injunction entered by the central district of california and in doing so also to vacate the setting of upon by the central district of california in the alternative even if this court chooses to uphold the preliminary injunction itself th is ultimately found to have been wrongfully entered this case is not a typical preliminary injunction case this is not a case in which we have two market competitors that are vying in a marketplace and we are running a significant risk in which one market competitor might be forced out of the marketplace might experience significant long term irreparable harm to its business in the marketplace this is also not a case in which we are faced with a public interest situation as this court has faced in the past in which we have a public interest group seeking to establish a social benefit or to maintain a social benefit that but for a preliminary injunction would be gone before any trial could be had in a case for instance damage to the environment the destruction of a building it cetera things that are in fact physically irreparable and as a result the public interest very much weighs in favor of a pr injunction instead this is a case in which we have an employment issue we have a company that is a fifty year old family health business that hired a software developer to make some software not to sell out to the public but actually to run a portion of the backbone of the company's business the company is not a software business the company is a logistics business in other words it takes an imports to come into this country puts them in warehouses ultimately boxes some of them up and ship some on to their ultimate destination is over the years such processes have become increasingly dependent on computers at one point physical records are maintained of what was in warehouses these days we look to databases here here's a question i have if we were to credit on an abuse of discretion standard the district courts determination of likelihood success on the merits your argument really amounts to what seems to me to be a compulsory license argument doesn't the likelihood of success point your honor we actually suggest that softer tears ultimately is going to bear the burden of going through several gates before ultimately establishing ownership over the standard over that finding itself fails in at least three regards in that there is no likelihood of success with respect to the employment status of mr men women and others who were  tears that seems like the weakest argument to me i mean that district court i mean the court went through all of that and that doesn't seem like a particularly strong argument in a district court didn't think so either  of the likely have success on arguments your honor these two strongest at this stage i believe are the irrevocable license argument referring to the asset marketing decision of this court and the contract based argument focusing on this court's effect associates decision the contract based argument of course relates to the contracts that mr when claims to have entered into with each of the independent developer defendants here where such contracts actually on their face purport to be a work for hire contracts but in a scenario where the independent developer defendants are necessarily independent contractors such that under the copyright act matter to companies here have been working together for a long time right yes or no and now they've come to this parting of the ways a fork in the road over you know after eighteen years this software in the end doesn't boil down to a question of money in terms of who's going to pay how much for the use of this software honor that's exactly what this will boil down to this is very much a case in which irreparable harm is really a key factor for consideration on the preliminary injunction issue and there can be no valid finding of irreparable harm here there is no marketplace competition consideration this is a scenario where we are slowly concerned with what is the number to be assigned for the use of the southwest size claim that going out of business as a result of this problem i it is a likelihood on both sides or o up not exactly iran or the defense and the defendant side at least the defendants are working actively to try to mitigate the harm that is occurring as a result of the preliminary injunction and as quickly as possible to put in place alternative  software and in the meantime hold together a business using bubble gum and scotch tape that's in many ways the american way and they're doing their best in doing so they have already incurred cost of in excess of one million dollars in hiring outside developers to create  software this of course gets us to the bond issue even while the preliminary injunction is in place defendants are encouraged significant cost to try to mitigate the damage to their business as a result of the preliminary injunction and they have long s already blown through the seventy five thousand dollars bond that was set by the court and as this circuits and pretty well every circuit that is spoken on the issue has stated consistently in line with the supreme court a bond is ultimately the ceiling for what can be recovered in damages from a wrongfully issued injunction such that if we get to trial in this matter and if a trial it is determined that rico or others of the defendants in fact had valid ownership interests in the software such that the preliminary injunction would have been found to be wrongfully entered not as an abuse of discretion but wrongfully entered because rights would have been vindicated seventy five thousand dollars is woefully insufficient to cover the damage the district court judge here provided absolutely no reasoning for an award of a seventy five thousand dollars bond instead of the only finding of