good morning your honor so that more and a half of capital one may please the court the district court ruled against capital one on summary judgment for two reasons nor pennington an issue preclusion the district court was wrong on both counts just to apply this because we could easily be here all day on this case none of us want to be in that position let's assume we agree on those two what's left in my mind is a rd question which goes to the fact that he said there's enough factual dispute to allow the trier of fact to take to consider the market and so i'd like to ask you about that one he relied heavily on the fact that this is a fact intensive inquiry on what the relevant market is and that's sort of theoretically true but in this sense it strikes me if we've got two competing experts and they're talking about we different antitrust principles being applicable to the analysis of the relevant market why isn't that a minimum kind of a legal question and which the district court never really answered is that one we're left to answer because i don't think the parties the spirit the legal principles i think they dispute the facts if you look at how you determine a relevant market you do it based on how the supreme court is laid out in brown shoe versus united states you start identifying a product and this case judge graham looked at that and said the product is intellectual ventures patent fall and he said that's based on abundant facts and he said that based on page eight thousand and fifty nine dollars of the joint appendix and once you know the product is the i v profile e l then you have to look for products that are reasonably interchangeable with that product and here intellectual ventures argument the product really is on the basis that they think you have to look at the individual needed to do the traditional substitute analysis which would go not to the entire end product look to the individual pieces of the product so it's circular going back to the beginning you've got to look at the pieces again you go from st to identify the product once you have to determine is judged from that that the product is the or folio as a whole you can't then go back and say you've got to look at the pieces you've got to find an alternative for the product as a whole and here there are no alternative market and it would be the other isn't that the the burden of your argument in effect you're saying if the market is i mean the portfolio then it doesn't matter how big the portfolio is the market is however many patents  portfolio right true so one patent would be the market in which they would have a monopoly you know but if you do if you conflate at that level then they're the same market i would agree with you but here it's one of the this is like the performing rights organizations that w individual people own copyrights and have the right to license or copyrights when your ass capped b m i or c sac and you aggregate all those licensing rights to license that blanket license to those things that creates a different product in the supreme court has found that long scrutinising are they i trust laws the performing rights organizations one of the things that's always been true is those performing rights organizations when they pool these huge for full years together they only license they only have the right to license they don't extinguish the individual copyright owner's right to license those individual copyright owners still have the right to provide a license as well so there's some competition there but doesn't your theory really expand the reach of antitrust  let's not go to the extremes we've got three thousand five hundred patents at least here and the hypothetical judge price mentioned this one but what about if you help thirty patents and you put them together the question of whether or not you need to find a substitute for each of those individual patterns or the look at it is only the aggregate of these number of patents together really means you're going to get a market that's equivalent to the patent portfolio in virtually every case made their full out into this product this unavoidable product they put on the market there was no market like in the past just like the performing rights organizations in the copyright world have created products that didn't exist among just the individual owners  exact composition of that collection of patents and therefore we don't know how many of them have a great deal to do with the particular technologies that the capital one is concerned with and how many of them have nothing to do with those  of that they've created it into a product with other companies you can largely license their patents individually or separately they're used on a merits based determination intellectual ventures has created a product which is their perform as a whole and all concealing the rights of their proposal this is different than anybody forcing companies well what i'm hard pressed to understand here is why it is that when ivey approaches capital one and says we want you to to license our entire portfolio or some significance subset of it and that's the deal the company one could just say well let's see what you've got and they say oh no we're not showing we're what happened here the curse so i'm i'm not sure why their strategy is all that different from what happens in any other cases where it's in the defendant's interest typically to get a global resolution of the dispute with the di so that the defendant will never see that and he again it's the concealment that's the crux that's the difference of something you haven't seen in any other market the world if i've got a great product i show it to you here it is it's got these bells and whistles it's the greatest product on the market intellectual ventures has done something that would never happen in a normal market they have said i want to pay huge ransom for this product but i'm not going to show it to you that turns economics on its head it's like reverse payments was can't innovate and in fact there's an antitrust injury case that isn't before this court or capital one has presented evidence of the and i trust injury it's that it's felt and it's product development efforts because of the threat of the uncertainty of analysis about which judge graham considered when determining the market effect judge graham had a technical tutorial with intellectual ventures experts and professor fiona scott morton where he questioned the economists that length about the relevant market and determine aspect of this but the other aspect is we just don't have the bandwidth to deal with this inquiry he mentioned in one patent with that was before him in dispute remember that the but not where he talks yes nine ph d s coming from i b so that suggests that even if you've got a portfolio of twelve thousand three hundred and forty five patents you could just out of necessity throw up your hands and say we're not going to do the substitute analysis with respect to the components of that portfolio you're just the same camp and competitive issues and they group them together for analytical convenience and the f t c and the government does this all the time they did in the banking industry and us st philadelphia national bank they've done an office supply stores and they have to see versus says what you look to is whether there's another regime they can take care this he also we for is to the danger in the risk of false positives in this antitrust space is as regards the alternative regime  there is an alternative regime it might not be a fish and i'm not sure hope fish and antitrust litigation is but it's the patents fear where you have already defended him against infringement and you've prevailed in terms of the validity now judge trying to i didn't have the benefit of octane but not district court judges have the benefit of octane so we turn east these i think the award of attorney sees has increased in the number of cases why isn't that getting  exactly where you are where you want to be and what you should do this case proves exactly why the pattern regime wouldn't work capital one is already defended itself in two lawsuits involving and