`
`527
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TYLER DIVISION
`
`VIRNETX INC., ET AL,
`
`PLAINTIFFS,
`
`VS.
`
`APPLE INC.,
`
`DEFENDANTS.
`
`
`
`CIVIL ACTION NO.
`6:12-CV-855-RWS
`
`
`)(
`)(
`)(
`)(
`)(
`TYLER, TEXAS
`)(
`)( OCTOBER 28, 2020
`)(
`9:09 A.M.
`)(
`
`TRANSCRIPT OF JURY TRIAL
`MORNING SESSION
`BEFORE THE HONORABLE JUDGE ROBERT W. SCHROEDER, III
`UNITED STATES CHIEF DISTRICT JUDGE
`
`APPEARANCES:
`
`FOR THE PLAINTIFF:
`BRADLEY W. CALDWELL
`JASON D. CASSADY
`JOHN AUSTIN CURRY
`CALDWELL CASSADY & CURRY
`2121 N. Pearl St., Suite 1200
`Dallas, Texas 75201
`T. JOHN WARD, JR.
`WARD, SMITH & HILL PLLC
`1507 Bill Owens Parkway
`Longview, Texas 75604
`R. CHRISTOPHER BUNT
`PARKER BUNT & AINSWORTH
`100 East Ferguson, Suite 418
`Tyler, Texas 75702
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`FOR THE PLAINTIFFS:
`
`ANDY TINDEL
`MT2 LAW GROUP
`MANN TINDEL THOMPSON
`112 E. Line Street
`Suite 304
`Tyler, Texas 75702
`
`FOR THE DEFENDANT:
`GREGORY S. AROVAS
`ROBERT A. APPLEBY
`JEANNE M. HEFFERNAN
`JOSEPH A. LOY
`LESLIE M. SCHMIDT
`AARON D. RESETARITS
`KIRKLAND & ELLIS LLP
`601 Lexington Avenue
`New York, New York 10022
`AKSHAY S. DEORAS
`KIRKLAND & ELLIS LLP
`555 California Street
`San Francisco, California 94104
`MICHAEL E. JONES
`POTTER MINTON
`110 North College Avenue, Suite 500
`Tyler, Texas 75702
`
`COURT REPORTER:
`
`Ms. Shelly Holmes, CSR, TCRR
`Official Court Reporter
`United States District Court
`Eastern District of Texas
`Marshall Division
`100 E. Houston
`Marshall, Texas 75670
` (903) 923-7464
`
`(Proceedings recorded by mechanical stenography, transcript
`produced on a CAT system.)
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`P R O C E E D I N G S
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`(Jury out.)
`COURT SECURITY OFFICER: All rise.
`THE COURT: Please be seated.
`Good morning, everyone.
`I understand there are a couple of issues that we
`need to discuss before we begin with the jury this morning.
`I know there was -- Apple had an issue with respect to
`Mr. Larsen and also with respect to Mr. Weinstein's
`testimony.
`Who wishes to be heard?
`MR. JONES: Your Honor, with regard to Mr. Larsen,
`
`I will.
`
`THE COURT: Okay.
`MR. JONES: For the record, Your Honor, Mike Jones
`for Apple.
`I think this is a very straightforward issue, and
`the issue is this. In looking at the hypothetical
`negotiation, one of the things the jury should consider is
`the circumstances in which other licenses were negotiated
`as compared to the circumstances of the hypothetical
`negotiation.
`In opening, Mr. Caldwell referred to Apple's
`situation as plumb out of bargaining power. With regard to
`the other licenses, with regard to Mitel, NEC, Siemens, and
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`Aastra, for example, he said at the time they were all
`still saying their problems -- products might not even
`infringe or that they could remove the infringement.
`With regard to Microsoft, he stated that Microsoft
`had decided to pay for the permission to use the patents.
`Mr. Short on direct was asked the question: Now,
`did Microsoft ultimately decide to take a license?
`He answered: Yes, they did.
`Now, the circumstances of that are that Microsoft
`did decide to take a license, but they did so after a
`determination was made by the jury that they infringed.
