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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BEFORE: v.

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Norfolk Division

- - - - - - - - - - - - - - - - - I/P ENGINE, INC., Plaintiff

AOL, INC., GOOGLE INC., IAC SEARCH & MEDIA, INC., GANNETT CO., INC., and TARGET CORPORATION, Defendants. - - - - - - - - - - - - - - - - - -

) ) ) ) ) ) ) ) ) ) ) ) )

CIVIL ACTION NO. 2:11cv512

TRANSCRIPT OF TRIAL PROCEEDINGS DAY 10 (Afternoon session) Norfolk, Virginia October 30, 2012

THE HONORABLE RAYMOND A. JACKSON, and a jury United States District Judge

JODY A. STEWART, Official Court Reporter

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APPEARANCES: CRENSHAW, WARE & MARTIN PLC By: Donald C. Schultz W. Ryan Snow Counsel for the United States AND DICKSTEIN SHAPIRO LLP By: Jeffrey K. Sherwood Frank C. Cimino, Jr Kenneth W. Brothers Leslie Jacobs, Jr. Dawn Rudenko Albert Charles J. Monterio, Jr. Counsel for the Plaintiff KAUFMAN & CANOLES, P.C. By: Stephen Edward Noona AND QUINN EMANUEL URQUHART & SULLIVAN LLP By: David Bilsker David Perlson Robert Wilson Antonio Ricardo Sistos David Nelson Counsel for the Defendants

JODY A. STEWART, Official Court Reporter

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PLAINTIFF'S WITNESSES NONE

I N D E X PAGE

DEFENDANT'S WITNESSES KEITH UGONE Cross-Examination By Mr. Sherwood Redirect Examination By Mr. Wilson

PAGE 1732 1749

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(Hearing commenced at 2:29 p.m.) THE COURT: The Court has a question, Mr. Brothers. Yes, sir.

MR. BROTHERS: THE COURT:

I'm trying to figure out a time frame.

Approximately how long do you think the direct examination of your rebuttal witness, Dr. Carbonell? MR. BROTHERS: We expect Dr. Carbonell to be

between -- probably about an hour and 45 minutes. THE COURT: All right. Okay. Thank you.

Bring the jury in.

(Jury in at 2:29 p.m.) THE COURT: You may be seated. Please let the Does counsel

record reflect all jurors are now present. agree? MR. SHERWOOD: MR. WILSON: THE COURT: Yes, Your Honor. Yes, Your Honor.

You may resume, Mr. Sherwood. Thank you.

MR. SHERWOOD:

CROSS-EXAMINATION (Cont'd) BY MR. SHERWOOD: Q. So, Dr. Ugone, before we broke for lunch, I think I was

asking you some questions about Google projecting forward with the total cost of the 12(d) application fee. remember that? A. I do recall our conversation on that, sure. Do you

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Q. A.

And it was in the range of $490 million; is that fair? Yeah. What we were talking about that if you did

Dr. Becker's calculation, that added up to 493.1 million from the hypothetical negotiation or from the date of first recovery through present. Q. Right. And so Lycos would have that projection going It would know about that,

forward, as well, wouldn't it? too? A.

Well, here is where we have to be careful.

We have a

disagreement over a form of the license and the nature of the discussions. My view is, based on everything I've looked at, Dr. Becker believes

is that it would be a lump sum payment. in a running royalty rate.

If you go into that framework,

all I was saying is, is that people would look at payments over time if you were in that world. Q. So in that -- with that frame of mind, Lycos would have

the same anticipation about the value of the royalty as Google, right? A. I'm missing what your question is because Google's view

would be that, given everything that we looked at, the value of the license payment would be 3 to $5 million. So you

wouldn't even get to this $493 million calculation because that wouldn't make sense in light of all the economic considerations that I've been talking about. Q. Well, I understand that's your opinion, but before the

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lunch break you told me that Google, following the running royalty analysis, would have anticipated the full cost of the royalties over the life of the patents, right? A. Q. A. What I was -Isn't that your testimony? Very similar to that. If one was in that situation, they They would say, well,

wouldn't just look at here's the rate. what does that add up to over time. Q. A. Right.

And Lycos would do that, as well, wouldn't it?