patents and in those ten patents intellectual ventures was accused yes yes and so we've got a little gate affectively ten cases in capital one still standing it's gone over ten so these cases go to one it's going ten for temple of on time that's exactly right and so what this is shown here is that we've got to spend a fortune to defend these cases and if you're the in house counsel at capital one of your cigar i might have to defend more of these cases most companies in america wouldn't still be standing today they were it had to acquiesce and pay the demand but the question is if you get it turne fact it recognises the weakness of its path and that doesn't work in the same logic as a supreme court applies in california motors the four circuit applies in chapel is because one case being objective leave baseless you can get your fees there but the burden of one case  baseless pales in comparison to the burden of defending multiple cases where the chances might be fifteen percent of winning it might not be bad enough to be objectively baseless but you've still got to fight these claims and you still got a fan of his  faceless it's such a low bar and so once you've got once you've filed cases that that is exceed that low bar you can files a series of cases and the burden and the anti competitive effects of those cases go up ten times what's important here it's not just the burden it's the likelihood of success and intellectual ventures own documents show this is why professor fiona scott morton found a fact issue and why the district court found a factors and why i don't think there's been nearly enough briefing in this case  series of cases that are incredibly daunting to an in house counsel you've got no choice you can spend literally tens and tens of millions of dollars to finding cases or you can just pay that's not an efficient way for the system that work and the patent system more than operate that way but there's also if they search five patents they think they've got a fifty six percent chance of winning if they assert ten patents they think they have an eighty one percent chance of winning and what do you know he's got more and they win one case out of one hundred dollars what do they get i mean the damages are going to be minimal damages and the right to keep going and then the never ending series these cases what this document shows is that intellectual ventures of some are talking about the risk to your client the risk on your side because this is never going to end yes the threat that you're facing with this individually but when i put five of them together i artificially inflate my chances of success to fifty six percent and that's not even considering the burden which goes up five times and then if i assert ten of those patents i artificially inflate my chances of success to by extension why why are you in any different position with respect i v than you would be if instead of one i v there were let's say twenty nine practicing entities that were coming at you at the same time because of the effects on competition and the control of prices the heart of this and i trust claim when you're dealing with one intellectual ventures the effects on competition are daunting if i'm dealing with an individual patent owner owns pounds i can see the light at the end of the tunnel and i can ok there might be a step that at the end of the tunnel come thirty more of these non practicing entities after it's not as if i mean i'm just having a hard time seeing fundamentally different when you've got one of these and these versus thirty and i've used doc and sell a story that's one entity they're going to make a rational decision because they know the cost of litigation are going to come out of their pocket as if we're going to lose all these cases there's an economic drawn into the numbers here and the numbers and just to add to that when we're talking about number of patents that's often misleading because one patent to have three claims another patent may have thirty claims what's the what's the line when is the light in the v claims to have over seven thousand six hundred patents we know they're all six thousand of them could have nothing to do or six thousand nine hundred could have nothing to do with the particular technologies that you're concerned with we don't know that but we know our intellectual ventures and the fact is in the record they believe they've got over seven thousand six hundred we know all patents are presumed valid we know intellectual ventures own documents say they believe they've acquired enough low cost assets to have market power we have all their documents that say their own for unavoidable and we know they've said this is not an opt out opportunity this is not the we're not going to stop we're not going away and what that does is create a market that we can't avoid so if you're sitting us capital one you've got the choice of either dealing with this net you like whereas the perfect whereas enough enough it's when you've got you've created enough to create a market that's different than the market there's no other alternative for you've created your own market that didn't otherwise exist so you have no opportunity to avoid it and that with that market they've eliminated competition with most that negotiations i can design around i can challenge the patents with intellectual ventures it doesn't matter you can't design around you can't innovate around because you're going to run into some other patent i can't do my product development efforts because no matter which way i go you're saying that you will run into another exactly you don't know and that's exactly what professor for fiona scott morning supplanting the way they've done it with so many pat conceal that it creates the economic incentive that i'm going to artificially assume the risk of an adverse judgment is worse than it would otherwise be i'm going to assume the risk of getting sued endlessly is higher than it would otherwise be and so for all those reasons intellectual ventures has put itself in a very unfair negotiating position that the banks can't deal with they have to pay the demand or deal with this threat which is where you get the control of prices because there's no competition for intellectual ventures their own see their own stuff that's a new one overlaps with the concealment and the acquisition and that's really this discussion we flex that i mean so much of we've been talking about is the threat of litigation if not the litigation itself so what's the standard i think your brief uses it's not integral the government uses the opposite saying the opposite it's only incident two so what standard do we apply clearly the threat of litigation seems part and parcel of concealment it's the extinguishing direct licensing this is all private marketplace conduct that is squarely in the crosshairs of the i trust laws and we don't need litigation to be part of that in any way and the government's brief actually deals with well on page thirteen litigation does not have to be part of the on a competitive conduct here litigation however can be used for intent and damages and the government thinks about that you know damages is is all we were concerned if we could completely wipe the litigation off the slate and say we're just concerned with aggregation because of concerns that we have with thinking that there's a lot of potential not it's more than that it's also the damages for the impact they've had on our product development that's the i trust injury part of the case that's not before the court so arc our damages are not limited to attorneys fees but there's an important line here what north says is that litigation is protected conduct that's petitioning the government it's protected conduct so filing litigation can't be illegal can't be the anti competitive conduct but that's different than saying litigation can't be evidence of intent or evidence of damages and this is what the supreme court has talked about the united mine workers was pennington it's true in the u s for singer case where the i t c case was the use that has to consider intent and other issues in the case so there is a line you can use litigation