1 2 3 4 5 VIRNETX, INC.

-vs-

THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS TYLER DIVISION ) ) ) ) ) ) DOCKET NO. 6:10cv417 Tyler, Texas 9:00 a.m. July 12, 2012

CISCO SYSTEMS, INC., ET AL 6 7 VIRNETX, INC. 8 -vs9 MITEL NETWORKS CORP., ET AL 10 11 12 13 14

*************** ) ) ) ) ) DOCKET NO. 6:11cv18

TRANSCRIPT OF MOTIONS AND MARKMAN HEARING BEFORE THE HONORABLE LEONARD DAVIS, UNITED STATES CHIEF DISTRICT JUDGE

A P P E A R A N C E S 15 16 17 SEE SIGN-IN SHEETS DOCKETED IN THE MINUTES OF THIS CASE. 18 19 20 21 22 23 24 25 Proceedings taken by Machine Stenotype; transcript was produced by a Computer. COURT REPORTER: MS. SHEA SLOAN 211 West Ferguson Tyler, Texas 75702

2 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 please. THE CLERK: Court calls Cases No. 6:10cv417 and P R O C E E D I N G S THE COURT: All right. Please be seated. Ms. Ferguson, if you will call the case,

6:11cv18, VirnetX v. Cisco Systems and Mitel Networks Corporation, et al. THE COURT: Announcements. Good morning, Your Honor, Brad

MR. CALDWELL:

Caldwell from McKool Smith on behalf of the Plaintiff VirnetX. With us today is Mr. Robert Parker, Mr. Chris Bunt. Craig

Toliver from my firm, Austin Curry from my firm, and Jason Cassady from my firm. Plaintiff is ready, Your Honor. THE COURT: MR. TINDEL: Defendants. Your Honor, Andy Tindel. I'm here on

behalf of plaintiff, Science Applications International Corporation. THE COURT: Thank you, Mr. Tindel. I think the

plaintiffs were about to move for default. All right. MR. TINDEL:

No one answered.

I'm trying, Your Honor. Good morning, Your Honor. Michael

MR. RICHARDSON:

Richardson from Beck Redden here for the Siemens Defendants. Also with me is Mike Renaud, Mike McNamara, and Alex Fennell.

3 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 THE COURT: MR. GREEN: All right. Thank you. Christopher

Good morning, Your Honor.

Green of the Fish & Richardson Firm here for Defendant Avaya, Inc. With me today is my partner, Ruffin Cordell, and Mr.

Brian Boyd. THE COURT: MR. JONES: Okay. Your Honor, Mike Jones for the Cisco

Defendants with Mr. Eric Findlay, Mr. Mike Stadnick, and Mr. Brad Black. MR. WILLIAMS: Williams for Apple. Good morning, Your Honor. Danny

With me today I have Scott Woloson with I have also with me Steve And we have a client

my firm, Terry Morgan of my firm. Edwards of the Albritton Law Firm. representative Katie Prescott. We are ready to proceed. MR. MAZZINGO:

Your Honor, Jason Mazzingo this

morning here for the NEC Defendants. THE COURT: All right. Okay. Thank you. What other client

Very well.

representatives do we have here, other than the one that was just referred to? MR. GREEN: Your Honor, this is Christopher Green. We have on behalf

I beg your pardon and my client's pardon.

of Avaya, Mr. Joe Curcio in attendance today. THE COURT: Anyone else have any client

4 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 morning. representatives here? All right. We have several matters to cover this A few

Let me start with a couple of observations.

weeks ago Judge Gilstrap had a quote that I heard that he gave of Oliver Wendell Holmes which says that lawyers spend a great deal of their time shoveling smoke. And that really struck a bell with me when I heard that quote. I had never heard it before. But I think there

has been a lot of that going on in this case. I have reviewed all of the materials that are before me today, and we are going to go through them. But I have got

to tell y'all I am, as Judge Gilstrap said, I am gagging on your smoke. Y'all are way, way overpapering, overlitigating, not being agreeable, creating issues where there don't need to be issues, on both sides; and you are causing a great deal of expense to your clients that I, frankly, feel is unnecessary. This is a trial court. I want to help you get your This is not a

case resolved either by settlement or trial. summary judgment court. about.

That is not what this Court is

I will grant summary judgments when they are meritorious and when they are truly a legal issue. But -- we

will get into it in a minute -- there is an overabundance of people feeling like -- and I want to explore with you why you

5 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 are doing it -- I don't understand it -- filing summary judgments on every possible issue. I don't know whether you

are thinking -- surely you are not thinking you are going to get them all granted. Or maybe you are using a shotgun approach. Maybe,

you know, younger lawyers in the firm are just -- each one have their issue, and nobody is minding the store as far as what gets brought to this Court. overwhelming us with motions. And I have said it before in seminars and I will say it again to you today, if you really want this Court or any other court to look at some of these motions, use some judgment. You know, pick what you really think you have got a But you are literally

chance of getting granted, and don't shotgun but shoot with a rifle. You lose so much credibility, both sides do, when you

just -- every conceivable issue gets papered with a motion for summary judgment. So I have got three areas I want to work through with you this morning and see if we can get this case narrowed down and some of the smoke out of the room and get you moved toward getting this case ready for trial. The first area is I want to talk about the letter briefs that have been filed. The second area I want to talk

about and work through are all of the discovery and other motions that are pending. And then the third area, as time

6 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 allows, will be the Markman that we will be revisiting. So let me start with the letter briefs. This Court

a number of years ago implemented a standing order regarding letter briefs because of the large number of pending patent cases in this Court, to really accomplish three purposes: increase the efficiency of cases proceeding to trial; to decrease the trial costs for the parties for their clients, and to save time for the Court and the parties; and, finally, to sharpen the Court's focus on the truly dispositive issues and the most important issues in the case. The Court further adopted the letter brief procedures because parties were filing summary judgment motions on nearly every major trial issue, again, wasting both the client's money and the Court's time with non-meritorious motions. The parties in these two cases have proven the old adage that "no good deed goes unpunished," or it could be said that these cases personify the unintended consequences of implementing a policy that was directed at reducing the amount of work for the parties and the Court, while also decreasing the cost of litigation for your clients; and I think we have accomplished exactly the opposite in this case. These (indicating) are the single-spaced letter briefs that I have received in this case. And, for the To

record, I am holding up two stacks, two to three inches each,

7 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 briefs. single-spaced. Many of these are copied on both sides.

By my count -- and it is hard to keep track of them because they keep coming in -- I have 52 different motions for summary judgment and motions to strike, among the two cases. In other words, if you assume each letter brief is four pages single-typewritten, I have 208 pages of single-spaced letter briefs that the parties have filed asking leave to file motions for summary judgment. To put that in context, the Local Rules of this district impose a collective 60-page limit on all summary judgment motions, double-spaced. the wrong direction. I think you have taken what -- and missed the whole point of what we were trying to do here. And, again, you are So I think we are going in

back to shooting with a shotgun, and most of them are going to get very little attention. The Court, however, has read all of the letter Some are not even marginally close to being Some are in direct contradiction to the And some appear

meritorious.

positions you took earlier in the case.

worthy of further study and consideration. Now, what to do about that -- well, let me say one other thing first. Additionally, many of the motions across

the two cases are repetitive and could have been filed as a single motion across both cases as to all parties. And,

8 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 again, in those instances, you have done a disservice to your clients by wasting their money and to the Court by filing separate motions regarding precisely the same issue, all of which have to be reviewed and sorted out by the Court. I want to say this about these two separate cases: There seems to be some conception that, since the AIA, every case and every party is allowed to proceed on its own, you know, and file as much stuff and get as much stuff as they want, with the Court. That is not the case in this Court.

You have requirements that the Court is going to follow the AIA as far as severing cases among defendants, but it doesn't entitle you to not cooperate and coordinate your discovery or motion filing and that type of thing. Let me ask right now, do the Defendants have a joint defense group in either case or among both cases? MR. RENAUD: Your Honor, there is an active joint

defense group within the community of Mitel Defendants, and we are fairly active in coordinating. There is a very infrequent

contact with the Cisco group, which is a separate community of defendants. MR. STADNICK: Cisco case. Your Honor, Michael Stadnick for the

In the Cisco case -I can't hear you. If you would go to

THE COURT: the podium, please.

MR. STADNICK:

Yes, Your Honor.

Michael Stadnick

9 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 for Cisco. In the Cisco case there is also a joint defense As Counsel

group amongst the defendants in the Cisco case.

just mentioned, there has been some informal discussions between the two joint defense groups in the two cases. THE COURT: Well, let me encourage y'all to have

more communication between the two defense groups, and see if you can't coordinate some of the activity in these two cases. Okay? MR. STADNICK: Yes, sir. We will certainly do that

going forward, Your Honor. THE COURT: Now, what to do about this. Frankly, I

am inclined to just deny all of them, or to spend a couple of hours trying to sort through them all. But I think what I am So we have

going to do is I am just going to grant them all.

accomplished absolutely nothing by the letter brief writing. But you will remember, and I am going to impose and modify and force you to do what you should have done initially, and that is view these things critically, make strategic decisions, get your meritorious points up-front, and forget the other stuff. So what the imposition is going to be with regard to motions for summary judgment, you can file as many different ones in one motion as you wish, as many different issues as you wish. briefs. There will be no cross-referencing your letter

So any authority you want the Court to consider needs

10 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 to go in there. Plaintiffs are going to be limited to 40 pages. Defendants are going to be limited to 40 pages collectively and then an additional ten pages per individual defendant if you have different issues. Hopefully, you will not put in

three lines as to each motion you want the Court to consider; and you will, as I said, prioritize and get, up front for the Court to consider, issues that will either dispose of something major in the case or issues that will be case dispositive and involve purely legal issues. If it has got fact disputes in it -- and maybe -- I don't know whether you are, you know, just listening to each other and you get so wrapped up that you just think you are going to win on every issue; but get somebody on your side of the case to play devil's advocate and say, really, what is the Judge going to do with this? say with this? What is the other side going to

And try not to overburden the Court with so

many non-meritorious motions with regard to the summary judgments. With regard to the motions to strike, I am not going to give you a limit on that, but it will follow the general rules on your motions to strike that you filed; but, again, I encourage you to, again, think strategically and not bring to the Court a motion to strike everybody in the case. If you are worried about preserving error, work with

11 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 the other side. I mean, you can enter into a simple

stipulation, you know, we wish to preserve error as to your expert on such and such. And see if you can work something

out like that without having to bring a motion. Or bring a motion if you want to and the other side, and just clue me in, Judge, we are just doing this to preserve error. We don't really want you to have to spend your time

going through it because it is that close of a call. Okay. Any questions on the letter briefs? No, Your Honor. Any questions on -- do you need

MR. CALDWELL: THE COURT:

Okay.

any guidance on summary judgment motions and what you should be pursuing and shouldn't be pursuing? MR. CALDWELL: The only clarification, and I think

it is probably implicit in the procedure Your Honor described, but if the plaintiff gets 40 pages for opening and the defendants get 40, plus a module for each defendant as a separate issue, I assume we need corresponding pages for our response? In other words, if they have four different defendants and that results in a total of 80 pages that the defendants were to file, presumably -- and plaintiff responds to the summary judgments, we will get to match up however many pages they used in filing the motions in the first place? THE COURT: I would hope that would not be the case.

12 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 not. MR. CALDWELL: THE COURT: Me, too.

I would encourage defendants to file a

joint response where possible, and then very limited briefing individually. Don't rehash -- I have got some motions for

summary judgment in here that are -- they are exactly the same thing. The only thing different is the changed parties. I

don't know -- I don't see the point in that. But I don't know if that answered your question or If you have some specific request with regard to page

limits and numbers. MR. CALDWELL: to make things fair. No, Your Honor. I guess I was trying

I know that when we filed the summary

judgment motions, I believe Your Honor said the defendants could file 40 pages collectively and then an additional 10 pages -THE COURT: on summary judgments. MR. CALDWELL: Precisely, and I'm just wanting to No, no, that is for their opening briefs

make sure that the plaintiff has to respond -- if the defendants availed themselves of that option and ended up filing 40-plus -THE COURT: I see. -- I just want to make sure the

MR. CALDWELL:

plaintiff gets, at least, a corresponding number. THE COURT: Yes, you can respond accordingly.

13 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 time. MR. CALDWELL: THE COURT: Hopefully, it is 10 pages total.

Right. But I just wanted to make sure. Mr. Williams. Clarification on the page

MR. CALDWELL: THE COURT:

All right.

MR. WILLIAMS: numbers also.

Yes, sir.

There are, potentially, motions going both So

directions, plaintiffs' and defendants' and vice versa.

are these page limits for the total -- so, for example, let's suppose that the plaintiff filed a 20-page opening brief and a five-page reply, let's say we stay within 40 pages each, they would have to have 15 pages to respond to ours. what I am saying? THE COURT: No. All right. Let me try this one more Do you follow

MR. WILLIAMS:

We have motions going, so they will have, let's say, an We will have a response. And then

opening brief against us. presumably a reply.

Then we would have a motion, say, going

in their direction; and they would have a response and we would have a reply. THE COURT: On the same issue? On different issues potentially. I'm

MR. WILLIAMS:

not sure what the issue will be. THE COURT: All right. But let's say worse case they are

MR. WILLIAMS:

different issues so that there is -- it is not reasonable to

14 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 case. MR. CALDWELL: Totally understood. I just meant in say -- to answer in a single round of briefs. So the 40-page

limit and the 40-plus-10 on the unique issue applies to the entire round of briefing. THE COURT: Is that --

The 40 pages applies to the entire case. Got you. So you need to put

MR. WILLIAMS: THE COURT:

It is not per issue.

in one, 40-page motion for summary judgment, whatever point you are wanting to raise. MR. WILLIAMS: And responding to their motion to us,

also counts against the 40 pages; is that correct? THE COURT: No. That would be your normal response.

MR. WILLIAMS: THE COURT:

Thank you. Any further questions? In fact, plaintiff is

Okay.

MR. CALDWELL:

That's fine.

perfectly willing to reach an agreement because I guess I'm afraid they are still going to present far too many issues to the Court. Plaintiff is perfectly fine if you want to put in

place a limitation that basically says plaintiff can file one in each case, and the defendants can file one in each case or each defendant can file one in each case, just so we are not here -- we are getting ready preparing for trial -THE COURT: That is what I am saying, 40 pages per

terms of limiting the number of issues so Your Honor is not

15 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 looking at 10 different four-page motions to make up the 40, which I think is actually going to end up leading people to do more terse writing that perhaps is less thorough, just talking about maybe more independent work for the Court, we are willing to limit it to one summary judgment filed in each case -THE COURT: Let me ask y'all, what do you suggest? I am open to any I just want y'all I mean, you

I have presented my problem to you. suggestions.

I don't want to micromanage.

to focus and narrow this down.

Less is more.

know, the more y'all are pursuing, the harder it is for the Court to really address anything. MR. RENAUD: Siemens Enterprise. Your Honor, if I might, Mike Renaud for But I think the

I will speak for myself.

defendants will probably, in light of your guidance, make a coherent effort between both the Mitel Defendants and Cisco Defendants to present a single issue if it is shared in a single context. You don't have to see the same motion four

different times from the groups. And I think limiting the single issue per case doesn't I think lend itself to the whole purpose, which is narrow the issues. There are probably a couple of issues that

I think you have probably already honed in on that will greatly simplify the case that are, I think, ripe for summary judgment. There are others that are along the road. We got

16 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 Mitel. think. the message. We will coordinate it amongst the defendants to

have a coherent, narrow group of motions targeted for the message the Court sent. And I think putting any artificial

limit on how many we can move on, doesn't benefit the Court in trying to narrow the issues for trial. MR. CALDWELL: THE COURT: I took a shot. Thank you both for your

All right.

thoughts, and you have your direction on that. Let's turn to the pending discovery motions. will start with the '417 case. We

And the first one we will take

up is the plaintiffs' motion to compel discovery from Apple, Docket No. 235. MR. CASSADY: little good news. THE COURT: Good. I think the Court is aware that Aastra Judge, let me see if I can give you a

MR. CASSADY:

in the last number of months signed a running royalty license deal with VirnetX. Last night we reached a running royalty deal with So there is no Mitel representative here, I don't They have settled out. We put a press release out.

That case will be dismissed likely in the next 15 days after payment is made. good news -THE COURT: So you are saying the Mitel Defendant in So I thought I would give the Court some

17 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 Honor. THE COURT: All right. Back to the plaintiffs' And these are the Mitel case has settled? MR. CASSADY: THE COURT: Yes, Your Honor.

The other defendants are still there? Yes, Avaya and Siemens are still

MR. CASSADY: there, Your Honor. MR. CORDELL:

Just for the record, Your Honor, we

represented Mitel and did, in fact, reach that settlement. THE COURT: the second case. And has anybody settled in the first case? MR. CASSADY: Aastra, Your Honor, A-A-S-T-R-A, has So Siemens and Avaya are still left in

settled in the first case. THE COURT: Anybody else? Okay.

MR. CASSADY:

We are still working on it, Your

motion to compel discovery from Apple.

basically -- I guess, the first would be Interrogatory No. 11; is that correct? MR. CALDWELL: Yes, yes, Your Honor.

Mr. Martin, do you have my slides for the Apple motion to compel? MR. MARTIN: 235? Yes, 235. I was going to show

MR. CALDWELL:

I would like to get started.

18 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 you the interrogatory. When the interrogatory is up for the

Court to see, we can talk about it separately. Yes, Your Honor, there are several parts to this motion to compel. Discovery in this case against Apple has

been an iterative process since the beginning where we constantly find new things that we need, that are relevant, should have been produced, or should have been -- questions that should have been answered, and they haven't been. As of the last Markman Hearing that Your Honor conducted on January 5th -- Your Honor probably won't remember, but one of the first things we did in that Markman Hearing is walk in and say, Your Honor, you don't have to hear a motion to compel against Apple because on the eve of hearing a motion to compel against Apple, they relented and gave us discovery. That was on a related interrogatory, actually to

Interrogatory No. 11. What Interrogatory No. 11 seeks is for Apple to tell VirnetX to the extent that it contends it would encounter difficulties complying with an injunction, please describe all those -- such difficulties. And Your Honor knows, our firm has been here in a few cases of similar magnitude; and this is how this line of thinking has evolved. In i4i where Your Honor entered an injunction, the injunction had to have a time frame in which it started. And

19 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 Your Honor was reversed on that by the Federal Circuit. They

said, wait a minute, you said the injunction starts and I believe it was one month, and you don't have enough evidence on that. And the Federal Circuit reversed Your Honor and So we

extended the injunction start date by several months.

are thinking we have got to make sure we get this discovery. Then in the VirnetX v. Microsoft case, we attempt to take that discovery and don't have a lot of luck. And as the

case is moving forward, we come to, I believe it was a pretrial conference, and we are asking Your Honor about the opportunities to get further discovery on injunction and injunction difficulties post-trial. And Your Honor told us, and I quote, both parties have had an extended period of time to conduct extensive discovery in this case knowing that injunctive relief would be sought if VirnetX prevailed on liability. April 20, 2010 order. Here we are with our injunction request -Mr. Martin, would you put up Slide 3? MR. MARTIN: Excuse me? Slide 3. That was in an

MR. CALDWELL:

Our injunction request, again, asking Apple to identify the difficulties it would face if required to comply with an injunction. What happened is Apple wouldn't answer. Concurrent with serving its

Then we filed a motion to compel.

20 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 response, Apple provides a little supplement. We file our

reply and say, hey, wait there are still big holes in this. They provide a little more supplement and serve their surreply and they say, oh, we fixed it now. But they haven't. Apple

still has not completely answered that interrogatory to describe the difficulties it would face if confronting an injunction. Scoot forward to Slide 6. There is more content in Apple's response. I am not

meaning to suggest that this is the only thing in Apple's response. But the general flavor of Apple's response is we

haven't investigated the time or cost to implement the modification, but we estimated one to three months. That is

about all the information we have on the challenges to Apple in implementing -- or complying with an injunction if the Court were to issue one here. And that is not sufficient.

Yet I think if you look at the other side of the coin it tells a slightly different story. What is displayed on the screen now -- and the heading of the slide may be cut off -- but what is displayed on the screen now is an excerpt from Apple's technical expert. context. Obviously, VirnetX seeks damages in this case. And, So let's set the stage for a slightly different

unsurprisingly, Apple says they shouldn't have to pay any or

21 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 it be very low. One of their bases for making that argument That

is it is no problem to design around these patents. won't cost very much.

So Apple's technical expert is able to have three or four pages, maybe 10 paragraphs talking about no problem, we can have a system that selects a VPN or encrypted channel where the user manually selects things. And then as to the

FaceTime part of the allegations, the FaceTime server is located outside the U.S. Or we could just do relay servers.

