questions well yes your honor we are in the business of licensing the use of a confidential material that's been designated as confidential all relates to the license agreement with the sun agreement between  was marked confidential and so we're not in the complete those market confidential in the course of the agreement the court the agreement expression the states at the agreement is confidential so we don't have the power to waive that honor i don't believe that the court's opinion below when extensive long no i take that back you shouldn't be going in recent going to the court below do publish an opinion i don't think you've got extensively into the exact contractual terms that we're discussing don't have a unilateral right to waive the confidentiality provision and that's certainly sure you think that that might suggest that saniel has control over some substantial control over your ability to stand here and answer important questions that to stop you from talking about it well how does that not my understanding your honor is that given the context of the court proceeding that we're in right now we are freely able to talk about the provisions of the contract because it's ok i understand that and there will be possibly a published opinion correct here and you haven't asked for the courtroom to be clear i have not he d so we can take it you waive the confidentiality your honor i think we've done what we need to do to protect the confidentiality as with respect to our contractual partner stan you know i believe at this point saying you can complain about the steps we've taken to protect the confidentiality but your honour's need to be able to ask me questions about these provisions in the agreement and so at this point per court order per the court's ruling is and that's that's nice we've got to discuss these issues  but as it relates to this contract i think an important initial matter we should consider your honour's is how this case differs from the vast majority of this court's previous standing cases in the vast the courts previous standing cases we have a situation in which a holder of title of the patents exclusively licenses some set of rights to a licensee and then this court is faced with the question from a provincial standing standpoint of whether or not the licensee but let me ask you that clean up question for me on yes or no in your blue brief on thirty four and thirty seven you say various provisions were all simply intended to insure and then again on thirty seven simply kind of to protect but you don't have any evidence to support that intent that's correct what's the evidence in the record that shows there is no evidence with respect to intent in the record  but no we're not relying upon this person or that person's affidavit or declaration that says this agreement was intended to be x y or z to the contrary under new york laws you don't look to pro evidence in order to  can also lease it as you so i'm going to ask you a question about what l s e use protection if any against infringement is if you buy something if wit which is only based on a sale and therefore wouldn't cover the lease situation anyway and sand you know can provide manufacturing services and then  of this per pan exhaustion principles of course we're talking about that lessee has to be obtaining a saniel produced product so it's really not any different than selling a sandow produce product to that person leasing it or selling it they're still going to wire some certain rights per suing to the doctor patent exhaustion as to the issue foundry rights so you think that sonia by virtue of this agreement and choose to effectively license its foundry customers and it's less ca's to engage in otherwise infringing activity a form of licensing why is that not  me separate out those two as far as the lessee rights that's really no different than what a non exclusive licensee normally gets the right to do so under that theory every non exclusive licensee who has the right to make use or sell a product gets a right in some sense practitioner's sale customers it's purchasers that right but this gives santiago the right to allow me if it pleases me something or if it makes something for four make it very clear that for example hyundai and kia could not go to san you know and say we've been sued let's start buying product from you soon you know because that way we can get foundry rights and be exempt from suit because section two point four states that saniel may not provide those foundry rights to anyone who's under notice of infringement so this court frequently lives it but that takes care of some group the ones who have who have added note notice but as to others old castle license that too and i would shoot use and sell i would submit your honor that's not a substantial right because in that situation saying you can only provide those rights to its customers who are normal customers about normal customers well it's that it doesn't use that phraseology normal customers but it's talks about covered products which are covered saniel products so sand you know can't go out there and start my point being your honor that in order for someone to enjoy the two point four a license rights that are provided here they're saying you know they've got to be customer saniel it's got to be a stand your product which is not any different your honor than any other not exclusive licensee who also gets the right to make use and sell products and thereby exempt its customers from infringement suits but at another what is your understanding the full scope of the of the concept of the foundry rights my understanding the concept of foundry rights is like contract manufacturing so if someone comes to you and says i would like you to make this product for me the foundry performs and creates the product for that that's correct it's saying it was acting as the founder so if anyone wants to take advantage of these rights they have to go and start using stereos foundered which by the way or i would note that there is no record evidence whatsoever that say no actually has been acting  for anyone so putting that aside the license grant and the rights that are granted in two point four a day are very limited and don't give saniel any right to divulge infringement because once infringement comes up once it's identify that there is an infringe at least court your honor under this court's standing precedent and consistent with the policy behind the potential standing doctrine diamond coating technologies d c t lacks all substantial right enforce the patent and she'll say in yo from the obligations and burns of u s patent litigation while providing all the benefits including saniel maintaining substantial financial and ownership interest in the pan there's a transfer of title to the patent to d c t and two is that half of any proceeds from the either the sale or the exploitation by licensing or infringement action form in effect