for damages and intent without including as part of your scheme and treading on your pennington so our theories really break down into four different alternatives we think st and foremost the district court's decision on nor has to be reversed because the private marketplace conduct alone supports our conduct regardless of litigation the nd alternative is we do think litigation should be able although not being used for our area competitive conduct not being used  conduct being used to show intent and damages and that's is the supreme court as is the government explains on page thirteen the supreme court cases say and it's also consistent with this court's precedent trans web on that issue the rd alternative in our getting to the last two and this is the st time i think we're actually getting to a tough issue that's new before the court i think the st two are very solid the nd two where the law is unclear is when we do want to include litigation as part of the an and i trust it sectional point four f where they've had to debate this line between litigation judge white concluded it should be considered part of the scheme and herbert hoving camp said no it can be used for intent damages but we don't want the litigation kind of to be illegal so it shouldn't be part of the scheme but it should be able to be used for intent and damages and comparing those two articles is the best way i think to understand that issue and then the th alternative is that there's actually a sham litigation here under the california motor standard and we think there clearly is because you can't just look at this is to petition it's like the district court that in two cases if you ignore applies to conduct for petitioning the government it's not limited to lawsuits  certainly includes buses even civil lawsuits between private parts but my point is you can't apply the rigid standard just counting to suits you've got to look at the size and substance and burden of the petitions and here when you're talk talking to lawsuits you're talking to is lawsuits involving government so each one of those patents are sins especially when the patents are totally unrelated should be considered separately so when you look at all of the actions by i v against any defendants all of the actions against the banking industry how would you count the total number for purposes of distinguishing between p r and tell transport the st place i'd start is where we squarely puts us in the series of of the different standards and different courts of appeals have said well two cases is not of what fourteen is and i'm trying to see where and you say well you should look at more than just the suits against capital o herb so there was only one suit filed by herb in that situation and i remember correctly and we also have the case here at the ok we can look at it still give us the number i mean what number is enough to i think if you have two that's enough to be a series but i don't power found four cases was enough so that's kind of where you're left with between an outer tail and hand over reality but i also think it's important is they talk about a pattern of petitioning it's not a pattern of lawsuits we can't get focused in on lawsuits we've got to look at the petitioning conduct as a whole and every patent claim they've brought is a separate petition in the patent world to say that i can file one case with twenty unrelated patents and that's one cause of action so p r a i place that allows the plaintiff to have total control of the situation which is totally arbitrary because the burden of all of that one case is a poet composed of the one case as opposed to twenty different cases isn't any different i still got litigate affectively twenty different cases and i've still artificially increase my chances of successes not based on the merits of the patents but based on the volume of the pa but if there's merit to it the problem becomes worse not better if they're fact these patents were actually valuable and they did say they do include the hundreds of standard essential patents i think one standard essential patent can give you an apple a power if you own batting average like wow chappell and like hanover realty and wow chappell they were one for fourteen and so the court looked at that it's important to california motors as you is a fact issue it's a fact issue for the jury through it it wasn't appropriate for the judge decide that on summary judgment and what you do is what they looked at and well chappell is that that creates a which you can find it here it shows that there is a policy of starting legal proceedings without regard to the both subjective intent and objective merits and here what they didn't watch apples they said by going one for fourteen i'm not sure if any of those were objectively unreasonable but the batting average suggest that there was a policy of asserting cases without regard to the merits and we know this from the mitchell meeting between capital want to know lots of ventures when intellectual ventures presented in capital one had an employee sitting in the meeting who took notes during the meeting and intellectual ventures played a capital one wasn't based on look at this great patent look at this rate invention they said and she's got in her notes twice the value is you don't get sued again this is eight hundred and eleven eight hundred and seventy nine we protect from other suits they weren't selling patent values remember they've determined their patents are more valuable concealed this is this market that's never existed before we're not going to show your product and ask you to pay hundreds of millions of dollars this tight that we've turned economics on  head because of their market power and their with the value they're presenting to companies like capital one is protection protection against lawsuits so what i mean my my concern here is that if we to adopt your framework of analysis this may be the most extreme case i v maybe the most extreme example and non profits the unity but there are many others out there that are at least a product that didn't exist otherwise that's the abundant facts that judge brinn refers to what page eight fifty nine dollars is of opinion and that they declare that for four to be unavoidable such that you must pay the demand or walk away and here it is intellectually ventures can't even present options we've got none of that here and what you're trying it but if there's no indication that they've been successful what it makes our point because despite that lack of success of intellectual ventures its founder nathan myhrvold declare their deposition i can say the testimony that capital one and all the other banks still need a license for their making through under threat if you can use if you say it's unavoidable it clearly use avoidable of your client through your assistance has been able to avoid woodward to be right back into another firstly of mass so many prefer patents that they can declare that patents are folios unavoidable you've eliminated all account for titian there are no design arounds there's a number there isn't enough patents you can't possibly reasonably challenge the validity of all the patents the fact that you then created this elimination of competition because there's no design around there's no way to innovate without walking into the threat of intellectual ventures even further there's no way to challenge the lay the patents and the fact that they've controlled prices because you can't go to the market here and do anything else you can't go and use all turned this is from intellectual ventures own depositions you can't go and license an alternative for for all you can't go and use alternative technologies i want you to believe or deal with a company that's got more than a credible threat this is where you do look at their litigation conduct as a whole a credible threat that they are going to sue us over and over but now i'm going to stay on them to not be an issue you've got access to the whole portfolio at this juncture no we don't even that they're not is it laughable because it's incomplete or is it laughable because they're not giving you patent numbers or