`Obviously, you know, we understand the motion in
`limine, Your Honor. We're not asking to go into the
`verdict. We're not asking to open the door of, well,
`there's a verdict and then there were appellate rights or
`anything like that.
`What we think we should do is really what we have
`done in prior trials when there was a similar situation
`where there was a verdict against Apple and there were
`still appellate rights and stuff like that, and what we did
`is we merely told the jury there had been a determination
`made that there was infringement.
`That's what we're suggesting is that we be allowed
`to just ask the question to say that there was a
`determination made that there was infringement before a
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`decision that's been called, and that's what's been
`represented by the other side, was made to take a license.
`We think that adequately tells the jury what they need to
`know about how to compare the two circumstances.
`And that's our request, Your Honor.
`THE COURT: Thank you, Mr. Jones.
`Can I ask you, Mr. Caldwell, to let me follow up
`with Mr. Jones on one thing?
`How -- how near in time to the opening did
`Mr. Caldwell refer to Apple being out of whatever the
`phrase was used -- out of -- out of options or something
`along those lines, how near in time did that comment come
`to the discussion of the Microsoft license?
`MR. JONES: I think it was at the same time, but
`I -- I couldn't swear to you on that, Your Honor. Just off
`the top of my head, if -- and if Mr. Caldwell, I've said
`something wrong, it's because of my memory. But I thought
`it was all at the same time.
`THE COURT: Do we have the transcript? It looks
`like Ms. Schmidt might have the transcript.
`MR. JONES: The statement that they were plumb out
`
`of --
`
`THE COURT: Could you put it on the ELMO, please?
`MR. JONES: Sure. The statement that they were
`plumb --
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`THE COURT: Mr. Jones, you're going to have to get
`by the mic, I apologize, or take the --
`MR. JONES: Sure. I apologize.
`THE COURT: That's all right.
`MR. JONES: The statement they were plumb out of
`bargaining power is on Page 300.
`And the other statement is on Page 307, Your
`
`Honor.
`
`THE COURT: Okay.
`MR. JONES: Thank you, Your Honor.
`THE COURT: Thank you, Mr. Jones.
`Mr. Caldwell.
`MR. CALDWELL: Thank you, Your Honor.
`May I start by actually just responding to the
`question you asked and provide context actually how this
`came up?
`THE COURT: Sure. Sure.
`MR. CALDWELL: So here's Page 299. On Page 299, I
`referred to the fact that Apple had already been determined
`to be infringing, which had already come in the preliminary
`instructions.
`And then on the next page is where I made this
`remark that they're -- they raised a complaint about for
`the first time last night -- that there is another fact you
`will learn, which was when they came to that negotiation
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`table, they were plumb out of bargaining power because
`you're going to hear, and it's not in dispute, they had
`previously infringed with a different version, and you will
`also hear that at one point, they tried to go to an
`alternative that did not infringe and it did not go well.
`So literally, the point I made exactly, not seven
`pages later in a totally unrelated part of it, literally
`the point I made was what made the Apple one unique is they
`had actually tried to go to a non-infringing alternative,
`and it did not go well. It had nothing to do with anything
`about the Microsoft license whatsoever, nothing.
`Absolutely nothing.
`And everything I said about the Microsoft -- the
`only reason I say things like they had a suit against
`Microsoft, Microsoft ultimately took a license, never once
`did I attempt to mislead anybody. I was respecting the
`agreed motion in limine that's in place.
`And so what happens is they let us get a day into
`a trial, and then they want to change the story and have it
`look like we didn't tell something to the jury. That --
`that really bothers me.
`But the other problem is, the way that Mr. Jones
`started his argument was by saying, well, the reason we
`need to talk about that Microsoft came following a
`verdict -- or not a verdict -- a determination of
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`infringement, is because we need to talk about the
`comparability of the circumstances of other licenses.
`Well, the thing is, before any of these experts
`did their reports, everybody knew that the Microsoft
`license came after there was a verdict. And if we were
`going to call it a determination of infringement or
`anything like that, the time to do that is when you -- you
`know, prior to deciding to agree to this motion in limine
`that we've been following up until this point, because
`everybody knew there was that.