We can hire a vendor and have all the traffic run through this vendor. So on and so forth. I won't belabor it.

The same thing happens when you get to Apple's damages report. Apple's damages expert is able to say I don't So it is a bit

think these design-arounds cost a lot. self-serving.

When it would limit Apple's damages, they are We can do it. It

willing to say, hey, this isn't a problem. would be cheap. No problem.

Jury, don't give them much It is an easy

damages because that's the cap on damages. design-around.

But the flip side of the coin is whether it would be hard or easy or costly to implement and comply with an injunction, and Apple is not willing to answer that. believe they should. THE COURT: Response. Well, first of all, let me say that We

MR. WILLIAMS:

22 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 consistently throughout this case we have tried to resolve issues. An iterative process, absolutely. I have not been

involved in a patent litigation that did not involve an iterative process. We have tried to get issues off this

Court's docket and off the Court's plate even at the last moment. Now, with respect to this interrogatory, the injunction, the way the interrogatory was first served to us was just exactly what he said. Tell us how you would have That seems to be

difficulties dealing with an injunction.

pretty broad, given the breadth of this case; four patents asserted against Apple, two major products. Now, through some negotiations with them, they sent us a letter and they said how about this narrowed version? So

they narrowed it, and we find more specifically what they were referring to in terms of the injunction. for the first supplemental response. Now, later then when we got into the motion practice, they weren't satisfied with that. We continued, by That was the impetus

the way, to press our objection on the broad interrogatory. The first supplement was directed to the more specific recitation that they gave us in their letter, their letter of February 17th of this year. They weren't satisfied with that

and proceeded with the motion. During the briefing of that motion, some issue in --

23 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 to be quite honest with you it escapes me right now, but it came up in the briefing. that issue. So where we are here right now -- and I guess before I leave this point, let me address the design-around issue. In the supplemental responses, we pointed to our design-around -- response to the design-around interrogatory where we laid out these design-arounds. So the impression We supplemented again in response to

that I got in hearing Counsel speak just a moment ago is that they are seeing this for the first time in the expert reports. In fact, I don't know that he intended to convey that impression; but just to make sure there is no misunderstanding, we gave them that design-around information in the supplemental response by reference to the supplemental response on design-around. surprise to them. So none of that comes as a

So the design-around is obviously, we said,

one way or ways that we specified that we would, in fact, avoid an injunction. So what we are left with right now is we have, in fact, responded to their narrowed versions, if you will, of the interrogatory. What is outstanding and what they want us

to do is answer an interrogatory that gives us no bounds in terms of which product would be subject to the injunction, which patents would be subject to the injunction. To the

24 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 extent it is anything and everything, we have told them we will design around it. information. that. We have estimated the amount of time it would take. We gave them that. So I'm not sure how much more specific We gave them that design-around

I don't see how we can be more specific than

information we can give them to the general, broad interrogatory than we have already given them. We did give

them information specific to the more specific versions they submitted to us by letter. THE COURT: Response. Well, the sequence is a little bit They told us we don't We met and conferred

MR. CALDWELL:

wrong, the additional detail. understand your rog.

It is too broad.

and provided narrowing, narrowing suggestions to help them and help define it, well before we got into the motion to compel practice. So the suggestion that their amendment was actually

in response to we are in the middle of briefing, VirnetX narrowed it, is not true. We tried to narrow it beforehand and clarify. still wouldn't answer. Apple

And we only got answers when they were

faced with sending -- (microphone pops) sorry -- sending response in to Your Honor and saying this is a moot issue because we have answered now. response and at the surreply. And happened twice, both at the

25 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 patents. But the critical issue is their answer still does not provide any detail on the costs, the expenses, the time it would take, other challenges Apple would face in complying with the injunction. And now they say that they know --

(microphone pops) I keep doing that -- now they say they know in more detail exactly what these design-arounds would be. They have got an expert report on it. There is no reason,

Apple can't tell us, here are the challenges we would face in complying with that. THE COURT: They still haven't provided that answer. What about your response to his argument

that it is not either -- they don't know which accused products, they don't know which patents. MR. CALDWELL: Well, they definitely know which

I mean, there are only so many patents asserted They have infringement contentions, expert

against them.

reports, and they know exactly what the accused products are with the FaceTime application and VPN On Demand. They know

what they are, and Apple was confident enough to put out the expert report saying as to the VPN product, here is how we get around that and limit our damages; and as to FaceTime on these patents, here is how we get around it and limit our damages. So I don't buy the suggestion that Apple is somehow unable to figure out what the costs and difficulties of implementing the design-around would be. They were able to do

it for the beneficial aspect of limiting damages but not for

26 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 the part that matters to VirnetX of getting an injunction. Your Honor, VirnetX doesn't want to be in the position of we are later at a post-trial hearing seeking an injunction; and we cannot tell you why a certain time frame or certain other limitations on an injunction are appropriate because Apple is going to come forward with declarations or witnesses or arguments or things we haven't got a chance to test during discovery, and say, hey, wait, now there is a verdict against us -- if that were to happen -- we can't comply with an injunction because that is just too costly or it would take too long, it would be too disruptive. haven't told us all the ways it would be disruptive. They We need

to know that information so we are not ambushed if seeking an injunction. MR. WILLIAMS: Your Honor, in terms of the broad

interrogatory -- let's back up for a second. THE COURT: I realize, Mr. Williams, the

interrogatory is broad; but I am sympathetic to the position that VirnetX is talking about if a verdict comes in against you. I have run into this in not just VirnetX but in other

cases where during trial, oh, it is no problem; and then you get to an injunction and the sky is falling in. I think that is what they are trying to avoid, and I think that there is some merit to what they say. But I don't

want you to have to spend an inordinate amount of time on this

27 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 until we get to that point. MR. WILLIAMS: Well, I think that we gave them,

certainly, what we had at the time and I think continues to be our best estimate of the amount of time. I think that was

even put that up on the screen, the best estimate of the amount of time it would take. In terms of the cost, whether that is in, I guess, the damages context or some other context, I don't understand. I don't think the cost would change. I wouldn't

anticipate the cost would necessarily change for one context versus another. So I am not sure -So you are saying they could rely on the

THE COURT:

cost that is indicated in your expert reports on the design-around as being the costs that would be involved in an injunction? MR. WILLIAMS: I mean, if that is the estimate we

have given for the cost of changing today, then that would be the estimate of changing today, I think. I am not sure what We gave

else he is asking for, to be quite honest with you.

them the design-arounds that we would use to avoid an injunction. I don't think there is any dispute about that. He showed that on the

We gave them the estimate of time. screen.

And, apparently, we have given them the estimate of

costs to implement that design-around. THE COURT: Okay.

28 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 MR. WILLIAMS: MR. CALDWELL: Unless I am mistaken about that. So is Apple now going to incorporate

those aspects of their expert reports into their interrogatory answer? I don't know that they have to go serve us another Obviously there has been enough paper so far. I take it you have just done that; is

piece of paper.

THE COURT: that correct?

MR. WILLIAMS: THE COURT:

I'm sorry?

I take it you have just done that? I believe that everything that I have

MR. WILLIAMS:

represented on the record I stand by, you bet. MR. CALDWELL: I understand then what their damages I don't want to

expert is saying is part of Apple's answer.

be in a situation, obviously, where a fact witness now reverses course and says the experts are wrong. is Apple's position, I can live with that. THE COURT: I am going to -- Mr. Williams, if you But if that

will file a brief supplemental answer just confirming what you just said on behalf of Apple; that the cost estimates contained with regard to the design-around by Apple's experts would be what Apple would anticipate its costs would be if an injunction were entered. MR. CALDWELL: Just for clarification, I would also

say that the technical feasibility and ability to do it, not even solely the cost, but it all goes into difficulty. It is

29 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 the cost and I would think the technical feasibility and suitability. MR. WILLIAMS: I thought we had already addressed For

that, Your Honor, but let me just take an example.

example, one of the things he threw out there a while ago is that we would route traffic through some servers, different servers I think was the issue. I think we have indicated why that is technically feasible because, in fact, that is happening today on a number of calls. I am not sure what -- I am not sure where we are I have not heard an allegation as to why

deficient in that.

we are deficient in that regard. MR. CALDWELL: The point is simply -- I think we are

all on the same page and Your Honor asked that Apple file a supplement saying that it references -THE COURT: Thank you, Counsel. I am going to allow

Here is what I am going to do:

VirnetX to designate -- file a 30(b)(6) and give them a two-hour deposition of a 30(b)(6) witness. And I presume your

witness will be answering fairly consistent with what you have represented to the Court today. MR. WILLIAMS: THE COURT: That's fine.

What is next? Thank you, Your Honor. The next aspect of

MR. CALDWELL:

Hopefully this will be quick.

30 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 the motion to compel are requesting answers for some requests for admissions. And, admittedly, these requests for

admissions are fairly uncomfortable for Apple to answer. Mr. Martin, can we get back on the screen? MR. WILLIAMS: Counsel, while he is doing that, let

me point out that I think some of the slides that were shown earlier were AEO designation. So I don't know what you are

going to get into this time, but I ask that we take that into account. MR. CALDWELL: MR. WILLIAMS: MR. CALDWELL: Do you want to seal the courtroom? I don't know what you have. Fair enough, Danny. I intend to show

our request for admission not -MR. WILLIAMS: MR. CALDWELL: it is an issue. MR. WILLIAMS: MR. CALDWELL: Okay. What is displayed on the screen here Okay. -- not your answers. I don't think

is one of the requests for admissions that Apple is unwilling to answer. Apple. As I say, admittedly this is uncomfortable for

Admit that Apple has stolen great ideas from other It is a quote from Steve Jobs. We are

companies.

We are not arguing admissibility here today. arguing discoverability. prejudicial.

Apple thinks that, oh, this is too It is not

It is taken out of context.

31 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 applicable. But VirnetX should be able to take discovery -again, it is not an admissibility issue -- but we should be able to take discovery, understanding that Apple will very likely walk into this courtroom and say Steve Jobs is great, he is our hero, the company is built around him, he did things great, our company does things great, we don't even take ideas from other people. And we need to have these arrows in our So

quiver depending on what arguments Apple makes at trial.

on the basis of discoverability the question is relevant and should be answered. There are other requests for admissions that are similar to that, and I streamline this down to just a couple of example ones that Apple is refusing to answer. Another one is No. 8, Request for Admission No. 8 asks Apple to admit that it could pay a license of $250 million for VirnetX's patents without any significant disruption or burden to Apple's operation or business. Apple, at least according to Steve Jobs in his book, Apple is flush with cash. very well. Apple compensates executives very,

And this amount of money, we do not believe, would But, again, this is Apple should

be at all disruptive to their business.

an issue of discoverability, not admissibility. answer this.

There is no good reason for Apple not to answer

this question so VirnetX is equipped should Apple suggest

32 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 otherwise at trial. And another example, request for admission on the screen, is No. 18. Admit that Apple could pay a license for

VirnetX's patents equal to the value of the total compensation package it paid to its CEO in one year, without any significant disruption or burden to Apple's operations or business. As I said, Your Honor, these are not comfortable requests for admissions for Apple, but they are relevant and they are discoverable. harassment. They are not for any purposes of

VirnetX should have them available should Apple

suggest otherwise at trial, but that is what the discovery period is for. THE COURT: Response. We believe that Apple should

MR. CALDWELL: answer them. MR. WILLIAMS:

Yes, Your Honor.

Let me cover the

first -- I think there are three. Apple steals great ideas.

4 through 6 deal with this

First of all, they didn't ask us to That is not the admission.

admit that Steve Jobs said that.

The request for admission is that we admit we steal great ideas from companies. And I wonder -- he made reference to the book about Steve Jobs, so maybe he really understands the context for that statement and just hasn't articulated that. If he does

33 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 case? understand the context of that statement, I would hope he wouldn't press this issue because it seems to me what they want to do is put in front of the jury some alleged statement that was made by Mr. Jobs. For what purpose? What issue does it go to in this In fact, they

There is no allegation of willfulness.

confirmed that recently in response to one of those letter briefs, even though there was a prayer -- a pleading in their complaint. But they have alleged -- they have now conceded So

they are not alleging willful infringement against Apple.

it is not clear what issue in the case that is even relevant to. But let me explain what the context of that statement was and why it would be misleading, and the position they are trying to put Apple into with this request. The

context of that statement was that Xerox PARC had developed a user interface, and Steve Jobs was interested in purchasing that interface. good deal. And what he said was, in essence, is I got a steal. It would be like me going down and buying a good car and getting a great deal on it and say I got a steal on this car. That was what he said. That is what he said, and that is the It was not in any kind of He negotiated what he considered to be a very

context in which he said it.

context we are going around ripping off anybody's property.

34 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 Mr. -THE COURT: What about Requests 1 and 2? 1 and 2 VirnetX just agreed not to things. So that is, first of all, why it would be misleading. What is wrong with this request for admission? Two

One, it doesn't go to any relevant issue in the case Two, it is misleading. Three, they are

I can conceive of.

trying to get Apple to either admit it, at which they can then read it to the jury. Again, there is no context. Or deny it

and thereby open the door, if you will, to them putting in some video or some excerpt from a book or something like that. I will submit that both of those are improper because it doesn't even go to an issue in the case. THE COURT: All right. Request for admission --

motion to compel, Request for Admissions 4 through 6 are denied. That is not to say that if you want to try to impeach

with a statement by somebody in the corporation, I will take that up at the time you wish to offer it. Now, it is my understanding that requests 3, 7, 16, 17, 19 through 22 have been resolved; is that correct? MR. CALDWELL: I think so. THE COURT: 3, 7, 16, 17, 19 through 22. Some have been resolved. I'm with I believe you said the right numbers.

MR. WILLIAMS:

MR. CALDWELL:

35 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 correct? MR. CALDWELL: Yes, Your Honor, it is source code It is a similar pursue. I believe -- I want to say it is in our reply brief. THE COURT: That leaves us with 8 through 15 and 18

which deal with damages. MR. CALDWELL: MR. WILLIAMS: Yes, Your Honor. Those that deal with the amount that

Apple could pay for a license without it impacting their business. We set forth in detail why we cannot admit or deny Could we pay something now? The question is could we

after further investigation.

That is not what the question is.

pay for a license at some point in time? The question will be, of course, what the financial condition of Apple will be at that time. Now, I'm not up here

to tell you that I think Apple is going down the tubes and won't be able to afford something. But to admit or deny a

specific request like this, based upon not knowing when we will be faced with that or what the conditions would be, I don't believe we can answer that -THE COURT: All right. Requests 8 through 15 and 18

are granted, with the proviso that you can make that request based on a current point in time -- that admission based on a current point in time. All right. I think next is source code; is that

and then the next one is executable binaries.

36 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 situation so we will, hopefully, make this pretty streamlined. As with the requests for admission and the interrogatories, everything with Apple has been shockingly iterative where our expert has to go look at the code and see reference to some other function that invokes part of the code, and then we have to go ask Apple. weeks. We have to wait a few

We have to send a guy back to Houston. THE COURT: Are they giving you code that is up and

running that you can run? MR. CALDWELL: No, they are giving us code that is We cannot actually

source code that we can look at the code.

run it, and that running part is part of the executable binaries aspect of it. So, no, Your Honor. It is essentially It is

like looking at text documents.

They are not compiled.

not something that we can actually execute. But as to the source code problem, again, we just asked for it iteratively and got little pieces. Here is what I suggest for the Court at this point because now, as of the date of this hearing, it is a little late in the game for Apple to give us more source code, which is what we were requesting in the motion. And I think what we

need is either an order from the Court or representation from Apple that the source code produced by today is all of the source code that bears on any issue in the case; and that anything not produced by now cannot come in or be alluded to

37 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 by Apple for any reason or issue. result. THE COURT: Okay. Mr. Williams. That is the only fair

MR. WILLIAMS:

Well, let me say, first of all,

before I get to his proposal, it is not terribly surprising to me that source code would be an iterative process. We did

produce a lot of source code to them initially, which is what they wanted. They have an expert come out. He would go

through it apparently, find things he thought he needed, we would produce those. So it was, in fact, an iterative

process, which in my mind illustrated that we were trying to keep the discovery going and produce what they needed. Now, the request for binaries came a little bit later and thus spurred some discussion between us as to not understanding what the purpose for binaries was. That is all

laid out in the papers, and I am not going to belabor that point. But let me get to this point. The expert in his

report makes no indication whatsoever, none whatsoever that he couldn't find something; that he was unable to fully analyze something because something was missing; that he was -- that his analysis was hampered in any way because of something that was missing. In fact, after we produced things from the last

supplemental production that we made on the source code, one of their experts came out twice. Another one came out once.

38 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 There was never any further discussion or something else being missing. So as far as I know, we have produced everything We produced more than they thought they

they think they need.

needed in the first place, but nevertheless we did. Now, as far as his stipulation, we don't have any intention to come in here and refer to code that we didn't give them. I don't think I can ever tell you I want to put in So we are not going

some code that we didn't produce to them. to do that.

But we are certainly going to attack the analysis We were are not going to be using code that we

of his expert.

haven't produced to them in this case. THE COURT: Does that satisfy you, Counsel? I'm not sure he agreed to really what

MR. CALDWELL: I was stating -THE COURT:

Restate your request. I tried to write it out carefully.

MR. CALDWELL:

And hopefully this is workable, Mr. Williams. And, again executable binaries is a separate issue. This is on the source code portion. The source code produced

by this point is all of the source code that bears on any issue in the case, and anything not produced by now cannot come in or be alluded to by Apple for any reason or issue. MR. WILLIAMS: Okay. I hear the last part, but the

first part, read the first part. MR. CALDWELL: The source code produced by this

39 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 point is all of the source code that bears on any issue in the case. MR. WILLIAMS: Oh, bears on any issue. As far as I

know it is all of the code that bears on any issue, for sure; and we are not going to be coming in here and relying on code that we haven't produced in the case. Is that what you are asking for? MR. CALDWELL: MR. WILLIAMS: Yes. Your Honor, I really don't think I think they just want to know

there is any issue anymore. the cards are on the table. THE COURT:

They want to know that there is an end. That the cards are on the table. And

MR. WILLIAMS:

the cards are on the table. MR. CALDWELL: Okay. That is fine. And we are very

much interested in this issue because I don't want to put our expert on the stand and have him crossed by saying you didn't look at X, Y, and Z that were never produced. important to us. time today. MR. WILLIAMS: Let's not get too cute here, but So it is very

We are not just trying to take the Court's

let's do recognize that your -I'm sorry, Your Honor. That the plaintiffs' expert

has not complained about something being missing in his report.

40 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 time. And you say I agree or I disagree. MR. CALDWELL: The sources code produced by this hampered. THE COURT: All right. Restate your thing one more THE COURT: All right. He has not even indicated that he is

MR. WILLIAMS:

point is all of the source code that bears on any issue in the case; and anything not produced by now, cannot come in or be alluded to by Apple for any reason or issue. THE COURT: Agree or disagree? I have one slight reservation, and Otherwise, I don't have any

MR. WILLIAMS:

let me put this on the record. problem with it.

Here is the reservation:

If I say that is all of

the code that bears on any issue in this case, if something comes up later down -- I know something is going to come up later down the line. They are going to pop up with something

and say, aha, here is some other code that bears on an issue in the case, and you have represented to the Court that is it. I am not aware of any other code that bears on any issue in the case. Your Honor, I think that is as far as I

can go because as sure as I swear here that that is all of the code, something is going to pop up.

41 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 THE COURT: Well -Otherwise, I don't have any problem

MR. WILLIAMS: with that. THE COURT:

All right.

With that one proviso, but I

will say this and be forewarned, Mr. Williams, that the Court would take a very dim view of any attempt at anything that has not been produced by today. MR. WILLIAMS: MR. CALDWELL: similar, Your Honor. Absolutely. And executable binary is very

It ought to be quick.

Executable binaries are basically the compiled version of the source code, things that you could run. can play around with an iPhone and see how it works. And we

But

obviously their server is back at Apple, and they have functionality that is very relevant to this case. And Apple has humans that can walk around and play with the servers and test them. experiments on them. functionality. And what we have requested was we wanted copies of the executable code that we don't have access to but that Apple does because now there is obviously an imbalance in evidence. What we don't want is Apple to come into court and Maybe they have run

Maybe they have observed certain

have a witness and go, well, but I have actually sat at the machine and looked at it and observed it; what they say is

42 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 wrong because I have noticed this phenomenon and we wanted to test them and we don't understand why we can't. adequate protections in the protective order. But I think this can be resolved essentially by a similar stipulation because at this point expert reports and rebuttal reports have happened in both cases, and we are pretty far down the road. What I would propose is that the best way to handle this is Apple is precluded from saying or suggesting that they work with the actual FaceTime code or actual FaceTime servers, in that it suggests Apple's position is more credible or more trustworthy because it had the ability to experience or work with something that VirnetX did not. It's just a suggestion that Apple having the witness say, well, I actually get to play with the executable and run it, so I know it better or I can tell you about its functionality. THE COURT: Response. Your Honor, I can't agree to that, There are

MR. WILLIAMS:

and let me tell you why, too, because we have produced witness after witness including on the server side about how those things operate. So for me to agree that I can't put a witness

on the stand to talk about how the server side operates, seems to me to be out of bounds. THE COURT: What is your objection to producing the

43 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 Tuesday. executable code? MR. WILLIAMS: Our objection was simply, as we They

spelled out in the papers, that it is merely cumulative. have the source code.

