understanding the argument is that your client was improper improperly paid or was forced a will to the already been paid by under the touchy license under the license that touchy pay the license for your clients excell store duplicate that license right that's correct your honor and there's a provision in the contract that seems to cover that why isn't this just a red claim plain breach of contract action that seems a simple saying what you just go and say look you breached the contract by collecting from my client a  very good point your honor and i think the answer to that and i'd risk providing a little bit of advantage to our the opposing party but but i will explain that from the beginning perhaps his argument has been that there is a car about provision in the touchy agreement and that care about provision basically excludes all that hard drives and so are believes that the patent exhaustion doctrine would be a better response to that  that we can use it in an affirmative way and perhaps let me explain by way of background in two thousand and two pabst actually brought suit against excel to store patent bridgeman covering basically the same hard drive issue here the same patent at issue here and as a result of that lawsuit pabst an excel store signed the licensing agreement in january two thousand and four which basically settled that lawsuit now that  time haps was telling exults court you owe us these royalties you need to settle this case and so we entered it in on that basis obviously your honour's that was not true the hard drives that were covered by the excel store pabst agreement are also covered by the hitachi agreement which was affected by january one two thousand and three we signed and made our agreement effective january of two thousand and violation of the patent exhaustion doctrine the second response is your honor is right we quote bring a claim saying that they have violated the provision in the agreement that says they shall not double they they will reimburse us if they do but again they argue that there's this karbala provision in the hitachi agreement which excludes that would be a defense so to that argument and so the pan exhaustion doctor actually provides u in a way a better response so that car about provision your honour's and so let me also your honour's get to the declaratory relief cause of action as well we discuss the fraud in the breach of contract claims a little bit honour's are aware whether or not there is subject matter jurisdiction over a declaratory believe action depends not on the contours of the declaratory relief action itself but on the commerce of claim that the defendant might have brought or the declaratory relief defendant might have brought and it is clear here that pabst could have brought a patent infringement claim as its course of claim now pap's response to that is to say well no we can't bring a patent infringement claim because if we were to terminate the agreement with excel store you would be covered under the hood toci agreement and so we could not bring a patent infringement claim there are seve problems with that argument your honour's the first problem with that argument is that pabst is basically saying if we were to bring upon infringement claim there would be no subject matter jurisdiction because you excel store have a defense based on licensing however the case law is clear that subject matter jurisdiction cannot be determined with respect to a defense in other words if i have a valid federal claim patent for enjoyment the fact remit is a is ironclad as perhaps would like the court to believe as i mentioned before there is this car about provision and in fact from beginning to end perhaps as argued to excel or store that this card out provision specifically cards out the excel store hard drives from the taji agreement in other words perhaps position has always been that the excel store hard drives are not covered by the touch agreement i think it's awkward to say the do the clear should not be delving into the merits of a hypothetical claim especially at this early stage especially when it can't receive proper guidance from the parties because we would both be an awkward positions perhaps as arguing we can bring pat infringement because you have a valid defense we excel square argue i know you have a valid defense that's very awkward the court should not be delving into the merits and in that way the pan exhaustion doctrine the requirement is that one element of the fact claim require a federal element obviously honors misrepresentation is a necessary element of the fraud claim and in order to prove misrepresentation here your honour's we basically have to show two things one perhaps made a representation with respect to pat your honor in this case we would have to show not only that they made the statement but that the statement was false and the only way to show that the statement was false is to show that they violated the pattern exhaustion doctrine and so this c that this case is more complicated than it has to be is just basic contract claim just going soon breach of contract i understand your honor i mean it just seems somebody is trying to make the case overly complex it seems you have a contract provision it says x you said it was breach go and so i think little this other stuff i think that there are serious concerns about the representations that were made to excel stuart even before we got into the we can read the contract action in state court as george noory was suggesting we could your honor however again we are quite concerned about that part about provision and look here see what happens i mean it's just a straight breach of contract cl exhaustion aspect actually really gets to the heart of this claim in a way that the breach of contract the strait region on track or that or the pure state fraud claim really doesn't get to it in the same way your honor i think it is in some ways it's actually more complicated if you do it the with the state claim early because then you get the issues of the part about provision and what does that mean and to be honest your honor your honor it took us a long time to ferret out how that would all play out i think is quite complicated as the car about provision says that the car's out hard drives that were current at the time that they were that you're saying that you'd have to get into this carve out slash contra slash at nu shu in breach of contract action we would we would absolutely have to get in the car about provision that's i think that that is one of perhaps main defenses to any breach of contract claim with respect to whether or not they were required to reimburse us for royalties romack and so in this case your honor they have to sheryl misrepresentation and in order to show misrepresentation they have to show we have to show excuse me the facet of the representation i e that the pat exhaustion doctrine was violated and that is where the analysis oboe should have ended it was enough just to say we  letter for plaintiffs to prevail the district where air by going one step further and it basically said well i don't see that there is a representation here now that was going to the merits and it said i don't see that we're that there was any representation at the patent exhaustion and therefore plaintiffs you lose there where i don't need to get to the patent exhaustion doctor and therefore there is no subject matter jurisdiction that was a relevance in the same way would be a roni is for the