`But more to the point, it's not comparable to
`Apple. What Apple wants to do is put it up and say ignore
`all the other licenses because Microsoft and Apple are
`uniquely alike because those are the only two with a prior
`determination.
`But the problem is that's a false equivalence. If
`Apple were to go down the road of Microsoft, they had a
`verdict, there wasn't denial of JMOLs, there wasn't a
`judgment, there wasn't an appeal, there wasn't an
`affirmance.
`So literally what would happen is if Apple tries
`to present now the false equivalence from the fact that
`Microsoft had a verdict and tries to equate that as
`uniquely similar to Apple's situation, the only fair way to
`respond would be to stay wait a minute, Apple had JMOLs
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`denied, judgment granted, what about appeal. All I did was
`follow absolutely what we were supposed to do in motions in
`limine, and that's why we were kind of shocked when this
`came through at 9:00 o'clock last night.
`THE COURT: All right. Thank you, Mr. Caldwell.
`Mr. Jones, anything else?
`MR. JONES: Can I say one thing, Your Honor?
`THE COURT: Yes, but you need to go to the podium
`to do it.
`MR. JONES: Your Honor, we're not accusing anybody
`of violating a motion in limine and we're not doing
`anything that we don't think's been done in prior trials.
`For example, in the 417 case, the question was asked by
`Mr. Cassady on direct of Mr. Larsen -- and, again, this
`just shows you that this is how we've viewed -- done things
`in circumstances like this -- he asked: And at that time,
`had it been -- had it been -- at that time, there's a
`determination like the one in this case that the products
`infringed like this in this case?
`Yes, sir.
`So that was how it was done in the 417 trial
`according to the transcript.
`So we're not saying anybody's done anything wrong.
`We're just saying this is the way to deal with the
`situation.
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`THE COURT: I understand. Mr. Jones, I'm going to
`overrule your objection. I understand where you're coming
`from on this, and I certainly -- I see the point, but I
`don't think the door has been opened wide enough here,
`particularly given where Mr. Caldwell's comments fell in
`his opening. I think there -- if they were closer in time,
`I would be considerably more concerned about it, but I
`don't think it's -- it's opened the door, you know, enough
`to introduce what would otherwise be precluded evidence.
`And I think Mr. Caldwell makes a good point,
`frankly, Mr. Jones, if -- if that came in, then it raises a
`whole host of other problematic testimony, confusing
`testimony about, you know, whether there were appeals or,
`you know, what a non-final judgment is, and I just -- I
`just think we're opening a box that none of us want to open
`if we do that.
`MR. JONES: Thank you, Your Honor.
`THE COURT: Thank you.
`MS. HEFFERNAN: Good morning, Your Honor.
`THE COURT: Good morning.
`MS. HEFFERNAN: Regarding the -- the Weinstein
`demonstrative, Apple does have an objection to the use
`of -- the testimony regarding the use of the opening slide
`with Mr. Weinstein.
`And I'll put that up on the --
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`So just to be clear, we are not objecting to the
`use of the slide. It has already been used in opening.
`The only objection is that we anticipate testimony will be
`elicited from Mr. Weinstein that during this time frame
`here, between 2009 and 2013, he had an opinion during this
`period of agreed infringement that it should be $1.20 per
`unit, for units that had both FaceTime and VOD in them and
`for units that only had VOD in them.
`And that raises a procedural issue that can cause
`substantive prejudice in this case. That was an opinion
`that he held in a separate case, the 417 case, on different
`products. Having Mr. Weinstein talk about that opinion in
`front of this jury will invite the jury to speculate, well,
`did Apple pay for its infringement of those products? You
`had an opinion of $1.20 for those units, and the parties
`agreed they infringed. Did Apple pay on those? Did it pay
`$1.20 for units with VOD only in them? That is just going
`to, I mean, undo the Court's granting of our MIL about the
`prior verdict.
