ip engine inc v aol inc et 10 30 12 (pm session)

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 JODY A . STEWART , Official Court Reporter 1729 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Norfolk Division ------------------ I/P ENGINE, INC., Plaintiff v. AOL, INC., GOOGLE INC., IAC SEARCH & MEDIA, INC., GANNETT CO., INC., and TARGET CORPORATION, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) CIVIL ACTION NO. 2:11cv512 ------------------ TRANSCRIPT OF TRIAL PROCEEDINGS DAY 10 (Afternoon session) Norfolk, Virginia October 30, 2012 BEFORE: THE HONORABLE RAYMOND A. JACKSON, and a jury United States District Judge Case 2:11-cv-00512-RAJ-TEM Document 764 Filed 10/30/12 Page 1 of 67 PageID# 17314

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10/30 PMM Session - Cross Exam

TRANSCRIPT

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JODY A. STEWART, Official Court Reporter

1729

IN THE UNITED STATES DISTRICT COURTFOR THE EASTERN DISTRICT OF VIRGINIA

Norfolk Division

- - - - - - - - - - - - - - - - - -

I/P ENGINE, INC.,

Plaintiff

v.

AOL, INC., GOOGLE INC., IACSEARCH & MEDIA, INC., GANNETTCO., INC., and TARGETCORPORATION,

Defendants.

)))))))))))))

CIVIL ACTION NO.2:11cv512

- - - - - - - - - - - - - - - - - -

TRANSCRIPT OF TRIAL PROCEEDINGS

DAY 10

(Afternoon session)

Norfolk, Virginia

October 30, 2012

BEFORE: THE HONORABLE RAYMOND A. JACKSON, and a juryUnited States District Judge

Case 2:11-cv-00512-RAJ-TEM Document 764 Filed 10/30/12 Page 1 of 67 PageID# 17314

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JODY A. STEWART, Official Court Reporter

1730

APPEARANCES:

CRENSHAW, WARE & MARTIN PLCBy: Donald C. Schultz

W. Ryan SnowCounsel for the United States

ANDDICKSTEIN SHAPIRO LLPBy: Jeffrey K. Sherwood

Frank C. Cimino, JrKenneth W. BrothersLeslie Jacobs, Jr.Dawn Rudenko AlbertCharles J. Monterio, Jr.Counsel for the Plaintiff

KAUFMAN & CANOLES, P.C.By: Stephen Edward Noona

ANDQUINN EMANUEL URQUHART & SULLIVAN LLPBy: David Bilsker

David PerlsonRobert WilsonAntonio Ricardo SistosDavid NelsonCounsel for the Defendants

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JODY A. STEWART, Official Court Reporter

1731

I N D E X

PLAINTIFF'SWITNESSES PAGE

NONE

DEFENDANT'SWITNESSES PAGE

KEITH UGONECross-Examination By Mr. Sherwood 1732Redirect Examination By Mr. Wilson 1749

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1732

(Hearing commenced at 2:29 p.m.)

THE COURT: The Court has a question, Mr. Brothers.

MR. BROTHERS: Yes, sir.

THE COURT: I'm trying to figure out a time frame.

Approximately how long do you think the direct examination of

your rebuttal witness, Dr. Carbonell?

MR. BROTHERS: We expect Dr. Carbonell to be

between -- probably about an hour and 45 minutes.

THE COURT: Okay. Thank you.

All right. Bring the jury in.

(Jury in at 2:29 p.m.)

THE COURT: You may be seated. Please let the

record reflect all jurors are now present. Does counsel

agree?

MR. SHERWOOD: Yes, Your Honor.

MR. WILSON: Yes, Your Honor.

THE COURT: You may resume, Mr. Sherwood.

MR. SHERWOOD: Thank you.

CROSS-EXAMINATION (Cont'd)

BY MR. SHERWOOD:

Q. So, Dr. Ugone, before we broke for lunch, I think I was

asking you some questions about Google projecting forward

with the total cost of the 12(d) application fee. Do you

remember that?

A. I do recall our conversation on that, sure.

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1733

Q. And it was in the range of $490 million; is that fair?

A. Yeah. What we were talking about that if you did

Dr. Becker's calculation, that added up to 493.1 million from

the hypothetical negotiation or from the date of first

recovery through present.

Q. Right. And so Lycos would have that projection going

forward, as well, wouldn't it? It would know about that,

too?

A. Well, here is where we have to be careful. We have a

disagreement over a form of the license and the nature of the

discussions. My view is, based on everything I've looked at,

is that it would be a lump sum payment. Dr. Becker believes

in a running royalty rate. If you go into that framework,

all I was saying is, is that people would look at payments

over time if you were in that world.

Q. So in that -- with that frame of mind, Lycos would have

the same anticipation about the value of the royalty as

Google, right?

A. I'm missing what your question is because Google's view

would be that, given everything that we looked at, the value

of the license payment would be 3 to $5 million. So you

wouldn't even get to this $493 million calculation because

that wouldn't make sense in light of all the economic

considerations that I've been talking about.

Q. Well, I understand that's your opinion, but before the

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1734

lunch break you told me that Google, following the running

royalty analysis, would have anticipated the full cost of the

royalties over the life of the patents, right?

A. What I was --

Q. Isn't that your testimony?

A. Very similar to that. If one was in that situation, they

wouldn't just look at here's the rate. They would say, well,

what does that add up to over time.

Q. Right. And Lycos would do that, as well, wouldn't it?

A. If you were in a situation where it made sense to do

that, the parties would do that.

Q. And Lycos would have known that Google was going to use

its patented technology in not only AdWords but AdSense for

Search and any other programs like that that came along,

right?

A. Well, if you were in that running royalty rate world, you

would do that calculation, but I have been assuming that the

patents are valid and infringed, in other words, that you

would require a license to use that technology. So I think

that is a yes to your question, that it would be known that

the technology could be at least used on a going forward

basis.

Q. And Lycos would know that irrespective of the structure;

isn't that right?

I'll rephrase the question. Lycos would understand

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1735

Google's anticipated use of its technology, right?

A. They -- the assumption of the hypothetical negotiation is

that Google would need a license to use the technology, yes.

Now, at that point on a going forward basis, Google can

choose to use the technology or not. Remember what

Dr. Becker said --

MR. SHERWOOD: Your Honor, I'd like just an answer

to my question.

THE COURT: Just answer the question, Doctor, and

then --

THE WITNESS: Okay.

THE COURT: Just answer the question.

BY MR. SHERWOOD:

Q. Can you answer the question?

A. If I could have the question again.

MR. SHERWOOD: I'm sorry, Your Honor.

THE COURT: He did answer the question, but then

he --

MR. SHERWOOD: And then he went on. All right.

BY MR. SHERWOOD:

Q. Okay. And Dr. Becker calculated his royalty on the basis

of use, didn't he?

A. He applied an apportionment factor that we've discussed,

but that's how he started with a base, and then he took his

royalty rate, as we've talked about, from those Overture

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1736

license agreements.

Q. And the payments varied according to the extent of use,

right?

A. The payment varied according to his mathematical

calculations and the apportionment factors, I'll agree with

that.

Q. Can we have PDX-76, please. So you remember this slide

that Dr. Becker used?

A. I do, yes.

Q. And that was based upon -- the blue numbers were based

upon use, right?

A. The blue numbers were based upon the draft chart.

Q. Right.

A. And adding together the SmartAds, the disabling and the

promotion boxes that we've talked about --

Q. Right.

A. -- and then dividing it by the total.

Q. I'm sorry. And those were what Dr. Becker used to

determine Google's use of the patented invention, right?

A. Apportionment, but as we've talked about, that overstates

it, but that was the calculation he did.

Q. And it varied according to the number? Through 2007, it

varied according to the numbers that were in PX-64, right?

A. Actually, there is a couple of numbers that are missing

because it started out as 7.8 and then 12 point something,

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1737

then it got up to the 15. He didn't show those in his chart,

but if you did the calculation he did, which had too much in

it, you get what's in the blue, yes.

Q. The 7.8 was outside the recovery period, wasn't it,

Doctor?

A. Yes. But that was at the time of the hypothetical

negotiation.

Q. But you understand that the damages are limited to a

certain period of time, don't you?

A. I do. So the calculations would start with the 15.9 in

terms of the calculations. But with the first alleged

implementation of SmartAds, the number from the chart that

Dr. Becker got was 7.8 percent.

Q. And that's outside the recovery period, correct?

A. There is the alleged infringement period, then there's

the recovery period. But back here, the 7.8 is where the

hypothetical negotiation would be.

THE COURT: The question was --

MR. SHERWOOD: Your Honor --

THE COURT: -- outside of the.

THE WITNESS: Yes.

BY MR. SHERWOOD:

Q. It's outside the recovery period, right?

A. Yes.

Q. Now, you criticize Dr. Becker's calculation of a royalty

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1738

rate of 3.2 percent, right?