district court to say for example so that you will lose on this claim therefore you will receive nothing and therefore the amount of controversy requirement is not met it's completely erroneous for the district  to go to the merits of this case well it needs to do is to determine whether or not the pat exhausted doctrine is an element that would matter whether or not at the end of the day we will prevail and in fact that's exactly our quote your honour's it is the the state court that the defense that they would have would work just for them just as well as it works in our argument and the and the answer is that that's not really true because that clear tory judgment  has to be based on a realistic claim in a realistic claim has to be one that we could really make the idea that a patent he has the alternatives available to him in that case with licensee doesn't pay the world he's of  pursuing breach of contract we're pursuing patent infringement is that if he pursues patent infringement he's treating the accused products is not being licensed at all if you look at page nineteen of excel to pursue a patent infringement action if they were being treated as not licensed and that the excel store contract then because of the language in the touchy contract they would be licensed under the  contract the very that's what a patent license it it's protection against patent infringement liability so the idea that you could happen to clear it to a judgment action intice a painting a patent infringement action doesn't make any sense if there's no patent infringement liability and that the drives that are in issue would be licensed either under the touchy contract or into the excel score contract so therefore they could not be any  you've got a favorable claim interpretation and favorable view of the evidence by the court you could prevail in your breach of contract to prevail on your on your on your fraud i mean look at paragraph sixty of the complaint on page eighty seven of directors of the appendix and while there's always language in this complaint about the first sale doctrine everywhere what the complaint is alleging is that excel store relied on pap's misrepresentations by and by relying on pap's assurances that were contained in the quarterly letters that were required by paragraph four point six of the excel store contract they've alleged a lot more but that it's certainly fairly accomplished within the complaint that plain old vanilla fraud is included in their complaint just a plain old breach of contract is included in their complaint and then under the christianson test that's all that's necessary the fact that there could be other theories on which they might prevail which would involve pat law that's not the test under christians in the good test and the christians whether there is any theory in which they could prevail which would not involve and it seems to be significant portions for example of the red brief dealing of the blue brief dealing with facts and so for tat how are the parties still maintaining that that material is confidential because it could make it difficult to write any kind of a meaningful opinion that explains why the court is either third thing or reverse because you have to get into the facts yet we're a particular way in order to do that it seems to me you have to explain the contract provisions what we did well i think that  maintained the confidentiality endured in our briefs certainly you know facts facts are not confidential the fact of bringing a suit alleging certain causes of action is a matter of public record why is that claimed to be confidential  excell store license agreement are confidential that yes but what are we to do that can we can we i mean do you see the problem i understand the problem and i don't see result flannels i mean can we can we go ahead and write a proper opinion are you still maintaining your position you see the problem here i see the problem you're on  the can we go ahead and say with these provisions are you insisting that we keep them confidential close two point four is that a problem some new non statutory category of federal jurisdiction i think they misread the cases that they rely on when that where they're talking about federally mandated contracts suggesting that even if a contract in the federal law that somehow could be federal jurisdiction i think that the courts that they're relying to court court cases that they're relying on to really say is that in some cases that the circumstances specifically because that's what congress intended and the jackson case in which they relied wasn't one of those cases in that in the jackson case the sixth circuit was reversed the supreme court said that there was said well sure there is the complaint alleged violation of federal statute and therefore there's federal jurisdiction strictly speaking but they are made at the last sentence of the footnote which explained that what the intend that this federally mandated contract there was minute by statute that included specific protections that were then put in the contract still did not arise under federal law and that's why there was no federal jurisdiction apologize if in an abundance of caution we marked great portions of the brief confidential but it wouldn't look it would look bad if we were to be sued by paps for breaching the contract in the middle of this lawsuit and so we did it out of abundance of caution it was apologize if it causes inconvenience for your owners too and also to judge to answer judge charles question whether or not you can write an opinion without dealing with the confidentiality agreement at the answer is absolutely yes and you can do that basically by reading the complaint the way that we have written it not the way that the district court rewrote it the way that we wrote the complaint o claims don't have a lot to do with the contract other than as background material and so if you if you read the complaint the way we wrote it and the complaint is about patent exhaustion and not about the a response of some of the points made by mr friedman mr friedman noted that there has to be a realistic claim with respect to the declaratory relief action that is in fact not correct the standard only is that the  hitachi agreement would cover our hard drives so it would be hardly frivolous when the iron clad defense that mr friedman posits is directly contrary to the position that perhaps has taken from beginning to end in addition your hon me respond to a point that judge larry made with respect to mr friedman's argument that is is pan exhaustion just a defense and your honor is correct it is a defense however a defense can be used defense to be used as part of a fraud cause of action now i concede your honour's that the way that we have pled this complaint is unusual and it may be counter intuitive as i believe it is for you judge shaw however that is the burden that we have taken on this is not just a pleading game at the end of the day we will have to prove what we have pled and if we cannot prove those things then we will lose we are bound by the way that we have pled which is why and why the court has been consistent in saying that we can plead in a way that we choose not the way the district court chooses to rephrase  final point i would make your honour's is that this issue was presented to the district court just one time and the district court did not grant leave to amend we ask that if the court is not so new argument and soon your brush your t