`Now, to the extent there's any concern about my
`cross of Mr. Weinstein, and I -- I know Mr. Weinstein is in
`the courtroom, and that's fine -- I'm not going to cross
`Mr. Weinstein on his failure to reduce his 855 opinion for
`the fact that FaceTime does not -- has been determined not
`to infringe.
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`THE COURT: Okay.
`MS. HEFFERNAN: That should alleviate any issue
`with any need to do any comparison of any testimony.
`But even -- like, he can testify -- Mr. Weinstein
`can testify that he had an opinion in this case, the 855
`case, that it should be $1.20 for units with both FaceTime
`and VOD in them. We have -- we're not moving to keep out
`that testimony. He's welcome to have that opinion and
`express it in front of the jury.
`On that point, I will just renew for preservation
`purposes, I guess, our Daubert on that issue, but it's not
`an issue that we're going to explore.
`THE COURT: Okay. All right.
`Mr. Cassady, are you addressing this?
`MR. CASSADY: Yes, Your Honor.
`May I be heard?
`THE COURT: Yes.
`MR. CASSADY: Thank you.
`Your Honor, the issue here is that this slide has
`already made it in front of the jury. Mr. Weinstein's
`testimony is going to be factual about this slide. The
`issue --
`THE COURT: Factual as in how?
`MR. CASSADY: Factual as in he's going to say his
`opinion has been consistent with regards to the units in
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`this -- in this case.
`THE COURT: Well, that's what Ms. Heffernan is
`concerned about.
`MR. CASSADY: Right.
`THE COURT: So the fact that it's factual I'm not
`sure makes a difference.
`MR. CASSADY: Right. Your Honor, this is exactly
`the argument we made in the motion in limine, and Your
`Honor said that the verdicts and -- and other issues will
`not come in, but your ruling was explicit that we were able
`to use Mr. Weinstein's opinions on the prior case and we
`were able to use the cross-examination of Mr. Bakewell of
`all opinions from both cases. And the reason why is
`because the theme that's being presented right now is we
`needed to deal with the '504 and '211. That's the theme.
`And so the point is we have evidence that our
`witnesses are being consistent and that theirs are being
`inconsistent.
`THE COURT: Well, why don't we wait and see what
`happens on cross, Mr. Cassady?
`MR. CASSADY: Well, Your Honor, it's already out
`there. They've opened and argued this -- they already said
`in opening that we didn't deal with the '504 and '211.
`They already said that the licenses in this case were for
`the '135, '504, and '211, and we have not dealt with those.
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`That -- they've already put that out there.
`So the issue is --
`THE COURT: Do we -- do we -- can I see that
`transcript?
`MR. CASSADY: Yes.
`THE COURT: Do you have that?
`MR. CASSADY: Yes, Your Honor.
`THE COURT: Could you put it on the ELMO?
`MR. CASSADY: I will. For Shelly's sake, I'll try
`and pull this mic over here.
`THE COURT: That will help me, Mr. Cassady.
`MR. CASSADY: Okay. It's a little small, Your
`Honor, so I'm going to do the best I can to get it to you.
`Okay. Your Honor, let me see, I don't know if
`that helps you or not. Can you read that?
`THE COURT: Yes, I can.
`MR. CASSADY: Okay. So what we then -- each of
`these squares is the front page of the license agreements.
`Sorry.
`
`THE COURT: Is this -- is this Mr. -- I'm sorry.
`Is this Mr. Arovas?
`MR. CASSADY: This is Mr. Arovas, yes, Your Honor,
`and the highlighted portion. And what you'd see is that
`each of these five licenses, Aastra, NEC, Avaya, Mitel, and
`Siemens, they all -- out on the very first page three
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`particularly important patents that drove those license
`agreements [sic].
`And then he goes on to say: And the two other
`patents, the '504 and the '211 patents, those three
`particular important patents, there's a lot more that are
`also contributing to the value and the price they paid.
`And we know that the reasonable royalty that
`you've determined in this case is for all -- is not for all
`three of these patents. In fact, two of those three
`patents Apple doesn't infringe, doesn't use, it's no --
`it's not part of the reasonable royalty analysis at all.