If you were in a situation where it made sense to do

that, the parties would do that. Q. And Lycos would have known that Google was going to use

its patented technology in not only AdWords but AdSense for Search and any other programs like that that came along, right? A. Well, if you were in that running royalty rate world, you

would do that calculation, but I have been assuming that the patents are valid and infringed, in other words, that you would require a license to use that technology. So I think

that is a yes to your question, that it would be known that the technology could be at least used on a going forward basis. Q. And Lycos would know that irrespective of the structure;

isn't that right? I'll rephrase the question. Lycos would understand

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Google's anticipated use of its technology, right? A. They -- the assumption of the hypothetical negotiation is

that Google would need a license to use the technology, yes. Now, at that point on a going forward basis, Google can choose to use the technology or not. Dr. Becker said -MR. SHERWOOD: to my question. THE COURT: then -THE WITNESS: THE COURT: BY MR. SHERWOOD: Q. A. Can you answer the question? If I could have the question again. MR. SHERWOOD: THE COURT: he -MR. SHERWOOD: BY MR. SHERWOOD: Q. Okay. And Dr. Becker calculated his royalty on the basis And then he went on. All right. I'm sorry, Your Honor. Okay. Just answer the question, Doctor, and Your Honor, I'd like just an answer Remember what

Just answer the question.

He did answer the question, but then

of use, didn't he? A. He applied an apportionment factor that we've discussed,

but that's how he started with a base, and then he took his royalty rate, as we've talked about, from those Overture

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license agreements. Q. And the payments varied according to the extent of use,

right? A. The payment varied according to his mathematical

calculations and the apportionment factors, I'll agree with that. Q. Can we have PDX-76, please. So you remember this slide

that Dr. Becker used? A. Q. I do, yes. And that was based upon -- the blue numbers were based

upon use, right? A. Q. A. The blue numbers were based upon the draft chart. Right. And adding together the SmartAds, the disabling and the

promotion boxes that we've talked about -Q. A. Q. Right. -- and then dividing it by the total. I'm sorry. And those were what Dr. Becker used to

determine Google's use of the patented invention, right? A. Apportionment, but as we've talked about, that overstates

it, but that was the calculation he did. Q. And it varied according to the number? Through 2007, it

varied according to the numbers that were in PX-64, right? A. Actually, there is a couple of numbers that are missing

because it started out as 7.8 and then 12 point something,

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then it got up to the 15.

He didn't show those in his chart,

but if you did the calculation he did, which had too much in it, you get what's in the blue, yes. Q. The 7.8 was outside the recovery period, wasn't it,

Doctor? A. Yes. But that was at the time of the hypothetical

negotiation. Q. But you understand that the damages are limited to a

certain period of time, don't you? A. I do. So the calculations would start with the 15.9 in But with the first alleged

terms of the calculations.

implementation of SmartAds, the number from the chart that Dr. Becker got was 7.8 percent. Q. A. And that's outside the recovery period, correct? There is the alleged infringement period, then there's But back here, the 7.8 is where the

the recovery period.

hypothetical negotiation would be. THE COURT: The question was -Your Honor --

MR. SHERWOOD: THE COURT:

-- outside of the. Yes.

THE WITNESS: BY MR. SHERWOOD: Q. A. Q.

It's outside the recovery period, right? Yes. Now, you criticize Dr. Becker's calculation of a royalty

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rate of 3.2 percent, right? A. Q. A. Q. A. Q. That was 3.5. 3.5 percent, excuse me? Yes. Is that correct? Yes. And you understand that that 3.5 percent was based upon

licenses that Overture gave to its '361 patent? A. Q. Yes. Or three of them at least.

And you also understand that Dr. Frieder testified that

the Overture '361 patent is comparable to the patents-at-suit in this case? A. Q. I read that testimony, yes. And you're not competent to give an opinion about whether

that's accurate or not, are you? A. Q. Not on the technical side, no. You don't know whether Dr. Ungar's opinion about that as

opposed to Dr. Frieder's about that, you don't know which one is right, do you? A. Well, I was able to have discussions with Dr. Ungar so I But I can't evaluate the

understood kind of his rationale.

accuracy of either of the two of them. Q. You can't give an opinion about which one of those

opinions is correct? MR. WILSON: Objection. He has been over this.

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THE COURT:

He just answered that. Your Honor, he gives a lengthy

MR. SHERWOOD:

THE COURT: said was the answer. again, Doctor?

He just answered it.

The last thing he

Do you want to repeat your answer

THE WITNESS:

Yes.