A. That was 3.5.

Q. 3.5 percent, excuse me?

A. Yes.

Q. Is that correct?

A. Yes.

Q. And you understand that that 3.5 percent was based upon

licenses that Overture gave to its '361 patent?

A. Yes. Or three of them at least.

Q. And you also understand that Dr. Frieder testified that

the Overture '361 patent is comparable to the patents-at-suit

in this case?

A. I read that testimony, yes.

Q. And you're not competent to give an opinion about whether

that's accurate or not, are you?

A. Not on the technical side, no.

Q. You don't know whether Dr. Ungar's opinion about that as

opposed to Dr. Frieder's about that, you don't know which one

is right, do you?

A. Well, I was able to have discussions with Dr. Ungar so I

understood kind of his rationale. But I can't evaluate the

accuracy of either of the two of them.

Q. You can't give an opinion about which one of those

opinions is correct?

MR. WILSON: Objection. He has been over this.

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1739

THE COURT: He just answered that.

MR. SHERWOOD: Your Honor, he gives a lengthy

answer.

THE COURT: He just answered it. The last thing he

said was the answer. Do you want to repeat your answer

again, Doctor?

THE WITNESS: Yes. I cannot -- I'm not the

technical person, so I have to leave it up to the two

technical experts.

BY MR. SHERWOOD:

Q. All right. And you know that Google licensed the

Overture patents for its AdWords program, don't you?

MR. WILSON: Your Honor, I object to this line of

questioning. We got a ruling on this.

MR. SHERWOOD: Your Honor, this was within the scope

of direct.

MR. WILSON: This was not in the scope of the

direct, Your Honor.

THE COURT: I'm going to sustain the objection.

BY MR. SHERWOOD:

Q. You know that Lycos licensed the '361 patent, right, the

Overture patent?

A. I --

MR. WILSON: Beyond the scope of direct, Your Honor.

I don't know where it is coming from.

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1740

MR. SHERWOOD: Your Honor --

THE COURT: Yes, sir.

MR. SHERWOOD: -- this relates to his analysis of

Georgia-Pacific factor 12.

THE COURT: And states Georgia-Pacific factor 12?

MR. SHERWOOD: Georgia-Pacific factor 12 is --

portion of the profit or of the selling price that may be

customary in particular business or comparable businesses to

allow for the use of the advancement or analogous invention.

He did an analysis, he said, of all 12 factors. He

criticized Dr. Becker for using Overture licenses, and I'm

entitled to cross-examine him about that.

MR. WILSON: Your Honor, neither Dr. Becker or

Dr. Ugone relied on this agreement, and based on Your Honor's

earlier ruling, those are out.

MR. SHERWOOD: Your Honor.

THE COURT: Wait a minute now. Do you have -- go

back to his expert report. Did he make any comments on that

in his expert report? Did Dr. Becker make any comments on

his expert report.

MR. SHERWOOD: I'm sorry, did he make comments in

his expert report?

THE COURT: Regarding the line of inquiry you are

pursuing right now?

MR. SHERWOOD: He criticized Dr. Becker for --

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1741

THE COURT: He did?

MR. SHERWOOD: Yes. He did it in his direct

testimony, Your Honor. He said he can't rely on the Marchex,

eXact and Interchange agreements.

THE COURT: I will allow limited inquiry on that,

but there is some danger here. So make it quick, make it

short.

MR. SHERWOOD: Okay. Your Honor, may I ask the

question doesn't he understand that Google licensed that

patent?

THE COURT: All right.

BY MR. SHERWOOD:

Q. Don't you understand that Google licensed the Overture

patent?

MR. WILSON: Your Honor, this is a different

question. This is exactly what Your Honor ruled on earlier.

We are moving on to something else.

MR. SHERWOOD: Your Honor.

THE COURT: Hold on a second. Ladies and gentlemen,

I can't settle this across the bench. I've got to get close

up. Stand up for a second.

(Side-bar conference.)

THE COURT: All right. Let's get straight on where

we are, okay. The Court's been ruling to try to avoid

getting the witness too involved in the matter that may be

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1742

beyond his expertise as a forensic economist's technical

matter. That is what is in the back of the Court's mind.

Now, what is it that you were getting ready to ask?

MR. SHERWOOD: Your Honor, Dr. Becker gave an

opinion on direct that was based upon Dr. Frieder's testimony

that the '361 Overture patent is comparable to the

patent-in-suit. You may recall on cross-examination

Dr. Wilson opened the door about the value of the license

that Google took to that patent. Now, I'm not going to ask

that question, but what I am going to do, and what he did on

direct testimony, was he said that the witness testified --

THE COURT: Don't shake your head. The jury is

sitting here looking at what you're doing, Mr. Wilson.

MR. WILSON: I'm sorry.

MR. SHERWOOD: He testified that that patent, the

'361, that the Overture patent was not comparable. He

criticized Dr. Becker's analysis with respect to that. And

what I want to do, Your Honor, is go and cross-examine him

about that. And I can do that not only because they opened

the door with respect to Dr. Becker's testimony, but they

also opened the door with respect to his direct testimony.

THE COURT: Okay. Here's what --

MR. WILSON: Your Honor, if I may respond to that.

This is Robert Wilson. Your Honor, we had the

cross-examination, and the next day we moved to strike any

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1743

testimony regarding the Overture and Google license, and Your

Honor granted that motion. So that's off the table. The

reason that was is because Dr. Becker specifically opined in

his expert report that that was not a comparable license and

he did not include it in his analysis.

Second point is I understand they want to ask about

Lycos and an Overture agreement. That agreement, both of the

experts considered and both of them concluded that that was

also not a comparable license agreement. So we have a

situation here, Your Honor, where he is saying, well, he

criticized the rate. Well, he criticized the rate based on

what Dr. Becker relied on in order to obtain that rate.

THE COURT: No. No. No. The problem I keep having

in this case is the Court rules, and both parties somehow

manage to work their way right back into something that the

Court has previously excluded for some reason or another.

You work your way right back to it again. To the extent the

Court has excluded certain testimony because we found that

the agreements were not comparable, then no matter what he

said, we are not going to get back into it again, just not

going to do it, and the fact that somebody get up here and

inadvertently open the door and say something that is not

licensed, for either party to go back and get back into it

and inadvertently reverse what the Court has said.

Now, you know something? The Court has a real

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1744

concern. You think about it tactically, just how much the

jury is going to remember of this cross-examination,

Mr. Sherwood, on this point. So I think you probably need to

make your point and move on without getting back in here and

let us -- end up developing a problem we have here in talking

about noncomparable agreements and licenses, no matter what

came of these experts about.

So find some other way to deal with this and go on

with this witness. I mean, so I'm going to sustain the

objection. Find something else to deal with and terminate

this cross-examination.

MR. SHERWOOD: Yes, Your Honor.

MR. WILSON: Yes, Your Honor.

THE COURT: And I say that because the Court is able

to measure just how, what you've covered, how far you've

gone, and determine whether fairly you've had an opportunity

to challenge him on the issue, and you certainly have. So we

are start beating a dead horse, colloquially speaking.

MR. SHERWOOD: Your Honor, may I say one thing?

THE COURT: About what?

MR. SHERWOOD: The comparability issue relates to

the fact that it was a settlement, and the Court didn't

strike the testimony. That is not what happened. I read the

transcripts over. The Court said it would take it up later.

All that Dr. Becker said was -- he wasn't going to use the

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1745

value because it was a settlement of litigation. There was

no testimony that the technology wasn't comparable. In fact,

Dr. Frieder said it was, and that is the basis upon which

Dr. Becker --

THE COURT: Let me put it this way, Mr. Sherwood.

It is a possibility that the Court is dead wrong on this

ruling. But the Court is not going back and going to read

the transcript and try to figure it out at this time.

MR. SHERWOOD: I understand.

THE COURT: Just abide by my ruling and let's move

on. You find more fertile ground, let's move on and

terminate this.

MR. SHERWOOD: I understand.

MR. WILSON: Thank you, Your Honor.

(End of side-bar conference.)

BY MR. SHERWOOD:

Q. Can I have the Elmo, please. You looked at all of the

Georgia-Pacific factors, right, Dr. Ugone?

A. Yes.

Q. And including factor 12?

A. Yes.

Q. And, in fact, this is the text of factor 12 in your

report, isn't it?

A. I'm sorry. This is a page out of my Appendix A.

Q. It is a text of factor 12 from your report, right?

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1746

A. Yes.

MR. SHERWOOD: Your Honor, may this be published to

the jury?

THE COURT: Yes, it may.

MR. SHERWOOD: Thank you, Your Honor.

BY MR. SHERWOOD:

Q. And this factor relates to the portion of the profit or

customary price that's used for use of the patented

invention, right?

A. Yes, within the spirit of what you said, it's a way to --

one of the factors that will bring in some additional

considerations, yes.