First of all, you understand, I'm sure,

they can't read the executable binaries. THE COURT: I know. But they can run it, they can

run traces, they can play with it as your experts can play with it. MR. WILLIAMS: Everything our expert has done is

laid out in his report, so I don't think there is any reference to server -THE COURT: Okay. The Court is going to -- excuse

me -- the Court is going to grant as to production of the executable binaries of the source code. What else? MR. CALDWELL: May I request a very, very, very Otherwise, if Mr.

short time frame for that at this point? Williams -THE COURT: say, noon Monday? MR. WILLIAMS: my client, Your Honor. Today is Thursday.

Can you do that by,

I'm getting a disgruntled look from All I can say is we will get to them

absolutely as soon as we can. THE COURT: Let's have it to them by 5:00 p.m. on

44 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 do. attorney. MR. CALDWELL: Your Honor, given that expert reports

have already been exchanged, I presume it would be fair if something needs to be supplemented in our expert report -THE COURT: I'm not going to rule on that now. File

a motion if you feel that there is something. it out with them first if you can. All right.

But try to work

Next will be Apple's motion for

protective order for halting the deposition of Christophe Allie and the corresponding motion for sanctions by VirnetX; that is, Docket Nos. 250 and 272. MR. WOLOSON: Woloson for Apple. Good morning, Your Honor. Scott

I don't want to blow smoke, Your Honor;

but as the Court is aware, the underlying goal of the discovery rules is about getting to the truth. This

deposition was not about getting to the truth because if it was, they would have given Mr. Allie an opportunity to review a patent that he said he had never seen before. Mr. Allie is a fact witness. He is not an expert witness. He is not a patent He wasn't even a

30(b)(6) witness. So what was the reasonable -- expect Mr. Allie to First thing would be to come in and talk about his We are not objecting he couldn't give There wasn't an issue about him

patent, which he did.

opinions about his patent.

giving opinions on his patent.

45 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 It is when they presented the '135 patent to him that the issue came up. He said 14 times before that that he

had never seen that patent, he didn't know what was in it, he had no idea if he could even understand it. So they got exactly what they were -- he was entitled -- they got the extent of his personal knowledge. What they are asking for is something more, for him to give an off-the-cuff opinion about a patent that he has no idea what it is about. Now, their argument is, well, we reviewed it. read one claim out of that patent. They

Even in his response he He is a fact witness.

said that is vague, but I understand.

He has no idea that the Court is going to require him to read the spec. The Court is going to tell him to read the spec,

read the other claims, read the prosecution history to get an idea of what the scope of that claim is. So that is why we objected because it wasn't about getting to the truth at that point. uninformed testimony. It wasn't in bad faith because Apple's Counsel tried to work it out and said, can you just give him an opportunity to review this patent? They wouldn't do it, so that is why we It was about getting

had to seek for protection. THE COURT: Counsel. Okay.

46 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 MR. CALDWELL: this, Mr. Martin? I am really bothered by this repeated suggestion in the briefs and in court today that VirnetX's Counsel did not give Mr. Allie an opportunity to review the patent. It is May I have the plaintiffs' slides on

crystal clear in the transcript Mr. Allie never asked to look at the patent. That is one thing that is just absent from It is pretty glaringly absent -Let me ask you this: What happened

Apple's briefing.

THE COURT:

during the 30-minute recess that was taken when you were attempting to call the Hotline, that was on the video, did he review it then? MR. CALDWELL: THE COURT: No, he didn't review it then.

Why didn't he review it then, Counsel? At that point -- I'm not sure. I

MR. WOLOSON:

think at that point they were waiting to see because -Counsel suggested that -- let's move on to another topic. can come back and address that. We

So I am sure at that point

Counsel wasn't aware if this was going to come back to that or they were going to move on. MR. CALDWELL: Definitely that doesn't make sense.

Apple's Counsel was suggesting you guys move on because Apple's whole point was Apple didn't want VirnetX to ask those questions. But the whole point of trying to call the Hotline And for

was because these are the questions we wanted to ask.

47 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 Your Honor's information -- I can't remember if it was in the briefs -- but it was Good Friday. THE COURT: I saw that. I would like to direct Your Honor to

MR. CALDWELL: a little bit of this.

If at any moment you think it is not

helpful, please let me know. There is really not a dispute. Mr. Allie actually

four-and-a-half years later tried to patent a DNS-triggered VPN, which will probably sound pretty familiar to Your Honor. He straight up said, yes, I tried to patent the idea of using a domain name to determine whether to establish a VPN. Now, there are very few occasions when you can stop a deposition or instruct not to answer. I won't belabor this

with the Court, but it is issues like are you annoying, embarrassing, or oppressing the deponent? But the key is Are you You

those questions are about the manner of questioning. being abusive?

You are really down this guy's throat.

are not letting him answer.

You are refusing to do something. And Counsel

Not once did Mr. Allie ask to read it.

was exceedingly, exceedingly polite throughout this deposition, which is why we submitted the DVD to Your Honor. The Counsel taking the deposition is Mr. Curry. He was

extraordinarily polite throughout this deposition. Now, we also know scientists, they are smart folks, right, scientists and engineers? When scientists or engineers

48 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 work with complex technology, they are smart enough to know when they don't understand the question. enough to ask for clarification. for a time to read. They are smart

They are smart enough to ask

He didn't ask any of that. The witness Here is what

The witness can ask for clarification. never asked for some other time to read. really happened. Okay?

Your Honor is obviously very familiar with Form." And

the Local Rules and the rules on, "Objection. there is a reason for all that, of course.

You don't want to

be interrupted with every single depo that goes on and having to rule on something. The idea is we get the discovery, you worry about admissibility later. place. Well, here is what happened. When Mr. Curry first That is why we have these rules in

asks about the VirnetX patent relative to Mr. Allie's own application four-and-a-half years later: So as it turns out Apple isn't the first company to have the idea of determining whether to establish a VPN based on a domain name request, right? Objection. Form. Objection. Counsel, you haven't

established that he's ever even seen this document before. You're asking him to interpret it based on 30 seconds of you having read one portion of the entire document to him. If you want him to comment on this document, you

49 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 have to give him a fair opportunity to read it and analyze it. You cannot expect him to form an opinion like that on the fly without knowing more about the document. Now, all of us in this courtroom understand why Apple's Counsel would want to put that on the record to its witness hoping then that the witness picks up on the vibe that, wait a minute, I can't answer this. stuff I don't know. I can't proceed. There is a bunch of

But in any event, that is clearly not an, "Objection. Form," despite the two words that it begins with.

There (indicating) is the remainder of the quote I read verbatim to Your Honor. Now, when that didn't work, a view pages later -- 18 pages later in the deposition, Mr. Curry asked: Okay. I'll read Claim 1 and you let me know if Okay?

there is anything you don't understand about Claim 1.

I'm going to object -- this is Counsel for Apple -I'm going to object to this line of questioning. If you want

to ask him questions about a document that he has never seen before, then he deserves an opportunity to review the document in detail. MR. CURRY: Is that an instruction not to answer? It is

No, it's not an instruction not to answer.

that this is an inappropriate line of questioning, and you know better.

50 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 patent. document. That is the second attempt, Mr. Allie, don't answer this stuff. Zip it.

Now, can we go to -- there we go. Finally, the final instance -- and this is what led to the Hotline call. of Your Honor. This is where Apple essentially, although they are claiming it is not an instruction not to answer, it is pretty much the most definitive instruction not to answer you could have because they pack up their toys and leave. Mr. Morgan says: No, you did not review the This is what led to this motion in front

You read him one claim out of a 48-column patent.

He has to have an opportunity to look at the entire patent in order to understand what the claims are saying. to look at the prosecution history. to look at? So now the suggestion is, okay -- it is a 70-page He is going to go read that thing word for word and And, oh, by the way, He also needs

Do you have that for him

you can't ask him a question until does.

I don't care how many reexams this has been through, I don't care how much the prosecution history is. Let him sit there

for the next 12 hours or maybe 12 days, give him the prosecution record, and then let him read every single one of those. We don't have to answer any questions. But that is this instruction.

51 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 choice. That is when Apple decided to leave, and Mr. Curry went to go call the Hotline and ran into the Good Friday issue, understandably. Again, it is important to remember the context. person may instruct a deponent not to answer only when necessary to preserve a privilege, to enforce a limitation order by a court, or to present a motion under 30(d)(3) -which has those standards I showed you before -- about embarrassing, oppressing, annoying. happened. And none of that A Hotline. Apple's Counsel: I don't need to go to the Hotline Counsel. Response: And I am going to dictate this Mr. Curry -There was actually a question pending, if I remember correctly. -- I am not going to let you dictate my questioning,

questioning because I am going to shut the deposition down. It's inappropriate. If that is your choice, then I request we go on the

to shut it down and seek a protective order. Mr. Curry: Response: I'm going to go to the Hotline. You can do whatever you want. I have the

52 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 But it is a conduct issue. I-don't-like-the-answers issue. admissibility issue either. So what we have noticed is as Apple is briefing this -- initially the motion for protective order -- truth be told, Apple didn't want to file it. They said they were going We called them and It is not a

And it is not an

to leave and go seek a protective order.

said, hey, when are you going to file this protective order? We want to get resolution on this. We are waiting for you to

file because you told us you were going to file one. And when we told Apple, hey, we are going to file a motion for sanctions. Okay? They said, ah, fine, fine. We That

will go ahead and file our motion for protective order. is how this got in front of the Court.

But as the briefing

evolved, you started seeing Apple realizing, wait a minute, this is a conduct issue. So we have got to pitch this as

conduct -- VirnetX's conduct was inappropriate. Here is what you see in the briefing. Oppressive

behavior, badgered, badgered, badgered, harassed, badgered, unreasonable conduct, oppressive, harassed, badgered. All of

these different instances that I have thrown up in my pretty little slide here are unique. We didn't reuse them. And they

start about the second or third brief Apple files in this thing when it starts to make it about VirnetX's conduct. I would like to show you -- I don't know if Your

53 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 A. A. Q. A. Q. Yes. You understand what that means? MR. MORGAN: Objection. Form. A. Honor has had an opportunity to listen -(Deposition excerpt played.) Q. Claim 1 reads: A method of transparently

creating a virtual private network, VPN, between a client computer and a target computer. MR. MORGAN: You understand that, right? Objection. Form.

A method of transparently creating between a

client computer and -- it is a little vague, but yes. Q. Step 1 is: Generating from the client computer

a domain name service, DNS request, that requests an IP address corresponding to a domain name associated with the target computer. A. Uh-huh. MR. MORGAN: Objection. Form.

It is vague again, but yes. Step 2 is: Determining whether the DNS request

transmitted in Step 1 is requesting access to a secure website. MR. MORGAN: Objection. Form.

Again, it is vague.

It can be interpreted in

different contexts. Q. But you understand what it means?

54 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 A. Q. Yes. And then Step 3 is: In response to determining MR. MORGAN: Objection. Form.

that the DNS request in Step 2 is requesting access to a secure target website, automatically initiating the VPN between the client computer and the target computer. A. Again, it is vague, but....

(Deposition excerpt concluded.) MR. CALDWELL: I don't know why it cut off there.

Is that the end of the clip? MR. MARTIN: Yes. I think it is vague, and he says, I

MR. CALDWELL:

yes, but it is all there; or something along those lines. didn't mean to cut it off there. My point is this: I didn't realize I did.

VirnetX's conduct was exceedingly At no time did he ask to

polite throughout the deposition.

bail out or read or anything like that, and he laid the foundation. That is when the deposition ended, Your Honor.

Now, Your Honor is well aware Your Honor has discretion to impose sanctions. sanctions under Rule 30. And there is a rule for

And, admittedly, I think our They

briefing was a little bit vague on Rule 30 and Rule 37. can both provide bases for sanctions. does. The Court can impose appropriate sanctions on

Certainly Rule 30(d)(2)

55 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 someone who impedes, delays, or frustrates fair examination of the deponent, which is exactly what happened here. We know that walking out of the deposition that is like that with that sort of very polite conduct and certainly relevant questions, is not the rule in this Court. VirnetX

would suggest nor does the Court want it to be the rule in this Court. What you do when something becomes terribly uncomfortable on a fact basis in your deposition is you leave, seek a protective order, add costs to the case, add delay to the case, add an opportunity for Counsel to revisit how they may want to prep their witness, and then you come back later. Now, VirnetX believes that Apple should be sanctioned. Apple. The sanctions are sought against the company

And I think each of these things essentially follows It is not something that is meant to be

from the conduct.

crazy oppressive or anything like that. The first we request is that VirnetX can call Mr. Allie to testify at trial by deposition, but Apple cannot call at trial Mr. Allie or another witness to testify about that patent application that Apple filed. Second, is we seek an order that Apple cannot present counter or rebuttal designations of Mr. Allie's deposition testimony. And I think it is important to understand that

56 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 typically in a deposition, of course, you have things that are good and bad for both parties and you have an opportunity for redirect and then you can test those theories on recross. at the end of the day you hope to get a thorough, complete transcript. It has got ups and downs for both sides; and you And

present your testimony and maybe rebuttals. That obviously didn't happen here. allowed to complete the examination. transcript to start with. Now, the third request that VirnetX seeks -- and these are all on Page 9 of Docket No. 271 -- is an instruction to the jury -THE COURT: Let me ask you on Mr. Allie's Was there We were never

There is not a balanced

deposition, were you -- was VirnetX deposing him? an examination by Apple? MR. CALDWELL: No, Your Honor.

They didn't hang

around long enough for any sort of redirect or anything like that. THE COURT: All right. So then the following one -- I won't

MR. CALDWELL:

read it unless Your Honor wants it in the record, Your Honor. We seek a jury instruction informing the jury exactly what happened; that VirnetX asked questions related to his patent application. It was filed four-and-a-half years later. We

asked questions about that, and Apple terminated the

57 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 deposition, did not permit Mr. Allie to answer those questions. That is improper.

In rendering its verdict on issues of validity, infringement and damages, the jury can consider the actions of Apple's Counsel to be evidence unfavorable to Apple. We think each of these sanctions is appropriately tailored based on the conduct which is -- absolutely is not the rule and cannot be an appropriate way to prosecute cases in this Court. Thank you, Your Honor. MR. WOLOSON: I'd first like to respond to -- there After the

is a disagreement how we got to this point.

deposition was halted, we went back and asked for a meet-and-confer before we filed a motion. you don't need a meet-and-confer. meet-and-confer. So we filed -- we had a meet-and-confer. The first They said, well,

We said, yeah, we do need a

thing we did during that meet-and-confer was say we are going to offer to put Mr. Allie back up at your convenience. said no. The damage is done, no. That right there shows that they got everything they wanted out of him, and now they want to go for these overarching sanctions. So to say that we just now come back They

and we are now here not offering to put him back up, that is just not true. We offered to put him back up immediately.

58 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 Honor. So -- I mean, that is the point. They got And the other question is, what did they expect. They make it sound like he is -- it was an expert opinion. That he had reviewed this patent before, he knew everything about it. He had never seen it. 14 times before -- it is not

in the clip. seen that.

14 times before that point he said I have never I don't know how many

I don't know what is in it.

more times they have to ask him before it becomes oppressive to say are you going to do it or not. There is no doubt that both Counsel were polite. Our Counsel wasn't arguing with him. It was just

fundamentally unfair to expect Mr. Allie who had never seen this patent before, to understand its claim scope. the one claim -THE COURT: Why had he not seen the patent before? He is an Apple engineering manager. I mean,

MR. WOLOSON: THE COURT: deposition? MR. WOLOSON: expected them to -THE COURT:

Did you meet with him prior to the

We did.

We did.

But I don't think we

You did not anticipate that they would

ask him to compare the patent that Apple subsequently filed to the previously-filed VirnetX patent? MR. WOLOSON: Not that I am aware of, no, Your

59 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 vague. everything that you would expect him to give. goes to the sanctions are over the top. inappropriate and unjust. As the Court is aware, 7 of the 15 terms that the Court construed are in this one claim. than 30 minutes looking at it. looking at it. understand it. You saw the deposition testimony. He is not a patent attorney. He said it is The Court spent more So that just

They are just

They spent more than a day

They expect Mr. Allie to say, hey, oh, yeah, I

He doesn't understand

claim scope.

He even admitted it is vague.

Regarding the sanctions, the first two sanctions go to the evidentiary conclusion. And, generally speaking, those

don't apply when a party's actions were substantially justified or harmless. Here we believe they were justified

because he wasn't given an opportunity to review the patent. They were harmless because, like we said, they got everything they would expect a fact witness to know about, his personal knowledge. This is a complex document. To expect him to pick

it up off the fly, that is just not fair. The third sanction relates to the adverse inference instruction. And in this Circuit you have got to have showing Now, VirnetX has never said bad

of bad faith and bad conduct. faith or bad conduct. gamesmanship.

In the briefing they said calculated

60 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 yes. THE COURT: Why during the 30-minute break didn't he But as we explained, this was not gamesmanship. They just simply asked, give him an opportunity to review the document. So based on that, we think the Court should -- the proper, appropriate, and just remedy is to grant Apple's motion for protection -THE COURT: He was an Apple employee, right? He is an Apple engineering manager,

MR. WOLOSON:

take that time to review the patent? MR. WOLOSON: I would -- I don't know why he didn't,

but I would say that even that wouldn't be enough for him to understand the patent fully. It is a 60-page patent. There

are 48 columns of text, 32 figures. attorney. THE COURT: All right.

He is not a patent

Response. I

MR. CALDWELL:

Your Honor, I'll be super brief.

think it is apparent that cutting off the deposition was utterly improper. I will also point out as to your

question -- which I think is a very good one -- why had he never looked at the patent before? The lawsuit had been

pending approximately 19 months, if memory serves, by that point. We had asked virtually all their witnesses about the

patents.

61 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 And this is a guy who actually has his own patent application pending that is subsequently filed and would have had a duty of candor to submit our patent to the Patent Office in connection with his own. So I believe your question is

actually very insightful and the sanctions are utterly appropriate and narrowly tailored, as this is not the way we can conduct depositions. THE COURT: All right. The Court is going to deny

the motion for protective order and grant the motion for sanctions. And I will enter a written order detailing exactly

what sanctions will be imposed as a result of the granting of the motion. All right. What is next would be VirnetX's motion

to compel, Docket No. 275. MR. CASSADY: there, right? THE COURT: That's correct. We will have to share the Elmo. Your Honor, there is no Elmo over

MR. CASSADY:

Your Honor, Jason Cassady for the plaintiff, in case you don't remember. VirnetX brings this motion to compel use data and deployment data of Cisco's customers. In the -- situation we

are in, just like in most cases, a defendant commonly pleads ignorance on the use of its devices with regards to its customers; and uses that as a reason to argue that either

62 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 there is no direct infringement, indirect infringement, or most commonly it is not worth anything because nobody uses it. You know, in some cases that can be reasonable. A

defendant could actually have no knowledge of its customers. But the issue we have here, though, is that Cisco is not just a provider of equipment. They are a provider of service. So

they actually go in and they do work for their customers in setting up these complicated systems of routers, phone devices, call centers. They do all this work.

In order to do this work, Your Honor, they have to know how they are set up. They have to know what they are

doing when they go to these customers, and they set these things up. And the issue we have, Your Honor, here -- and I

don't want to belabor the history of discovery because I don't think it is entirely relevant other than to say we repeatedly asked for materials related to how the deployments are done at Cisco's customers and how Cisco's service centers deal with issues related to how these products are implemented and used by its customers. discovery. Now, candidly, Your Honor, I think the issue is that the defendants -- or Cisco in this case -- are not maybe looking in the right places for the discovery. may be what it is. I think that We have repeatedly been stonewalled by that

I can show Your Honor a couple of examples I will go to the Elmo here

of documents that are templates.