line they don't know when we asked for this list in litigation they said we can't tell you we don't know there's no way for us to figure out our eighty thousand patents which is the list that applies to you we can't do it that makes the point of why they've got monopoly power here even the owners of these patents claim they can't come up with a lesson until you make these arguments before hav show that intellectual ventures wheels and no lawful monopoly argument you're making now with these these these arguments have been made before and we have the the regina district court that's already ren decision involving the same issues the same parties maybe even the same council i think that's completely incorrect i think there's two reasons issue preclusion does not a buyer st for issue to pollution applied or for circuit law the issue decided by the eastern district of virginia as to be critical and necessary to the eastern district of virginia's decision and here we are now in judge graham says it clearly on his order page eighty seven dollars there is no dispute alternative holdings were made here to support the east and just a virgin is the citizens holdings based on relevant market monopoly power and at least then i could out of conduct and arguably others so there's no dispute we're dealing with alternative holdings so when you're in the th circuit as this court is held clearly issue preclusion alternative holdings are not sufficient and that's even of those with further loss since that with the four circuits sitting on can legally minds to further confirm that this court in the th circuit were on the same page in fact if you look at the only case as being law of the case and not issue preclusion so that's not applicable yourself on that basis alone the district court's decision on issue preclusion should be reversed because based on the alternative holdings the eastern district region is decision on relevant market was not critical or necessary to that decision but further i just wanted us one more part of his question if i may you said that this issue's already been raised this market was never raised in the eastern district region yet and the record is unclear here because i think the district court got confused the only market that we played in the eastern district of virginia was a market that related to the technologies that enable commercial banking and you can see the two markets next to each other on the grave of page eighteen but that's all the technologies that was presented to the lower court and rejected but the market we're playing now is i v s for fully a market they're fundamentally different because all the technology in the commercial banking history includes all the patents all the trade secrets all the technical know how the intellectual ventures for folio market doesn't include any patents other than intellectual ventures it doesn't include any trade secrets doesn't put on technical know how it doesn't include patent so there are clearly different markets and while there is some confusion about what was discussed at the hearing market for all the technology that enables commercial banking and you can change that market based on what happens in our argument even the court can't do it the courts limited to the siding the issue on the pleadings and that's clear from the  as best the court can discern it knew it was confused it knew it didn't understand the market i interrupted you i think it while you were in the middle of answering my question you were answering the question that i about what's going to keep this theory from popping up in every case and you started by saying well this is unique in that there are so many patents and they are declared by the to be unavoidable but you had other grounds as well i'd like to hear what the other grounds were and that you were about to tell me before i interrupted you well i think one would obviously be concealment that you have to if you're going to negotiate and sell a product you have to not conceal you've got to put your cards on the table and show where you think the value is so i think if you want a license for folio and this is why i've never seen a company do this or other than intellectual ventures they hide their patents instead of telling you here's my proudest here's my best patents and here's why i think you should pay it so i think concealment would be a limiting license i think another factor you should look at they can't be able to extinguish the direct licensing options where if you look at the performing rights organizations they are allowed to wreck the licensing oppo opportunities from the individual copyright owners i think intellectual ventures should be able to do that as i should have to do that because if you think about it if they only had ten patents and i'd have to deal with i said ok i don't want your whole i'm just worried about these ten and they still try to overcharge me i could then go and go to the individual patent owners and get a license from them because of b competition well but if they own it's the individual known as have already signed them to ownership then you don't have that option you should not dealing with the correct and that's a direct or any other non practicing it correct and that's why i think if you look at the copyright regime which didn't deal with this before the patent regime that's one the ability to license them separately so if i don't want to get a license from b m i because they're charging me too much but i do need a license to hotel california by the eagles i can contact the eagles and get a license ok well that's that's that would be unusual  themselves think well not if you're not if you're trying to achieve what intellectual ventures suggest that's trying to see which is this the competitive advantage of licensing the for fully as a whole you still need to leave competition so when you're going to create this new product you create a new dynamic and so while if you're going to create a perfect folio that's eighty thousand patents you've got to leave some option for competition and that would be another thing i would look at in fact one of the things that's important this case is the i trust laws are meant to be of the most efficient way to deal with this the i trust laws are designed to handle this forward thinking unlike the patent system where you have to deal with an unsolved cases to maybe have been here most companies couldn't we wouldn't be standing as long as capital one has if they two if they sue the smaller company and they would have had to acquiesce st they'd hear that you are the i trust laws are forward thinking the fact that the government's precise on page eighteen they look at acquisitions before they even occur they want to prevent know we'll hear from the government for three minutes good morning your honor and may please the core michael murray of the united states and thank you for letting us appear here this morning we're here to make a much more limited but we think important point and that is that the enforcement of patents in the litigation does not protect the acquisition of those patents from view that it to pick it depends and we have to analyze whether or not it is incidental to what's going on or whether it's integral yes so we think of the correct standard as what the the supreme court announced and pennington and allied toobin also colombia and that the standard is we take the petitioning activity here it will be litigation conduct anything that is incidental to the activity and will strip it out from the complaint and then of the courts analyze with the rest of the activity whatever's left amounts to an antitrust violation i think the best case to for the court to look at for that that understanding of the law is the columbia case there the supreme court explained that even though in that case there was a broad scheme that included lobbying to enact a killer or ordinance and that that that lobbying was protected under more pennington that didn't resolve the dispute because there were other allegations in that case that standing alone could be sufficient to sustain a judgment against the defendant and so we think that that's the way