
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`25
`
`and we'll get you back in here and continue as quickly as we
`
`
`
`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 20 of 258 PageID #: 33381
` 20
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`can -- as we can. I apologize.
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` 2
`
`COURT SECURITY OFFICER: All rise.
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` 3
`
` (Jury out.)
`
` 4
`
`THE COURT: Y'all be seated.
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` 5
`
` (Pause in proceedings.)
`
` 6
`
` 7
`
` 8
`
` 9
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`10
`
`(Bench conference continues.)
`
`THE COURT: Is this his report?
`
`MR. WARD: Yes, sir.
`
`MS. HEFFERNAN: Sorry.
`
`MR. WARD: And, Your Honor, starting at Page 141,
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`11
`
`Paragraph 364, is where he starts talking about the cost of
`
`12
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`what happened after the verdict.
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`13
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`14
`
`THE COURT: Right.
`
`MR. WARD: And then going forward is where he gives
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`15
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`the cost of the other area that I want to ask.
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`16
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`THE COURT: We're just talking about FaceTime over
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`17
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`relay, right?
`
`18
`
`19
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`20
`
`MR. WARD: Solely FaceTime over relay.
`
`THE COURT: Okay.
`
`MR. WARD: Which has never been in dispute about the
`
`21
`
`disclosure under Interrogatory No. 7. I'm not going back
`
`22
`
`and --
`
`23
`
`24
`
`THE COURT: No, no, I understand.
`
`MR. WARD: Anything about an order or what they said
`
`25
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`in the prior trial.
`
`
`
`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 21 of 258 PageID #: 33382
` 21
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`
`THE COURT: Sure.
`
`MR. WARD: Solely the cost of the FaceTime --
`
`THE COURT: Okay.
`
`MR. WARD: -- over relay 100 percent.
`
`THE COURT: Okay. May I have -- may I have that?
`
` 6
`
`I'll give it back to you. I promise.
`
` 7
`
` 8
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` 9
`
`MR. WARD: Yes, sir.
`
`MR. CASSADY: Your Honor, can Mr. Bakewell --
`
`THE COURT: Just -- that's fine. We're going to take
`
`10
`
`a recess. I'm going to go back and look at this.
`
`11
`
`12
`
`13
`
`sorry.
`
`MR. CASSADY: Okay.
`
`MS. HEFFERNAN: So on that point regarding -- oh,
`
`14
`
` On that point regarding Mr. Bakewell's report, he
`
`15
`
`issued it as a rebuttal report.
`
`16
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`17
`
`THE COURT: Okay.
`
`MS. HEFFERNAN: So he was responding to Mr. Weinstein
`
`18
`
`talking about the cost of non-infringing alternatives and that
`
`19
`
`they wouldn't be commercially viable.
`
`20
`
` And what Mr. Bakewell does in his report is he says
`
`21
`
`he's not going to -- not going to take cost approach, right?
`
`22
`
`There are three approaches to damages.
`
`23
`
`24
`
`THE COURT: Right.
`
`MS. HEFFERNAN: So he's not going to do the cost
`
`25
`
`approach because of the holdup problem.
`
`
`
`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 22 of 258 PageID #: 33383
` 22
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` 1
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` 2
`
`THE COURT: Okay.
`
`MS. HEFFERNAN: Right. So you should talk about what
`
` 3
`
`the non-infringing alternatives were in 2009, not in 2013 after
`
` 4
`
`Apple has already invested all of this time and is locked into
`
` 5
`
`using Akamai's relay server.
`
` 6
`
` 7
`
`THE COURT: Uh-huh.
`
`MS. HEFFERNAN: And nowhere in this report does he
`
` 8
`
`calculate the cost of that non-infringing alternative and say
`
` 9
`
`this somehow relates to damages --
`
`10
`
`11
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`12
`
`13
`
`THE COURT: Okay.
`
`MS. HEFFERNAN: -- and we should think about --
`
`THE COURT: So why does the number come in, Mr. Ward?
`
`MR. WARD: Because it's relevant to Georgia-Pacific
`
`14
`
`Factor 9, the cost of other available alternatives. It goes to
`
`15
`
`the value of this technology. That's why Apple doesn't want
`
`16
`
`this in evidence because they say, we have this alternative and
`
`17
`
`that is to go 100 percent over relay.
`
`18
`
`19
`
`THE COURT: Uh-huh.
`
`MR. WARD: There's a dispute between the experts as
`
`20
`
`to whether or not it's relevant with respect to damages.
`
`21
`
`Mr. Bakewell says, no, it's to --
`
`22
`
`23
`
`24
`
`relevant.
`
`THE COURT: Right. Sure.
`
`MR. WARD: Of course, Mr. Weinstein says, no, it is
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`25
`
`THE COURT: Right.
`
`
`
`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 23 of 258 PageID #: 33384
` 23
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`MS. HEFFERNAN: This is the direct testimony of
`
` 2
`
`Mr. Weinstein. They're trying to open this door. Apple has
`
` 3
`
`been very careful not to say, because it doesn't believe that
`
` 4
`
`non-infringing alternatives would be at all relevant to the
`
` 5
`
`measure of damages here. And this is the direct of
`
` 6
`
`Mr. Weinstein.
`
` 7
`
` Did there come a time when Apple tried to redesign
`
` 8
`
`FaceTime as to non-infringe VirnetX's patents?
`
` 9
`
` Yes, they did. 2013 time frame. Apple temporarily
`
`10
`
`used 100 percent relay.
`
`11
`
` Was there anything about their attempt to design
`
`12
`
`around the patents that's relevant to your analysis?
`
`13
`
` Now, I didn't know where they were going with this,
`
`14
`
`right? Because there's been no discussion of it.
`
`15
`
` And then this is what comes out of Mr. Weinstein's
`
`16
`
`mouth on direct.
`
`17
`
` But what's most relevant that really trumps the other
`
`18
`
`is that they try to do this, they abandoned it; and that says
`
`19
`
`to me as an economist that the alternative of Apple, Apple
`
`20
`
`adopted during that period --
`
`21
`
`22
`
`THE COURT: Yes.
`
`MS. HEFFERNAN: -- when its devices are not accused
`
`23
`
`of infringement, was not commercially viable because Apple
`
`24
`
`abandoned it.
`
`25
`
` Did it -- this is on direct.
`
`
`
`Case 6:12-cv-00855-RWS Document 444 Filed 02/04/16 Page 24 of 258 PageID #: 33385
` 24
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`it would?
`
`THE COURT: Sure.
`
`MS. HEFFERNAN: Did it cost more than Apple believed
`
` 4
`
` And I was on my feet.
`
` 5
`
` 6
`
`THE COURT: Right.
`
`MS. HEFFERNAN: It must have cost more than Apple
`
` 7
`
`believed it would because they ultimately abandoned it.
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` 8
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` 9
`
`THE COURT: Okay.
`
`MR. WARD: One thing, Your Honor.
`
`10
`
`You just asked her -- you asked her to show me -- show you
`
`11
`
`where in Dr. Wecker's direct I opened this door. She didn't
`
`12
`
`sh
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