63 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 in just a second and show you. generally to Your Honor. These are templates that are called the infrastructure discovery document or statements of work or solution and user requirements or architecture validation reports. All of these things are highly relevant to how Cisco I will describe them just

knows to set up these products at its customers' implementations. And the issue is, Your Honor, we have got evidence that these documents exist; yet these documents are not in the production. If they are in the production, they are for

products not even accused in this case. So we just at this point had no other option than to come to this Court and say, Your Honor, we are at the league's end here. coming. exist. We have asked for these documents. They are not

We know they exist.

Cisco won't tell us they don't

They just say we have done the best we can, and we are

not getting anywhere on it. And telling to me, Your Honor, one of the letter briefs that were filed in this case is a letter brief asking to dismiss the case because we can't prove who uses what. Now, Your Honor, we can prove those elements with some of the limited documents we have, and we can make inferences. But the reality here is they are filing a letter

brief on the ball they hid from us this last six months to a

64 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 Cisco. year in discovery. And basically it has been this same iterative process of saying where are these documents? They give us an

example of that document, but they don't tell us where they all. They say here is one example of it. We go look in the production, and we can't find those documents. So we are stuck in a situation where the

motion very clearly -- their responses and our motion -- set out what we are looking for by name, statements of work, industry documents, architecture validation reports. it all out. They respond with an example or two of a document but not an identification of the body of production that relate to those things, and that is the issue, Your Honor. can't find them. examples. We don't think they are there. We We list

They give us

That is all they will give us.

So we are asking

for them to either identify them or produce them, one or the other. THE COURT: Response. Your Honor, Michael Stadnick for

MR. STADNICK:

Let me begin by saying we are not withholding We are not refusing to produce documents. I heard

documents.

Counsel say that we have been playing hide the ball, and it is simply not true. While I do appreciate that there is a potential

65 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 issue of proof that VirnetX is facing with respect to the deployment, configurement, and use of the accused products, it is a proof issue that flows from the merits, Your Honor, and not from an effort to withhold or conceal discovery. In order to explain where we are, I do think it is important to look at the history of this dispute. And if you

will indulge me for a minute, I would like to go through it. From the very beginning of this case, Cisco has attempted to do whatever is necessary to give VirnetX the discovery to which it is entitled. At the outset of the

discovery period, we reached out to VirnetX and we said to them we would like to work with you to make sure that the discovery procedure we put in place is adequate, is comprehensive. As Your Honor is no doubt aware, the vast majority of Cisco's documents -- like most companies these days, technology being what it is -- are electronic in form. are billions of them. They

They are distributed throughout the

company, although Cisco is better than some in having more centralized databases, the only way for us as a practical matter to review those documents comprehensively and do the best we can to get VirnetX what it needs, is to use search terms and to query electronic repositories. We knew that. VirnetX knew that. We went to them

and said let's come up with a plan.

And that is what we did.

66 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 We let VirnetX identify for us over 150 broad search terms. We then took those search terms without alteration and used them to query a variety of different repositories at Cisco, not only our engineering databases and other databases that we believe were most likely to have these sorts of documents, than others, but also the personnel files of over 40 individual custodians we believed were most likely to have relevant information. That goes above and beyond what I have seen in patent infringement cases like this. It resulted in millions

and millions of documents, which we turned over to VirnetX without question. We didn't stop there. We supplemented, we

augmented that production with more targeted collections of specific documents like source code and financial documents and patent licenses and the like. We also went and interviewed the relevant custodians and asked them questions like, where else should we be looking? Do you have any hard copy documents. And we

collected those materials, and we produced them to VirnetX. We still didn't stop there. Throughout the discovery period, as is often the case, VirnetX would come to us and say we think this particular category of documents might have slipped through the cracks of your documented collection procedure. Each and every time they did that, we talked to

67 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 them, we understood their concerns, we went back and investigated. Most times, as is I believe the case here, it

turned out the documents had already been produced; and we pointed to where those documents could be found in our production. Once or twice we came across a category of documents or a specific document that somehow had slipped through the cracks of the collection procedure and we would go, we would collect it, and we would produce it. discovery process went. That is the way the

It went all the way through fact No motion to compel was addressed

discovery without issues. to the Court.

So why are we here today?

On the very last day of

fact discovery at 11:00 p.m., as a matter of fact, we got a letter from Counsel for VirnetX which purported to identify a couple dozen categories of use and deployment documents that they had never identified to us before. And we got an

ultimatum that we had to confirm that they had all been produced or we would face a motion to compel. Now, we had some skepticism as to whether that was a genuine effort to try to resolve a discovery deficiency, but we engaged them, as we had throughout the discovery process, and we said tell us how you came up with this list. why you think these documents are missing. is too late for that. Tell us

They said, no, it

Here is what you can do, you can throw

68 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 out what you have done as far as this document production in the case so far. You can go back and have a human being

manually eyeball every electronic document in the company and give us a blanket assurance that not a single relevant deployment use and configuration document has escaped production; and if you are not going to do that, we are going to move to compel. Obviously, that is not something that is practical. It is not something we could have done. It is not something

we can do today; and it is, frankly, not something that is required by the rules. That doesn't mean we are withholding things. doesn't mean we are refusing to produce things. It

In fact, we

have with this particular category of documents throughout the discovery process on a couple of occasions gone back and worked with VirnetX to produce deployment, use, and configuration documents. In February of this year they asked us to serve just particular -THE COURT: Okay. You know, I realize y'all have

been working well together and wheels have come off this in the eleventh hour. this? What, if anything, can be done to resolve

And I understand your argument that, perhaps, they did I understand that argument. I

not negotiate well with you.

will hear their response in a minute.

But what can we do to

69 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 get this resolved? these documents. I think they have a legitimate interest in

Can you identify them and get them to them? That is a problem. You look at the

MR. STADNICK: list they come up with.

It is not a list of documents We can show

identified by names that people at Cisco use.

them to Cisco witnesses and they say I don't know what these documents are. our production. In some cases they find an example of a particular type of document and say give us more of those. In some cases It appears they created them by going through

they see a particular function within Cisco that is performed and say give us documents related to that. And the only way

we can go about trying to meet that request is to use search terms on electronic repositories. we can come up with. We have used the best terms

We are happy to work with them to try We have proposed that in the last few Beyond that I am not sure what we

more focused searches.

days and they rejected it. can do. THE COURT:

Counsel. Your Honor, we have gotten into the It was an

MR. CASSADY:

history and I think it is important to this issue.

iterative process where we tried to identify new documents that we had evidence that Cisco should have produced, and we couldn't find them. More production would trickle in. We

would do more review.

We continued to negotiate with one

70 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 exist. another. I'm not here to tell you that Mr. Stadnick has been unethical during the last six months negotiating with us. has been a process. It

But the wheels came off when we got near Six thousand pages or six thousand

the end of discovery.

documents came in about a week before the end of discovery. We looked through there and still didn't find what we were looking for, and that is why the motion had to be filed. Now, to Your Honor's question is how can we get around this? The issue we have, Your Honor, is that it is

unfathomable that Cisco does not have documents that say how their customers use these things because they are the ones who install them, so how can they not know how it got installed and how it was set up? It doesn't make any sense.

So we have done the best we can to identify specific named documents that their own documents referred to that say their service people have to fill these documents out, and we don't see those documents in their production. So maybe they are in someone's file drawer. Maybe

the problem is they are looking in this massive electronic database, and this stuff is sitting in their sales teams' drawers. I don't know. I just know that these documents

They are not going to tell you they don't exist, Your They are not going to say they

Honor, and that is problem.

71 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 don't exist. They are just going to say we have done this

search on this massive electronic database, and we haven't found them. They are obviously somewhere. They obviously exist. They are Exhibit

And I can go through the ones on the Elmo. 5, 6, and 7 and 8 to the motion.

I can walk through them.

But, Your Honor, they identify these documents I am talking about which is statement of work, infrastructure discovery documents, solution end-user requirement validation reports, architecture validation reports, and then one extra group that is in the motion that we didn't talk about is the customer portals. Cisco provides these Internet portals to their customers to go on and look at these documents and figure how to set up their materials and how to set up their devices. didn't get access to that other than they offered to let us have them stand over our shoulder while we reviewed using their passwords to get into this portal. So we don't have access to those portals. they produced some documents from those portals. They say We

My bet is,

Your Honor, there are a number of people out there, and they are not going deep enough into those to find those documents. And considering the issues in the case and what they are saying to this Court is this case should be thrown out based on the lack of these documents, I think it is only fair they

72 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 problem. go find these documents. MR. STADNICK: Your Honor, we have produced

thousands of deployment, use, and configuration documents. They have taken third-party discovery from at least ten of our customers trying to ferret out this information. They have

deposed 20 of our employees and asked them questions about this deployment, use, and configuration. The fact that that discovery they have gotten doesn't support their infringement theories, isn't evidence of a failure to produce the discovery that does. Again, we have done everything that we can think of to try to find the kinds of documents they suspect exist and the sources where they would exist if they did exist. haven't turned them up. And we

We offered as of last night to run

further searches with still additional targeted terms chosen by VirnetX again any database we can search electronic to see if more of these things exist, and they rejected that request. I don't know what more we can do. MR. CASSADY: Your Honor, I think that is the

They go to their databases, and that is all they They go to these databases and they hope people Maybe Cisco does that. Maybe they

have done.

put them in the databases. don't.

But the reality is their sales force filled these Where are those documents? All right. What I am going to do is I

documents out.

THE COURT:

73 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 one. Honor. THE COURT: Okay. The last part, let me cut you off, am going to grant the motion in this regard: I'm going to

allow VirnetX to take up seven hours of 30(b)(6) depositions regarding these topics. Produce people from your sales group or wherever that would fit that and let them ask questions and see if they can find the documents. All right. Next is 30(b)(6) testimony regarding

testing, deployment, and other uses -MR. CASSADY: I think you just ruled on that, Your

MR. CASSADY: Your Honor. THE COURT:

All right. You don't have to worry about that We are not asking for other

MR. CASSADY:

VirnetX withdraws it.

litigation documents anymore. THE COURT: All right. Is that all of your motion?

MR. CASSADY: Your Honor. THE COURT:

I think that is all for this motion,

All right.

Very well.

The next motion

is defendants' motion to submit invalidity contentions, Docket No. 277. MR. STADNICK: Yes, thank you, Your Honor. I think

this is one where we can clear some of the smoke Your Honor

74 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 was alluding to earlier. Since the time we filed the motion

under Rule 3-6(b) most of the proposed amendments I believe will be withdrawn. Just to do a little housekeeping, the defendants will draw the proposed amendments as to the Wang, Lindenmann, and SSL 3.0 references in order to conform the contentions to our recently served expert reports and to streamline the case. We will withdraw the proposed amendments as to the Altiga System because the parties are now in agreement that invalidity contentions need not be amended just to disclose additional evidence in support of previously-disclosed theories, and that was the only reason. We had proposed an

amendment Altiga System, so we will withdraw that. And we will withdraw the proposed amendment concerning double patenting and non-statutory subject matter because under Rule 3-3 neither of those are invalidity defenses that actually have to be in the invalidity contentions, so we can withdraw that one as well. That leaves us only one issue to resolve, which is our proposed amendments concerning the Schulzrinne presentation. I will turn to that now.

The Schulzrinne presentation, Your Honor, is a slide deck that was produced by VirnetX in this case. And it was

prepared by Professor Henning Schulzrinne at Columbia

75 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 it. University to describe the SIP protocol, which is a communications protocol that is useful in setting up network connections. We are proposing to amend our contentions to rely on the presentation as 102(a) art that anticipates various claims of the patents-in-suit. The reason that good cause exists for

the amendment at this point in time is that until we took Dr. Schulzrinne's deposition recently, we had no basis to assert that the presentation itself qualified as 102(a) art. It doesn't have any sort of copyright indication on It doesn't appear to be the sort of document that would Most importantly, when

be published or publicly accessible.

VirnetX produced it to us from their files, they labeled it "outside counsel only" under the protective order, leading us to reasonably believe that it wasn't a public document; that it was something that VirnetX obtained under confidential circumstances. Why did we take Dr. Schulzrinne's deposition? an interesting issue in the case. It is

It turns out the very day

that the VirnetX inventors allegedly came up with the ideas for the patents-in-suit, they paid Dr. Schulzrinne a visit up in Columbia and went and talked to him about the possibility of using SIP to initiate VPNs. He gave them the presentation that we would like to rely on as 102(a) invalidating art. On the train ride home

76 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 they allegedly came up with the inventions of the patent-in-suit. The Schulzrinne presentation concerns many of the concepts that VirnetX claims to have conceived on that train ride. It addresses many of the concepts that VirnetX is

accusing in Cisco's accused products, including the use of encryption to secure SIP signaling, the use of a DNS to initiate secure communications, and other aspects that are central to the infringement accusations in this case. Again, good cause exists to amend our contentions concerning the Schulzrinne presentation now because we were unable to identify it as 102(a) art earlier. And once we did

identify it at the deposition, we moved immediately to amend our contentions and provide fulsome invalidity disclosures to VirnetX. VirnetX can't claim prejudice obviously because the document came from their own files. VirnetX's inventors, who

are also officers of the company, certainly can't claim to be unaware of the Schulzrinne presentation and its relevance to their alleged inventions. And VirnetX has already had access to every witness they might potentially depose on the issue. They took

substantial deposition testimony from Dr. Schulzrinne himself, and the only other potentially relevant witnesses are VirnetX's own inventors and officers.

77 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 So what are VirnetX's challenges to the Schulzrinne presentation? First, they argue that we should have served

conditional invalidity contentions; that we should have served invalidity contentions on the presentation in case one day down the road we are able to prove that it is 102(a) art. I

don't think that is a manageable or practical burden to place upon defendants. Invalidity contentions are voluminous enough

as it is without having to forecast what documents might potentially turn out to be prior art in the future. They also suggest that we weren't dilatory in conducting Dr. Schulzrinne's deposition. borne out by the facts either. But that is not

The only reason we ultimately

turned to Dr. Schulzrinne was because when we deposed VirnetX's own inventors, none of them seem to remember what happened at the meeting of Dr. Schulzrinne. None of them

could talk about where the presentation came from or the circumstances that led VirnetX to have it. We conducted -- Dr. Schulzrinne, by the way, is currently a senior -- has a senior position in the Government. He is the chief technical officer for the FCC. work to be done to get his deposition. There was some

After we secured a And then again

date, it was postponed at VirnetX's request.

as soon as we conducted it and got the information, we acted immediately to amend our contentions. So for all those reasons, good cause exists to amend

78 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 the defendants' invalidity contentions concerning the Schulzrinne presentation. MR. CASSADY: Your Honor, with regards to the

amendment of the invalidity contentions, I think we will reorient the Court on where we are. Seven months ago now

plaintiffs gave the defendants in this case their updated doctrine of equivalents position and filed a motion with the Court to amend our infringement contentions. The Court denied that on the grounds of the motion, but said if we can make an addition under 3-6(a) go ahead, but otherwise I'm going to deny it. Discovery had not taken place at all before that disclosure. The next six to seven months discovery occurs

where they have our doctrine of equivalents positions and discovery goes on. guys questions. Now, how the situation right now is different, Your Honor, is -- and this is where I am being very explicit -- the ball was hidden for a year or two. They allowed all discovery We ask their guys questions. They ask our

to go on before ever bringing up these references as invalidating art against what they are trying to add it to. So, Your Honor, they disclose it to us a week before our reports are due and come to you and say can we add it because of things that our inventor said in their depositions or things other people said in their depositions.

79 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 Now, Your Honor, Mr. Stadnick said he was going to drop a couple of references. Really what he told you was he

is going to try and argue to get them in under something else, so, therefore, he doesn't want to talk about them right now in this motion. I think they are all relevant right now except for two of them. Wang, they have dropped entirely, is my And Lindenmann, they have dropped entirely.

understanding.

Is that true? MR. STADNICK: is correct. MR. CASSADY: Okay. So those are gone. But there From our invalidity contentions, that

are still four remaining, not just the Schulzrinne presentation that we just talked about. I think it is very

important -- and I will be as brief as I can, Your Honor -- to walk through kind of the history of that. So can you put my slides up, Mr. Martin? MR. CASSADY: Your Honor, let me ask another

question of Mr. Stadnick. So double patenting, you are saying you are either dropping it entirely or are you saying you don't need to plead it, and that is why you are not talking about it right now? MR. STADNICK: No, we are saying we are dropping the

motion to amend our invalidity contentions, because it doesn't have to be in the invalidity --

80 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 MR. CASSADY: So it is still a part of the case is So that is why here we

what they are asking for, Your Honor. are.

What I have got up in front of you is the presentation that was just spoken about, Mr. Henning Schulzrinne's presentation. The next three is the SSL reference, the Altiga System, and the double patenting. Okay. I am going to go

through these in reverse order because I think it is important. We start the case off, we get invalidity contentions back in July of 2011. We are talking a year ago now. That is

the initial invalidity contentions. due, and that is what we got.

That is when they were

Didn't say a word about double patenting or non-patentable subject matter. Now, the position they are

taking is they didn't need to plead that; but, Your Honor, double patenting is saying that one patent is invalid based on the prior patent. So what their argument is, the '211 patent

is invalid based on the '504, so the '504 should have been charted as a reference of invalidating the '211. I have never seen it not at least listed as a defense in some way in the invalidity contentions, but they stayed silent on that until a week before reports. is why it is important, Your Honor: And here

They show up to

81 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 The next is the Altiga System. They give us their deposition number one in March -- or at least not number one, but the first couple of depositions of our main inventors, third-party Edmund Munger, and they show up with this highlighted chart that highlights the distinctions between the two claims, and they start asking our witness what are the distinctions in the claims. Now, Your Honor, our witness answered based off of his off-the-cuff right then answer. deposition down. Now, we didn't shut the But what

We let him answer the questions.

has happened is that depo ended, other depos went by, they asked these questions, they hadn't pled double patenting, so we weren't preparing our witness, and they were not getting ready. We weren't reviewing these details about double

patenting because it wasn't in the case. So now what they have done is add it and go play this testimony for you and for the jury and say, look, they only have these distinctions here. Our witness wasn't That

prepared for it because it was not part of the case.

will be the theme you are about to hear through all of these.

contentions in July of 2011 and they say Altiga invalidates these patents because it uses split tunneling. tunneling is all over these contentions. Okay. So by Split

We go to the depositions, we ask questions.

82 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 Altiga? I actually started searching for source code. the time split tunneling is used, the VPN in the Altiga System is already up. Yes. That kills split tunneling, Your Honor.

Split tunneling cannot be invalidating prior art if it is up and running before the determination whether to use it or not is made. So we killed that. That is done. Does split No.

tunneling have anything to do with the initiation of VPN? Again, split tunneling is done, out of this case.

Then -- so then we go down this road, and now, Your Honor, they are trying to add "packet filtering." their new catch phrase. That is

"Packet filtering" is what they are Well, we didn't ask

trying to add with this new amendment.

questions about packet filtering because packet filtering wasn't part of the invalidity contentions. So we went though all discovery, asked all of the questions we thought were relevant to all of our contentions, and now they are trying to add that. Your Honor, maybe it is not fair, maybe we are not being fair to them about what they could go figure out when they did their invalidity contentions. Cisco. Cisco. Altiga is owned by

All of the witnesses that do Altiga still work at We deposed those guys. They said, have you searched for source code for

83 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 When did you start searching? Last night. Last night, Your Honor. a couple of months ago. discovery. That is March 8th. That is

That is a month before the end of

And that witness is the guy that they said is the Didn't even ask him about it a year before. I

guy in Altiga.

bet you if they had asked about it a year before he could have said packet filtering was a good idea. Your Honor, we still

don't think it is invalidating prior art, but the point is we didn't get to ask about it. That is Altiga. Now, SSL 3.0. Same thing, Your Honor. They charted We were in that situation again.

in their contentions against the '135, the '504 and '211; they chart against those three -- with those claims. not chart it against the '759 and '151 patent. Now, Your Honor, it baffles me that they can chart a reference again three patents in a case and then a year later come to us and say we are going to add it against the other two patents in the case. Their reasoning, Your Honor, was our But they do

inventors couldn't differentiate SSL 3.0 from the '759 patent and the '151 patent. Your Honor, our inventors were not prepared to talk about that reference with regards to those patents because it wasn't in the case. answers. Again, the same thing. Let's get good And that

Let's go to the Judge and get this added.

84 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 way they are not prepared to talk about it when we get there. That is exactly what happened. Then finally the presentation that we did talk about before I got to stand up and make my arguments here is the Henning Schulzrinne presentation. Now, Your Honor, Henning

Schulzrinne was the kind of grandfather on some level, at least that is the defendants' position, of the SIP standard. And Your Honor may remember the SIP standard was part of the Microsoft case. different things. You know, it was part of

It has been around for a while.