Q. I mean, I paraphrased it a little bit, right?

A. Yes.

Q. But it was an accurate paraphrase?

A. Yes. This is somehow, when there is like licenses

unrelated to the two parties, sometimes you bring them in

under factor 12. That is how it is commonly used.

Q. Yeah. In fact, it doesn't require that a party have made

a licensing decision based upon a particular agreement,

right?

A. Correct. What it is saying if there is comparable

technologies and comparable reasons why you might want to

look at another license to give you some -- that has some

probative value, you bring it in under factor 12.

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Ugone, K. - Cross (Cont'd)

JODY A. STEWART, Official Court Reporter

1747

Q. And Dr. Becker did his analysis of royalty rate under

factor 12, didn't he?

A. I believe that is where he put it, yes.

Q. And you didn't do any calculation of the royalty rate of

a customary rate under factor 12, did you?

A. I did not do a royalty rate because I did a royalty

payment, as we discussed.

Q. Your report does not disclose any rates that would be

described by factor 12 as customary in the industry, right?

A. Um, you're talking about customary in the industry. I

did extensively discuss the three licenses that Dr. Becker

was relying upon, I did discuss those in my report.

Q. And he used those licenses to calculate his rates, right?

A. That was the basis for his royalty rate, and obviously I

had differences with him, as I described.

Q. And you didn't use any licenses to calculate a rate?

A. Not a royalty.

Q. Under factor 12, excuse me?

A. Not a royalty rate because my opinion, as I've testified,

is that it is a lump sum payment.

Q. So just to connect a few of the dots here, you testified

that real world factors are very important, but your report

didn't include any of the actual public financial data of

either Lycos or Google, did it?

MR. WILSON: Your Honor, asked and answered, also

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JODY A. STEWART, Official Court Reporter

1748

mischaracterizing.

THE COURT: Overruled. Go on and ask it.

THE WITNESS: I didn't have their profitability

numbers but I did have testimony from their representative

about the financial difficulties that Lycos was under at the

time, as well as what was in the public press about closing

offices, and so forth, and laying off of 20 percent of the

work force.

BY MR. SHERWOOD:

Q. Isn't it true that Lycos and Google were on fairly equal

footing economically?

A. I don't believe that to be the case, no.

Q. They both had substantial resources, right?

A. I think they were going in different directions, so, yes,

they had resources but they were going in different

directions.

Q. In fact, Terra Lycos, I think we saw, had 1.6 billion

euros at the time, didn't it?

MR. WILSON: That has been asked and answered.

THE COURT: Asked and answered, sustained.

MR. SHERWOOD: Your Honor, I'll pass the witness.

THE COURT: Redirect.

MR. WILSON: Yes, Your Honor.

THE COURT: Within the bounds of the cross.

MR. WILSON: Yes, Your Honor.

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Ugone, K. - Redirect

JODY A. STEWART, Official Court Reporter

1749

REDIRECT EXAMINATION

BY MR. WILSON:

Q. Good afternoon, Dr. Ugone.

A. Good afternoon.

Q. So Mr. Sherwood asked you quite a few questions about

lump sum versus running royalty. Do you remember those lines

of questions?

A. Yes, I do.

Q. And he showed you some testimony from Lycos's

representative, Mr. Blais, regarding any preference that

Lycos might have had. Do you remember that?

A. Yes, I do.

Q. And he read one particular question and answer into the

record. Do you recall that?

A. Yes, I do.

Q. And he didn't want to show you the next question and

answer. Do you recall that?

MR. SHERWOOD: Objection, Your Honor.

THE COURT: Objection sustained. The Court provided

that he did read it.

MR. WILSON: Let me show you the complete deposition

testimony. If I could get the Elmo set up here.

BY MR. WILSON:

Q. I'm just going to put up a portion of the Blais

testimony, and the question that Mr. Sherwood asked, was:

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JODY A. STEWART, Official Court Reporter

1750

"At the time did Lycos have a preference for one of the two

models?" And then there's an objection, and the answer is:

"There were some preferences for a running royalty to create

a revenue stream, but it wasn't strong."

And then the next question and answer: "How about in

2006, do you know if Lycos had any preferences in licensing

out its patents for a lump sum versus a running royalty?"

There's another objection, and then the answer: "I wouldn't

say there was really any preferences." Do you see that?

A. Yes, I do.

Q. And did you consider that deposition testimony in

connection with preparing your opinions?

A. Yes. In fact, I considered all of this, and this is what

I was remembering during your questioning.

Q. And how did that factor into the conclusions you reached

regarding Lycos's preference for a lump sum?

A. Well, just like the representative from Lycos said,

quote, I wouldn't say there was really any preferences, which

I believe is what I testified to.

Q. And you were also asked about Google's preferences for a

lump sum. Do you recall that line of questions?

A. I do.

Q. And you heard Dr. Becker testify at trial in this case,

right?

A. Yes.

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JODY A. STEWART, Official Court Reporter

1751

Q. And he testified about Google's preference for a lump

sum. Do you recall that?

A. Yes.

Q. Let me put up that testimony. So this is Dr. Becker's

trial testimony at Page 885, Lines 11 to 13. Do you see that

on the screen?

A. I do.

Q. And I asked Dr. Becker: "And you know that Google has a

preference for lump sum agreements, correct?

"ANSWER: Yes."

Do you recall that testimony?

A. I do recall that testimony, yes.

Q. And how did that compare with your conclusion regarding

Google's preference for a lump sum?

A. I agreed with him on that assessment that Google has a

preference for lump sum payment structure and licensing

agreements.

Q. You were also asked about the Georgia-Pacific factors and

use of the patented technology. Do you recall that?

A. Yes.

Q. Does the lump sum amount that you arrived at in

connection with the hypothetical negotiation, does that take

into account Google's use of the patented technology?

A. Well, it takes into account that they, in a hypothetical

negotiation, that they need a license in order to use the

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Ugone, K. - Redirect

JODY A. STEWART, Official Court Reporter

1752

technology. That is what the whole hypothetical negotiation

is about.

Q. Okay. And you were also asked many questions about

apportionment of a royalty base. Do you recall that?

A. Yes.

Q. And is there a reason you didn't do an apportionment with

respect to your analysis?

A. Well, there is two reasons: One, the first primary

reason is, is that the parties would have agreed to a lump

sum payment; and then the second reason is all of the

difficulties with the calculation that I pointed out in

Dr. Becker's calculations.

Q. And you were also asked about the basis for your

conclusion that a reasonable royalty in this case would have

been between 3 million to $5 million. Do you recall that?

A. Yes.

Q. And there was a suggestion that somehow you used

something other than the Georgia-Pacific factors for your

testimony today. Do you recall that?

A. I do recall that.

Q. Did you use the Georgia-Pacific factors to arrive at the

3 million to $5 million range for your opinion?

A. Yes, I absolutely used the Georgia-Pacific factors.

Q. And Mr. Sherwood showed you part of your deposition

testimony. Do you recall that?

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JODY A. STEWART, Official Court Reporter

1753

A. I do.

Q. And he didn't want to show you any other part?

MR. SHERWOOD: Your Honor, I object to that.

THE COURT: Objection sustained. Please leave his

comments out, Mr. Wilson, and just direct the question.

MR. WILSON: Yes, Your Honor.

BY MR. WILSON:

Q. Let's put up another portion of your deposition

testimony. Could we please have Page 137. And do you see at

Lines 9 to 13, if we could blow that up. And Ms. Albert

asked you, "What does 3 to $5 million come out of?" Do you

see that?

A. Yes.

Q. And: "Answer. That would be the outcome of the

hypothetical negotiation. That would be the value to Google

for the use of the technology." Do you see that?

A. Yes.

Q. And that was your testimony at your deposition; is that

correct?

A. Yes. And the hypothetical negotiation is Georgia-Pacific

factor 15 which takes into account all of the Georgia-Pacific

factors.

Q. Okay. You were also asked about the cost and effort to

Google to implement the patented technology. Do you recall

that line of questioning?

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Ugone, K. - Redirect

JODY A. STEWART, Official Court Reporter

1754

A. You may have to remind me on that one.

Q. Sure. So you recall Mr. Sherwood asking you about

whether it would be difficult or not for Google to implement

the patented technology or whether Lycos could help. Do you

recall that question?

A. Yes.

Q. And you were here for Dr. Frieder's testimony in this

case?

A. Yes, I was.

Q. And do you recall him testifying about the implementation

of the patented technology?

A. Yes, I do remember that very vividly, actually.

Q. And if you put on the Elmo again, I would like to put up

Dr. Frieder's testimony. This is Dr. Frieder's testimony at

trial, Page 455 to 456.

THE COURT: What is the question?

MR. WILSON: The question is, do you recall

Dr. Frieder testifying about the implementation of the

technology, and I want to ask the witness whether he

considered that and how that comports with his opinion.