I cannot -- I'm not the

technical person, so I have to leave it up to the two technical experts. BY MR. SHERWOOD: Q. All right. And you know that Google licensed the

Overture patents for its AdWords program, don't you? MR. WILSON: questioning. Your Honor, I object to this line of

We got a ruling on this. Your Honor, this was within the scope

MR. SHERWOOD: of direct. MR. WILSON: direct, Your Honor. THE COURT: BY MR. SHERWOOD: Q.

This was not in the scope of the

I'm going to sustain the objection.

You know that Lycos licensed the '361 patent, right, the

Overture patent? A. I -MR. WILSON: Beyond the scope of direct, Your Honor.

I don't know where it is coming from.

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MR. SHERWOOD: THE COURT:

Your Honor --

Yes, sir. -- this relates to his analysis of

MR. SHERWOOD:

Georgia-Pacific factor 12. THE COURT: And states Georgia-Pacific factor 12? Georgia-Pacific factor 12 is --

MR. SHERWOOD:

portion of the profit or of the selling price that may be customary in particular business or comparable businesses to allow for the use of the advancement or analogous invention. He did an analysis, he said, of all 12 factors. He

criticized Dr. Becker for using Overture licenses, and I'm entitled to cross-examine him about that. MR. WILSON: Your Honor, neither Dr. Becker or

Dr. Ugone relied on this agreement, and based on Your Honor's earlier ruling, those are out. MR. SHERWOOD: THE COURT: Your Honor. Do you have -- go

Wait a minute now.

back to his expert report. in his expert report? his expert report. MR. SHERWOOD: his expert report? THE COURT: pursuing right now? MR. SHERWOOD:

Did he make any comments on that

Did Dr. Becker make any comments on

I'm sorry, did he make comments in

Regarding the line of inquiry you are

He criticized Dr. Becker for --

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THE COURT:

He did? Yes. He did it in his direct

MR. SHERWOOD: testimony, Your Honor.

He said he can't rely on the Marchex,

eXact and Interchange agreements. THE COURT: I will allow limited inquiry on that, So make it quick, make it

but there is some danger here. short. MR. SHERWOOD: Okay.

Your Honor, may I ask the

question doesn't he understand that Google licensed that patent? THE COURT: BY MR. SHERWOOD: Q. Don't you understand that Google licensed the Overture All right.

patent? MR. WILSON: Your Honor, this is a different

This is exactly what Your Honor ruled on earlier.

We are moving on to something else. MR. SHERWOOD: THE COURT: Your Honor. Ladies and gentlemen, I've got to get close

Hold on a second.

I can't settle this across the bench. up. Stand up for a second. (Side-bar conference.) THE COURT: we are, okay. All right.

Let's get straight on where

The Court's been ruling to try to avoid

getting the witness too involved in the matter that may be

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beyond his expertise as a forensic economist's technical matter. That is what is in the back of the Court's mind.

Now, what is it that you were getting ready to ask? MR. SHERWOOD: Your Honor, Dr. Becker gave an

opinion on direct that was based upon Dr. Frieder's testimony that the '361 Overture patent is comparable to the patent-in-suit. You may recall on cross-examination

Dr. Wilson opened the door about the value of the license that Google took to that patent. Now, I'm not going to ask

that question, but what I am going to do, and what he did on direct testimony, was he said that the witness testified -THE COURT: Don't shake your head. The jury is

sitting here looking at what you're doing, Mr. Wilson. MR. WILSON: MR. SHERWOOD: I'm sorry. He testified that that patent, the He And

'361, that the Overture patent was not comparable.

criticized Dr. Becker's analysis with respect to that.

what I want to do, Your Honor, is go and cross-examine him about that. And I can do that not only because they opened

the door with respect to Dr. Becker's testimony, but they also opened the door with respect to his direct testimony. THE COURT: MR. WILSON: This is Robert Wilson. Okay. Here's what --

Your Honor, if I may respond to that. Your Honor, we had the

cross-examination, and the next day we moved to strike any

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testimony regarding the Overture and Google license, and Your Honor granted that motion. So that's off the table. The

reason that was is because Dr. Becker specifically opined in his expert report that that was not a comparable license and he did not include it in his analysis. Second point is I understand they want to ask about Lycos and an Overture agreement. That agreement, both of the

experts considered and both of them concluded that that was also not a comparable license agreement. So we have a

situation here, Your Honor, where he is saying, well, he criticized the rate. Well, he criticized the rate based on

what Dr. Becker relied on in order to obtain that rate. THE COURT: No. No. No. The problem I keep having

in this case is the Court rules, and both parties somehow manage to work their way right back into something that the Court has previously excluded for some reason or another. You work your way right back to it again. To the extent the

Court has excluded certain testimony because we found that the agreements were not comparable, then no matter what he said, we are not going to get back into it again, just not going to do it, and the fact that somebody get up here and inadvertently open the door and say something that is not licensed, for either party to go back and get back into it and inadvertently reverse what the Court has said. Now, you know something? The Court has a real

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concern.