And Mr. Henning Schulzrinne's presentation was in our production. 2011. We produced it to them on February 22nd,

They had months to get ready for the July 1st They could have charted it. Telling

invalidity contentions.

me, Your Honor, they did chart RFC 2543, which is the standard for SIP. They did chart that. They don't chart this

presentation. Your Honor, the issue can't be you don't chart things because you are not sure if it is prior art and then you wait until you get a good answer and then you chart it. That can't be the answer. That is what I am hearing is they

are saying we go take depositions, we get the answer we want, and then we come back and we chart it based on the answer they want, rather than giving the contentions in the first place. That is what happened with Mr. Henning's presentation.

85 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 They didn't know whether Mr. Schulzrinne's presentation was prior art. That is their position. Well,

Your Honor, they didn't know that two or three other references were prior art, and we went and took the depos and proved that they weren't prior art, but they still put those in their contentions. So the rule can't be that you only put

in your invalidity contentions things that you know to be prior art. What you do is you put them in there and you go out to discovery and we all together try to prove whether it is or it isn't. What they did with Mr. Schulzrinne's presentation And here is why they waited, Your

is they decided to wait. Honor.

Mr. Schulzrinne's presentation is part of, at best, a circumstantial conspiracy theory that the defendants, Cisco and Apple have fell in love with. They want to tell this jury

that Mr. Schulzrinne disclosed the invention to us and then we ran off and patented it. Your Honor, the problem is, is that it is all based on circumstantial evidence. The only true evidence, Mr.

Schulzrinne's testimony, our inventor's testimony about the events says exactly the opposite. five years to look at the patents. refused to say we stole his idea. patented his idea. Mr. Schulzrinne has had In his deposition he He refused to say we

86 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 The defendants refused to show him the patent itself because I think they knew what he would say, which is this isn't my idea. So, Your Honor, the issue here is they have lost their conspiracy theory, and now they want it as a prior art reference because that conspiracy theory is dead. evidence of that conspiracy theory. There is no

Now they want this as

prior art evidence to be able to hint at a conspiracy theory and go in front of this jury and show it as 102(a) art when they never disclosed it to us as 102(a) art. They never

disclosed that they intended to go after it as that art. And, again, Your Honor, all four of these references we were in a position where our witnesses, our attorneys, our parties in the case were not given the chance to prepare for any of these contentions. They took all of the discovery in

the case -- and for both cases, Your Honor -- Mitel and Cisco, and then they disclosed their contentions on this point, and now they just want to add it. Honor. That is the problem, Your

And they shouldn't be allowed to add it. MR. STADNICK: Your Honor, I will start by focusing

back on the Schulzrinne presentation, which, again, is the one reference that we are currently moving for leave to amend. Counsel admitted that we had disclosed the SIP presentation or the SIP standard 2543 in our invalidity contentions. The reason we did that was because it was

87 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 clearly prior art. If we had an indication that the

Schulzrinne presentation was prior art, we probably would have disclosed it in the invalidity contentions as well. didn't have that information. The theory we are relying on is that presentation, which is, frankly, quite clearly, a homemade slide deck which doesn't look like anything that would be published to the general public, was marked "outside counsel eyes only" for Counsel for VirnetX -- they haven't addressed that point -and produced to us in a manner -- they gave us no clue whatsoever that it would qualify as a 102(a) printed publication. When we got that information at the deposition we acted quickly to supplement our invalidity contentions. Now, I have heard accusations this is some sort of plan to end run around some conspiracy theory that failed. That is not the case. We heard some of VirnetX's requested We just

argument on a proposed motion for summary judgment on the derivation theory. today. That is not an issue for us to address We believe there is

Obviously, we disagree with that.

plenty of evidence to demonstrate that VirnetX's inventors derived the subject matter that they claim in the patents, from Dr. Schulzrinne. comes. The issue here is, were we diligent in asserting We can deal with that when the time

88 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 this piece of prior art, this piece of paper as a 102(a) prior art reference? And we were.

The other three references that Counsel chose to address, again, were no longer -- we requested leave to amend our contentions. I'm not sure it is an issue here today, but

I'm happy to address his comments. On the SSL 3.0 document, as I mentioned before, we are withdrawing our request to proceed with invalidity contentions, and that is to streamline the case, so we don't need to spend any more time talking about that one. On the double patenting theory, you can read Rule 3.3 for as long as you want. It doesn't say anything in it

about disclosing double patenting or 101 type invalidity theories. It is limited to the identity of prior art that is

alleged to anticipate or render obvious. I understand that VirnetX's position now is that double patenting is essentially an anticipation analysis of one patent against the other. That is simply not the case.

The patenting by its very nature only takes place where the two patents claim the same priority date. is not prior to the other. By definition one

It is a completely different

doctrine, and it is not covered by Rule 3.3, so we don't need to discuss it today. Finally, on the Altiga System we did, in fact, disclose in our initial contentions alternative theories above

89 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 and beyond the split tunneling theory that Counsel focused on today. I am happy to show Your Honor. I have our invalidity

contentions here. the case.

I can give you one example of why that is

Again, I'm not sure if this is an issue that is currently in front of us to address; but nevertheless, here is -- here are our invalidity contentions served back in July of last year, by the Court's initial deadline for invalidity contentions, addressing the Altiga System. As you can see if you look right at the bottom, it refers to: Befitting its positioning as a VPN concentrator --

that is the Altiga piece of equipment -- the C10 includes a host of configuration options for controlling remote access behavior, including remote user configuration. Security

options and network configuration are handled centrally, enabling simultaneous access to both the Internet and your VPN. When you connect to the Internet or your VPN, you

receive configuration information from the server. That is referring to the profiling that Counsel was referring to as our newly-disclosed theory. You can see down

below there is a completely separate section that talks about split tunneling, but that is not what we are talking about here. How you know -- we are talking about what Counsel is

referring to as our alternative theory. If you look at the document that is cited here,

90 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 Altiga Concentrates on VPN Security, Page 1, that document itself in describing the Altiga System specifically points out that -- here's the quote we just read from our contentions, and immediately below that it refers to packet-filtering rules, in this sentence here: Much like a firewall,

Concentrator's IPSec tunnels are implemented as rules on public and private interfaces, along with other packet-filtering rules. It is that packet-filtering technology that they are claiming we did not discuss in our initial invalidity contentions, and it is right there. Again, we don't believe But if and when they

that is an issue before the Court today.

do intend to raise it, we will be happy to show that our initial invalidity contentions more than adequately addressed all the theories we are proceeding on with the Altiga prior art. Thank you. THE COURT: Response? Would you like to respond to

the "attorney eyes only." MR. CASSADY: The "attorney eyes only" Henning Your Honor, we didn't know it was It was in our production. We put

Schulzrinne presentation. publicly available or not.

a label on it because we didn't know where it had come from either, at least the attorneys didn't. There was no issue

with regards to whether we were saying it wasn't public or not.

91 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 I will tell you, with Altiga, Your Honor, the documents they cited for Altiga they put the AEO contention on too; and that is prior art and they had no problems charting that. So that is AEO and they chart it, but this is That doesn't make any sense

AEO and they can't chart it.

actually, Your Honor, because the point of the contention is that you are going to put forth everything that you think invalidates this patent. out and prove that up. And, Your Honor, they failed to prove up a number of references, so that shows that they put it up, and we knocked it down. That is the purpose of the contentions. Give us a That is the point. You have to go

chance to deal with it. Your Honor. THE COURT:

We didn't get that opportunity here,

Anything further on this motion? Your Honor, I would be remiss not to

MR. CASSADY:

tell you, apparently I said we know that Altiga is invalidating prior art. So I got a note from my Counsel Obviously, I didn't intend to

saying I said that or misspoke. say that.

I meant to say we don't think it is invalidating

prior art, but the defendants do. And then, finally, Your Honor, I think the issue that is very important that is kind of the smoke that Your Honor would be referring to, is that what Counsel is saying to you right now, is don't talk about it right now, we are going

92 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 to slip it in under 3-6 as invalidity contentions, and we are going to cause another motion to be filed, Your Honor. just trying to deal with it now. I am

It is in front of the Court.

There is no reason to belabor this thing down the road and have another motion on it. Your Honor wants us to deal with these issues. we are, we have taken your time up with it. it. Here

Let's deal with

So these four references that he is telling you they are

not going to go down the road with, what he is really telling you is there is going to be a motion to strike their 3-6 addition of these claims. So that is why I am talking about

them now, Your Honor, because Henning Schulzrinne presentation, whether it is under 3-6 or whether it is under this motion should be dismissed. invalidating prior art. The SSL 3.0 reference, they should be stuck with the contentions they made back in July or the ones they updated in December. The Altiga System, Your Honor, same way. I will It should not be added as

live with their contentions back in the day, and in front of you, Your Honor, we will deal with what is or what is not in their contentions when they are presenting a witness in front of this Court; and I think that is a -- you know, it is not in his report or it is not in the contentions, that is the kind of thing Your Honor commonly deals with when we approach the

93 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 Bench and talk about it. I am okay if you want to pass that one down the road, but, Your Honor, that issue -- as long as they are not updating under their 3-6 contentions, I can deal with that. And, finally, Your Honor, the double patenting and the non-patentable subject matter. Your Honor, now they are

just saying we never disclosed it to you, but we didn't have to. Counsel is not here telling you he disclosed it to us elsewhere. period. He is just saying we didn't have to disclose it

The reality is, Your Honor, this theory was not

disclosed to us, it was required under the contentions, it was required in responses. They didn't come. They got the

answers they wanted, and now they want to use it against us. THE COURT: All right. The Court is going to deny

defendants' motion to supplement invalidity contentions, Docket No. 277. time. I am not going to go beyond that at this

When there is an appropriate motion in front of me, I

will take that up. All right. We are going to take about a 10-minute

break, and then we will come back and take the rest of these up. (Recess was taken at this time.) THE COURT: All right. Please be seated. Next on our agenda we will turn to the

94 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 second case, Mitel case. And we have the companion, the

defendants' motion to compel deposition, Docket No. 224 and VirnetX's motion for protective order, Docket No. 115 dealing with the depositions of the inventors. Who would like to go first on that? MR. BUNT: THE COURT: MR. BUNT: I would be happy to, Your Honor. All right. Your Honor, our motion deals with the

depositions of several inventors and/or employees of VirnetX. These individuals were all deposed once in the Microsoft litigation. Beginning around February of this year we began When we did,

noticing the depositions of these individuals.

we notified the defendants in both cases that we will be presenting the witnesses. We provided ample notice, and we

offered to coordinate the dates so that everybody could attend those depositions. The Mitel Defendants never complained about the timing of the depositions. They didn't suggest that a

different date would work for them, and they didn't ever say they were unable to attend. The only thing they did say is

they were not obliged to participate in any of the depositions, and they could depose the witnesses in the order and at the time of their choosing. Your Honor asked a question earlier today about whether there is a joint defense agreement. I heard there was

95 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 one among the Cisco Defendants and I heard there is one among the Mitel Defendants. I didn't hear an answer as to whether It certainly would not

there was one between both groups.

surprise me if there was a common interest agreement because they did say that there have been informal communications back and forth. Presumably with those communications they have discussed if counsel -- discussed strategy, discussed discovery, how to conduct it. It would certainly come as no

surprise that the Cisco Defendants had told the Mitel Defendants what sorts of questions they intended to ask of our witnesses and whether the Mitel Defendants had any information, comments, edits to those questions they might like to see made. It wouldn't come as a surprise because that is typically what happens in these joint defense groups, and it also wouldn't come as a surprise because the two cases involve similar claims, common witnesses, shared evidence. They are

proceeding on roughly parallel tracts, and they are both before the same Court. So at the heart of the matter for us, we just don't believe there is any reason the Mitel Defendants should not have participated in the deposition of these individuals when they were taking place. They shouldn't be awarded for taking

a wait-and-see approach to discovery that increases costs and

96 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 causes duplicative litigation discovery. THE COURT: MR. GREEN: Counsel. Thank you, Your Honor. I want to start

by, I guess, just diffusing this notion a little bit that there is complete overlap and there is some obvious coordination between the defendants in the two cases. I can

represent to you without reservation that I have not been ghost-writing deposition outlines nor to my knowledge has anyone else in the Mitel action -- it feels odd to call it the Mitel action now that Mitel has settled out. the 018 action -- but our case, I have not been ghost-writing deposition outlines being a guiding hand behind the scenes about what should happen at any deposition in that case. With respect to my colleagues in the Cisco case, I have allowed them the chance to pursue their own discovery, and they made clear, I believe, to us and, I believe, VirnetX that they had -- where they had noticed witnesses for deposition, they believed that they had the ability, and I agreed with them at the time, to pursue their own strategies and ask the questions within the time allotted. Your Honor, if we were going to have a meaningful discussion about coordinating specific deposition dates and somehow reconfiguring the limits of the discovery order to have one witness appear in some consolidated fashion, we had a It might just be

97 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 perfect opportunity to have that discussion in September of 2011 when we negotiated the discovery order in this case. At no time was it expressed to us that VirnetX expected witnesses to be made available one time, one day only, all seven or eight parties from two actions had to come and appear. That was never discussed. If it had been, we

could have discussed then whether it was feasible to have one day with a particular witness, whether we could have consecutive days, the order or who we get to go first, and those disputes could have been discussed, if there were disputes at all. What the Mitel Defendants objected to was being told this person will be available for deposition on this date even though you haven't noticed them, even though this is coming at a point in the case where you may or may not be ready, and it is not true that we never said we could just appear or we just decided not to go. We did communicate that we did not -- or

we could not be available for all these depositions; that we thought there was discovery yet to be had that would have impacted our ability to take those depositions. I believe this was a frequent topic of discussion in the motions we just heard, whether certain disclosures have been made, things like claim construction, certain contentions have been served, and whether witnesses would be available to be prepared, whether you knew the theories of the case

98 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 overlap. advanced by the other side with sufficient preparation. The Cisco case, or the 417 action, leads ours by several months. In fact, their fact discovery cutoff was Our fact

April of this year, as you saw on the slide. discovery did not cut off until June 28th.

If the goal of

VirnetX was to say every single witness that we have must be simultaneously deposed on one day in one case, that effectively cuts 10 weeks, or two months plus, off of an already compressed discovery period in the Mitel case. is completely contrary to the discovery order. contrary to what we expected. We are not trying to manufacture a dispute. not trying to gain an unfair advantage. We are That

And it is

We would like the

ability to take depositions of VirnetX's witnesses using the theories of our case, testing the theories of infringement they have against our products, against the theories of validity that they have against the prior art that we have asserted. The patents in the two cases do not completely They are different patents in the Cisco case that There are some that overlap, that

are not in the Mitel case.

is true; but there are several others that are not present. And it is not effective or efficient for the Mitel Defendants to go and have a single day of deposition of, say, an inventor compressed because that person is an inventor on several

99 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 patents that are not asserted against our clients, and then have us get the residue of the day to share with four or five other defendants from another case and try to fit everything in. We have made very clear in email correspondence -and I will represent again to you today, Your Honor, that I have no desire to waste anybody's time. I simply would like

the opportunity to pursue questions of VirnetX witnesses relating to their damages allegations against my client. my co-Counsel, it seems, would like the same opportunity. What is their basis for injunctive relief against our client? Their theories of notice. Why do they allege And

that we willfully infringe?

What is the theory of How does that align or

infringement against our products?

juxtapose with their theories of validity against the prior art that I have asserted? That is the basis. We have

There is not an unwillingness to cooperate.

heard you loud and clear that you would like to see some coordination between the cases. I would suggest that, you

know, some responsibility for that can fall on all parties; but it is unfair and it is prejudicial for VirnetX to say now that because you didn't show up to take depositions on a day we dictated, even if you had notice of depositions and contrary to discovery limits we had already negotiated, then you forego the right to that deposition at all. That is what

100 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 they are seeking. MR. RENAUD: Your Honor, may I add one short thing?

In light of trying to coordinate a lot of what Avaya's Counsel has taken the lead on, I take exception to the accusation that we didn't try to negotiate. In fact, I actively negotiated

trying to get a back-to-back date more than seven hours so in case we were not able to get time on the record that one single day. While there was some stops and starts as to that negotiation, it eventually petered out with no agreement to allow us extra time. us to get a deal. I do believe Counsel tried to work with But there was

We weren't able to get one.

definitely attempts made to get additional time to negotiate a resolution. And to suggest that we said no, and we had no

basis other than to say we wouldn't show, is not consistent with the record. MR. BUNT: As to the discovery order and the docket

control order which they throw up as an indication that they should have separate hours, there was a discovery order, there was a separate docket control order, we acknowledge that. allows the parties to take depositions. It

It does not mitigate

the need, however, for the parties to conduct discovery in a timely, cost-effective, efficient manner. Rules recognize that. We offered to try to coordinate these depositions. And the Federal

101 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 To my recollection, I don't recall a different date being suggested that would work for everybody. We also offered in

an email a couple of extra hours if that would solve the problem. That was not picked up upon by the defendants. The defendants' purpose in all this was to wait and see what happened at the first set of depositions and then a couple of weeks later to notice the depositions again for themselves. They have obviously been coordinating the discovery and strategy of this case between the two. There is no reason

why they couldn't have coordinated the depositions here. There is common -- obviously common issues between them. think the deposition should be prevented. MR. GREEN: Your Honor, if I could add, I would We

suggest as an indicator or barometer of the reasonableness of this approach is the last part to join this action was SAIC. And SAIC has not imposed this same approach of here is my witness, everyone from each case must appear on this one day and take this one deposition. We have been collegiate with SAIC's Counsel. I'm

not suggesting we have not been collegial with VirnetX or they have not been collegial with us. But the approach that

VirnetX has taken is it is not workable, it is prejudicial and it is not necessary, as evidenced by the fact that the other party on the other side of the "V" there has not adopted this

102 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 stance. And we have made representations to SAIC, that they have accepted, that we will not abuse the extra time we seek with their witnesses to pursue theories, issues, facts of particular interest to the allegations and issues in our case. Again, Your Honor, we have heard you loud and clear on the need to have some coordination and to not be wasteful. That is not our intention at all. It is fair to ask that we As a closing

have an opportunity to build up our own case.

point, I would redirect the standard for precluding a deposition, as VirnetX seeks, to be extraordinary circumstances. Extraordinary circumstances are not met by

stereotypical statements or conclusory statements of burden or expense. I have seen no declarations, no specific evidence of

anything that would say VirnetX can't appear for these depositions or their witnesses can't appear. I guess it is reality that VirnetX has these patents, that they pursue them in a technology licensing format. That is part of their business. I am not commenting That is

on whether it is a good business model or isn't. VirnetX's business.

It is unreasonable for VirnetX to

complain that the burden of pursuing that business prevents it from undertaking its obligations that normally go along with litigation, just like it would be unfair for Avaya to say it

103 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 is too much of a burden for me to go about my daily business operations. When they have asked for deposition of our guys, we have worked on dates, we have put them up, I haven't denied any depositions at all, as I hope it is evident from the fact there are no motions to compel pending against us. only asking for reciprocation. MR. BUNT: That is it. The We are

Just very briefly, Your Honor.

extraordinary standard that they reference, the cases that deal with that are all situations where no deposition has been allowed at all. Here depositions were taken once in the

Microsoft litigation -- I am not saying they are limited to that. But we offered up depositions in the Cisco case to

everybody, and these folks didn't attend. I would also point out one final matter, all of the opening and rebuttal expert reports have been done in both cases. They have all been submitted based on the discovery There is simply no

that has already taken place in this case.

reason to allow further depositions when these folks could have been taken at the same time as everybody else. THE COURT: could have agreed. All right. You know, I wish that y'all

The proper way for this to have been done

would be to get an agreeable date, get some additional time for specific defendant discovery and then common discovery among all of the defendants in both cases and spread that out

104 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 over a seven-hour plus however many hours we would be looking at. I think both sides have been a bit unreasonable on this. I am willing to give defendants some relief for additional deposition time, but my question is -- well, first of all, I am going to give you some additional time; but I'm not going to allow you go into any area that was gone into in the earlier deposition. In other words, questions that were

asked, we are not going to be replowing the same ground as to any of that. If you have questions that are specific to your particular case and your particular issues that were not gone in -- are not part of a more general category that were gone into earlier, I will allow you to go into those. What I need

to know is how many hours do you think it would take you to do that? Is two hours enough? MR. GREEN: One moment, Your Honor.

(Pause in proceedings.) MR. GREEN: Your Honor, given that there is not

perfect overlap in between the -THE COURT: MR. GREEN: Given what? Given that there is not perfect overlap

in between the number of claims asserted against Siemens represented by Mr. Renaud, and Avaya, who I represent, and that -- or the technologies, we would ask for something closer to three, maybe three-and-a-half hours for the inventors and,

105 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 you know, something like three-and-a-half to four hours for the 30(b)(6) to continue. We have specific 30(b)(6) topics, for example, in the case of Avaya asking about the allegations against specific Avaya products and the basis for the allegations against those products. That might be of interest of Mr.