of a share of the proceeds is not enough to defeat the transfer of substantial rights i believe that's consistent with this court's precedent that that in and in itself alone would not be enough u k and what do you think setting aside the sharing of proceeds what do you think it is that in your view principly most importantly trips the wire for getting this over into a non substantial right so i would leave it some it down to a couple of things your honor i mean first off and the court has looked at this for example in the pro pat case the inability to be able to assign its rights under the agreement and the patents themselves and other worse to the extent the c p has something they have something that they can't sell or transfer to someone else without sandow giving its consent which is unfettered when we knew they can't transfer the businesses in fact limited if you look at the agreement to licensing in force and practices in that they can't practice it and at the invention and they can license litigate and then there's a cost to says you can't do anything else this is an ongoing operation that can do what it wants to do it's limited in what it can do and then i believe that the security interest that we recorded against the patent and there's no clear way to erase the security interest anyone taking the patent so theoretically if they were to make an assignment without saying yes costs and any consent anyone taking the pants with steps certainly be taking them subject to whatever rights sankyo has and whatever the agreements ask and they would have the security interests that would prevent that sort of further to purchase these particular assets so i believe that's one issue i also believe that the questions that your honour's touched upon in terms of the ability of san yo to actually give some licenses is also important it's a very substantial right and i view the  foundry rise in connect in addition to the have made right this sand you know has under the license gives saniel except for the narrow exception pointing out where there's a notice of infringement the sand you know can both make products for somebody else so they could make products for nissan and hyundai if they had not been sued on notice of infringement or they could in fact have their suppliers make products for saying you know that saniel that then sell less than you product so i do believe this is different than the other cases  the courts precedent where they have not been substantial rights in the sense that there are substantial rights are licensing here are the foundry rights limited solely to us and you know many are making the materials well the i believe that the foundry rights are is position any different from that of any nonexclusive license it's a good question your honor i believe that if you set aside the foundry rights i mean and  have made rights i pay you're important to there certainly have been other cases in this court where that type of ability to stop license for i think for example the lumen are a case that the court recently had before there was some ability for disney in that case to do some licensing to affiliates and to other people that were associated it and that sounds a bit more similar to that circumstance than the circumstance we have in this case on that wouldn't be a substantial right retained it sufficient to defeat the transfer of title i gather in the standing would not be a problem and for the transfer rate correct i believe that some system so and i make view that puts sand you know in a different position from someone in my position i believe what's different is the foundry rights quite frankly your honor because all those sand those would be products that were made by sand you know and then sold to downstream customers but we have the opportunity for san yo to make a product let's figure out in the automotive industry for general motors that could be and then be so and so they have an additional right to provide others not just their own customers but they could make products for others so for example well they're going to be done at those price those people become their customers i mean if they're making the products yes it's true that they are contracting with i believe that's what i want to step back though and say what if it were if it were our supplier shape so say for example somebody supply distance to the automotive industry saniel is not in that business of supplying those to the automotive industry i don't know if they are not as prophetical but because of the patents and the rights that they have in terms of the license including the rights to do foundry insan you could make that product for the supplier safe look sell that to the entire automotive industry so therefore they have some ability to indulge infringements if you will that d c t does not is it the norm in retaining a non exclusive license that they transfer doesn't have a right to practice the patent suit i think it is somewhat it is abnormal for the transfer iraq or not to be able to practice the patmos suit that we have this actually that distinguishes it well right i never finished my list of distinguishing but in fact big not been able to have the right to practice the invention there's also some level of control that is being maintained by saying you know with regard to the who gets sued and who doesn't get sued  are lying solely on foundry rights and i thought there was more i apologize for i know you are relying on all the right set for fanaa or brief both individually and cumulative with respect to this particular situation because that's what the court's precedent has looked at and so i started out with that but certainly the right to practice or the inability of d c to actually practice the invention is very important also i think was very important in this particular case are the brought up reversionary rights that there are in the actual assets themselves so that it seems no matter what happens these assets end up back with sandia so for example if they fail to maintaining the patents and prosecute the past there are provisions that allow sand you know that either step in and do the prosecution through them or it requires them to give the pattens bat to d c t if d c p decides it doesn't want to exploit the pads and and i know you've read the briefs but they need to exploit these passages in the best interest of saniel and d c and that's a different circumstance than what's in the court's precedent as well determines the best interest that's a very good question your honor i think if samuel writes them a letter and says it's in our best interest that you do x y and z i believe they're required to give that some consideration or those words don't have meaning in the agreement and those words are important i think into the agreement so what is in the interests of saniel that we know that they identified some particular targets at some point and we know that they also allow d