You think about it tactically, just how much the

jury is going to remember of this cross-examination, Mr. Sherwood, on this point. So I think you probably need to

make your point and move on without getting back in here and let us -- end up developing a problem we have here in talking about noncomparable agreements and licenses, no matter what came of these experts about. So find some other way to deal with this and go on with this witness. objection. I mean, so I'm going to sustain the

Find something else to deal with and terminate

this cross-examination. MR. SHERWOOD: MR. WILSON: THE COURT: Yes, Your Honor. Yes, Your Honor. And I say that because the Court is able

to measure just how, what you've covered, how far you've gone, and determine whether fairly you've had an opportunity to challenge him on the issue, and you certainly have. are start beating a dead horse, colloquially speaking. MR. SHERWOOD: THE COURT: Your Honor, may I say one thing? So we

About what? The comparability issue relates to

MR. SHERWOOD:

the fact that it was a settlement, and the Court didn't strike the testimony. transcripts over. That is not what happened. I read the

The Court said it would take it up later.

All that Dr. Becker said was -- he wasn't going to use the

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value because it was a settlement of litigation.

There was In fact,

no testimony that the technology wasn't comparable.

Dr. Frieder said it was, and that is the basis upon which Dr. Becker -THE COURT: Let me put it this way, Mr. Sherwood.

It is a possibility that the Court is dead wrong on this ruling. But the Court is not going back and going to read

the transcript and try to figure it out at this time. MR. SHERWOOD: THE COURT: on. I understand.

Just abide by my ruling and let's move

You find more fertile ground, let's move on and

terminate this. MR. SHERWOOD: MR. WILSON: I understand. Thank you, Your Honor.

(End of side-bar conference.) BY MR. SHERWOOD: Q. Can I have the Elmo, please. You looked at all of the

Georgia-Pacific factors, right, Dr. Ugone? A. Q. A. Q. Yes. And including factor 12? Yes. And, in fact, this is the text of factor 12 in your

report, isn't it? A. Q. I'm sorry. This is a page out of my Appendix A.

It is a text of factor 12 from your report, right?

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A.

Yes. MR. SHERWOOD: Your Honor, may this be published to

the jury? THE COURT: Yes, it may. Thank you, Your Honor.

MR. SHERWOOD: BY MR. SHERWOOD: Q.

And this factor relates to the portion of the profit or

customary price that's used for use of the patented invention, right? A. Yes, within the spirit of what you said, it's a way to --

one of the factors that will bring in some additional considerations, yes. Q. A. Q. A. I mean, I paraphrased it a little bit, right? Yes. But it was an accurate paraphrase? Yes. This is somehow, when there is like licenses

unrelated to the two parties, sometimes you bring them in under factor 12. Q. Yeah. That is how it is commonly used.

In fact, it doesn't require that a party have made

a licensing decision based upon a particular agreement, right? A. Correct. What it is saying if there is comparable

technologies and comparable reasons why you might want to look at another license to give you some -- that has some probative value, you bring it in under factor 12.

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Q.

And Dr. Becker did his analysis of royalty rate under

factor 12, didn't he? A. Q. I believe that is where he put it, yes. And you didn't do any calculation of the royalty rate of

a customary rate under factor 12, did you? A. I did not do a royalty rate because I did a royalty

payment, as we discussed. Q. Your report does not disclose any rates that would be

described by factor 12 as customary in the industry, right? A. Um, you're talking about customary in the industry. I

did extensively discuss the three licenses that Dr. Becker was relying upon, I did discuss those in my report. Q. A. And he used those licenses to calculate his rates, right? That was the basis for his royalty rate, and obviously I

had differences with him, as I described. Q. A. Q. A. And you didn't use any licenses to calculate a rate? Not a royalty. Under factor 12, excuse me? Not a royalty rate because my opinion, as I've testified,

is that it is a lump sum payment. Q. So just to connect a few of the dots here, you testified

that real world factors are very important, but your report didn't include any of the actual public financial data of either Lycos or Google, did it? MR. WILSON: Your Honor, asked and answered, also

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mischaracterizing. THE COURT: Overruled. Go on and ask it.