Renaud and his client Siemens, but I can't say that would satisfy the questions he might have. that. MR. RENAUD: Yeah, Your Honor, we have the same In fact, I will let him speak to

issue here, which is the products are different.

there is not even knowledge as to between competing companies as to whether the products overlap in any meaningful way. VirnetX may, frankly, know more about that than we do. I know some products have different standards. There is an H323 standard. Our products that practice that We have a different set of

standard have not been accused. product technologies.

So our request would be that we be able to pursue, as Your Honor suggested, the areas that have not already been plowed that are specific to our client and we have 30(b)(6) subject matters that match up against the various accused products and the issues that are specific to Siemens. I do think that partially informs, by the way, Your Honor, the prior art, the extent they are reading on the prior

106 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 art, which as you are going to find out from the letter briefs that we believe they do, we need to be able to explore and say now that we have addressed your infringement allegation, how is that different from the prior art A, B, and C. So while those references may already have been the subject matter of prior deposition, I can suggest to you that depending on how they are conforming them to our products, their infringement reads, that is going to inform the prior art play for each of the clients in a slightly different manner. Obviously, we will coordinate consistent with your instruction to make sure we don't in between ourselves unnecessarily drag the deposition out. We will be judicious

of the time, but we would request that there be three to four hours on 30(b)(6) subject matters because they don't wholly overlap -THE COURT: MR. RENAUD: witnesses -THE COURT: MR. RENAUD: Okay. I think two to three to four hours on a And then as to the We Are you talking about per witness? Well, it depends on how many

30(b)(6), which is a complement of topics.

inventors, we would like some time with the inventors. have gotten a chance to depose none of the inventors.

If they are going to put a single designee up for

107 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 30(b)(6) and my suggestion is that they probably are not, then we would split that time up as efficiently as we could. How many designees do you guys anticipate, VirnetX? MR. CASSADY: Your Honor, the topics between Cisco

and Siemens are identical other than the topics that were produced to us a couple of days advance of discovery. So we

are talking about the exact same testimony that the other defendants went into. I'm not sure where he is going except The

for what he said about comparing claims to the products.

problem is our clients don't have the information of Siemens to be able to identify the specific Siemens articles that apply to the patent claims because ours aren't allowed to see that information, our expert -- they have got that report. So I don't see what they are talking about with regards to Siemens and Avaya's interest in details of the products. That is irrelevant. They can ask Dr. Jones or Mr.

Nettles about it -MR. RENAUD: They are clearly not irrelevant, Your

Honor, and I take exception to the notion that there is not publicly-available information that VirnetX relied upon in the first instance to file. But I can say this: duplicative. The topics are clearly not

The topics relate in part to our own products. These are topics that existed in

And these aren't new topics. the very first notice.

There were additional notices that

108 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 included additional topics. But to presume if the accused

product is what is included in the topic, that that topic is the same for either company is ridiculous. So I would suggest to you this: You heard earlier

Mr. Caldwell argue that questions should be able to be asked of fact witnesses who hadn't been prepared for deposition on the patent; and that they should be entitled to pursue that discovery. And I think that the Court ruled that was

permissible. To suggest that we don't have a good-faith basis to pursue discovery on the very facts that underline their infringement claims as to our products, I think is a very far stretch. If the witness shows up and says I don't know

anything, if they say our lawyers concocted the whole thing and there were no facts that we were aware of that underpinned this case, then we will take that testimony as it comes. I really think it is a ruse to suggest that the topics overlap. THE COURT: do you anticipate? MR. CASSADY: Your Honor, with regards to the Cisco All right. How many 30(b)(6) witnesses But

case, I believe we put up three, I believe, 30(b)(6) witnesses. I don't intend for those to be any different,

given the topics are exactly the same. THE COURT: How many inventors?

109 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 MR. CASSADY: deposed in this case. Well, I think four inventors were One of them was a third-party that we Mr. "Gif" Munger, you may We made that very

are not under control of anymore.

remember, testified in the Microsoft case.

clear to them that you are not going to get ahold of this guy again. I think he is out on vacation for months and months

and months because he has got the benefit of retiring and being done with this. So I put that out there, he has been deposed, they had the opportunity. I think he went for eight hours that They didn't

day, and we were willing to give them more time. show up for that one. THE COURT: the inventors? MR. RENAUD:

How much time are y'all requesting for

What I would suggest for the

inventors -- and these are consistent with suggestions, frankly, that Counsel made before this all happened. I would

suggest for each inventor we split two hours time, two to three hours time, and then we put them on the same day and go back to back and bang them out. THE COURT: All right. What I am going to do is I

am going to allow you six hours total for all of the inventors and three hours total for the 30(b)(6) witnesses. MR. RENAUD: Your Honor, if they present multiple

30(b)(6)'s is there some latitude as to that three hours?

110 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 that one? MR. BUNT: No, Your Honor. Thank you. Honor. THE COURT: MR. RENAUD: THE COURT: MR. GREEN: That is assuming they produce three. So three per witness? No; three total. Okay?

Your Honor, if I may make one other

administrative thing on Counsel's last point on the expert reports. We prepared our expert reports despite lacking the We would like the ability to

discovery we had sought.

supplement those expert reports within some very short time frame of completing these depositions given that we were denied the discovery in the first instance. THE COURT: Well, that you will have to take up by

way of meet-and-confer with them and see if you can get an agreement on that. If you can't, then file a motion. Thank you, Your Honor. I would say that it would depend upon

MR. GREEN: THE COURT:

whether it is based on something that you -- new that you learned; or if it is something that you should have already known, then I would be disinclined to allow it, so you can use that -MR. GREEN: Thank you. THE COURT: Okay. Let's see, anything further on We understand the distinction, Your

MR. RENAUD:

Thank you, Your Honor.

111 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 part. All right. Let's move on now to Siemens' motion to THE COURT: You are welcome.

So I guess that is granted in part and denied in

amend answer, Docket No. 142. MR. CASSADY: sales issue? MR. RENAUD: MR. CASSADY: I believe it is. Your Honor, we made an agreement this Is that 1498, Your Honor, Government

morning about that one -- actually before the Court told us we should be more amenable, we made that agreement, just let you know that. THE COURT: Good. But it was -- we agreed they would

MR. CASSADY:

present a witness on the defense for a couple of hours over the phone; and that they would identify to us what documents they are relying on for that defense. They may have to amend

their expert report a small paragraph based on that. MR. RENAUD: Alex? MS. FENNELL: THE COURT: longer opposed? MR. CASSADY: THE COURT: No longer opposed. So that motion is granted as Yes. I think that is consistent.

And the motion to amend the answer is no

Okay.

112 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 unopposed with the proviso that this deposition will take place and documents will take place, and there will be a small amendment to the expert report? MR. RENAUD: MR. CASSADY: THE COURT: Correct. Thank you, Your Honor.

Thank you for resolving that one.

The next one is defendants' motion to modify the caption, Docket No. 157. MR. GREEN: Your Honor, thank you. On behalf of the

defendants on the motion to modify the caption, I will try to make this quick and not belabor the point. the Federal Rules of Civil Procedure. We can all read

And when we read Rules

10 and Rule 7 we see that they require all parties to the action be listed on the caption; and that the pleadings and other papers filed in the case reflect the parties to the caption. This is a matter of public record. It is fair for

the caption to reflect the parties that are providing contentions and assertions and taking positions against one another in the litigation. What I am hearing back from VirnetX is that it does not want SAIC in the caption because it perceives that will be used for some improper purpose. There is frequent reference

to an agreement that was made in the Microsoft case concerning the role that SAIC would play. And I would suggest that the

113 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 facts here are not the same. There has been no agreement here in the first instance as to what SAIC would or wouldn't do or what would or wouldn't be said about SAIC; and there is not an ability of VirnetX to impose an agreement by other parties on the defendants in this case. The other point I would bring to bear is that in the -- reading from the motion in limines that were filed, I'm holding a document filed in the Microsoft case on February 8th, 2010, Docket No. 310 in that Microsoft litigation, there is a statement that SAIC has not asserted any claims against Microsoft and would not assert any contention or any position regarding any issue in dispute between VirnetX and Microsoft. That has not happened here. We have served requests

for admission on SAIC asking specifically for SAIC's position on issues of infringement, and SAIC didn't take no position -or they did not -- refused to take a position. use better grammar. SAIC took explicit positions denying RFA's which have the effect of expressing a belief that Avaya infringes the patents-in-suit. SAIC has made other statements that are reflected in the briefing concerning the willful infringement. They That is I will try to

incorporate by reference, statements made by VirnetX. not taking no position.

That is not sitting on the sidelines.

114 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 VirnetX just can't have it both ways. We can't have

a party that is going to be injecting discovery responses or other evidence into the case and then they are somehow shrouded; they can't be referenced to in any paper; they can't be mentioned. This looks like a way to pave a process for

that kind of trial tactic, and that is prejudicial, Your Honor. That is the basis for this motion, not just a snipping

match over whether a party name is or isn't in the caption. THE COURT: regarding SAIC? MR. GREEN: There are declaratory judgment Will any issue be submitted to the jury

counterclaims, for example, of invalidity and unenforceability. And SAIC has acknowledged a case or

controversy and denied those claims. THE COURT: Response? Your Honor, I will start by saying I

MR. CASSADY:

bet you have never had a motion to modify the caption, in front of you before. you never have. I won't make you answer, but my bet is

And I apologize -- actually my wife says I

never do -- but I apologize for being in front of you on this motion. this. The history is Microsoft asked us to add SAIC -- or actually asked to kill the case based on SAIC. Your Honor But we have been here before and there is history on

chose to add them, at least my understanding was, for

115 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 discovery purposes so that all of the parties were given discovery. SAIC couldn't avoid its discovery obligations.

I think that is the same thing that has happened here in this case. Your Honor asked very explicitly that the

parties come to an agreement about the discovery that SAIC needs to give in this case once they are added. Your Honor, we have not come to any agreement. defendants have said we want everything. from them. We want their contentions. The

We want everything

We want RFAs, we want They want the world.

rogs, we want discovery, we want depos.

So, of course, SAIC at that point has no choice but to take a position because they weren't given the ability to not do that. But, Your Honor, they are not the ones asserting claims in this case. these patents. these patents. Again, maybe I misread it, but I believe Your Honor was adding SAIC for the very reason you didn't want the discovery to be dismissed because SAIC was just a deponent of a subpoena rather than some kind of party in the case. they have been doing their obligation. Candidly, Your Honor, they are not going to be a part of a trial in this case, just like they weren't part of a trial in the Microsoft case. Your Honor ruled on that in the So VirnetX is. VirnetX is the owner of

They are the ones asserting the claims of

116 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 Microsoft case. You ruled they didn't have to be at Counsel's

table; and they shouldn't be mentioned as a party who is not making a claim or made a different claim or has different issues. What is trying to happen here, Your Honor, if we go through the process, which we didn't do in the Microsoft case, of adding SAIC to every single header in this case, then we come in front of you, Your Honor, right before trial and you rule for us saying SAIC is presumably -- but if you rule for us that SAIC does not have to come to trial and does not have to make presentations in front of the jury, we are going to spend tens of hundreds of hours removing SAIC from every single header when they didn't belong there in the first place. And what is going to happen, Your Honor, is let's say we miss one, and I mean just one, and it gets in front of that jury, that jury is going to go, look, and say SAIC is here but they are not sitting at counsel table. That is

absolutely prejudicial to us because VirnetX is the owner of these patents making the assertions in this case. They are

the ones that have the right to go forward here and not SAIC. So what is happening here is they want to have SAIC in the header so that (a) we have to go through that process of removing them and going through the Court and making sure that they don't get referred to that way, but (b) there is no

117 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 this. prejudice to them if it is in there or it is not. If SAIC happens to sit at counsel table and they are not listed in the caption -THE COURT: Has SAIC agreed to be bound by the

judgment that is entered in this case? MR. CASSADY: Your Honor, that is my understanding.

That is the way they were in the last case and the way they are in this case. Mr. Andy Tindel is here. say that, too. MR. GREEN: Your Honor, I can say on behalf of the I assume he is going to

defendants if that offer has been made, I don't have it in front of me. I'm not aware of any such offer. Let me see if I can short-circuit

MR. CASSADY:

If I can get SAIC to say that, Your Honor -Does that deal with this issue, Mr. Green? MR. GREEN: We have the other issue of SAIC taking

positions and making statements in discovery, discovery responses that we will try to use in the course of the case. And these statements are things like SAIC incorporates by reference VirnetX's infringement contentions as to each of the defendants. In addition to their direct infringement, the Nothing

defendants have and continue to indirectly infringe.

about responding to discovery requires that kind of statement unless there is an intention to show some kind of unified

118 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 table. do. MR. CASSADY: SAIC is not going to sit at counsel front between SAIC and VirnetX -THE COURT: I think they are saying they don't plan

to mention SAIC in front of the jury. MR. GREEN: Your Honor, that may be a statement that

is being made now, but it certainly is not reflected in the discovery we have been receiving. THE COURT: Is that what you intend to do? Your Honor, SAIC may have discovery

MR. CASSADY:

that is out there as a third party that used to own these patents, but that is their relevance to this case and that is what we would go to trial on. MR. GREEN: Your Honor, are we going to go far as

saying SAIC will not present witnesses, it won't attempt to elicit any testimony? MR. CASSADY: Is that where we are? If you are going to play the

depositions, then obviously -MR. GREEN: I am referring to what SAIC is going to

And SAIC will not be presenting a witness except in

rebuttal to statements made by the defendants. MR. GREEN: But there we go. SAIC is presenting

witnesses, and the kind of statements they will make in rebuttal, I presume, would reflect the information they provided in discovery, and that information reflects taking

119 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 specific positions and averments on issues of infringement, enforcement, and validity. I would also feel a little more comfortable if these statements were coming from SAIC's actual Counsel rather than VirnetX's Counsel just as a matter of form, Your Honor. THE COURT: MR. TINDEL: Mr. Tindel. I heard somebody say there is no good As the Court knows, we tried to --

deed that goes unpunished.

SAIC tried to interject themselves in the case so we could provide discovery and conduct our other obligations, as we did in the Microsoft case. And we even presented an order that

governed how SAIC would not take positions, would cooperate fully in discovery, as we have done in the Microsoft case. That was sent in the spring of 2011. to that -THE COURT: MR. TINDEL: THE COURT: MR. TINDEL: From who? From anybody, of the defendants. What about from plaintiffs? No, that was a joint order that we And we got no response

proposed to the defendants. THE COURT: MR. TINDEL: Okay. All right.

And the response was to file a motion And the Court in its

to dismiss, which the Court denied.

order said I am not going to impose all of these Microsoft orders that were agreed to on the defendants in either the

120 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 Mitel or the Cisco case. But if you guys have any problems

with SAIC's discovery obligations, let me know. Well, Your Honor, we have tried, SAIC, to cooperate, to stay out of the way, to not cause any problems. as I know, that is -- that has proceeded at pace. And as far And we have We tried We

taken the positions because we have been forced to.

to get an agreement where we wouldn't have to do that.

never got any cooperation or back-and-forth from any of the defendants on this. And so if we are forced to take a position, we are going to take a position that is in line with VirnetX because we are aligned in the case. MR. GREEN: It is just that simple.

I am having trouble reconciling this.

The argument leaves with SAIC has no position, and then -THE COURT: I think what he just said is that SAIC

has no position unless you force them to take a position, which it sounds like you have. If they are forced to take a

position, it is going to be consistent with VirnetX because they may benefit from any recovery that is obtained in the case. MR. GREEN: Your Honor, understood. And fairly to

that point and VirnetX benefiting -- or SAIC, rather, benefiting or having interests aligned, that is the issue. If

SAIC and VirnetX are aligned in interest and they have taken positions -- I would, respectfully, disagree we have forced

121 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 them to do it. We have tried to get some discovery, but it is

special treatment to say SAIC -THE COURT: It sounds like to me what you have been

doing is generating a lot of unnecessary work in the case, Counsel. And I am going to deny your motion to add them to I will withhold ruling on how we will try the

the caption.

case or whether they will be included in the case, you know, in front of the jury or not. But, you know, again, to me, the way I view SAIC is that they are a very nominal party. I have endeavored to save

them attorneys' fees and save y'all attorneys' fees by trying to get something worked out that they can provide you with the discovery that you need. But I did not really intend for it

to be turned into an adversary proceeding between them and the defendants with all of the attendant expenses to both sides. And I don't see where it is going to be helpful to the ultimate issues in this case. I think it will be

confusing to the jury if they are put in there, unless you can identify some legitimate reason that they need to be in there. Mr. Tindel, I take it that SAIC is agreeing to be bound by whatever verdict or judgment is entered in this case as it relates to VirnetX; is that correct? MR. TINDEL: THE COURT: That is my understanding, Your Honor. So you have that agreement, so you don't

122 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 have to worry about them coming back and suing you again or any other claims or anything of that nature. So I just really

don't see where they have much of a role to play in it other than one if you intend to sort of create a role for them, which it sounds to me like you are doing. MR. GREEN: Your Honor, we certainly understand. We

don't mean to unnecessarily multiply this. discovery that is reasonable from SAIC -THE COURT:

We will pursue the

Your motion is denied, and we will take

up what everybody brings to me regarding when we get to trial. MR. GREEN: THE COURT: Thank you. I guess we have got one more. This is

defendants' emergency motion to compel responses to Interrogatories 1, 2, and 6. MS. FENNELL: Thank you, Your Honor. I am pleased

to report that I think we have resolved a number of the issues that were brought to your attention in this motion this morning through the discussions we have had with VirnetX's Counsel. THE COURT: hearing you. MS. FENNELL: Sure. I said I am pleased to report, I'm sorry. I'm having a little trouble

I think we have resolved a number of the issues presented in this motion this morning through discussions that we have had with VirnetX's Counsel.

123 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 I think what I would suggest, if Mr. Toliver is amenable to it, would be for you to explain on the record what it is you are willing to do to supplement your interrogatory responses, and then we can address the still-outstanding issues. MR. TOLIVER: Your Honor. Just to be clear, we have had a number of conversations about these interrogatory responses. We have I Sure. Craig Toliver for VirnetX,

been back and forth with the defendants a number of times. think what we saw after reading the briefing, including the

reply brief, is that we seem to have a few quibbles over some issues where I think that the parties were talking past each other. As I understand it from the reply brief of the defendants, they believe Interrogatory No. 6 has been resolved. And I see that in the reply. THE COURT: Is that correct, Counsel? It is correct, so long as VirnetX will

MS. FENNELL:

supplement its interrogatory response to include the information that is contained in its opposition brief. MR. TOLIVER: THE COURT: We will do that, Your Honor, yes.

No. 6 is no longer on the table.

What about 1 and 2? MS. FENNELL: So, Craig, I understand from our

124 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 discussions this morning that you are willing to supplement those responses in some respects as well. Can you state on

the record what it is you are agreeing to provide? MR. TOLIVER: I believe, Counsel, that the issue

that we have the dispute over is the Section 112 issue, which I think corresponds to your Interrogatory No. 2. As for Interrogatory No. 1 and 2 there is also the issues relating to conception, reduction to practice, as well as priority date. And based on -- Your Honor, based on the conversations that Counsel had just prior to this hearing, I understand that those issues have been resolved. With respect to the '504 and '211 patents, VirnetX said long ago in the interrogatory responses that, very specifically, April 26th, 2000 is the priority date that we believe those patents are entitled to. After followup questions from defendants, we then clarified that VirnetX in this case is not seeking an earlier conception or reduction to practice or invention date. Therefore, April 26th, 2000 is the priority date. believe that was in our interrogatory response. MS. FENNELL: So I think we can withdraw this And I

portion of our motion as pertains to the 504 and 211 patents, so long as VirnetX is willing to supplement its interrogatory response to clearly state that April 26th, 2000 is the date

125 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 that it is contending for the conception, reduction to practice, and priority dates of those two patents. Which I think is what you agreed to this morning? MR. TOLIVER: Again, the only issue I have with that

is the way I usually think about this, Your Honor, is that a patent has a priority date. And then a patentee may or may

not argue for a prior conception or reduction to practice or invention date. And what we have set out is that in this case we are not making such an assertion, so the April 26th, 2000 date, the priority date listed on the face of the '504 and '211 patents is the priority date. So when you say the conception or reduction to practice date is that date, I'm not sure that that makes perfect sense in the way we usually -MS. FENNELL: Understood. And I think, Your Honor,

and, Mr. Toliver, I think all we are looking for right now is for you to supplement your response to clearly identify the April 26th, 2000 date; and that it applies to all of the asserted claims of those two patents. MR. TOLIVER: And I believe that date has been laid

out; but if the question is whether that can be specified as to the asserted claims, to the extent that was unclear, we are happy to do that. MS. FENNELL: Okay. That should address our

126 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 concerns. So I think that leaves -- the only two issues that leaves pending from this particular motion are the conception and reduction to practice dates for the '135 patent. I

understand from discussions that I had with Mr. Toliver this morning that VirnetX is not able to provide specific dates on a claim-by-claim basis for the conception and reduction to practice in connection with the '135 patent. It is our understanding and our position that absent evidence of an earlier invention date, the invention date that VirnetX would need to rely on for the '135 patent would be the filing date of the patent. The only deposition testimony that VirnetX has cited in support of the conception and reduction to practice of the '135 claims is deposition -- oral deposition testimony from inventors. They haven't provided any further corroborating

evidence of the conception and reduction to practice of those claims that would pre-date the filing date of that patent, so it is our position that we are entitled to that evidence. And if they can't provide it they are just going to have to be forced to rely on the filing date of the patent application. MR. TOLIVER: On this particular issue, the

inventors, the main inventors have been deposed in the Microsoft case and in the Cisco case at least ten times. And

127 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 it. Anything further? in those depositions the inventors have provided testimony regarding the September 23rd, 1999 train ride -THE COURT: Thank you, Counsel.