fact in the order on modification of bond is a finding of fact that the previously entered bond of ten thousand dollars was found to be insufficient but there were no factual findings tied to the bond amount of seventy five thousand and the district court acknowledged its for them or injunction order that there was a significant risk that regal as one of the defendants would be driven out of business by the preliminary injunction and there was no dispute from the plaintiff regarding the amount of overall damage that rico was likely to incur what does a record share a what  if any proceedings are contemplated in the near term what's going to happen at the district court we are midway through discovery discovery slated to close in mid december and were moving on towards trial next summer i believe briefly rounder i've referenced of the irreparable harm issue i've also referenced the bond issue your honor judgement you when you have referenced the likelihood of success point just briefly to other points and then i'll reserve your mentor of my time for  is notable of course that that is a pre winter decision winter of course being the supreme court case that affirmed are confirmed rather that the preliminary injunction standard actually requires a full consideration of all four  factors and balance of hardships cannot be presumed or assumed as a result of a likelihood of success on the merits even a particularly high likelihood of success or the final point i did want to make is even in the event the preliminary injunction is not vacated directly by this court in view of the significant bond issue in play the preliminary injunction ought to be sustained suspended pending a resetting of bond and that i do not see a court decision in this circuit addressing that scenario in fact the sole decision of which i'm aware on that at this point is the w i'm asking i mean unpublished decision out of the federal circuit which is of course referenced in our so i would like to take up judge parker at your even with your question about proceedings below and it relates to something the counsel for the defendants and i reiterated about a likelihood that regal will go out of business in the near term that of course is the position that regal took in opposition to the preliminary injunction and also in support of a higher bond amount however we are now six months post injunction and a contempt motion that is set to be heard by the district court on november th because we believe that the defendants were telling the truth when they said they could not operate their business without using the source code and making some sort of that would be required and that they are therefore not in compliance with the injunction and that's backed up with some photographic evidence that was recently obtained let me ask you about the irreparable harm issue yes it does seem to me that payments related to an ongoing services if regal as it did here just took the software stopped paying southcott here is no longer has an income stream socket here is has according to the defendant's outstanding pay you for use of the software vendors that change the bankruptcy i mean it's a question of money and so often in these things you know what you really need is some kind of cross license arrangement so it's not clear down to one employee and there used to be seven independent contractors and it was two or three employees one of the employees and i want to say for the independent contractors no i'm as much as i'm really hard pressed to figure out how got one employee and even if you had more you have one license arrangement with one company i understand the irreparable harm finding by the district court that this erodes your goodwill and relationships with actual and prospective customers what's the evidence on that so the principle finding actually has to do with the likelihood of bankruptcy and it's simply that yes we have a trial set for next the next summer  there is no way my client is going to get to trial unless my client can generate revenues and and and by taking the software and under the supreme court's three a and b salem in case  at a point where a deprivation of money turns into a threat of bankruptcy that threatens extinction before a right can be vindicated that is irreparable harm well you know of course in  unlawful property cases since the supreme court's decision in the patent case we've applied these what i would call heightened irreparable harm standards or at least we've imposed real irreparable harm standards on intellectual property cases and i'm not sure that this is one where that's been done if you're correct how is it that a seventy five thousand dollars bond is sufficient in light of the claim a principle that a bond has to be high enough to cover damages in the event a bond and in fact is all it has recognized that where a bond set too high would actually close the courtroom doors no that's true but this bond is incredibly low given at least the numbers and the evidence thrown around at the in the injunction papers i mean seventy five thousand hands and said well if you're going to request a ridiculous amount i'll give a low amount i don't know but i am a little bothered by the amount in relation to the arguments made by both parties as to the amount of money that's and there's also it's also an abuse of discretion standard for at the setting the bond amount so what the district court had before it was hit because the defendants did not put in any evidence on bond in their initial  papers he originally set bond for ten thousand dollars and then allowed the defendants to make a showing on bond and the defendants didn't command saying you know what the replacement cost over the next year or two dollars are going to be a one million or two they came in and said it's going to drive us