THE WITNESS:

I didn't have their profitability

numbers but I did have testimony from their representative about the financial difficulties that Lycos was under at the time, as well as what was in the public press about closing offices, and so forth, and laying off of 20 percent of the work force. BY MR. SHERWOOD: Q. Isn't it true that Lycos and Google were on fairly equal

footing economically? A. Q. A. I don't believe that to be the case, no. They both had substantial resources, right? I think they were going in different directions, so, yes,

they had resources but they were going in different directions. Q. In fact, Terra Lycos, I think we saw, had 1.6 billion

euros at the time, didn't it? MR. WILSON: THE COURT: That has been asked and answered. Asked and answered, sustained. Your Honor, I'll pass the witness.

MR. SHERWOOD: THE COURT: MR. WILSON: THE COURT: MR. WILSON:

Redirect. Yes, Your Honor. Within the bounds of the cross. Yes, Your Honor.

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REDIRECT EXAMINATION

Good afternoon, Dr. Ugone. Good afternoon. So Mr. Sherwood asked you quite a few questions about Do you remember those lines

lump sum versus running royalty. of questions? A. Q. Yes, I do.

And he showed you some testimony from Lycos's

representative, Mr. Blais, regarding any preference that Lycos might have had. A. Q. Yes, I do. And he read one particular question and answer into the Do you recall that? Do you remember that?

record. A. Q.

Yes, I do. And he didn't want to show you the next question and Do you recall that? MR. SHERWOOD: THE COURT: Objection, Your Honor. The Court provided

answer.

Objection sustained.

that he did read it. MR. WILSON: testimony. Let me show you the complete deposition

If I could get the Elmo set up here.

BY MR. WILSON: Q. I'm just going to put up a portion of the Blais

testimony, and the question that Mr. Sherwood asked, was:

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"At the time did Lycos have a preference for one of the two models?" And then there's an objection, and the answer is:

"There were some preferences for a running royalty to create a revenue stream, but it wasn't strong." And then the next question and answer: "How about in

2006, do you know if Lycos had any preferences in licensing out its patents for a lump sum versus a running royalty?" There's another objection, and then the answer: say there was really any preferences." A. Q. Yes, I do. And did you consider that deposition testimony in "I wouldn't

Do you see that?

connection with preparing your opinions? A. Yes. In fact, I considered all of this, and this is what

I was remembering during your questioning. Q. And how did that factor into the conclusions you reached

regarding Lycos's preference for a lump sum? A. Well, just like the representative from Lycos said,

quote, I wouldn't say there was really any preferences, which I believe is what I testified to. Q. And you were also asked about Google's preferences for a Do you recall that line of questions?

lump sum. A. Q. I do.

And you heard Dr. Becker testify at trial in this case,

right? A. Yes.

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Q. sum. A. Q.

And he testified about Google's preference for a lump Do you recall that? Yes. Let me put up that testimony. So this is Dr. Becker's Do you see that

trial testimony at Page 885, Lines 11 to 13. on the screen? A. Q. I do. And I asked Dr. Becker:

"And you know that Google has a

preference for lump sum agreements, correct? "ANSWER: Yes."

Do you recall that testimony? A. Q. I do recall that testimony, yes. And how did that compare with your conclusion regarding

Google's preference for a lump sum? A. I agreed with him on that assessment that Google has a

preference for lump sum payment structure and licensing agreements. Q. You were also asked about the Georgia-Pacific factors and Do you recall that?

use of the patented technology. A. Q. Yes.

Does the lump sum amount that you arrived at in

connection with the hypothetical negotiation, does that take into account Google's use of the patented technology? A. Well, it takes into account that they, in a hypothetical

negotiation, that they need a license in order to use the

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technology. is about. Q. Okay.

That is what the whole hypothetical negotiation

And you were also asked many questions about Do you recall that?

apportionment of a royalty base. A. Q. Yes.