MR. SHERWOOD: Your Honor.

THE COURT: Wait. First let him answer the

question, do you recall that? If he doesn't recall it, then

we go back and try to refresh the recollection. Do you

recall it?

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Ugone, K. - Redirect

JODY A. STEWART, Official Court Reporter

1755

THE WITNESS: Yes, I do.

THE COURT: All right. Now what is the question?

MR. SHERWOOD: Beyond the scope of cross.

MR. WILSON: Your Honor, there was extensive cross

on implementation costs.

THE COURT: Overruled.

MR. WILSON: All right.

BY MR. WILSON:

Q. And at Page 455, Line 21, Dr. Frieder was asked on

cross-examination: "Dr. Frieder, this is a pretty simple

example. Is this how it would work?" Dr. Frieder's answer

is: "That is a simple example so I could illustrate it. It

is very, very difficult to implement this. It takes

significant effort. But I just -- my point was just to

illustrate, to explain how it works. You should not take

away the point that it is an easy thing to do. It is very

difficult." Do you see that?

MR. SHERWOOD: Your Honor --

THE COURT: What was the question?

BY MR. WILSON:

Q. The question is, do you recall that testimony?

A. I do recall that testimony.

THE COURT: Now, look --

MR. WILSON: How does that --

THE COURT: We are not going to use that technique

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JODY A. STEWART, Official Court Reporter

1756

anymore now for asking questions. You ask him a question.

We do not read the whole transcript to him, and then ask him

do you remember that. That is not the proper way to go.

Now, ask the last question, and let's move on to something

else.

BY MR. WILSON:

Q. We will move on. How does that comport with your opinion

in this case?

A. That is my understanding, that it takes a lot of effort

to do all the models and the algorithms and the training that

Google does.

Q. Okay. In preparing your expert report -- well, first let

me ask you this. You were asked a lot of questions about

commercial embodiments of the patents-in-suit. Do you recall

that?

A. Yes.

Q. And you reviewed Mr. Kosak's deposition in connection

with preparing your expert report, didn't you?

A. Yes.

Q. And you recall Mr. Kosak testifying about whether

commercial product had ever been made using the technology?

MR. SHERWOOD: Your Honor, object to the leading.

THE COURT: Objection sustained.

BY MR. WILSON:

Q. Did you rely on Dr. Kosak -- Mr. Kosak's deposition

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JODY A. STEWART, Official Court Reporter

1757

testimony in forming your opinion regarding commercial

embodiment?

A. I did. It's in my report, yes.

Q. And what did you rely on?

A. Well, his deposition testimony -- if you're asking me

what I remember about his deposition testimony, it was that

there was not a commercialized product that practiced the

claim teachings of the patents-in-suit.

Q. And you were here for Mr. Kosak's testimony at trial,

correct?

A. Yes.

Q. And did you hear him testify on cross --

MR. SHERWOOD: Object to the leading again.

MR. WILSON: Just asking --

THE COURT: As long as your answer doesn't suggest

to him what he did testify to. He testified to what he

recalls.

MR. WILSON: The question was, do you recall

Mr. Kosak testifying about commercial implementation of the

patent-in-suit? Do you recall that?

THE WITNESS: Yes.

BY MR. WILSON:

Q. Okay. And what do you recall regarding that testimony?

A. I recall Mr. Kosak testifying about some attempts to

implement the product, but at least my personal recollection

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JODY A. STEWART, Official Court Reporter

1758

was that there was no commercialization of such a product.

Q. And is that -- how does that comport with your opinion

regarding commercial embodiment?

A. That is what I was trying to explain, yes.

Q. You were also asked about your opinion that Lycos faced

serious business difficulties in 2004. Do you recall that

line of testimony?

A. Yes.

Q. And you were directed to Paragraph 74 of your report. Do

you recall that?

A. Yes.

Q. So why don't you get that out.

MR. SHERWOOD: Your Honor, I'm going to object to

any testimony that seeks to elicit from the witness what's in

his report.

MR. WILSON: Well, Your Honor --

THE COURT: Well, you know, we are all talking about

technique here. Let's find out what the question is first.

Let's find out what the question is.

MR. WILSON: All right.

BY MR. WILSON:

Q. You were asked a variety of questions about what you

relied on in connection with reaching your opinion, correct?

A. Yes.

Q. Besides the -- well, what did you rely on in connection

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JODY A. STEWART, Official Court Reporter

1759

with forming your opinion regarding Lycos's commercial

success or lack thereof in 2004?

A. Well, there was the deposition testimony of the

representative of Lycos, and there was also research we had

done from financial news web sites that contained information

that I also incorporated into my report, and those are

referenced in that section of my report.

Q. Okay. And so for the deposition testimony, what did you

rely on in connection with your conclusion that Lycos was

having business problems in 2004?

MR. SHERWOOD: Your Honor, I object to this. This

is testimony that is related to no personal knowledge.

THE COURT: Well, the Court, I think, has been over

this. To the extent it is on something the Court has

previously ruled on, we are not going to get to that point.

I quite frankly, Counsel, the Court doesn't know what his

answer is going to be. That is just a precautionary

statement. I made it before.

MR. WILSON: All right. Let me ask another

question, Your Honor.

THE COURT: That would be wise.

MR. WILSON: Thank you.

BY MR. WILSON:

Q. Did you, besides deposition testimony, did you rely on

anything else in connection with your conclusion that Lycos

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JODY A. STEWART, Official Court Reporter

1760

was having business difficulties?

A. Yes. There was some, I called them independently

obtained documents. There were some documents we obtained in

our research, yes.

Q. And did you also rely on any opinions of Dr. Becker?

A. With respect to?

Q. In Paragraph 74 of your expert report?

A. The ones I remember -- well, there were some things that

Dr. Becker had in his report, and I think he did talk a

little bit about sort of the prominence of Lycos in the

overall scheme of the companies that Lycos was a part of.

Q. Okay. And the companies that Lycos was a part of in

2004, that was the Terra companies?

A. Yes.

MR. SHERWOOD: Your Honor, I object to the leading

again.

THE COURT: Sustained.

BY MR. WILSON:

Q. And you mentioned publicly available sources in forming

your opinion regarding Lycos's business difficulties. What

did you rely on?

A. Well, there was some financial news, web sites that had

information.

Q. I'd like to put up DX-254.

And if you can take a look at 891379. Do you

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Ugone, K. - Redirect

JODY A. STEWART, Official Court Reporter

1761

recognize that, Dr. Becker?

A. Keith Ugone, but --

Q. I apologize. Do you recognize this?

A. Yes, I do.

Q. Okay. And what is it?

A. This appears to be the article that I was relying upon,

yes.

MR. SHERWOOD: Your Honor, I don't know if this has

been published to the jury. This is hearsay, object to any

showing it to the jury.

THE COURT: It is not being published to the jury.

Has this document been admitted into evidence?

MR. WILSON: It has not been admitted.

THE COURT: It is not going to be admitted into

evidence.

MR. WILSON: But, Your Honor, he was cross-examined

on --

THE COURT: Listen, he can testify to what he relied

on, but I've said consistently in here, your impeachment

document is not going to be admitted into evidence. This

witness has indicated he relied on this source. He has said

it before. And the fact that you are going over it is

nothing but repetition. He said it before the jury, and he

said it again.

Now let's not keep repeating what he said. We count

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JODY A. STEWART, Official Court Reporter

1762

on the jury to remember it. Okay. So let's move on.

MR. WILSON: We will count on it. Thank you, Your

Honor.

BY MR. WILSON:

Q. So, Dr. Ugone, you were also asked about Google's success

in 2004. Do you recall those lines of questions?

A. Yes.

Q. And you were asked specifically about a Google S-1

statement. Do you recall that?

A. Yes.

Q. And we went through some of the pages of that. Did you

rely on any Google SEC filings in connection with reaching

your opinions regarding Google's success?

A. Well, they were part of the documents that I reviewed,

including the S-1 statements.

Q. And did you review -- actually go to some of the

paragraphs that you referred to. So if you go to Page 20 of

your expert report.

A. I'm on Page 20.

Q. And you see Paragraphs 33 of 35?

A. Yes. A lot of that information came from the Google,

what is called their 10(k), which is an annual.

MR. SHERWOOD: I object to this, too. It is really

just asking the witness to read from this report.

THE COURT: Well, I think you can ask the witness a

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JODY A. STEWART, Official Court Reporter

1763

question. To the extent the witness does not recall, he

certainly can refresh his recollection by going to the

report. But don't use the report the way you're doing it

now. You can ask him the question. If he doesn't recall

whether he relied on that information in his report, you

clearly can use his report to refresh his recollection.

MR. WILSON: Okay.

BY MR. WILSON:

Q. So just for the purposes of the jury's information, what

is the form 10(k)?