to so i don't want to get into a very precise definition of incidental because it's not the parties are not speaking what is and is not incidental and this is what i'm curious as to what the government's position is with respect to that issue sure we haven't taken a precise position on exactly what defendant that says i have a variety of patents and i want to come to an agreement and if not then we will see you in court any of that conduct which happens in every single patent case just about every single that gets any of that conduct to be you regard that is falling on the nor pennington side of the law you don't consider that yes i think that's right and that's i think the globe trotter case from from the score which would be that's all pretty show you our patents take it or leave it you have to buy the whole package none of that is can be considered for purposes of assessing the any trust violation so we haven't taken a position on the  trying to see whether you would put those those kinds of activities into the globetrotter box possible it really depends i know i'm not answering that answer answering it exactly the way the way involving the sorts of things that are is as you mentioned are talking about all the time before a lawsuit might ensue or the types of things that could be incidental to the litigation itself one of the reasons that we're we're hypothetical and don't require you to get in to see of materials how about if hypothetically someone comes and says i'm not going to show you my patents and they say you have to take the whole deal all of that what i'm hearing you say i may be hearing more than you're saying is that that's all part of the litigation package and the anticipation of litigation is not part of the anti trust component is that a fair character your position hypothetically we have not taken a position on the concealment aspect that your honor has talked about and whether any concealment in the course of discussions before litigation may or may not be incidental al have taken the position is that certain pretty litigation communications where an individual says i would like to get a license from you or that takes the form of a letter or some sort of settlement negotiations that's protected we've tried to stay away  takes it seems to me a pretty big bite out of mr moore's argument much of which is predicated on the activities that occurred after ivy st contacted capital one back or hypothetically after the  overbroad language can be read suggest a position that is inconsistent with the position that we asserted if this court reads it differently and clarifies that that is not the proper way to read it that would be of a great outcome for the department because what we are primarily concerned about is being able to assess patent acquisitions under the into trust laws and even though there was subsequently fishing activity such as litigation something of a few about whether or not even read it the extreme that you say the worst possible activity of the intellectual ventures that offer has offered a contrary interpretation of where it is a sort of pseudo merits holding indicating that there is nothing nothing left  please in court i'm happy to address judge bryson's question to mr murray the answer is i think he's right in citing globe trotter the threats of litigation are clearly within globetrotter and clearly within or pennington this court held in globe trotter that the p r re standard must be satisfied to make a threat something that can be considered but i'd like to make a broader beyond that other aspects of the conduct that occurred let's say hypothetically in the st meeting with capital one such as concealment as i understand it and whether the facts are that saffi facts or not never mind i'm just trying to get a sense of what your position is if i v goes into the meeting and says we're going to sue you we have a large collection of patents and we're not going to show you any  we're just going to take it from us we've got a large collection and here's the dollar amount that we want any of that in your view well let me put it this way is all of that in your view within the context of the litigation please forgive me your honor for st saying that nothing like that ever happened well but now address your question that's deal with it ironically and then maybe you can tell me why it didn't happen yes so your honor threats of litigation or as the government puts it conduct incidental to litigation fall within or pennington if there is a meeting and by the way this particular meeting was a settlement meeting that shouldn't be considered under rule four hundred and eight anyway but let's move on from that right now if there is a meeting at which litigation is threatened the entire act of threatening livy geisha and whatever is being set falls within globe trotter falls with really and falls within the st amendment now that doesn't mean that there might not be incidental aspects that tie back to the same facts that could be considered but when there is an interaction capital one is within the protection of new york and well it would be on the facts of this case because all that happened was there was a reach out right no response litigation was filed and from that point for everything that took place was literally in litigation including the settlement but i'd like to make a broader point i'm not sure there could be a better explanation of the need for the objective screen in p r a than my friend's argument this morning in perry the supreme court explained why it's essential to have an objective screen surrounding litigation petition and in octane fitness the supreme court made the same point today my friend speaks of a variety of things that never happened he talks about testimony that was exactly the opposite and if we don't have the protection of the p r read objective screen not only judge bryson will it be the case that every defendant at least every defendant of a certain kind will face claims like this but they'll all be based on efforts to portray intent as transformative when you say every defendant you mean every counterpoint defendant presumes i do your honor yes now going all the way back to normal the supreme court has always made it clear that there must be an objective component that's what the supreme court said is that was the point of creating the famous two step test and without the protection of an objective screen we end up being faced with arguments that someone testified exactly the opposite of how he testified we end up with arguments that documents that don't exist do exist and that those that do say things they don't say this gives me are i'm having a hard time getting a purchase on these shirts or general statements my friend said that dr myhrvold testified a certain way he testified exactly the opposite my friend says i d has declared its portfolio unavoidable that never happened that these things are are you those words are the word unavoidable was not used or what what do you mean by that the word wasn't you used and the concept wasn't you use these things there's no support in the record for these ideas and when they're when they're asserted in briefs they're asserted without support i believe unavoidable was used and it was about it was in the context of a specific negotiation with a specific customer in a different industry there was no suggestion that but all of this and so i guess i'm not following statements made a few minutes without have really a lot of bearing on the issues we have to decide today well they don't know but what what they have a bearing on is the importance of the objective scoring but i think we need to go back to a couple of basic ideas my friend said that judge graham decided what the product is there wasn't a basis in the record for any such thing to occur brown shoe and the reasonable interchangeability of used test explains how we define a market professor you didn't did you in your brief i mean you make arguments with respect to substitute and so forth but i didn't see i don't recall that your brief four square went we're we went this morning which is the district court it was a question of law as to whether or