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` UNITED STATES DISTRICT COURT
` WESTERN DISTRICT OF TEXAS
` AUSTIN DIVISION
`IDENTITY SECURITY, LLC
`) Docket No. A 22-CA-058 ADA
` )
`vs.
` ) Austin, Texas
` )
`APPLE, INC.
`) July 27, 2023
`
`
` TRANSCRIPT OF VIDEOCONFERENCE DISCOVERY HEARING
` BEFORE THE HONORABLE ALAN D. ALBRIGHT
`
`APPEARANCES:
`For the Plaintiff:
`
`For the Defendant:
`
`Mr. Taylor C. Hoogendoorn
`Mr. John P. Lahad
`Susman Godfrey, LLP
`1000 Louisiana Street, Suite 5100
`Houston, Texas 77002
`
`Ms. Leslie M. Spencer
`Ms. Amy Wann
`Mr. Michael Wueste
`Desmarais, LLP
`230 Park Avenue
`New York, New York 10196
`Mr. Tom Gorham
`Gillam & Smith, LLP
`102 North College Avenue,
`Suite 800
`Tyler, Texas 75702
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`Court Reporter:
`
`
`Ms. Lily Iva Reznik, CRR, RMR
`501 West 5th Street, Suite 4153
`Austin, Texas 78701
`(512)391-8792
`
`Proceedings reported by computerized stenography,
`transcript produced by computer-aided transcription.
`
`LILY I. REZNIK, CERTIFIED REALTIME/REGISTERED MERIT REPORTER
`U.S. DISTRICT COURT, WESTERN DISTRICT OF TEXAS (AUSTIN)
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`Case 1:22-cv-00058-ADA Document 206 Filed 03/21/24 Page 2 of 13
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`THE COURT: Good afternoon.
`Jen, would you call the case, please.
`THE CLERK: A civil action in Case 1:22-CV-58,
`Identity Security, LLC vs. Apple, Incorporated. Case
`called for a discovery hearing.
`THE COURT: Announcements from counsel, please.
`MR. LAHAD: Good afternoon, your Honor.
`John Lahad of Susman Godfrey for the Plaintiff
`Identity Security. Also on the line with me today is my
`associate, Taylor Hoogendoorn.
`MR. HOOGENDOORN: Good afternoon.
`MR. GORHAM: Good afternoon, your Honor.
`Tom Gorham with Gillam & Smith for Defendant
`Apple. With me on the line with the Desmarais law firm is
`Leslie Spencer, Amy Wann and Michael Wueste.
`Ms. Spencer and Ms. Wann will be presenting
`today. Also joining midway through the hearing today will
`be two client representatives after we address some
`outside attorneys'-eyes-only material.
`THE COURT: Okay. I have down the first request
`is by Apple. I'll hear from Apple on it.
`MS. WANN: Good afternoon, your Honor.
`Amy Wann from Desmarais, LLP on behalf of
`Defendant Apple, Inc. May it please the Court.
`THE COURT: Yes, ma'am.
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`LILY I. REZNIK, CERTIFIED REALTIME/REGISTERED MERIT REPORTER
`U.S. DISTRICT COURT, WESTERN DISTRICT OF TEXAS (AUSTIN)
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`Case 1:22-cv-00058-ADA Document 206 Filed 03/21/24 Page 3 of 13
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`MS. WANN: So Identity Security, the plaintiff in
`this case, does not have any consummated licenses on the
`asserted patents, however, it previously offered to
`license the asserted patents to third parties RPX, Acacia
`and Samsung. Those license offers fell through and that
`is -- now is that Apple seeks discovery regarding these
`offers to license the asserted patents. But plaintiff has
`refused to produce communications related to those license
`offers.
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`Now, if plaintiff wants Apple to pay for these
`patents, Apple should get discovery on what plaintiff
`thinks these patents are worth and --
`THE COURT: Why?
`MS. WANN: I'm sorry, your Honor?
`THE COURT: Why? What factor does it have
`anything to do with the trial?
`MS. WANN: Your Honor, because Identity has no
`executed licenses on these patents, patents-in-suit, so
`these licensing offers are the best and only reflection of
`what plaintiff thinks these patents are worth.
`THE COURT: How would they be used?
`MS. WANN: They would be used, for example, in --
`so the Federal Circuit has acknowledged in several cases
`that offers to license can actually be considered by
`experts in, for example, infringement and issues related
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`LILY I. REZNIK, CERTIFIED REALTIME/REGISTERED MERIT REPORTER
`U.S. DISTRICT COURT, WESTERN DISTRICT OF TEXAS (AUSTIN)
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`Case 1:22-cv-00058-ADA Document 206 Filed 03/21/24 Page 4 of 13
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`to damages such as calculating a reasonable royalty and
`comparable licenses.