c t to exclude certain people from being sued and so all of those things which relate to who has who gets sued under these patents are being governance to act in the interest of the shareholders and that would mean that they would not be able to do things that were adverse to the interests of this large shareholder that has just transferred the pat that i'm wondering whether the act in the interest of sanioura really goes any farther than a different kind of arrangement would go which would clearly not be a retention of interest i believe it goes very far i mean obviously corporate officers have something to do sherry obligations i think those are different they relate to sort of the corporation itself here we have share it's the shareholders themselves as absolutely here we have a situation where d c t sort of has color of title and is a separate operation and we both have saniel limiting their corporate operation at the same time and they have to act in the best interests of san diego and d c tea whatever that is refrigerate with relation to commercializing these particular inventions which really means licensing and litigating these particular pads what is it about the term exploiting i think it's a exploitation or exploiting the patents that leads you to believe that that this not include the possibility of transferring the pa for if that turns out to have been the wisest commercial course for d c t right so if you turn it in the agreement at least we've made several arguments your honor on this particular issue in the first one as the whole character of the you for this these patents what is it that tells you in the agreement that the city couldn't do that even though they would conclude that that was very much in their interest and that if send you right they would transfer half of that very large proceeds to send right your honor you know as you say the question what i would as you ask the question my answer would deal in practicalities quite frankly and i believe that there's language about exploit that we've raised in our brief but sure if someone showed up with a ton of cash which just actually what these parties set out to do in the very beginning before they got to this arrangement to sell those patents i believe that there might be an arrangement that could be struck but there's nothing in this agreement that the terms of what those arrangements would be and in fact then you know would have to give its consent to that arrangement at that time and i believe that the parties would work it out at that came in and said we're exploiting that what better formal exploitation than to get more than you could possibly get by licensing would there be an answer in that in the four corners of the agreement to where you would conclude they could not do that no matter word and exploitation if you look in five point one point four at least your honor there's one statement there that in the middle of five point one four in the event d c t determines it will no longer exploit a exploit as used in that particular part of the paragraph could not use could not mean selling the assets because if they stop exploiting them if they were explored it mending selling them and they wouldn't have anything to return back to send us contemplated this paragraph so we don't believe that you read this entire remit that you come away with the idea that there was some ability to sell the patterns and if you compare it with the other agreement in fact the other agreement was very explicit about selling the pet as i'd like to just hit a couple of the substantial rights that my colleague mentioned the first thing i mentioned my colleague mentioned was that saying you know controls the ability to assign and that d c t has no ability  seniors consent rights are unfettered my colleague unfortunately i'm afraid is mistaken in section nine point one two of the agreement states expressly that any time a consent is required in the agreement that consent cannot be unreasonably with health and judge pricing you held in the speed pay speedplay case that assignment clauses that are conditioned upon the reasonable withholding of consent do not give rise to a substantial right so even if we want to interpret section nine point six as limiting the ability of d c t to assign the patents without the consent of santiago pers be played that's not a substantial right because saying you know has to give cannot unreasonably withhold its consent to new misspoke yourself i'm sorry the court tell the court yes you the second right that my colleague referenced was the right the a legit absence of any right t have granted a license to say and you know to practice that that on top of all that i would direct your honor's attention to article one the definition of gross proceeds the definition of gross proceeds within article one express prohibition against the city practice and the city has to pay fifty percent of all of its revenues from the use of the patents and there is no possible way that the z t could grant a license to practice to san you know the exploitation rights that the city enjoys include the right to sell the paths and saniel itself has argued what is exploited mean exploit means make productive use of in our definition i'm willing to embrace if you look at schedule b to pass schedule b s the compensation arrangement under this agreement schedule b says stan you know shall be paid for the quote productive use close quot of the patents based upon fifty percent of the gross proceeds and how his gross proceeds to find it includes cash that is made via the purchase of the patents someone else purchasing the patents paying t money in that case daniel gets fifty percent of those gross proceeds so scared will be makes it clear that exploit is associated with the concept of selling the patents based upon saying your own definition of which is to make the productive use of her schedule be making productive use of something includes selling it lastly with respect to the issue of acting in the best interest of seeing you again i would  i green specifically provides the cd showing gaijin know this or activity other than the business and the business is up prosecution maintenance licensing litigation enforcement and exploitation but not many actually practicing well your honor by the definition of santa even uses of exploitation exploitation means to make productive use of something i would submit the practicing a patent is plainly making the productive use of something you using the patent to make a product made exploit has got to mean something your honor beyond litigation and licensing because litigation licensing are separately identified in section five point one point one so we have to struggle with what exploit means two zero one gross proceeds is defined as part of language but if you get down to a paragraph big or so of section be shown clude any cash blah blah blah blah blah including relating to the purchase