not something judgment should be granted on the relevant market that he was wrong the relevant market and so forth now i understand maybe you didn't spend a lot of time on that because you want other issues issue preclusion and nor stuff but where is it really presented in your  is in the last section of our brief chief judge pros and what we said there was there was a suggestion and the suggestion was repeated this morning that judge graham had decided there was an issue of fact requiring a trial in the last section of our group we put that in context here's what happened at capital one although professor scott morton did not use the word cluster in her expert report and did not claim a cluster market in a reply expert report that she did in her testimony as i recall that she talked about plus she may well have gone we have jack and i thought that what she said was something to the effect of well you know you could call it a different thing insurance or she said i think less politely protection but she said that's basically the just isn't that a fair there's pretty much what it was she just threw out an idea with no legal standard and chief judge provost that's the point that we made in our brief so what judge brinn said was issue preclusion and or pennington aside there would be a requirement for a trial because he said he couldn't say as a matter of the law that there wasn't a cluster market theory that was available what we pointed out in our brief is that there are two recognized bases for the use of cluster market analysis one requires proof of demand for the cluster and this is illustrated very well in a green country food money case decided by the temp circuit the point is this cluster market technique can be used when there is evidence of demand for the cluster as opposed to demand for the individual components now in this case capital one's position is there is no demand for any of the individual patents or for them as a group and we pointed out that for judge graham to say that he wasn't convinced that there is no other legal theory is not good enough what's necessary is that a proper legal theory be articulated and that evidence that would provide a basis for a favorable outcome under that theory we identified that didn't happen and that is the only basis on which capital one was arguing that it had a case so so three points and that you've just crossed st under rule eleven that analysis has to take place before the claim is made it isn't possible to file a lawsuit and say here's my theory well you know i'm not going to be able to prove it because it's too hard what's required under rule eleven is that that analysis take place in advance and then we move forward nd i'm not sure i get  large market it isn't true normally what one does is begins with a narrow market and tests it tries to move product but let's suppose that one wanted to claim a broad market like three thousand five hundred dollars patents one wouldn't need to test that market initially by looking at every single path because the law requires that a that in the summary judgment process mr shoots identified substitutes for a few of the patents that evidence alone defeats the market claim because it demonstrates the substitutes owned by others we know from it that simple work you know that one of the problems i have with this case it's not the only one is that it seems to me that it awkward to talk in terms of substitutes when you're talking in terms of its patents don't give you a right to do something they give the owner a right to exclude you from doing something so if you find a patent out there that leads on or would cover your activity or would allow you to engage in that activity without being sued by the owner of that patent that doesn't protect you from possibly having five other people out there have patents that dominate that other person's pain and that would keep you from so i'm having a rough time understanding the meaning of the term substitute in this context but i think the  question clear it is you're right i think the question the issue there judge bryson is that there are two kinds of substitutes that are being thrown out so st of all there is an idea that's being thrown out by the other side substitute would be another patent you could license the substitute is the availability of of equivalent technology right that's what it is that's right and that's spelled out in the end i trust guidelines for the licensing technology and its close substitutes just like it does in any other type of market so what you do if you're trying to create and i trust market if you look at the candidate technology you determine whether it has substitutes if there are substitutes you're part of the same mark and you continue that process looking for other lines of mr moore correct that in this circumstance with you will you you're the out whether that's the case if you would look at what the patents cover you would determine what those patents cover and that's how you would decide whether there was a substitute if you think of it in closer market terms why but what does it matter if there's a substitute if there is five hundred dollars patents and you conclude that there are substitutes for six of them that doesn't answer the question about you're selling this one product which includes all of those are tied to each other whether that and what relevance does that have while what is that answer the question if in fact you're just putting one product out there and that's the sum of all of them together well st of all when you know that there are substitutes for some you know it's not trust market but i think there are some factual issues here as well so st of all no one ever offered capital one a license to three thousand five hundred patents or seventy seven that didn't have what happened was a broader approach was made and the what was offered was a license to all of the patents own through two investment funds it wasn't specific to this group of three thousand five hundred the idea of three thousand five hundred comes soley out of the settlement meeting where an estimate was provided that out of all the patents that are wrong thousand five hundred dollars of them are relevant to banking so there is no specific group of three thousand five hundred dollars patents no one's ever identified one and no one ever made a specific claim about such a group it was an estimate so when you're talking about an estimate the st thing capital one should done is identified the pads now my friend said we wouldn't tell them something we told them exactly what was there and and nor pennington and we look at what's there what we see is a generic claim about an unidentified group of pathans no evidence that any of them is a substitute for each other undisputed evidence that substitutes for some of them exist outside the record outside the the three thousand five hundred and that's enough to show that there is no market independent of everything else there's a failure of proof and there's affirmative evidence that there are substitutes for some of the shoots his testimony on that was that there are other patents that are substitutes that's correct your honor but again that gets back to the problem i have which is happens almost inherently can't be substitutes they're just a protection from suit well that's true and that's why the sense in which ways she teaches statements if that's what he's saying don't seem to me to answer the question of whether there is there are substitute budgies that gets back to the twenty two ways the term is being used my friend is using the term to refer to the idea of another patent that could be licensed so you wouldn't have to take a license to the st one but the actual and i trust law concept means something you can use in place of a good product or service that is being offered by the defendant or technology and in the guidelines it spelled out that the technology so st of all one thing that's getting lost a bit in the shuffle here is the claim that was made by capital one capital one is saying on appeal that it made a case for a sufficient case they simply on acquisition but interestingly enough capital one doesn't