`Now so, the fact that the Federal Circuit has
`said that experts may rely on these offers to license even
`though those offers have not been consummated means that
`these offers are, at the very least, discoverable in the
`first instance under the broader discovery standard, which
`as your Honor knows is simply reasonably calculated to
`lead to relevant admissible evidence. And of course, down
`the line, your Honor may eventually decide that these
`license offers are not admissible at trial, but
`admissibility at trial is a different issue from whether
`these license -- these license offers are discoverable in
`the first instance.
`And there is no burden here. Plaintiff has not
`argued that this discovery would be overly voluminous or
`unduly burdensome. And we're aware that your Honor has
`held in the past that the parties seeking this discovery
`must show good cause or reasons that justify why these
`licensing offers meet their threshold relevance standard.
`And we have good cause here for two reasons.
`First, Identity has no executed licenses to
`produce, so that fact elevates the relevance of these
`licensing offers because, as I've said earlier, these are
`the only evidence of plaintiff's licensing activity and,
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`LILY I. REZNIK, CERTIFIED REALTIME/REGISTERED MERIT REPORTER
`U.S. DISTRICT COURT, WESTERN DISTRICT OF TEXAS (AUSTIN)
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`Case 1:22-cv-00058-ADA Document 206 Filed 03/21/24 Page 5 of 13
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`therefore, are the best and only reflection of the value
`of these patents.
`And we've cited a case, High Point SARL, where
`the Court found especially relevant the fact that there
`have been no successful license executions. And we just
`want to note that in your Honor's prior case Daedalus,
`there was at least one relevant executed license that had
`already been produced; so, of course, in that case, the
`executed license diminished the relevance of the licensing
`offers. That's not the case here where plaintiff has no
`consummated executed licenses.
`And our second reason is, you know, your Honor
`noted in Daedalus that allowing discovery of unconsummated
`licensing negotiations may have a chilling effect in
`ongoing negotiations. There is no risk of that here.
`Plaintiff has not told us that it's actively involved in
`licensing discussions with these third parties. So
`there's no chilling effect by allowing plaintiff's license
`offers to be discoverable.
`And again, the cases that your Honor noted in
`your Honor's opinion in Daedalus, the chilling effect was
`present because there were, in fact, ongoing negotiations
`in both those cases, but that is not the case here. And
`so, these two reasons make this case different from
`Daedalus and, therefore, meet the good cause standards for
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`LILY I. REZNIK, CERTIFIED REALTIME/REGISTERED MERIT REPORTER
`U.S. DISTRICT COURT, WESTERN DISTRICT OF TEXAS (AUSTIN)
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`Case 1:22-cv-00058-ADA Document 206 Filed 03/21/24 Page 6 of 13
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`showing the relevance of Identity's licensing offers.
`And again, your Honor may decide that these
`offers are not admissible down the line, but the relevance
`standard for discovering the first instance is much
`broader than the standard for admissibility at trial. And
`since they are the -- these offers are the only evidence
`of what these patents are worth, they are relevant. I'm
`happy to take any questions from your Honor.
`THE COURT: A response.
`MR. LAHAD: Yes. Thank you, your Honor. John
`Lahad, Susman Godfrey, for the plaintiff.
`The Court's reasoning in the Daedalus case
`applies equally here and I think the ruling should be the
`same. Unconsummated negotiations are unreliable. And
`Apple has not known any facts that would justify
`discoverability and the relevance of these generally
`unreliable statements.
`As counsel noted in the Daedalus case, the Court
`noted that it sought good cause to raise the discovery
`requests to the threshold relevance standard and Apple has
`not shown good cause, your Honor. First, Apple argues
`that unlike the Daedalus case, these discussions are the
`only evidence of licensing activity and there's no
`executed licenses, but that doesn't address the
`reliability concerns. That doesn't transform -- that
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`LILY I. REZNIK, CERTIFIED REALTIME/REGISTERED MERIT REPORTER
`U.S. DISTRICT COURT, WESTERN DISTRICT OF TEXAS (AUSTIN)
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`Case 1:22-cv-00058-ADA Document 206 Filed 03/21/24 Page 7 of 13
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`doesn't make them any more or less unreliable the fact
`that there is no other consummated licenses.
`And as the Mondis court and this court
`recognized, these statements have little to no probative
`value for several reasons: Puffery, informational
`disparity, differences in the nature of the potential
`licensee. And Apple argues, well, if Identity wants Apple
`to pay for its patents, it should know what it wanted
`others to pay and I'd submit, your Honor, that's not
`right. Apple doesn't care about what Identity wanted for
`its patent, wanted others to pay. As we've said in our
`dispute chart, it wants the lowball offers as some kind of
`a -- by others as some kind of alleged valuation of the
`patents by a third party. That doesn't make them more
`reliable for the reasons that I mentioned above.