`And so then we go on. What people are negotiating
`over is the two patents in this case, not the '504 or the
`'211, that Apple doesn't infringe but were called out as
`some of the most important patents.
`And it just goes on with this same theme. He goes
`through all -- he's saying over and over again the '504 and
`'211 is the critical non-infringed patents and that -- and
`our opinion has always been and our testimony from our
`witnesses has always been that it's consistently one rate,
`whether it's multiple patents or not.
`So the issue here is they're making a theme out of
`the very argument we have with regards to the motion in
`limines, and what's going to happen is they won't cross
`Mr. Weinstein on it.
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`THE COURT: Well, how -- I don't understand how at
`all this implicates Mr. Weinstein's prior opinions. What's
`it got to do with his prior opinions?
`MR. CASSADY: It's a consistency, Your Honor.
`They're -- they're going to attack Mr. Weinstein's opinion
`as not -- not taking the '504 and '211 out of it.
`THE COURT: And like I said, let's see what
`happens on cross.
`MR. CASSADY: Now, Your Honor, they're going to do
`it with Mr. Bakewell. Now that you -- now that you're
`saying let's see what happens on cross, they'll do it with
`Mr. Bakewell after Mr. Weinstein is off the stand. That's
`the -- that's -- that's trial by ambush, Your Honor. Like
`don't bring it up with the witness that can answer it, but
`bring it up with the witness that you can't bring the issue
`up --
`
`THE COURT: I don't understand what -- what you're
`trying to do not bolstering the witness's testimony. Why
`is it not?
`MR. CASSADY: The -- they have -- they have
`already brought an issue in the case that the '504 and '211
`must be removed from this thing. They've already
`criticized our opinion in this case because they're saying
`you must take the '504 and '211 out. And that's not what's
`happened here. That's the argument they're making.
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`It's the theme of their -- it's the theme of their
`opening, and it's precisely what they're going to do. And
`they'll -- maybe they'll ask Mr. Weinstein about it, but
`that's the intent. That intent is so that Mr. Bakewell can
`still criticize it --
`THE COURT: That's why we have rebuttal cases.
`MR. CASSADY: So, okay, that's -- I mean, that's
`one way to look at it, Your Honor, and I -- I appreciate
`that. And as long as Your Honor is of the perception that
`Mr. Weinstein can rebut --
`THE COURT: I'm not saying that. I'm just saying
`that's why we have rebuttal cases so that you can deal with
`issues that come up during, you know -- the opposing
`party's case-in-chief. We'll have to address that when we
`get to it.
`MR. CASSADY: Okay. Well, I mean, I guess, Your
`Honor, that my issue is if the grounds of why Mr. Weinstein
`can't get into it is because that's why you have rebuttal
`cases, but then we can't be comforted that we get to have a
`rebuttal case if they do it, that's where my concern is,
`Your Honor. Because this is where I get to talk about it.
`When I close my case, this is my evidence, and that's
`statements I'm relying on. And when they go and make a
`criticism of it but I can't bring my affirmative evidence
`in, that's the issue I have.
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`THE COURT: You're asking me to promise you I'm
`going to allow you to do that on rebuttal, and I'm not --
`I'm unwilling to do that right now.
`MR. CASSADY: I understand, Your Honor. I'm
`simply letting you know my concern, and I understand where
`you're coming from. I'm -- I'm not arguing with that.
`THE COURT: I -- I think you can get into the -- I
`mean, I think there are ways to do what you're trying to
`achieve, Mr. Cassady, without getting into Mr. Weinstein's
`previous opinions. And, you know, I mean, I can't tell you
`how to do that. I'm just not sure that going back through
`the tortured history of this case and every opinion
`Mr. Weinstein has had is the only way that you can rebut
`Apple's theme.
`MR. CASSADY: I understand what you're saying,
`Your Honor. I'll take your guidance, and I'll do the best
`I can. I mean, I will note also they crossed Dr. Short on
`it as well, but I understand where Your Honor is on it, and
`I will do my best to handle it as it is.
`THE COURT: Okay.