point to any acquisitions it doesn't point to the scope of any patents well i think their briefs i mean it's whatever they said he clearly they include acquisitions aggregation and concealment in terms of the condom they're alleging and litigation as well but on appeal they're trying to argue that it's just aggregation and concealment announcing that something was concealed when the record shows wells fargo was given a patent list b b t was given a patent yes there isn't real evidence that these patents were concealed there was a time when buying strategies were kept private but in the actual licensing interactions there's no evidence of concealment to just record deal with this and all the court didn't deal with that because the it thought i assume it's because he thought this was the quintessential jury question about what was going on you know whether you were disclosing it in your course of conduct right well i think the reason he didn't deal with this because he said well i think this case goes down and it should preclusion and nor pennington so i don't have to deal with the question of the market what the relevant market is at all he could have said that but he did he said there's enough of a debate and between the experts and i find the reasonable course is to send the jury he did your honor except as i pointed out what he actually said wasn't sufficient to require a trial because all he said is i'm not convinced that the legal theory can be confined he did not articulate another legal basis and as we explained in that let's just say i what are you referring to i'm on  out that under the air's analysis capital one doesn't have a case because capital one professes the absence of demand he then says nevertheless the parties do not cite nor have i located any controlling analysis i cannot clue that as a matter of law it isn't reasonable now there judge graham was speaking to the legal standard summary judgment gets granted only where the competing theory isn't reasonable and he's  and the supreme court's decision in philadelphia national bank is very long it's got some complexity to it but it makes the point that because of the factors that were listed and they included c they included uniqueness of certain products there was a special demand for commercial banking services independent of the individual services that were in that in that group in green country day the temp the green country food market the th circuit explained that you have that clustering phenomena only when there is demand for the cluster and judge greer made this point he described that there is problematic for capital one because it doesn't alleged and so judge graham understood and identified the demand requirement he realized it wasn't met but nonetheless with out another legal theory he said he couldn't say as a matter of law that what professor scott morton was saying was no good but in order to say that what she said raises an issue it is essential to identify a legal theory and populate it with facts perfessor scott morton saying yeah let's have a trial that's not good there is no legal theory that was articulated and remember we have to go back to basics when we go back to ground shift they didn't do substitutability analysis they didn't look at any of the patents they made they didn't even identify them what they said was oh eventually they threw out the word plaster so we responded to that and we said well wait a minute there are two legal theories green country food market explains one and pro medicare describes the other of the other described impro medica it doesn't allow market definition it's market in order to use the cluster market there it was incumbent under philadelphia national bank grinnell phillipsburg bank green country to market balanced as a portfolio that's legally insufficient the marketing is a portfolio is relevant only if one of two things has occurred a proper analysis underground show has been done and it's been determined that that's a market or proper analysis under the cluster market technique as illustrated in philadelphia national bank and green country food market has been performing but merely saying you call your product a portfolio that's not legally sufficient that's not enough to require an expensive trial in an antitrust case it's not that simple and capital one didn't go beyond a label for like that but there are twenty two dollars ways to get down that path one is brown shoe the other is philadelphia national bank they didn't even try on ground shoe and they didn't do anything sufficient under philadelphia national bank so that's the point there's no there there and yes out was that the undisputed evidence in the form of peter that ken's testimony by declaration established that no new patents were acquired after the cancer claims were filed in virginia invention investment on one and two had not purchased any past those are defendants i after one and i have two there is a later rd investment fund it's not a part it's called invention investment ireland sometimes fun three on appeal capital one seeks to avoid a claim preclusion or by pointing generically oh it's not available in this court went beyond the words that were in the complaint in terms of what the market was but perhaps he's forgetting the transcript of the hearing before a judge trying again and the claim that i v has one hundred percent of that market my friends response was we believe they have one hundred percent of that market that goes on the court said you're saying that thousand five hundred dollars patents that are owned by intellectual ventures constitute one hundred percent of the patents involved in the expos market for technology enabling for patents pertaining to technology enabling business processes the response and that's because of the an actress on appeal capital one defended that market and specifically what capital one did on appeal  this isn't in the appendix it explicitly label those patterns as the market they called it a sub market and they said those allegations this is pages foreign five of their brief on appeal to this court those allegations supported a stent market or some deal in the eastern district of virginia that's right you are limited to ivy's portfolio monopoly of three thousand five hundred financial services we actually look as i think we did at the client compton claims that would were pleaded in virginia and maryland it confirms does no i don't agree at all you're either so they use a different word in a kind of time there's no doubt about that however they made reference to the three thousand five hundred patents and when confronted with the question of whether the market did in fact consist of three thousand five hundred patents the answer was yes on appeal that's how they argued it they portrayed it as a sub market but we needed to focus it wasn't the way they characterized it in the complaint right the mark well in pleading in a complaint words matter and the words were different and they were significantly different if they threw around the notion of three thousand five hundred patents of course they did that's what they're talking about in terms of your portfolio but the reference to that fact doesn't undermine that they're pleading with the relevant market with different different words different means well here's what here's what does what does matter centrally your honor what matters is what was decided here that there is another issue in that regard and i'll address that the moment if i may but as far as it goes there's no doubt that judge trying get actually decided the question of whether the three thousand five hundred patents are relevant market he did it explicitly there's no doubt that on appeal capital one attempted to defend its case by arguing that it had placed an issue a distinct sub market consisting of those very patents there's no doubt notwithstanding the words that the issue was decided and of course as we explain that our brief what matters is not not what the evidence that supports it is what matters is what was decided and in this instance there's no doubt the judge trying to decide that that three thousand five hundred dollars grouping is