`And I will say this about the chilling effect.
`One grounds on which counsel sought to distinguish the
`Daedalus case, I don't think that there have to be ongoing
`negotiations for the chilling effect to be considered.
`Patentees aren't going to readily engage in licensing
`negotiations if there's this cloud looming over them
`about, you know, whatever they say will be used against
`them. So that factor, too, militates against allowing
`discovery of these communications.
`At the end of the day, your Honor, under Daedalus
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`LILY I. REZNIK, CERTIFIED REALTIME/REGISTERED MERIT REPORTER
`U.S. DISTRICT COURT, WESTERN DISTRICT OF TEXAS (AUSTIN)
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`Case 1:22-cv-00058-ADA Document 206 Filed 03/21/24 Page 8 of 13
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`and that line of cases, these unconsummated license
`negotiations, they're unreliable, not discoverable, and
`Apple simply has not met its burden to show the good cause
`required or set forth in Daedalus and I think that the
`ruling should be the same.
`THE COURT: Anything else from Apple?
`MS. WANN: Yeah, just a couple of things quickly,
`your Honor.
`So the first thing that Mr. Lahad spoke about the
`relevance of these licensing offers, your Honor did
`acknowledge in Daedalus that there's a whole other line of
`cases that do say that licensing and settlement
`negotiations are, in fact, relevant. And your Honor
`acknowledged that the law was split on this issue. And
`so, we think that our facts here are different from the
`facts that your Honor confronted in Daedalus; and
`therefore, your Honor should follow the other line of
`cases that Daedalus mentioned, the line of cases based on
`Phoenix Solutions where the courts have said that
`discovering -- discovery of settlement negotiations will
`lead to relevant admissible evidence.
`And about the second thing that Mr. Lahad
`mentioned, the chilling effect, the reality of the
`situation is that plaintiffs still cannot show any real
`prejudice here because the fact is they're not currently
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`LILY I. REZNIK, CERTIFIED REALTIME/REGISTERED MERIT REPORTER
`U.S. DISTRICT COURT, WESTERN DISTRICT OF TEXAS (AUSTIN)
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`Case 1:22-cv-00058-ADA Document 206 Filed 03/21/24 Page 9 of 13
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`engaged in any licensing discussions with any third party.
`So any chilling that Mr. Lahad describes is merely
`hypothetical. And again, there have been many cases where
`the plaintiff made the same argument and the Court decided
`that the risk of chilling was outweighed by the relevance
`of the licensing offers.
`And of course, I'd like to mention one last
`thing. Any risk of chilling can be addressed by obviously
`adherence to the protective order that's been entered in
`this case. So we will, of course, disclose and use these
`confidential materials under the terms of the protective
`order. Thank you, your Honor.
`THE COURT: I'll be back in a second.
`If we can go back on the record. The Court is
`going to deny Apple's request.
`The other issue I have is taking up Mr. Petr
`Kostka and if you would -- one of you would spell that for
`the court reporter, who, by the way, is Lily. Thank you
`for being here today, our all-star reporter. And I'll
`hear from plaintiff on this issue.
`MS. SPENCER: Mr. Kostka's name is K-O-S-T-K-A.
`And we have outside counsel from Apple who would like to
`join for this portion since it's not under the
`confidentiality of the protective order.
`THE COURT: That's absolutely fine with me.
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`LILY I. REZNIK, CERTIFIED REALTIME/REGISTERED MERIT REPORTER
`U.S. DISTRICT COURT, WESTERN DISTRICT OF TEXAS (AUSTIN)
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`MR. HOOGENDOORN: And while we'll waiting for
`them to join, I think Petr is P-E-T-R, atypical spelling
`for the court reporter.
`THE COURT: I'm ready for plaintiff whenever you
`want to make your argument.
`MR. HOOGENDOORN: Do we have Apple's counsel in
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`now?
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`MS. SPENCER: Appears we do, yes.
`MR. HOOGENDOORN: Great. Thank you, your Honor.
`Taylor Hoogendoorn from Susman Godfrey.
`The bottom line here is that plaintiff is
`proceeding with a remote deposition as an Apple party
`witness in the Czech Republic in order to save both
`parties, really everyone involved, a very large amount of
`time and money. There's a seven-hour time change between
`U.S. central time zone and Prague's time zone. Obviously
`that creates some logistical challenges.