out of business one hundred million dollars that's what they came in and said and so the district court following a lot of authority would include for example this court's decision and go to dot com versus walt disney rejected  recently had the defendants have ramped up inquiries into various issues that we weren't really in play my take is that they smell in this that and the other which really don't go to the ownership issue the ownership issue is based on the parties read factors and on the parties contracts and so so if that's the case it's going to trial then that should be what we're looking at but we're getting i still want i'm still on tommy clear on what this trial is going to look like you mean if you if it's if it's based on you know contracts and documents and are that's not really before us i think it is because it's alleged as in her own defendant's part but we always would be looking at is whether there is an abuse in finding a likelihood  wouldn't make a substantive ruling on the work for hire for example or the legitimacy of the contract so if you were to prevail in the appeal i think what would come out is that the injunction would continue learning and so going back to the question of what trial looks like next summer we think it should be that simple proceeding that is just the the district court perhaps with the aid of a jury in some respects making a final determination regarding the retractors and and the contracts with the with the independent contractors and then damages would be that that would be what i would expect to be trying next summer injunction and therefore of the need the only opportunity he has his company has that's off the tears has to continue generating revenues and therefore make it to trial before it's squeezed out of existence jurisprudence as we understand it this court has stopped short of a rule that requires a bond large enough to cover damages that this was articulated in the save our sonoran case which was a public interest case but the principle was not limited to that the public environmental cases were pointed to as an example but the problem that's being generated by by both of your arguments is that the financial stakes  to property and there was some mention made of how this is different from your usual case involving market competitors it's not really my client has had as productive property that is how it makes a liv it means so i mean one of the difficulties of course with the passage of time is if real develops its own software you could be left with a product with very limited market correct a but for product of the property and so forth we are sure that if they develop their own software it's going to increase the complexity because that's going to have to be determined whether that was  return back to where things were before regal took the source code really took the source code there is no allegation or argument to say anything other than that as of december twenty regal did not have the source code regal hired some people away from socrates they took th but thank you thank you thank you just a few points for a full year honors first on the issue of irreparable harm there was questioning to counsel for pelleas regarding of the a bankruptcy issue as well as about the issue of goodwill as noted in our paper and as a parent on the face of the preliminary injunction order the district court's findings with respect with respect to goodwill reference only the possibility of a loss to goodwill that exactly is what the supreme court in winter took on and the notion that  possibility of irreparable harm does not rise to a significant sufficient level for a finding of irreparable harm in fact the standard is likely accordingly as to good will the district court's findings should be disregarded on the issue of bankruptcy  there's two items worthy of note item one there was no actual substantiated evidence put in record regarding the plaintiff's point of a pelleas financial circumstances their likelihood of bankruptcy the timing of bankruptcy and the business model is this year not seeking additional business there's been nothing to suggest that what software tears was paid for which was hourly rate of services there was no payment of a license royalty for you there was payment of services on behalf of any number of possible clients the concept of a bankruptcy is certainly questionable but yet beyond that a preliminary injunction it necessarily needs to remedy or mitigate whatever the apparent harm is that the preliminary injunction is targeting the plumber injunction here does not even potentially remedy the of what is identified as irreparable harm to softer tears the only way  as mr sears notes to this court that harm could be remedied is if we go were to hire softer tears back there is no term in the preliminary injunction order arena regal to hire socrates back nor would such a term in fact be appropriate as a result rico is very much intitled to choose even if it risk of its business to go about holding things together with bubble come scotch tape as i referenced earlier and to focus its attention on finding replacement software so as to avoid doing business with softer tears again in the future accordingly the preliminary injunction would do nothing to alter mentally remedy what has been identified as irreparable harm on the issue of bond just briefly counsel references this court's has held that in its precedent for now several decades but so what's your estimate of how many how much an attorney's fees is going to be spent from now through trial on your side additional point on that without divulging anything of settlement talks the fact the parties are willing to on an ongoing basis to enter into settlement for a monetary amount is actually generally noted by courts as a reason not to find irreparable