not a mark mines until reply judge graham didn't cited the microsoft court didn't cite it lisa only mines as a black lung case it's not an issue preclusion case under the regime for a black one claims for st this court doesn't need to reach relevant market or monopoly power to issue squarely before this court are nor an issue preclusion and with regard to relevant market and monopoly power those are fact issues there's been extensive discovery below there's been technical tutorials to judge grimm it was suggested he didn't thoroughly consider them he wrote about them from of over ten pages of an i trust analysis an economic theory in his opinion genuine disputes of tiriel fact that wouldn't title it's to judgment as a matter of rock on the issues of possession of monopoly power in the relevant market and the willful acquisition and maintenance of that power as distinguished from the growth or development as a consequence of the severe product is a sacrament or restorable accident i would deny the motion and allow the case to proceed to trial he was very clear he thought about these issues a lank and he determined that a trial was necessary in fact on these issues judge graham talks about for example he says on page it's hard to deny that concerning  that you were also very careful in this is true in their briefs q you did not hear any dispute that acquisitions were not petitioning conduct you didn't hear any arguments that the aggregation of these patents was not petitioning conduct you didn't hear any dispute the concealment wasn't not petitioning conduct in judge bryson as a mushroom of the government seem to suggest that at least in the context of the discussions  pretty petitioning conduct and non petition accounting have decision yes but but the concealment that i thought you were focusing on was the concealment that is part and parcel of the presentation that's made to the defendants in three elements to our concealment case st there were i b acquires these patents it doesn't acquire as intellectual ventures it makes up these came names of companies that don't have anything to do they create these shell companies right that we're not anymore that wouldn't be anti competitive i can't imagine how you would would say that it's that some prejudice is you know it is and i can put it in the context of the scheme because there are documents show they do it intentionally they they are documents actually say that we tell the world it's for administrative reasons but we all know it so the banks and people don't know what patents we own so it's all part of the monopoly power they created by you can't even go online and figure out what patents intellectual ventures owns say we're here we're interested in having a chat that that all is part of the petition process and you may disagree with them but i thought that was the government's position i don't think that was i think the government deliberately didn't take a position on that issue and said we haven't contemplated we don't know the facts here so i don't think they took a position on that so but i think there's three levels here st the concealment certainly is part of the anti competitive conduct because it prevents us from knowing what patents they own and evaluating the scope of the product and determining design arounds and terminating innovation it all leads to our and i trust injury we talked about earlier so that part's clearly non petition and i would disagree with your honor if you're suggesting otherwise that simply licensing discussions without the threat  it prospect of litigation part and parcel of license why would anybody pay for a license if they didn't have the ultimate threat of litigation hanging over their head companies often and licens the issue with that logic is that would apply to any patent ever and that logic that any patent this goes back to what her hoping can and that's the concern the government had which is why they're here if you hold that ok i'm never going to pay for a license because patents are always here segregated from the other features concealment is certainly part of our scheme that was considered an argue to judge them as part of the two thousand shell companies which is clearly not what this new conduct which the court considered all the documents you consider the testimony expert revealing those documents who actually testified that that was part of the inappropriate licensing conduct and feeling scott morton consider that a new term that's all part of the and i competitive conduct and none of that can be considered petitioning so you've got to look at i issue that's a question on which i'm having difficulty you say you say just can't be considered petitioning but my supposition is if they are concealing after they arrive at your office and you say what happens you have to offer us and they say we're not telling you that does seem to me at least potentially to be within the scope of the whole international consensus and now you're kind of merging the concealment with the licensing discussion yes and here that's right and i understand that you're saying they're two different yet these two different aspects of the concealment that setting aside the fact that they are going through shell companies the concealment that it seemed to need a professor scott morton was concerned with was the  e to reveal in the course of the licensing what patents were in their portfolio and i'm and i'm questioning whether that is not fairly construed as part of the whole petitioning process and i would suggest that the two thousand shell companies because exist if they can't be enforced and there's no rights so the idea that you can't that that conduct would be for covered purely in a licensing discussion because without any threat of litigation to me what effectively be the same logic that acquisitions would be protected by nor because you're effectively saying if you're assuming patents can only be enforced in litigation so that's part and parcel of the negotiations that's of course the case that's true of every patt in history and that would mean patton that related activities couldn't be attacked under the patent under the and i trust that you because patents don't exist in a world where they can't be enforced and people don't have to worry about the rights granted they're in fact there is no rights if they can't be enforced so this conduct when companies are licensing each other and discussion things friendly without the context of litigation to me clearly wouldn't be nor protected because that's a cop that's a private marketplace exchange between two parties that's an arm's length negotiation that doesn't necessarily involve litigation doesn't necessarily result in that senator correct so i would suggest that conduct is not on petitioning hound act as well and so  opposed to a string of never ending patent cases and it's important if you look at here then i trust law as we talked about section two and section seven both being directed at acquisitions but i'd also look at one of the release we're seeking here is an injunction against this conduct and under fifteen u s c a section twenty six dollars that's where the court allows an injunction or it literally provides injunctions against threatened loss or damage or things that will cause loss or damage injunction would say it was one of the women in princes we talked about here was concealment and you'd have to show that you own patents and you have to show up there that they would have to identify the patents they think of value and have to have it have to if they wanted to man royalty show it based on a patent you know one of the things that goes fundamental their conduct here and they showed up at intellectual ventures they didn't say any specific show that you know it capital one they didn't show any specific product or service needed a license and therefore the really as they just they just said your biggest area of revenues  m card swipes which is debit and credit cards on line a mobile banking and based on that we want this percentage of a royalty payouts regardless there and so what injunction would do is say the extent you're enjoying from seeking damages without