I am just sitting here listening to y'all talk back and forth to each other. And it is just beyond me that it has

come all the way to a court hearing, and now you are both trying to -- still not understanding what the other one is saying. I'm going to deny the motion as moot. And y'all If you

meet and confer and see if you can work this out.

can't, bring back what you cannot resolve; and I will then take it up. But I think -- I don't know. It just seems like

we are trying to tie things down so tight where it is already established by the facts in evidence and everything else. don't know. That is my ruling. I

Anything further? MS. FENNELL: Your Honor, if I may, the Federal

Circuit has developed a clear rule requiring corroborating evidence where a party only relies on oral inventor testimony. THE COURT: I'm familiar with that. I would appreciate your guidance on

MS. FENNELL:

what more we need to do to frame this issue in light of that. THE COURT: You file a motion if you can't resolve

128 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 MS. FENNELL: We have one other outstanding issue in

connection with this motion -THE COURT: I have already denied that motion. Okay. In its entirety.

MS. FENNELL: THE COURT:

All right. That is all of the

Let's turn to the Markman. motions, isn't it? MR. TOLIVER: THE COURT:

Yes, Your Honor. Let me just note for the

All right.

record that we have already been through one Markman on these patents in the Microsoft case. We have been through the

Markman in the Cisco case, which I believe that was just -- we had the hearing when and when was that opinion handed down? MR. CALDWELL: It was April 25th we got an opinion.

I believe the hearing was January 5th. THE COURT: So we have gone through this twice. I

have reviewed the briefing, and I don't know whether y'all are just attempting to preserve the same arguments on behalf of your clients. If that is the case, just tell me and we can do

that without going through them. I didn't really -- I saw -- I didn't really see any new arguments on the terms that are briefed other than arguments that have already been presented and I have already ruled on. I see one new term to be -- and I am willing to And I will hear any new arguments that

hear argument on that.

129 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 you have. But if it is an argument that has already been made, there is no point in re-making that argument before me today. So, Counsel, how would you like to proceed? MR. CALDWELL: you have captured it. From VirnetX's perspective, I think

All I was going to stand up here and Obviously, there was the

say first is you are correct.

Microsoft Markman and then there was the Markman in the Cisco case. Another data point, when the case management conference in this case was held, Your Honor specifically invited the defendants in the second case, come on, participate in the first Markman because by the time I invest all that time in getting a ruling it is not going to make sense to go around behind and just do a do-over, and they declined to do that, and that is why we are here today. So from VirnetX's perspective, we totally agree with what you said. Obviously, VirnetX is preserving error on its

claim construction opinions, as Your Honor has recognized. And one further data point for Your Honor is that actually in both cases, the Cisco case and in the Mitel case, the parties have done their burden expert reports and their rebuttal expert reports so it is kind of the inverse of the normal order we have. All I intend to do on behalf of VirnetX

is if somehow the defendants think they are actually

130 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 presenting something new and they want to go back and reargue something, I think we will intend to respond, but we are not going to charge ahead. THE COURT: MR. RENAUD: Counsel? Yes, Your Honor. I appreciate the

Court's time, and we plan on addressing only new issues as to construction, either based upon an issue that was previously never discussed; or in the instance of "secure communication link," a slight wrinkle on new information that wasn't subject matter of discussions. We will keep it very brief.

I would like to turn the Court's attention to Slide 23 of our slide deck. Can you pass those up. (Slide presentations handed out.) THE COURT: All right. Virtual private network, and

you are wanting to add the limitation "without additional setup," right? MR. RENAUD: Yes, Your Honor. And I think just -- I

will be very brief because I think the briefs cover it in pretty good detail, but I do think it is important for the Court to recognize this is a new argument based upon information that wasn't previously discussed. So if you page through to Slide 23, has "without additional setup" is a short way to refer to the language in question. If you go to Slide 38 of the slide deck that you

131 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 Honor -Slide 40. have in front of you. So what we have suggested is that VirnetX needs to be bound by what it said to the USPTO. We believe that when

you look at -- and it is just going to be a couple of pages of information from the file history, when you look at the relevant pages you are compelled to reach the conclusion that VirnetX has defined a "virtual private network" in a specific way during that prosecution, surrendered an understanding of what the virtual private network could be and couldn't be. And second bullet on Slide 38 is essentially a paraphrase of what they said to the Patent Office. A VPN, as

they have told the Patent Office, has to be able to address data to other computers without additional setup. Now, I am mindful of the notion that the Court -If you go to Slide 39. -- that this Court previously understood and accepted the notion that there were three separate bases upon which virtual private network of the prior art, if you will, was distinguished from the Aventail reference. I think I think the

VirnetX is going to say we said there is no VPN.

reality, as they have said, a VPN is a certain thing and they have also said it doesn't include certain things. So if you look at those three distinctions, Your

132 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 -- Your Honor addressed the third distinction, which has the word "directly" in it. There was a lot of I don't intend

conversation at the last Markman about this. to plow that ground again.

If you look at the first distinction, it is one of the separate distinctions that Your Honor identified as being a separate, independent way one could distinguish over Aventail. It says, first, Aventail has not -- emphasis on

"not" -- been shown to demonstrate that computers connected via the Aventail system are able to communicate with each other as though they were on the same network. Now, the notion there is further unpacked -If you go to the next slide, Slide 41. This is going to be the heart of the argument. Slide 41 actually lays out what is meant by that first distinction, which Your Honor has recognized as an independent distinction. If you actually want to hone in on the first paragraph of that -- of Slide 41 is talking what a VPN isn't. Okay. It says, Aventail -- final sentence of the first

paragraph -- does not disclose a VPN where data can be addressed to one or more different computers across networks, regardless of their location of the computer. So they are saying this is what it doesn't say. Now, more importantly it says on the next slide --

133 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 I'm sorry, the next paragraph of the same slide, Slide 41. It

says -- it goes through the description of what the invention is. And if you look at the final sentence of that -- or a

portion of it, it says -- if you look down one, two, three, four lines, it says: ...then A -- "A" is a computer; it is on

a network -- ...then A would nevertheless be able to address data to B, X, and Y -- other computers -- without additional setup. Now, that language that you are looking at there, A -- a computer -- would nevertheless be able to address data to -- other computers -- B, X, and Y without additional setup, is the language that I proposed to the Court on slide -- on the first slide we looked at, Slide 23. So what I suggest is -- they have said crystal clear that they said a computer would nevertheless be able to address other computers without additional setup. Now, the

interesting question is what is the "without additional setup" that they are talking about. But in more than one place --

and you will see it in our briefing -- in more than one place they talk about additional setup would not include the need to set up a new connection. And let me just jump to a couple of slides, and I will wrap it up, to give Your Honor some impression of that. If you go to -- first I will point you to Slide 43 for a moment which juxtaposes the language I just read in the record

134 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 from the file history which compares the -- basically the paraphrase on the bottom to the literal language that is used in the file history. But if you turn your attention to Slide 47, their own expert Dr. Jones has characterized in a recurring theme the notion that a new connection would not be an example of the invention. So he says: Further, every communication

requires -- this is the second bullet there -- further, every communication requires a new connection as noted above. As

such, one skilled in the art would not consider this to be a network. So the theme you see isn't even limited to Aventail. They continue to say, look, if you need a new connection -And let's turn to Slide 44 for one more shot at showing the same theme. This one says -- and this is a cite -- this is to the 135 reexam. In this situation not only would A be unable

to address data to Y without establishing a separate SOCKS connection, but A would be unable to address data to be over a secure connection. So this is the same page of the file history -- I apologize. I am trying to move fast recognizing Your Honor's

patience with a third Markman; but this is the third paragraph of the section on Page 41. So they start off in the first The second

paragraph of Page 41 saying this isn't a VPN.

135 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 paragraph they say what a VPN is claimed in the invention. And in the third paragraph they, again, say what it isn't. So, to me, it is clear they have had to work with Aventail and try to figure out a way to say we aren't that. Your Honor picked up on one of the distinctions of what we are asking for today is for you to consider a second of those separate, independent distinctions that they highlighted in their file history of the '135. Now, I am not going to go through the whole analysis a second time as to the '504 and the '211, but I will point the Court's attention to slide -- the slide that -- beginning on Page 56 in which we go through the same analysis here. Slide 56 has the language which has the "without additional setup." Your Honor, I'm sure, is familiar with If you go back the same argument we

that from the briefing.

are going to make beginning on Slide 61 and continuing on to 62 it says, look, there are three independent grounds for the "secure communication link," upon which they distinguished over Aventail. So it is the same movie all over again. Your I don't

They point to the same three distinctions. Honor identified that, frankly, in the Cisco order.

want to plow that ground, but I do want to direct Your Honor to the analysis you reached that, look, there are three separate, independent bases and I'm going to give meaning to the "directly" basis.

136 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 What we are simply doing today, which is brand new to the case, is we are asking you to consider a second of those three distinctions; namely, "without additional setup" and to give it meaning that I think as required by their clear statements on the record. So the reality is there is a slight wrinkle between the '181 prosecution, which is where the secure communications disavowals happened regarding Aventail, and the VPN arguments in the '135. As Your Honor probably knows, there is a Mr. Nieh is an expert who was hired

declaration for Mr. Nieh.

by VirnetX who helps them get allowance on various claims, including "secure communications" as the term is used in the '181 patent, and "virtual private network" as the term is used in the '135. Your Honor correctly identified that the argument in the '181 patent was virtually identical to the argument advanced in the '135 with the exception of, frankly, a handful of words that are important enough that Counsel for Avaya is going to spend a very brief amount of time directing the Court's attention to what those words need. But I will just say this: Whatever the analysis

ends up being, Your Honor, you recognize the parallel as in between the word "directly" being imposed on "secure communication link" and "VPN" as a result of your thoughtful analysis in the Cisco case. I am suggesting to a parallel

137 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 analysis as to "without additional setup" language is advisable here in light of the clear statements by the applicant and the -THE COURT: What do you think the "without

additional setup" language, what do you think that adds to the understanding over what is already there, including the "directly" element? MR. RENAUD: Well, "directly" simply says there is

no intermediate server, and we went through that in pretty good detail. That is one instance where the Internet can't be It can be a server or other

the thing that is in the middle. things.

But it doesn't capture the additional connection. So, remember, when Aventail was set up, you are

talking about making connection between A on one network and X on the other. It is a direct connection, and it is limited to Then if you make a connection between B

those two computers.

on the same network as A to Y, that is a separate, independent connection. What Aventail does is it makes separate new connections for each computer that wants to talk to each other. do. They said, whoa, whoa, whoa, guys, that is not what we

"Directly" doesn't accomplish that because you could have So they

a direct communication but they could be separate. said, no, no, no, guys, this is an easy system. the complex prior art.

This is not

We have a one-click sophisticated

138 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 system, and they say you don't need that new connection. Now, if they don't make that argument, they have got a real problem with Aventail. So they make it, they put

everybody on notice that a new connection is not an example. So "without additional setup" is an attempt, very simply, Your Honor, to say you don't get the bargain. made a bargain and you said no new connections. X on one network, can talk to Y. You

A can talk to

If they are part of a That is

virtual private network, no new connection required. pretty darn clear.

And their expert Mr. Jones effectively distinguishes over Kiuchi, a prior art reference, on that same basis. So

"without additional setup" provides something that directly cannot, which is a new connection is not an instance of a "virtual private network" as claimed in the '135 patent, or a "secure communication link" as claimed in the '504 or the '211. It is crystal clear. It just never was brought to the

Court's attention in either the Microsoft Markman or the Cisco Markman. So I tell you this is new ground, Your Honor. THE COURT: MR. RENAUD: Okay. Response.

One final point, and I'm going to sit

down and pass this off to Counsel to handle "secure communication link." There is a small additional argument Would Your

that Avaya has that is not part of our argument.

Honor rather do "secure communication link" separate from

139 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 13? Your Honor hit on this certainly. Obviously, we are I'm not "VPN"? THE COURT: MR. RENAUD: Yes. Okay. So, Your Honor, I would just respond

MR. CALDWELL:

to "secure communication link" when they get there, even though Counsel touched on it a little bit because there are some important issues there. Mr. Martin, would you do me a favor and go to Slide

preserving error on things like the anonymity issue. going to retread old ground there. whole "without additional setup." the head.

But the issue is this You hit that squarely on

Now, to be clear, the office action that Counsel is now pointing to was an office action Your Honor specifically looked at and addressed in Your Honor's old opinion. isn't any sort of new evidence. So this

It is not something that was It is

changed or changed or been intervening in the meantime. the exact same evidence you looked at before.

Now, a very interesting thing, I think, is to put this office action in context where Aventail is presented as '102 prior art, the inventors actually argued -- first of all, it is not even prior art. agreed. And ultimately the Patent Office

They haven't even shown that Aventail is prior art.

140 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 But setting that aside, there were technical distinctions. distinctions. As you know they say there are three technical I have got the technical distinctions -- the

first one -- I think you have already seen these slides, but I want to put it in context exactly what we are looking for. Without reading every one of these, this paragraph that is up here is that Aventail has not been shown to disclose the VPN in Claim 1 of the '135 for at least three reasons. First. The first argument is not something about The first argument is actually Aventail has

additional setup.

not been shown to demonstrate that computers connected in Aventail are able to communicate as though they were in the same network. That is actually the argument.

And as far as explaining that first argument, the applicant said: Aventail does not disclose a VPN where data

can be addressed to one or more different computers across the network. So this part about being on the same network, actually the argument is whether or not other computers can be addressed. The paragraph that Counsel is relying on is the

one that comes after it and says, for example, let's talk about how Aventail works and a shortcoming there. disclaimer or some sort of a disavowal. It is not a

The statement that

matters is the one that the first argument is, you can't communicate like you are on a private network, and you can't

141 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 address the other computers. It is addressing.

Now, Counsel is saying, oh, gee, this wasn't confronted by the Court in the last Markman order. haven't really dealt with this. You

But in the proper context

with what the Court is being asked to deal with is the issue of whether a VPN allows addressability. with that. And I want to skip ahead -- it is funny, in a different part of their brief the defendants agree with this. Your Honor's construction -- let me go there first. Your A Your Honor has dealt

Honor's construction, which is at the very bottom, says:

network of computers which privately and directly communicate, et cetera. Your Honor has already established it is a network, it is private, and they directly communicate. So the issue is

whether Your Honor has captured this addressability feature. And you have. And the defendants don't dispute it.

The defendants' own brief argues, Slide 17 of our Markman presentation, but it is defendants' responsive claim construction brief at Page 8 -- defendants themselves argue, they agree that the "directly" already in your claim construction, that "directly" refers to direct addressability as set forth in your Markman order; and thus they don't rehash all those arguments here. So the actual first argument may be -- there is the

142 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 first argument about addressability and being on the same private network. You captured that it is network. You

captured that it is direct.

You captured that it is direct It is really a

addressability and the parties agree to that.

second bite of the apple, which I believe should be rejected. MR. RENAUD: Okay. Your Honor, if I might just First, "directly"

briefly say a couple of quick things.

clearly is related to the third distinction, and that is unavoidable. Second, I think the characterization of the language associated with the A would nevertheless be able to address data to B, X, and Y without additional setup. To say that

that is not related to the first distinction, I think -- if that is what Counsel meant to convey, it is clearly related to the first distinction. In the second -- the final sentence of that second paragraph is very informative. This is true because A, B, X, So they are telling

and Y would all be part of the same VPN.

you what a VPN is in the context of this invention as claimed by the '135. They are telling you in the preceding sentence

exactly what "without additional setup" is related to. And if you look at the final paragraph in that trio of paragraphs on Page 41, it says, A -- this is talking about the Aventail reference -- A establishes a SOCKS connection with a SOCKS server for relaying data X and B separately

143 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 establishes a SOCKS connection for the SOCKS server for relaying the data to Y. So what they are saying to you is each of them is creating a separate connection in the final sentence of that same paragraph. This is one example of how the cited portions So every single one of

of Aventail fail to disclose a VPN.

those paragraphs on Slide 41 is consistent with the construction we are offering, and it is all part of the first distinction, and it has nothing to do with the "directly" issue that Counsel for VirnetX has mentioned. So the reality is, is we are talking about the first paragraph and not the third. The final thing I will say before transitioning this back, unless Counsel has a further remark, is that the "secure communication link" definition has the exact same analogous paragraphs. MR. CALDWELL: Okay. I do have another remark. I

actually thought we were saving "secure communication link" for later, so I am certainly not conceding something on that, Your Honor. The one thing that Counsel did not confront -- and I think there is no escaping this, VirnetX does not dispute that the third distinction over Aventail has to do with some of the directness in the way computers can interact. The first one is specifically about addressability,

144 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 direct addressability. And the parties agree in their briefs

you have already captured that in your claim construction that the "direct" means direct addressability. their brief. We say it. We agree. They say it in

You have actually

captured this precisely. As to -- I think it is interesting that the defendants are trying to put a whole lot of words -- or a whole lot of weight on this one little expression there "without additional setup" when they, first of all, haven't explained really what that would mean in the context of the infringement proof. But more to the point, here is what VirnetX is saying about that. VirnetX is trying to be -- you can see how

many people attend when you hold a Markman or a hearing in one of the other cases; and when we were in the other courtroom back in January, it was even worse. like a hawk. VirnetX is obviously in litigation, and we understand everything they say is going to be very, very carefully scrutinized and Your Honor is going to pore through it and so are a whole bunch of other people. VirnetX is People watch this stuff

exceedingly careful to describe things precisely. And in the instance of Aventail, VirnetX could have said in Aventail because you have set up this one little socket you could maybe talk to one person, but computer B

145 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 could never talk to anybody else. anything to anyone else. It could never address

Then we would be here having an

argument that VirnetX had lied to the Patent Office about Aventail or something of that nature because you could take Aventail and you could change it. You can build it. You

could implement it in some sort of way.

You could add some

other technology onto Aventail and possibly make Aventail to where it could have this addressability feature in some way that is not disclosed within Aventail. But what the applicants did is describe it precisely. If you are looking in the four corners of It was just a precise

Aventail, you can't do this. description.

It is not any sort of disavowal on the claim

scope because the argument is whether in a VPN you can directly address one or more computers that are in the VPN. That is already captured in Your Honor's -THE COURT: MR. RENAUD: Final word? One sentence, Your Honor. So, one, I

think VirnetX has it backwards. They made the representations.

They put weight on this. We are all living with them.

They put the public on notice accordingly. Two, VirnetX has continued to ignore what exactly was said as to the first distinction. Whether addressability What they

is a factor in multiple distinctions is irrelevant. did is they made a distinction.

They have to live with it.

146 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 The final point is, they said what a VPN is, and they said what a VPN isn't. for "VPN," Your Honor. THE COURT: MR. RENAUD: communication link." I don't know whether -- Mr. Caldwell, do you want to go first on "secure communication link," or does it matter? MR. CALDWELL: Oh, no, as I represented to the Court What is next? So I'm going to hand over the "secure It is crystal clear. That's all

we think the Court has worked on this hard enough, and we are trying to just streamline things. So if you guys want to make

an argument, I'll respond to something if there is something new. MR. RENAUD: So what I would say, Your Honor, is Mitel and

there are competing proposals from the defendants. Siemens provided a proposed definition for "secure communication link." Avaya proposed another.