A. It's a filing with the Securities and Exchange Commission

that public companies that are traded on stock exchanges have

to file annually, and it gives, in a sense, the annual

performance of the company so investors that are thinking

about investing in the company know something about the

financial performance of the company.

Q. And did you rely on Google's form 10(k) in forming your

opinions regarding Google's success?

A. Yes, I did get a lot of information from their form

10(k).

Q. Okay. Let's move to the Carl Meyer agreement. You were

asked several questions. You can put your expert report

back. You were asked several questions about your reliance

on Carl Meyer. Do you recall that?

A. I do.

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Ugone, K. - Redirect

JODY A. STEWART, Official Court Reporter

1764

Q. Okay. And you had testified that you used the Carl Meyer

agreement in one other case involving Google?

A. Yes.

Q. Okay. And did you consider whether the Carl Meyer

agreement was comparable to the hypothetical negotiation in

this case?

A. Yes.

Q. What did you do?

A. Well, with respect to the technical aspects of the Carl

Meyer patents, I was relying on the testimony of Dr. Ungar.

Q. And did you rely on the economic framework of the Carl

Meyer agreement in connection with your analysis of the

hypothetical negotiation here?

MR. SHERWOOD: Your Honor, I believe this is

cumulative. He's covered that.

THE COURT: I will sustain the objection to the

extent that the Court believes it is leading.

MR. WILSON: Sorry?

THE COURT: The Court believes the question is

leading.

MR. WILSON: Okay, Your Honor.

BY MR. WILSON:

Q. How, if at all, did you rely on the Carl Meyer agreement

with respect to your analysis of the hypothetical negotiation

and the result of that negotiation?

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Ugone, K. - Redirect

JODY A. STEWART, Official Court Reporter

1765

A. Okay. So it's really a two-part analysis. Once Dr.

Ungar gave me input there was a comparable technology to the

patents-in-suit, then I looked at the economics of that

purchase agreement and saw that Google had purchased those

patents, the Carl Meyer patents for a lump sum amount of

$3.55 million.

Q. Okay. And you also -- there was some questions about

whether or not the Carl Meyer agreement was an arm's length

transaction. Do you recall that?

A. Yes.

Q. And do you recall Dr. Becker testified about that issue

at his deposition?

A. Yes.

Q. And what do you recall regarding Dr. Becker's testimony

regarding whether the Carl Meyer agreement was arm's length?

A. In his deposition he agreed that it was an arm's length

negotiation.

Q. Okay. And did that factor into your opinion regarding

the use of the Carl Meyer agreement in the context of the

hypothetical negotiation?

A. Well, it meant that two parties had -- it is called an

arm's length, so it meant that two parties had negotiated and

that was the outcome of the negotiations. So that was the

value both parties put on that license agreement.

Q. You were also asked about the charts from the draft

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JODY A. STEWART, Official Court Reporter

1766

revenue force document that Dr. Becker relied on. Do you

recall those lines of questions?

A. I do.

Q. And you were asked about the deposition of Nick Fox, who

was on the revenue force team at Google. Do you recall those

questions?

A. Yes, I do.

Q. And you reviewed Nick Fox's deposition in connection with

forming your opinions?

A. Yes.

Q. And that was plaintiff's deposition of Google employee,

correct?

A. Yes.

MR. SHERWOOD: Object to the leading, Your Honor.

THE COURT: Sustained.

BY MR. WILSON:

Q. Do you recall a single question that plaintiff's counsel

asked Mr. Fox about the draft revenue force document that

Dr. Becker relied on?

MR. SHERWOOD: Object to the leading, Your Honor.

MR. WILSON: I'm asking --

THE COURT: What is the question?

MR. WILSON: The question is does he recall a single

question that plaintiff's counsel asked Mr. Fox about the

draft revenue force agreement?

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JODY A. STEWART, Official Court Reporter

1767

THE COURT: Can you answer that?

THE WITNESS: Yes, sir, I can answer it this way,

that I don't recall any questions at all dealing with the

chart that Dr. Becker was relying upon.

BY MR. WILSON:

Q. Okay. And did that surprise you in your review of

Mr. Fox's deposition?

THE COURT: Don't answer that. That is

argumentative, calls for speculation.

MR. WILSON: I'll move on.

THE COURT: I'll give you about four more minutes.

MR. WILSON: Your Honor, I'm just about done.

BY MR. WILSON:

Q. You were also asked a line of questions about Google's

services agreements. Do you recall that?

A. Yes.

Q. And I/P Engine doesn't have a services agreement with

Google, right?

A. That's correct.

Q. It doesn't operate a search engine, correct?

MR. SHERWOOD: Object to the leading, Your Honor.

THE COURT: Sustained.

BY MR. WILSON:

Q. Is there a difference between the services agreement and

the patent license?

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JODY A. STEWART, Official Court Reporter

1768

A. Yes.

Q. What is that?

A. Well, Google's providing services to the companies that

enter into these arrangements with them, and it has to do

with the advertising that are on the various web sites and

which ones there is access to, which is different from a

patent license agreement where someone is getting a license

to use the technology that is in a patent.

Q. And what is the result of the hypothetical negotiation?

A. The hypothetical negotiation deals with a patent license

agreement.

MR. WILSON: No further questions, Your Honor.

THE COURT: Step down. May he be permanently

excused, gentlemen?

MR. WILSON: I believe so, Your Honor.

MR. SHERWOOD: Yes, Your Honor.

THE COURT: Dr. Ugone, thank you. You may be

permanently excused.

(Witness excused.)

THE COURT: Next.

MR. NELSON: Your Honor, I have the proffer that

we've discussed in the past for you.

THE COURT: All right.

MR. NELSON: We will file this, as well, Your Honor.

THE COURT: You can just simply file it, take into

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JODY A. STEWART, Official Court Reporter

1769

the Court's consideration, you can file it. The Court will

read it.

MR. NELSON: Thank you, Your Honor.

THE COURT: All right.

MR. NELSON: At that point, though, we rest, Your

Honor. That is all the evidence we have right now.

THE COURT: Okay. Thank you.

Ladies and gentlemen, the defendants have rested in

this case. I need just a few minutes with counsel before I

determine exactly when you will be able to depart. All rise.

(Jury out at 3:13 p.m.)

THE COURT: Second thought. Maybe I should have

done it at side bar. You may have a seat. The Court wanted

to determine, Mr. Brothers, Mr. Sherwood, whether there was

anything else you wanted to do before this jury before we

went out of here?

MR. BROTHERS: Not with the jury, Your Honor. I

think that the jury can be dismissed for the day. We have

our Rule 50 motion, which I think we can take up, and then

Dr. Carbonell needs to leave now to make his 3:30 conference.

THE COURT: That is fine.

MR. BROTHERS: Thank you, Your Honor.

THE COURT: Okay. Then we will just bring them back

in. I also understand there are some issues regarding some

exhibits, which is next, with Dr. Carbonell. We will take

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1770

that up, too.

MR. BROTHERS: Yes, Your Honor.

(Jury in at 3:14 p.m.)

THE COURT: You may be seated. We are just going to

wait.

Let the record reflect all jurors have returned to

the courtroom. Does counsel agree?

MR. SHERWOOD: Yes, Your Honor.

MR. NELSON: Agreed, Your Honor.

THE COURT: All right. Ladies and gentlemen, this

concludes the live testimony that you will receive today.

The Court and counsel have a number of things we need to

review that do not require that you be here. So what we are

going to do, we are going to excuse you for the day. I want

you to come back tomorrow morning at 10:00. We will start

with the live witness testimony.

Remember the precaution that the Court has given you

regarding discussing the case. Be safe and we'll see you in

the morning at 10:00 a.m. You might want to get here about

9:45 so we are ready to go. All rise.

(Jury out at 3:16 p.m.)

THE COURT: You may be seated. I'm going to ask

that counsel file your proffer on laches, ask the clerk to

file it in the record.

MR. NELSON: Okay, Your Honor. I appreciate it.

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1771

THE COURT: Okay. Now, Mr. Brothers, what matters

are there that you wish to take up?

MR. BROTHERS: First of all, some good news for the

Court. I believe we have resolved all the objections that

defendants had with regard to Dr. Carbonell's slides, so we

won't have to take that up.

A ray of light.

THE COURT: I'm shocked.

MR. BROTHERS: I thought that might please the

Court. You know, after a couple weeks maybe we can begin to

all get along together. I'm not holding my breath, however.

At this point plaintiffs wish to make a Rule 50

motion with regard to the case that defendants have

submitted, specifically with regard to defendant's invalidity

and laches case.

As the Court knows, that under Rule 50, JMOL may be

granted when a party has been fully heard on the issue, there

is no legally sufficient evidentiary basis for the jury to

find in that issue. With regard to the invalidity defense,

we believe that defendants cannot satisfy this clear and

convincing burden regarding proof of either anticipation or

obviousness, or another defense that was pled, of which no

evidence has been submitted, and that relates to the lack of

written description.