`Apple's insisting that we start this deposition,
`this remote deposition at 2:00 a.m. central. We're
`offering to split the time change down the middle and
`start at 5:30 a.m. central time, which is just after noon,
`12:30, Prague time. As we said in our chart, the burden
`of a party witness potentially working a couple of hours
`past 6:00 p.m. is marginal and that's only the case even
`if the depo kind of approaches the full seven hour --
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`LILY I. REZNIK, CERTIFIED REALTIME/REGISTERED MERIT REPORTER
`U.S. DISTRICT COURT, WESTERN DISTRICT OF TEXAS (AUSTIN)
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`Case 1:22-cv-00058-ADA Document 206 Filed 03/21/24 Page 11 of 13
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`THE COURT: Let me hear from -- that sounds
`pretty reasonable to me. I'm not sure what the opposition
`is from the -- from Apple to starting at 5:30 instead of
`2:00.
`
`MS. SPENCER: Yes, your Honor. If I may.
`THE COURT: Sure.
`MS. SPENCER: With respect to the request to
`start at 5:30 as it's been -- 5:30 central as it's been
`noted, that would mean ending the deposition late into the
`evening hours, the local time, which is far outside of
`normal business hours, and would impinge on the travel
`plans of Mr. Kostka, who is meeting his family who is
`about three hours outside of Prague on vacation right now,
`and he is scheduled to meet them after work on --
`following the deposition.
`THE COURT: Would he rather -- would you rather
`me make you all fly over there and do this in person and
`really inconvenience everyone?
`MS. SPENCER: Apple actually has offered, is
`planning to present Mr. Kostka in person and its counsel
`will be there. It was plaintiff's option for its counsel
`not to do so and we are willing to be accommodating and
`making the deposition remote to arrange for conference
`space at Apple to do that and, also, to make some
`adjustments for the time difference. But Susman is a firm
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`LILY I. REZNIK, CERTIFIED REALTIME/REGISTERED MERIT REPORTER
`U.S. DISTRICT COURT, WESTERN DISTRICT OF TEXAS (AUSTIN)
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`Case 1:22-cv-00058-ADA Document 206 Filed 03/21/24 Page 12 of 13
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`with offices in many different time zones. It's a regular
`part of everyone's practice to operate in different time
`zones. They could even do this from New York and gain an
`hour by doing so. They've come to New York for source
`code review and other reasons. So we do think it's not
`reasonable --
`THE COURT: I'm going to split the difference
`again and I think that's a very fair suggestion. We'll
`make it 5:30 New York time, and that way, it saves your
`gentlemen an hour on his end, because he'll start an hour
`early, but I think 5:30 a.m. eastern time, that sounds
`very reasonable to me. Was that the only issue was the
`start time?
`MS. SPENCER: Yes, your Honor.
`THE COURT: Okay. Is there any other issue we
`need to take up?
`MR. GORHAM: Not from Apple, your Honor.
`MS. SPENCER: No, your Honor.
`THE COURT: Have a good day. Take care.
`MR. LAHAD: Sorry, your Honor. Nothing for the
`plaintiff.
`(Proceedings concluded.)
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`LILY I. REZNIK, CERTIFIED REALTIME/REGISTERED MERIT REPORTER
`U.S. DISTRICT COURT, WESTERN DISTRICT OF TEXAS (AUSTIN)
`
`
`
`Case 1:22-cv-00058-ADA Document 206 Filed 03/21/24 Page 13 of 13
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`* * * * * *
`
`UNITED STATES DISTRICT COURT )
`WESTERN DISTRICT OF TEXAS
`)
`
`I, LILY I. REZNIK, Certified Realtime Reporter,
`Registered Merit Reporter, in my capacity as Official
`Court Reporter of the United States District Court,
`Western District of Texas, do certify that the foregoing
`is a correct transcript from the record of proceedings in
`the above-entitled matter.
`I certify that the transcript fees and format comply
`with those prescribed by the Court and Judicial Conference
`of the United States.
`WITNESS MY OFFICIAL HAND this the 27th day of February,
`2024.
`
`
`
`
`
`
`
` 4 4 8 1
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`LILY I. REZNIK, CERTIFIED REALTIME/REGISTERED MERIT REPORTER
`U.S. DISTRICT COURT, WESTERN DISTRICT OF TEXAS (AUSTIN)
`
`~~~~~~~~~~~~~~~~~~~~~~~
`L I L Y I .
` REZNIK,
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` RMR
`O f f i c i a l C o u r t R e p o r t e r
`U n i t e d S t a t e s D i s t r i c t C o u r t
`A u s t i n D i v i s i o n
`5 0 1 W e s t 5 t h S t r e e t ,
`S u i t e 4 1 5 3
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`A u s t i n ,
` T e x a s 7 8 7 0 1
`( 5 1 2 ) 3 9 1 - 8 7 9 2
`S O T C e r t i f i c a t i o n N o .
`E x p i r e s :
` 1 - 3 1 - 2 5
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