Avaya's

proposal includes something besides the "without additional setup." Namely, they are looking to offer, I think, further

argument as to why anonymity should be in there based upon new reasoning. I will say this, while Siemens adopts and embraces Avaya's proposal that anonymity should be properly included within "secure communication link," we have made a separate argument as to adding a new limitation, as you are aware,

147 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 talks. Slide 22. Some of this I will probably rehash after Avaya But, essentially, defendants' arguments on this would called "without additional setup." I am going to hand it over to Avaya now to offer additional information regarding "secure communication link" that we haven't discussed yet, Your Honor. MR. CALDWELL: Out of curiosity, are we finished

then from the defendants talking about whether "without additional setup" that part should be in "secure communication link"? MR. RENAUD: Correct. Should I go ahead and hit on that

MR. CALDWELL: point specifically? THE COURT:

On which point? This "without additional setup" we

MR. CALDWELL:

just talked about with regard to "VPN" and given that the defendants have two competing constructions here, the Mitel and Siemens construction wants to bake the "without additional setup" into "secure communication link" as well, and I have a separate reason why that is improper here. THE COURT: All right. Go ahead.

MR. CALDWELL:

Now, Mr. Martin, if you would, go to

capture -- would try and equate a secure communication link to a VPN, those have been rejected. And whether it is by Avaya's

148 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 proposed tact of just saying it is the same thing as a VPN or whether it is by the Siemens' method of saying, well, we will just take the words from our VPN construction, either way, the Court has specifically considered this and addressed this and rejected that argument in its Markman order. Now, the '504 and '211 claims they have the words "secure communication link." virtual private network link. claims. They do not reference a VPN or a We know it is not in the And it is not

It is also not in the file history.

supported by the Cisco Markman opinion.

But that is what the

defendants really rely on, and this is really important. Here is a paragraph out of your Markman order. And

I would like to direct you to what I think is the second -no, it is the first sentence. As the Court is aware, during the prosecution of the application that resulted in the '181, VirnetX distinguished the Aventail reference from "secure communication link" limitation based on arguments that this Court has observed were "nearly identical" to those discussed above regarding Aventail. Now, that is a page out of -- I may have misrepresented that that was your opinion. out of defendants' brief. So the actual evidence that the defendants are citing for putting this "without additional setup" into their That was a page

149 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 "secure communication link" construction is Your Honor's claim construction opinion where, in the context in which you were considering an issue, you said some nearly identical arguments were made between "VPN" and "secure communication link." They are not really directing you to the actual arguments that were made in prosecution with regard to the term "secure communication link," and that is real important. Because when we look at the actual file history arguments about "secure communication link" -- remember before when we were talking about the VPN, there was three arguments, one, two, and three. And after argument one there was that "for example" paragraph that the defendants are relying on. That "for

example" paragraph, the one that mentions "without additional setup," isn't even in the file history where "secure communication link" was argued. The slide that is being presented to you now, Aventail does not teach the "secure communication link," reason one, first; and then the next two paragraphs that he relied upon and all his argument about VPN don't even appear in this file history. argument number three. So because they couldn't point to the actual intrinsic record to find that "without additional setup" stuff, they pointed to you saying the arguments were similar It jumps to argument two and then

150 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 between the two. That is utterly improper. It is not part of

the record on this term. THE COURT: MR. RENAUD: Okay. Okay. Thank you. Why don't I just clarify that

because I believe Counsel has not seen the whole record; otherwise, I don't believe he would have made that proffer. So if you look at Slide 64 it specifically cites to the June 7th, 2011 response and request for reconsideration on the '181, which is in part what Your Honor was referring to in his earlier order when he said they were virtually identical. This section actually incorporates the characterizations made in the Nieh Declaration. It actually

gives the paragraphs, as Your Honor will see, circled in red, Paragraph 25 and Paragraphs 24 through 27, which are on the very next slide, Slide 65. And Your Honor is going to have an opportunity later to compare that language on Paragraphs 25, 26, and 27 to the language that was included in the file history of the '135. And that language is substantially identical, although there are a couple of important distinctions that I am going to leave for Avaya's Counsel to point out. But I will say to you that I believe Counsel is wrong as a matter of law; that the Nieh Declaration has been incorporated by reference. Paragraphs 25, 26, and 27 have the

same language for the purposes of "without additional setup"

151 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 history." as I referred to the '135. I will point Your Honor to Paragraph 26 which has the magic language where they said what the invention was. They said a VPN in accordance with the invention is A computer would nevertheless be able to address data to other computers, B, X, and Y, without additional setup. If you read that entire set of paragraphs in their entirety, you will come away with the conclusion which is inescapable that there is a new connection required that cannot be a VPN as claimed in the '135, and it cannot be a secure communication link as claimed in the '504 and '211. And Page 65 is the Declaration of Nieh, which is literally part of the file history for the '181. So I think Counsel is mistaken as to the characterization of the file history. MR. CALDWELL: So looking at defendants' Markman

brief, this is actually the thing that tipped me off to this, to be completely honest with you, I look at their citation that says, oh, the Court observed the arguments for "secure communication link" were nearly identical to VPN. that. I looked at

And the citation was to Your Honor's Markman opinion. Then there is a "(;) see also the actual file Well, why isn't that your lead citation. And so I

go and look at it, and the whole paragraph "without additional setup" isn't even in that argument that was made with regard

152 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 to "secure communication link" during prosecution. not even in there. It is true that VirnetX cited the Nieh Declaration in connection with that part of the prosecution and the other part of the prosecution. It didn't make the argument or make That is

some disavowal that would lead to, without additional selection [sic]. All it did was include a technical expert's

declaration that had previously been prepared to say here is how Aventail works. Well, it is not the case that his description of how Aventail works. Every aspect of it becomes a limitation. If

he describes that the Aventail's computers are always blue, it doesn't then follow that the VirnetX claims can't cover blue computers. That is not the way it works. He cites the

declaration of how Aventail works. And then we look at the arguments that were made. The arguments were never made that this "without additional setup" is a reason for patentability for "VPN" or "secure communication link"; and that whole sentence doesn't even appear in the argument and prosecution for "secure communication link." MR. RENAUD: crystal clear. That's all I have. A one-line response. The argument is

On Slide 64 it says:

First, Aventail has not

been shown to demonstrate that computers connected via the Aventail system are able to communicate with each other as

153 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 though they are on the same network. That is the new connection concept. That cites They can't They

directly to Paragraph 25 on the Nieh Declaration.

avoid -- that is the basis in part of their argument. can try, but they can't. Next sentence:

Aventail discloses establishing

point-to-point SOCKS connections between a client computer and a SOCKS server. Declaration. And the final sentence, Your Honor: The SOCKS Cite again to Paragraph 25 in the Nieh

server then relays data received through the intended target -- I guess it is one more sentence. paragraph, Paragraph 25 Nieh. And then, finally, Aventail does not disclose a secure communications link where data can be addressed to a target regardless of its location. And in this instance it points to Paragraphs 24 through 27. So they went out of the their way to hire an Again, the same

expert to get this allowed, and now they are trying to walk away from it, and the public notice requirement won't allow it. There are additional "secure communication link" arguments that are Avaya's. And unless Mr. Caldwell wants to

respond to that, I am going to hand it over to Avaya for their addition to the "secure communication link" argument.

154 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 MR. CALDWELL: Counsel just made my argument for me.

The point is the argument is the distinction over Aventail was that Aventail the computers don't communicate as though they are in a private network, which Your Honor put in his claim construction; privately and directly. And then the other part is that Aventail didn't allow the addressability. All parties agree that the "direct" In other

already in your construction covers addressability.

words, the paragraph he points back to the actual arguments distinguishing Aventail, Your Honor has already looked at these and has already put them in the claim construction. it is already covered. MR. RENAUD: THE COURT: We disagree. Thank you. Let's move on. So

What does Avaya -- what new do you have to add to the fact that "secure communication link" should be the same as a "VPN." MR. GREEN: Yes, Your Honor.

If I may move to Slide 76, please. So, Your Honor, there are three reasons, but I am going to condense them because I was struck by one of the things that Opposing Counsel said; and that statement was that VirnetX is aware that many people, maybe the world, will be watching this litigation activities; and, therefore, VirnetX is exceedingly careful to describe things precisely.

155 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 I would like to take them at their words. And one

of the things that VirnetX has told us precisely is that -and told the Patent Office is that a "secure communication link" is a "virtual private network." And that statement was

made to get the related '181 patent issued. I would like to also, just so we are not debating whether this evidence I'm about to show you from the Declaration of Dr. Jason Nieh is or is not relevant, I am going to read to you from the statement that VirnetX made as to its purpose for submitting that Nieh Declaration in the '181 patent. And that statement is: The Nieh Declaration is

cited herein to characterize the cited references and their deficiencies. This isn't just some throw-away facts or just some interesting things that might be good to know. This is

evidence cited to make and support distinctions over the prior art and Aventail specifically. So with that, if we could jump over to Slide 82. What we see on Slide 82 of defendants' Markman presentation, Your Honor, is a juxtaposition of a claim from the '181 patent that was the subject of this Nieh Declaration and the description of Aventail not disclosing a secure communication link because Aventail does not disclose a virtual private network.

156 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 So when you look at the top section from the '181 patent we see a "secure communication link" highlighted in yellow at the bottom. We see the exact same formulation of If you look at The same term

the term in the bottom from the '504 patent.

the '211 patent you will see it there as well.

in both the '181 patent and the related '504 patent and that is why we are talking about things from the '181 patent. We have already discussed, and I believe it has been decided and resolved, that prosecution history from the '181 patent and distinctions made to separate these inventions in this family of patents from the Aventail reference are applicable to the '504, the '211, and the '135 patent that are at issue here. So if I could jump back to Slide 77. Claims in the '181 patent recite a "secure communication link." We have seen that. And we have seen

that the Examiner rejected the '181 patent claims on Aventail. We know the three reasons very well now. I would like to

focus you on the first reason, the first reason being that no communication between computers as though they were on the same network. What does that mean?

What I would like to do then is get to what Dr. Nieh tells us that means. So if we could jump ahead to Slide 80. Aventail also does not teach the claimed "secure

157 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 communication link." What is the evidence that VirnetX gave

us to prove that Aventail does not teach the claimed "secure communication link"? It is the Nieh Declaration. And

specifically it is Paragraph 25 in this instance and Paragraphs 24 through 27 in the instance at the bottom where VirnetX again says, Aventail does not disclose a secure communication link. So what is the proof? What is the deficiency of

Aventail that causes it to lack a secure communication link? If we go to the next slide. We have Dr. Nieh's Declaration. record I will spell that. mispronouncing it. my best shot. If we look specifically at Paragraph 25. To support And just for the I may be

That is N-I-E-H.

I mean no disrespect to him, but that is

that distinction we see that Aventail has not been shown to teach sending an access request message to a secure computer network address using a virtual private network communication link. We see this term invoked again. The method

disclosed in the '181 patent -- down on Line 4 -- differs from the virtual private network communication link that is recited in Claims 1, 17, and 33. And that is referring to the claims

that are then pending in the application for the '181 patent. And then the kicker is really at the bottom, Your

158 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 three. Your Honor, I certainly don't mean to put the words network. Honor. If you look at the sentence that begins with It

"Aventail" right after the discussion of the SOCKS server. is on the third line from the bottom. Aventail does not disclose a virtual private

So using the precise language that VirnetX's Counsel

has assured us it uses when it is speaking to the Patent Office and thus to the work in prosecuting these patents, the reason that Aventail did not invalidate these '181 patent claims which are drafted in terms of secure communication link, just like the claims in this suit of the '504 and the '211, the reason that distinction between "secure communication link" and Aventail exists is because Aventail does not disclose a virtual private network. That is it. It could not be more clear. So any

statement that this declaration is not relevant, these arguments were never made, those should fail just as a matter of law. They are part of the prosecution history. And if

this was not intended to persuade the Examiner in the office, then I don't know why they are there. Your Honor, just to follow up and show that we didn't just pull this out; we are not trying to push the claims in some awkward direction. If I could go back to Slide 76, reasons two and

159 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 in the Court's mouth; but we have already had the discussion in the Cisco case of whether a secure communication link must provide the same advantages of a VPN. And I believe the

conclusion we have reached is that they should. And one of those advantages is anonymity, and that is the reason for the distinction between the Avaya claim construction and the proposed claim construction that Mitel and Siemens put out there. We believe that VirnetX has defined "secure communication link" in that way. It conveys these

disadvantages where you look at the prior art and you don't see virtual private networks, then you don't have a secure communication link. And we know from the prior construction

exercises that anonymity is a feature of a virtual private network. And, finally, Your Honor, I will not rehash the specification in great detail. But if you will look at Slides

84 through -- 84 and 85 of the defendants' claim construction presentation, you will see perfectly consistent statements in the specification that a secure communication link is a virtual private network. That is on Slide 84.

If you look on Slide 85 you will see reference to "secure communication links" or "virtual private networks." Any time that a communication link is established, the link is a VPN network.

160 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 Again, looking at the bottom of 85, the user can optionally select a secure communication link through a proxy computer. Accordingly, the computer can establish a VPN

communication link. This is not importation from the specification. This is showing that our interpretation of what VirnetX has clearly stated to the office, it comports with the specification, it matches the claim language, it is a fair and appropriate construction to construe "secure communication link" without these distinctions over Aventail, would be asymmetrical with what was actually happening in the office. Thank you, Your Honor. THE COURT: Response? MR. CALDWELL: Yes, Your Honor. The point that I Thank you.

made earlier which I think bears repeating is the Nieh Declaration is a declaration from a technical expert describing how Aventail works. It is not an argument here is The arguments

why you should allow a given particular claim. we have seen in the file history are clear.

And I believe if

there had been a time when VirnetX said a secure communication link is a VPN, Counsel would have showed it to you. Or if the applicants had said VirnetX's secure communication link claims are patentable because a secure communication link is a VPN, they would have shown it to you.

161 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 That argument was never made. There is a technical description from an expert who describes how Aventail functions, and that is part of the prosecution record for some of the related patents. That

declaration being part of a prosecution record for some of the patents, that declaration was submitted, again, to show for the Examiner here is how Aventail works. There is absolutely no disclaimer. no clear disavowal. They have shown

And Your Honor considered these points

specifically whether "secure communication link" and "virtual private network" were the same thing, and Your Honor expressly rejected that they were. There are not.

There was an older patent in VirnetX's patent, and it is the '759, that specifically describes a "secure communication link" and then further in the claim defines it as in a virtual private network or a virtual private network link. That kind of restriction does not exist in the '504 and the '211. It just says a "secure communication link"

without describing it as a virtual private network link. And there is no reason to read virtual private network into the broader "secure communication link" as a limitation. no disavowal. No clear disclaimer. Simply

I don't want to belabor this because I know Your Honor has already considered it. So on Slide 27 and 28 of

162 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 Honor. "query"? MR. McNAMARA: My name is Mike McNamara, Your ours -- I'm not going to read it for you. It is part of your

Court's Markman Order where you went through and specifically recognized that there are embodiments where the "secure communication link" can be part of a VPN, but they are preferred embodiments, non limiting. And, finally, there is some suggestion that anonymity comes into play here. Aventail was never

distinguished on the basis of anonymity in order to get any of these '504 or '211 claims allowed. THE COURT: All right. All right. Thank you. That would be

What is our next term?

The next term is -- we have two terms to talk about I will

here "domain name" and "domain name service system." try to be as brief as I can. MR. CASSADY:

Your Honor, I hate to be rude and

interrupt him, but we all agreed that we would leave them on the papers other than "domain name" we said we would talk about. But the "domain name service" we specifically put it

and said we would leave it on the papers. MR. McNAMARA: did say that. Actually, we didn't -- I'm sorry. We

We did say that.

We didn't say that we would

leave "domain name service system" on the papers? MR. CASSADY: Yes, we did.

163 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 you. Your Honor, I have the email right here I can show I hate to be sticky-tacky -MR. McNAMARA: MR. CASSADY: MR. McNAMARA: We will just do "domain name." Fine. Fine.

So for "domain name" essentially the

evidence that Your Honor is being asked to consider is the same here as it was in the Cisco case. There is just an

additional argument that we would like to make. If you could turn to Slide 90. As you can see from this slide, Your Honor, our claim construction tracks what the Cisco Defendants have proposed except for it adds this sequence of character segments separated by periods and leaves out "corresponding to an IP address." Go to the next slide. The reason that we want to leave out "corresponds to an IP address" is because if you actually substitute that information into the claim language, the claim language becomes repetitive. It doesn't make any sense here to say

that "domain name" means a name that corresponds to an IP address because that information is already required by the claim. That construction tells you what the result of having a domain name is, but doesn't tell you what a domain name actually means. And it has the effect of reading

164 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 "domain" out of the claim language. language too broad. The slide that is up now shows Your Honor that the current construction is so broad that it actually encompasses strings of characters that VirnetX explicitly took out of the patent -- in the patent. It said that in the '135 patent that It also makes the claim

a "domain name" would not be a Mac address or other hardware addresses. But the current construction is so broad as to encompass those things, so that what we propose is that the construction be narrowed slightly to require that a "domain name" is a series of character segments separated by periods, which is supported by the intrinsic record. That is all we have on that. THE COURT: Response? Mr. Martin, can you pull my slides up Slide 39, I think, is where

MR. CASSADY: real fast. it starts.

The Markman slides. Thank you.

Your Honor, I think you have heard this a couple of times today, but with this one I want to be real clear. Microsoft took the same position that it needed to have a hierarchical sequence of words in order to correspond to an IP address. That argument was made by Microsoft and rejected by I'm not going to go through my slides and show

this Court.

you how you did that, but you rejected it.

165 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 Cisco made the same argument with its co-defendants arguing that "domain name," again, was a hierarchical sequence of words and a big kind of plethora of words for describing the word "domain name." Then Your Honor rejected that argument there again and said it is based on dictionary definitions, and it is just based on extrinsic evidence and there has been no disavowal of the term "domain name" to mean just this limitation. Now, Avaya still takes that same position in this case, in this Markman that Microsoft and Cisco and everybody else took. Siemens takes a different position.

What is telling, Your Honor, is that all of their positions are that everybody in the art knows what it means and it means this, yet they all can't agree on what it means. So they are sitting there telling you that a definition makes it clear that there is a disavowing here because it is such a clear statement but yet they can't agree together what it means. The examples that they pointed to -- I want to go to that one specifically. If you could turn to Slide 42 for me, Mr. Martin. This is my version of that same quote that they put forward in front of you. The whole argument is that VirnetX

did not use limiting language to say what a "domain name" was and was not. And here is the perfect example they showed the

166 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 Court. A conventional domain name server provide a lookup function that returns the IP address of a requested computer or host. For example, when a computer user types in the web

name, yahoo.com -- now, Your Honor, they didn't say "for example" -- actually let me back up. They didn't say when a computer types in the domain name yahoo.com, and that is all we mean by "domain name" is yahoo.com. It said, for example, when a computer user types

in the web name yahoo.com they get an IP address for yahoo.com. And what is happening here is they are trying to take these couple of examples that are used for the conventional DNS in the Internet space to say that means that VirnetX's invention can't cover anything else with regards to "domain name." Your Honor, back in the day I remember having network printers that you would title. You would name them.

That would be the domain name of that printer even though it was inside your local network. known by that. That is a domain name commonly

I'm not going to say I am a person of ordinary

skill in the art, but I understood what that meant back then. And you named it, it had a domain, property, that corresponded to an IP address. Your Honor gave us that definition. VirnetX agrees

167 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 Honor. THE COURT: All right. Very well. Y'all see if you can't communicate a Honor. THE COURT: that a new term? MR. CASSADY: Your Honor, it is a new term. We All right. What about "query," wasn't with that definition. Two times it passed and we hope the

third time is a charm, and we keep it. THE COURT: All right. Thank you.

What is next? MR. McNAMARA: I think that is all from us, Your

agreed to leave it on the papers. THE COURT: Is that agreeable? Yes, it is, sir. Is there anything else the

MR. McNAMARA: THE COURT:

Very well.

Court needs to take up with you today? MR. CASSADY: THE COURT: MR. RENAUD: Not from the plaintiffs, Your Honor.

Defendants? We rest on what's in the papers, Your

little bit better and get this case moved toward conclusion either by settlement or trial. I think we are set in October, right? MR. CALDWELL: THE COURT: Yes, November. And so see if you can do November?

All right.

168 1 2 3 4 5 6 7 8 9 10 11 12 13 /s/ Shea Sloan 14 15 16 17 18 19 20 21 22 23 24 25 SHEA SLOAN, CSR, RPR OFFICIAL COURT REPORTER STATE OF TEXAS NO. 3081 I certify that the foregoing is a correct transcript from the record of proceedings in the above-entitled matter. C E R T I F I C A T I O N that. Again, please adhere to my admonishments regarding your

motions for summary judgment and motions to strike and try to get me something very focused and whatever you think your best shots are. All right. We will be adjourned.

(Hearing concluded.)