With regard to anticipation, Dr. Ungar asserted two

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JODY A. STEWART, Official Court Reporter

1772

prior art references; the Bowman and the Culliss references.

To show a claim is invalid for anticipation, that single

prior art reference must expressly or inherently disclose

each claim limitation.

With regard to Bowman, defendants have not proved by

clear and convincing evidence that Bowman disclosed the

content, combining and filtering of both the '420 and the

'664 patents. In fact, Dr. Ungar admitted that Bowman ranks

and that filtering itself does not appear in the Bowman

patent and that he said ranking and filtering are different.

Likewise, with regard to Culliss, there is no

evidence, clear and convincing evidence that Culliss

discloses the content, combining the filtering limitations in

the asserted claims. Culliss considered, was considered or

rejected by the patent office, and Dr. Ungar admitted that

under his view, Culliss does not invalidate the asserted

claims.

With regard to obviousness, Ungar, Dr. Ungar failed

to set forth sufficient clear and convincing evidence to

show, consistent with -- as regarded by Federal Circuit

precedent, they must prove by clear and convincing evidence

that a person of ordinary skill of art in the field of the

invention, who knew the prior art at the time, would have

come up with the invention disclosed by the asserted claims.

And Dr. Ungar never connected up the pieces of prior art that

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JODY A. STEWART, Official Court Reporter

1773

were identified. He put up the five, the Lascara, the Rose

patents. He never explained how those used in combination

with each other rendered the asserted patents obvious.

Instead, he went and just referenced it and said, oh, it's

obvious. Obviousness requires a combination. So there is no

evidence, let alone any clear and convincing evidence, that

those combination of either Fab, Rose, Webhound, even in

conjunction with Bowman and Culliss, render the claims'

obviousness.

He also admitted that he had not tested the asserted

obvious combinations or any asserted obvious combinations to

get the same results of the patents-in-suit. And the Federal

Circuit requires that before something can be found obvious,

there must be testing to show that the alleged obvious

combinations result in the same teachings and the same effect

of the asserted claims. And in the absence of such evidence,

we believe JMOL is appropriate.

With regard to defendant's pled defense of lack of

written description, defendants have provided absolutely no

evidence to support that affirmative defense. They pled it

and they have abandoned it here at trial.

I also believe that JMOL is appropriate because

Dr. Ungar failed to follow the Court's claim construction

ruling in six aspects, and because he failed to follow the

Court's claim construction ruling, his testimony is

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JODY A. STEWART, Official Court Reporter

1774

inappropriate. First, with regard to scanning a network, his

testimony was contrary to the Court's claim construction. He

interpreted scanning a network to essentially mean spidering,

which this Court said was not that interpretation.

And although he was careful not to use the term

"spidering," he admitted during his testimony he had no other

opinions for scanning a network that did not include what

spidering was because that is all he disclosed in his report.

He said in his testimony, all it could be is

scanning of information on the Internet, which is the same

thing as spidering. Dr. Ungar testified, his construction of

collaborative feedback data, it was inconsistent with this

Court's claim construction. He improperly read in the mind

pools limitation of other nonasserted claims to try and

interpret and limit the meaning of collaborative feedback

data. Mind pools were a different embodiment in the claims

not asserted in this case. And Dr. Ungar's repeated

references to mind pools in trying to interpret collaborative

feedback data was inappropriate.

Likewise, he attempted to read in claims with

respect to wires, which are, again, claims not asserted in

this case. And limitations and embodiments relating to wires

to limit and interpret collaborative feedback data is

contrary to the Court's claim construction.

With respect to the claims of the '664 patent,

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1775

Dr. Ungar improperly imported the collaborative feedback data

limitation of the '420 patent into the '664. In fact,

Dr. Ungar admitted that under his interpretation of the '664

patent, as he was attempting to import that collaborative

feedback data limitation, it would exclude the preferred

embodiment of the '664 patent, and that is contrary to

Federal Circuit law.

Dr. Ungar's evidence that he offered, his testimony

were an improper attempt to reargue claim construction, and

based upon that his testimony with respect to invalidity,

quite frankly, as well as noninfringement, has suffused his

entire testimony, and we believe that judgment as a matter of

law against defendants is appropriate on that.

Finally, the last claim construction was Dr. Ungar's

attempt to improperly interpret the preamble as a limitation.

This Court repeatedly ruled the preamble is not a limitation.

The jury was permitted to hear some evidence which the Court

later struck. Dr. Ungar's testimony that the preamble is a

limitation, substantive limitation is inconsistent with this

Court's claim construction and contrary to Federal Circuit

case law.

We also move, with regard to the laches, affirmative

defense. To prevail on laches defendants must show that

plaintiff delayed in a reasonable and excusable time in

filing suit, and that the delay resulted in material

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JODY A. STEWART, Official Court Reporter

1776

prejudice to the defendant.

And as this Court knows, the plaintiff's delay in

filing suit is measured from the time that the patentee knew

or reasonably should have known of the defendant's alleged

infringement.

The reasonableness of delay must be judged based

upon the patentee's knowledge at the time of the delay, and

there is no evidence that the defendants offered that I/P

Engine or Lycos, for that matter, knew or should have known

that Google's system infringed more -- they had that

knowledge more than six years prior to the date of filing

suit.

The one document the defendants introduced into

evidence, Plaintiff's Exhibit 176, which was referenced by

Mr. Alferness, that was a document the plaintiffs had -- I'm

sorry, the defendants had previously identified as a

laches-related document. It is from July 2005.

Mr. Alferness disavowed that document. He said that it

contained inaccurate description of Google's AdWords system

and that one could not rely upon that document to understand

how the system worked. Thus, there is no evidence whatsoever

to support the laches affirmative defense. That fact in and

of itself is fatal.

But defendants must also show, even if there was

evidence that Lycos knew or should have known prior to

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1777

September 15th, 2005, that Google was infringing, defendants

must also show that the delay resulted in economic or

evidentiary prejudice. There has been no showing on either

point.

There is no showing that Google or any of the other

defendants had any monetary losses that could have been

prevented by an earlier suit, because that loss must be

caused by a change in the economic position with the alleged

infringer during the period of delay. Not only was there no

period of delay, the evidence is that Google would have been

done doing what it was doing all along. So there is

absolutely no evidence of economic prejudice on the record.

Likewise, there is no evidence of evidentiary prejudice such

as the death of a key witness or other loss of evidence.

Finally, again moves for judgment as a matter of law

on the damages testimony that it has just heard from

Dr. Ugone. Dr. Ugone testified that his -- at deposition

that his 3 to 5 million, that number was based on his

yardstick or his comparable result, a method that this Court

has excluded.

With regard to the specific data points, there is

the same in October or -- yeah, October 2004 of Lycos to the

Korean Company, Daum. Dr. Ungar acknowledged that was not in

his Georgia-Pacific chart, and it is not. It cannot be found

in his Appendix A identifying that as a Georgia-Pacific

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JODY A. STEWART, Official Court Reporter

1778

factor. So that testimony can and should be disregarded. It

was used solely as the data point for a comparable or a

yardstick.

With regard to the Meyer agreement, there was no

allegation of infringement to Google as a result and no

evidence of use by Google, and as a result using that as

comparable agreement is improper under Georgia-Pacific. Even

if the technology may be comparable, the facts were

completely different.

With regard to the $3.2 million purchase price of

the patents in 2011, that is legally irrelevant as a matter

of law. It is undisputed that Lycos made no inquiry into

Google's infringement at the time of the sale, and the sale

price does not equal under the statute a measure of damages

because under Section 284 damages are measured by the use,

i.e., of infringers of the patents. For example, if the

patents had been inherited or purchased at bankruptcy for a

hundred dollars, that is absolutely not probative of the

value of those patents.

The proper measure of damages under the law are the

defendant's infringing uses. And for those reasons we

believe that judgment as a matter of law under Rule 50 is

appropriate. Thank you.

THE COURT: Thank you.

MR. NELSON: Thank you, Your Honor. So let me take

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1779

them in the order it was addressed. I believe initially

there was, with respect to the anticipation references, there

was a motion regarding Bowman and Culliss saying there could

be no anticipation as a matter of law.

With respect to Bowman, I believe there were two

arguments. He said that there was no testimony that Bowman

does filtering because the word "filtering" never appeared.

Last I checked, that's not the law. The words don't have to

appear in the reference for there to be -- for it to have the

disclosure.

In fact, Dr. Ungar testified at length why filtering

was, in fact, disclosed in Bowman. Among many other things,

there is a thresholding described where there is a ranking

value that is determined for the particular item, and there

is a threshold set. And if it's below that threshold, it is

not displayed. If it is above that threshold, it is. It

might sound familiar because that's exactly what they are

using infringement in the case with the LTD score. So Dr.