`MR. CASSADY: Now, is the slide itself -- I mean,
`just to be fair, Your Honor, are the slides in opening --
`THE COURT: I think Ms. Heffernan said she didn't
`have any objection to the slide.
`MR. CASSADY: Okay. Okay. Thank you, Your Honor.
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`THE COURT: Anything else we need to discuss
`before we have the jury brought in?
`MR. AROVAS: This is not an issue, Your Honor,
`just an update. The parties did discuss JMOLs and just
`wanted to make sure Your Honor was fine that we follow the
`same procedure we followed in prior cases. We bring all
`the JMOLs at the conclusion of all of the evidence.
`THE COURT: That -- that's correct, yes.
`MR. AROVAS: That's fine. All right. We just
`wanted to make sure it was okay with the Court.
`THE COURT: Yes, absolutely.
`MR. AROVAS: I'm told we need to hand up the
`admitted list, as well.
`THE COURT: Okay. You want to read that into the
`record now or do you want to do it in front of the jury?
`MR. AROVAS: Do you have a preference?
`THE COURT: Do you care?
`MR. AROVAS: I don't care.
`MR. CASSADY: I prefer to do it in front of the
`
`jury.
`
`THE COURT: Let's do it in front of the jury.
`MR. AROVAS: That's fine.
`THE COURT: It's good to have some drama
`occasionally.
`MR. AROVAS: That's fine.
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`THE COURT: Mr. Pearson?
`MR. PEARSON: I apologize. Mr. Curry has
`something to say.
`THE COURT: Okay. Good morning, Mr. Curry.
`MR. CURRY: Good morning. Small housekeeping
`matter. Will the Court excuse Dr. Jones?
`THE COURT: Any objection to Dr. Jones being
`excused?
`MR. AROVAS: No, Your Honor.
`THE COURT: Okay. He may be excused. Thank you,
`Mr. Curry.
`MR. CURRY: Thank you, Your Honor.
`THE COURT: I understand -- did -- did the
`plaintiffs not have an objection to a demonstrative of
`Mr. Blaze's?
`MR. CASSADY: Yes, Your Honor, there is an
`objection to Dr. Blaze.
`THE COURT: Do we need to deal with that now?
`MR. CALDWELL: It doesn't seem like we do. It
`seems like it's -- at the very least, it will be at the
`tail end of the day if it even happens.
`THE COURT: Okay. Okay. So let me get a little
`sense from the parties about what you think the day will
`hold. Do the plaintiffs -- or does the plaintiff expect to
`rest today?
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`MR. CASSADY: Your Honor, I think it would be a
`close call.
`THE COURT: Okay.
`MR. CASSADY: We're -- we're going to present
`Mr. Larsen, and then present Mr. Weinstein. And it depends
`on the cross-examination of those particular witnesses
`whether or not we call an additional witness, which we put
`on our list Ms. Mewes. But, again, that's -- that's in
`question right now.
`THE COURT: Okay. My -- the -- my only concern is
`I know that Apple has two witnesses who are testifying
`remotely. And Mr. Jackson, our IT specialist, is not in
`Tyler today. We didn't expect any -- either of those
`witnesses to be necessary today. He will be here tomorrow.
`He can manage it remotely, Mr. Jackson, that is, but we
`just need a heads-up to know whether we need him in place
`to be able to do that.
`MR. CASSADY: Your Honor, I believe the majority
`of the time today will be taken up by my direct examination
`of my witnesses. But I can't control the amount of time
`they're going to cross. But I believe those witnesses will
`probably end up tomorrow. That was my imagination. I
`don't imagine a damages trial they're not going to cross
`Mr. Larsen and Mr. Weinstein for a good long time.
`THE COURT: Okay. Thoughts from Apple about that?
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`Mr. Jones maybe was listening.
`MR. AROVAS: I -- I apologize, Your Honor.
`THE COURT: The issue is whether we'll get to
`either of the remote Apple witnesses today because we've
`got a little bit of an IT situation if we do. It's not
`insurmountable. We just need a little bit of advance
`notice.
`MS. HEFFERNAN: Your Honor, we don't -- we're not
`going to get to the remote witnesses today.
`THE COURT: Fair