Ungar explained that at length. He explained a number of

other things where a set of n is shown. So you only take the

top values, which would be filtering as well.

In terms of the content, again, Your Honor, he's

testified at -- he testified at length why it does, in fact,

disclose content filtering. Some of the examples are

descriptions in the Bowman reference where there is matching

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JODY A. STEWART, Official Court Reporter

1780

of the query terms to terms that appear in the item and the

score is adjusted based upon that. Therefore -- and what he

testified is that function is a content-based function

because it takes a comparison of the query to words content

of the item and adjusts the score accordingly.

So for those reasons, the -- there is no merit to a

judgment as a matter of law on the Bowman reference.

As to the Culliss reference, the only thing that I

heard was the idea that it didn't disclose content filtering.

In fact, it does, and Dr. Ungar explained at length why it

does disclose content-based filtering. In fact, the tables

that he referenced in Bowman that are updated with apparently

what plaintiff agrees is feedback data are initialized with

content data based upon, among other things, that he

testified, the frequency of the terms in the articles that

are being indexed. Therefore, that is a disclosure of the

content-based filtering with a combination of collaborative

filtering.

Now, there was some testimony that he didn't apply

the Court's claim construction. That is not actually what

occurred. He testified at length in both in direct and under

cross-examination that he applied exactly the Court's claim

construction to the prior art when he was doing his

anticipation analysis. There was some testimony as to

whether he was applying the construction as Dr. Frieder

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JODY A. STEWART, Official Court Reporter

1781

applied them for purposes of infringement analysis, which, of

course, is entirely appropriate.

He applied the constructions, he applied the

appropriate clear and convincing evidence standard -- I

believe Your Honor heard that testimony -- and said that I am

looking at the prior art and applying the same analysis that

Dr. Frieder did for purposes of his infringement analysis.

So to suggest that he did not apply the claim

constructions and did not agree that these anticipated, under

the plaintiff's application of those to the accused products,

is simply incorrect. That testimony is very clear in the

record.

Now, as to obviousness, there were several

statements with respect to obviousness, that there was no

combination that was referenced. In fact, that is not

correct. What Dr. Ungar did first and foremost was to

address the Graham factors, which is, of course, the most

important factors of the obviousness analysis and show how

the claims, the asserted claims in this case were obvious in

light of those Graham factors.

He addressed KSR, and he talked about the specific

combinations that were -- he showed the disclosure in the

prior art, and, for example, there was some cross-examination

that with the Webhound reference, for example, that that did

not show filtering with respect to the query. And Dr. Ungar

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stated very clearly that when he combined that with the

Bowman reference, which plaintiff does not dispute, that that

shows filtering with respect to the query. You have

obviousness for that, and he did that with respect to a

number of other combinations. If you want me to, I can go

through all those at length, Your Honor, but those would be

some examples.

Now, as to -- there was some statement as to the law

that testing of the combination is required. That's not the

law. I'm not sure what case they're referring to, but the

law is, as I just said, is the Graham v. John Deere case, the

KSR case, and he's addressed both of those standards. So I'm

not actually sure what I/PE's counsel is talking about with

respect to that additional requirement.

Now, as to written description, we are not pursuing

a written description offense. So unlike the IP's argument

with respect to doctrine of equivalents, we can take that out

of the case right now, Your Honor.

With respect to then -- I'm not sure exactly what we

are talking about in the motion with respect to the claim

construction. I don't know if that was intended to be an

additional support for the anticipation or obviousness or

what it was. But let me just address the claim constructions

one by one.

So with respect to scanning and network, IP's

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counsel said that Dr. Ungar did not apply the Court's claim

construction. That is incorrect. He put the Court's claim

construction up. He testified under the Court's claim

construction, and for about 45 minutes on cross-examination

he testified about the scanning/network limitation under the

Court's claim construction.

In fact, it was on cross-examination where I/PE's

counsel put up something that was not the Court's claim

construction in an attempt to cross-examine him on that. In

terms of this notion that spidering is what he said, scanning

a network limitation was, the word "spidering" never came out

of his mouth. So I'm not sure where that comes from. He

applied the Court's claim construction, and there is no basis

for that.

To the collaborative feedback element, again, he put

up the Court's claim construction. He applied the Court's

claim construction. As to the statements that he imported

limitations from the embodiments, as Your Honor knows, there

were several side bars and several discussions. There was

never a statement made by Dr. Ungar that the construction was

limited by the embodiments, rather, they're illustrative

examples of the patents. He was very clear on that. So

there was no limiting instruction that said, yes, these are

limited to mind pools.

So he applied the Court's claim construction. As to

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wires, I'm not even sure what they are talking about, Your

Honor, so it becomes a little bit difficult to address. I

would challenge them to find anywhere in Dr. Ungar's

testimony where he referenced wires with respect to the

collaborative feedback element and said that they were

limited to wires. They were not. The only time wires came

up was a discussion in the invalidity section responding to

plaintiff's suggestion that the patent office had already

considered various things, and there was a discussion of the

final office action and the notice for allowance which showed

that the patent office focused on the element of wires. But

there was no testimony that the Court's collaborative

feedback claim construction was limited to wires, and, in

fact, he applied the Court's claim construction.

As to the '664, the testimony that I/P's counsel

referenced doesn't apply to the collaborative feedback

element, it wasn't even in reference to the collaborative

feedback element. There was some testimony that the

noninfringement argument that was being made and the way the

claim was applied may not be shown in embodiments in the

patent. And the testimony was that neither experts's

application was.

So, again, he applied the Court's claim

construction, and there is no evidence that he didn't. In

terms of the preamble not being a limitation, as you know,

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Your Honor, you kept -- policed that very carefully. There

was no noninfringement argument made to that regard. In

fact, the only testimony and the only box checking has been

on plaintiff's side with respect to that. So this is not --

certainly not a factor in the invalidity case, which is what

I believe the motion was directed to.

With that, Your Honor, I believe that deals with the

invalidity stuff. With your permission, I would like to have

one of my colleagues, Mr. Sohn, address the laches motion, if

Your Honor is okay with that?

THE COURT: That is fine. I will say this before

you start your arguing. You can go on and argue it but the

Court is not going to rule certainly on -- the Court is not

going to rule on any of these motions this afternoon. The

Court wants an opportunity to address these motions, plus the

Court wants an opportunity to read your submission on laches.

So you'll have to get my decision on all of these things

tomorrow morning.

The Court needs time to digest some of these

documents. So I'll hear your argument on laches, though.

MR. SOHN: Okay. Thank you, Your Honor. As I

understand it, plaintiff has made two arguments for why they

deserve judgment as a matter of law on laches. First, they

argued that there is no evidence this suit was delayed for

more than six years after they knew or should have known of

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the infringement. I understand that they are raising that

argument to say there is no presumption of laches. It was

simply delayed -- there is a presumption of laches.

Secondly, they argue there is no affirmative

evidence of prejudice that defendants have put into the

record. We respectfully submit that both these arguments are

fraud. Let me speak to the presumption first. So the

presumption of laches arises if there's delays more than six

years after the actual or constructive notice, and the

Federal Circuit is very clear that published inscriptions of

the allegedly infringing technology or technology similar to

the allegedly infringing technology are sufficient for

constructive notice.

Now, plaintiff referenced there has been a July 2005

blog post by Google put into evidence, Plaintiff's Exhibit

Number 176, and this describes quality score in exactly the

same terms that it was described in plaintiff's own

complaint. I'll just very briefly quote from that document.

It says, quote, the quality score is simply a new name for

the predicted CTR, which is determined based on the CTR of

your keyword, the relevance of your ad text, the historical

keyword performance and other relevancy factors." So what

Google is saying in this blog post is quality score is based

on ad text to relevance and CTR, and, Your Honor, that is

exactly how they described quality score when this complaint

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was ultimately filed in September 2011, more than six years

after that blog post is published, and I'll just very briefly

quote from Paragraph 43 of their complaint. It says,

"Google's search advertising systems filter advertisers by

using a quality score, which is a combination of an

advertisement content relevant to a search query, e.g., the

relevance of the keyword and the matched advertisement to the

search query and click-through rate from prior users relative

to that advertisement, e.g., the historical click-through

rate of the keyword and the matched advertisement."

So this 2005 disclosure prestages the same

infringement allegations plaintiff made in his complaint.

Therefore, the complaint could have been filed as early as

2005.

Now, plaintiff's counsel alleged that Mr. Alferness

disavowed Plaintiff's Exhibit 176, his blog post. Well, Your

Honor, certainly Google does not believe that the

descriptions in its blog post are a technically accurate

depiction of how the system works. The point is that being

near the allegations of other systems that plaintiff made in

his complaint.

So plaintiff was on notice of its infringement

allegations as early as July 2005 because the quality score

was described in July 2005, the same way plaintiff described

it more than six years later.

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So for that reason, Your Honor, we submit that the

delay was more than six years, the laches presumption does

apply. So, of course, once the presumption applies, it is

plaintiff that bears the burden of rebutting either the

unreasonable delay upon laches or the prejudice part of

laches.

Now, plaintiff didn't say anything in their

presentation about the unreasonable delay prong, and we

respectfully submit that there is no evidence of a valid

excuse that's been raised to excuse the six plus year delay.

As the prejudice prong, plaintiff said that defendants

haven't affirmatively introduced their own evidence of

prejudice.

Well, Your Honor, that has it backwards. Once the

presumption applies, it's plaintiff's burden to come forward

with evidence that defendants have not suffered prejudice,

and they haven't done so. There has been no evidence that

defendant lacked prejudice. That being the case, as we

referred to earlier, defendants are submitting a proffer,

proffer of evidence showing that the memories have faded,

documents have been lost, and therefore we do believe that

defendants have affirmatively shown prejudice.

However, on the down side, it is not the defendants'

burden. It is plaintiff's burden to rebut the prejudice, and

they have absolutely failed to do so.

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So for all those reasons, Your Honor, we

respectfully submit that laches certainly does apply.

THE COURT: Let me ask you a hypothetical question.

Let's assume hypothetically if the Court believes that the

presumption had not arisen of laches, such that the plaintiff

would be required to rebut it, what evidence of any would you

cite? You said you have -- you made a reference to loss --

memory loss or something else. What evidence would you cite

if you were in that position showing prejudice to the

defendant by virtue of the delay?

MR. SOHN: So the evidence in our proffer, I will be

happy to run through some of the specifics.

THE COURT: It is already in your transcripts?

MR. SOHN: It is in the proffer that we submitted to

the Court. I'd be happy to run through it.

THE COURT: The Court will read it. The Court will

read what you have submitted.

MR. SOHN: Thank you, Your Honor.

THE COURT: All right, gentlemen. Here is where we

stand here.

MR. NELSON: Do you want Mr. Wilson to address the

damages? It's not really a defense, Your Honor.

THE COURT: Oh, okay.

MR. WILSON: They made some arguments, Your Honor.

I'm happy to address them. I can be brief.

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THE COURT: All right. Go on.

MR. WILSON: So, Your Honor, the first argument that

Mr. Brothers made relates to the 3 to $5 million and the

proxy yardstick method. I think we've been over that with

regard to Dr. Ugone's testimony. In fact, I pointed him to

additional portion, the earlier portion of his deposition

where he testified that the 3 to $5 million comes from his

evaluation of the hypothetical negotiation. They had crossed

on that point. That is not a basis for judgment as a matter

of law.

It is clear from his report and his presentation

where he evaluated each one of the Georgia-Pacific factors,

and that he did testify that the 3 to 5 million came from his

evaluation of hypothetical negotiation.

The second point that plaintiffs seem to make is

they criticize each of the main transactions that Dr. Ugone

relied on in comparing to Dr. Becker's analysis, and those

are the Daum transaction, the Meyer agreement and the 2011

sale, as you heard.

Plaintiff has this exactly opposite. They turn

everything upside down. Their damages expert comes in and

relies on agreements that don't involve the patents-in-suit,

they are after the date of the hypothetical negotiation, and

they don't involve any of the parties in suit.

Dr. Ugone's reliance on these transactions relate

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to, for instance, in the Daum transaction in 2004, that

involved the patents-in-suit. The Carl Meyer transaction,

that is a licensed -- or a purchase of comparable technology

that involves Google, one of the parties in suit.

And similarly, the 2011 transaction involves, again,

the patents-in-suit and the purchase and sale agreement. So

that's exactly what the Federal Circuit says that experts

should be relying on in reference to licenses or purchase

transactions that are pulled out that go beyond the scope of

the parties and the patents that are involved in the case.

So, you know, more than being just not a basis for JMOL on

their part, it actually revealed the fundamental flau really

with their entire damages analysis.

And then finally, we keep hearing this idea that

somehow the reasonable royalty must be sufficient to

compensate the patentee for the alleged infringer's use.

And, you know, we look at the statute language, and what

plaintiffs seem to be arguing and implying to the jury is

that if you don't have a running royalty, if it's not

directly tied to a running royalty format, then that is not

tied to use.

And we heard a lot of cross-examination today with

Dr. Ugone, and he dealt with those questions, but it's clear

that as a matter of law you don't have to have a running

royalty as a reasonable royalty. A lump sum is equally

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acknowledged by the Federal Circuit. It is well recognized

as an alternative, and lump sums and running royalties stand

side by side as potential frameworks for the reasonable

royalty. Most recent case on that that I can think of is

LaserDynamics and I believe also Unilock addresses that, but,

anyway, it is a fundamental point that goes way beyond those

cases.

THE COURT: Thank you. You're not back again for

more argument, are you?

MR. NELSON: No, no more argument, but at this point

in time I'm renewing our Rule 50(a) motions that we argued to

you last week, I believe it was Wednesday, Your Honor. We

have made a written submission to Your Honor so you have

that. If you would like any more argument on any of those, I

am perfectly happy to address those now.

THE COURT: You don't need to do that. You made a

written submission on it, so you have given me plenty to

digest.

MR. NELSON: Thank you, Your Honor.

MR. BROTHERS: Thank you, Your Honor. We responded

verbally to their Rule 50(a) motion last week. This morning

they filed essentially the same thing. You require written

response?

THE COURT: I don't require written response. I

think we recall where you went.

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MR. BROTHERS: Thank you, Your Honor.

THE COURT: Okay. In terms of where we are going to

be going tomorrow, the Court's anticipating that we may get

to the closing arguments tomorrow in this case. So you

should prepare in that sense, because we are estimating, if I

make it to the lunchtime with completion of the testimony, we

will take probably about an hour, won't take me no more than

an hour, to go through these jury instructions, and sometime

tomorrow afternoon we will get to closing arguments in this

case. That is what the Court anticipates. That may not

happen. But be prepared in case we say we are going to do

it.

MR. NELSON: So on that point, Your Honor, I don't

think we have discussed yet the length.

THE COURT: Well, I'm sure you are going to get to

that. I'm here so let me hear.

MR. NELSON: Well, it is just a question, Your

Honor.

THE COURT: Okay. The Court would anticipate -- I

think I gave each party something like an hour in the

beginning, and an hour for closing is probably enough. I

will caution you the jury stops listening after about 30

minutes anyway, but you have an hour. I think an hour is

enough.

MR. NELSON: That is --

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THE COURT: You divide your time by an hour. We

will try doing that. But certainly the Court will not get to

the jury with any instructions tomorrow. We are not going to

do that. And what we are going to try to do, I don't want to

waste a day, but I do not want to split up the arguments,

either. We are not going to split the arguments. So we are

going to try to work it out so the arguments are on the same

day.

MR. NELSON: Okay. Thank you, Your Honor.

THE COURT: We will see how efficiently we can be

tomorrow.

MR. BROTHERS: Two points on that, Your Honor.

First, we, of course, will have rebuttal, carrying the burden

of proof. I want to make sure that we understand we will

have some time to respond after the defendant's closing for

our rebuttal.

THE COURT: Well, I said we are not -- the Court is

not going to deprive anybody of any entitlement regarding

argument. You divide your time any way you want to divide

your time.

MR. BROTHERS: All right. And the second point

is -- this was not something I raised with opposing counsel,

but with respect to the exchange of slides for closing, I

think under the pretrial order we are supposed to exchange

them at 7:00 p.m. tonight if we are doing closing tomorrow.

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I would propose that we exchange an hour before closing

instead of tonight, if there is no objection.

THE COURT: I don't know what time you are going to

get before closing, but you can certainly start thinking

about it.

MR. BROTHERS: Sure.

THE COURT: It all depends on how the time works out

tomorrow on this case. If we finish, we break before lunch,

I'm send them out early to lunch, and we will try to work it.

I just don't know. We will adjust it as we go along.

MR. BROTHERS: That is fine. Thank you, Your Honor.

THE COURT: All right. Thank you. Recess Court

till tomorrow morning at 10:00.

(Hearing adjourned at 3:54 p.m.)

CERTIFICATION

I certify that the foregoing is a correct transcript

from the record of proceedings in the above-entitled matter.

X_________________/s/_____________________x

Jody A. Stewart

X______10/30/2012________x

Date

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I/P Engine, Inc. v. AOL, Inc. et al, Docket No. 2:11-cv-00512 (E.D. Va. Sept 15, 2011), Court Docket

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General Information

Case Name I/P Engine, Inc. v. AOL, Inc. et al

Docket Number 2:11-cv-00512

Court United States District Court for the Eastern District of Virginia

Nature of Suit Property Rights: Patent

Related Opinion(s) 283 F.R.D. 322 874 F. Supp. 2d 510 2012 BL 329705