And is there a reason you didn't do an apportionment with

respect to your analysis? A. Well, there is two reasons: One, the first primary

reason is, is that the parties would have agreed to a lump sum payment; and then the second reason is all of the difficulties with the calculation that I pointed out in Dr. Becker's calculations. Q. And you were also asked about the basis for your

conclusion that a reasonable royalty in this case would have been between 3 million to $5 million. A. Q. Yes. And there was a suggestion that somehow you used Do you recall that?

something other than the Georgia-Pacific factors for your testimony today. A. Q. Do you recall that?

I do recall that. Did you use the Georgia-Pacific factors to arrive at the

3 million to $5 million range for your opinion? A. Q. Yes, I absolutely used the Georgia-Pacific factors. And Mr. Sherwood showed you part of your deposition Do you recall that?

testimony.

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A. Q.

I do. And he didn't want to show you any other part? MR. SHERWOOD: THE COURT: Your Honor, I object to that. Please leave his

Objection sustained.

comments out, Mr. Wilson, and just direct the question. MR. WILSON: BY MR. WILSON: Q. Let's put up another portion of your deposition Could we please have Page 137. And do you see at And Ms. Albert Do you Yes, Your Honor.

testimony.

Lines 9 to 13, if we could blow that up.

asked you, "What does 3 to $5 million come out of?" see that? A. Q. Yes. And: "Answer. That would be the outcome of the

hypothetical negotiation.

That would be the value to Google Do you see that?

for the use of the technology." A. Q. Yes.

And that was your testimony at your deposition; is that

correct? A. Yes. And the hypothetical negotiation is Georgia-Pacific

factor 15 which takes into account all of the Georgia-Pacific factors. Q. Okay. You were also asked about the cost and effort to Do you recall

Google to implement the patented technology. that line of questioning?

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A. Q.

You may have to remind me on that one. Sure. So you recall Mr. Sherwood asking you about

whether it would be difficult or not for Google to implement the patented technology or whether Lycos could help. recall that question? A. Q. Yes. And you were here for Dr. Frieder's testimony in this Do you

case? A. Q. Yes, I was. And do you recall him testifying about the implementation

of the patented technology? A. Q. Yes, I do remember that very vividly, actually. And if you put on the Elmo again, I would like to put up This is Dr. Frieder's testimony at

Dr. Frieder's testimony. trial, Page 455 to 456. THE COURT: MR. WILSON:

What is the question? The question is, do you recall

Dr. Frieder testifying about the implementation of the technology, and I want to ask the witness whether he considered that and how that comports with his opinion. MR. SHERWOOD: THE COURT: Your Honor. First let him answer the If he doesn't recall it, then Do you

Wait.

question, do you recall that?

we go back and try to refresh the recollection. recall it?

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THE WITNESS: THE COURT:

Yes, I do. Now what is the question?

All right.

MR. SHERWOOD: MR. WILSON:

Beyond the scope of cross. Your Honor, there was extensive cross

on implementation costs. THE COURT: MR. WILSON: BY MR. WILSON: Q. And at Page 455, Line 21, Dr. Frieder was asked on "Dr. Frieder, this is a pretty simple Dr. Frieder's answer It Overruled. All right.

cross-examination: example. is:

Is this how it would work?"

"That is a simple example so I could illustrate it. It takes

is very, very difficult to implement this. significant effort.

But I just -- my point was just to You should not take It is very

illustrate, to explain how it works.

away the point that it is an easy thing to do. difficult." Do you see that? Your Honor --

MR. SHERWOOD: THE COURT: BY MR. WILSON: Q. A.

What was the question?

The question is, do you recall that testimony? I do recall that testimony. THE COURT: MR. WILSON: THE COURT: Now, look -How does that -We are not going to use that technique

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anymore now for asking questions.

You ask him a question.

We do not read the whole transcript to him, and then ask him do you remember that. That is not the proper way to go.

Now, ask the last question, and let's move on to something else. BY MR. WILSON: Q. We will move on. How does that comport with your opinion

in this case? A. That is my understanding, that it takes a lot of effort

to do all the models and the algorithms and the training that Google does. Q. Okay. In preparing your expert report -- well, first let You were asked a lot of questions about Do you recall

me ask you this.

commercial embodiments of the patents-in-suit. that? A. Q. Yes.

And you reviewed Mr. Kosak's deposition in connection

with preparing your expert report, didn't you? A. Q. Yes. And you recall Mr. Kosak testifying about whether

commercial product had ever been made using the technology? MR. SHERWOOD: THE COURT: BY MR. WILSON: Q. Did you rely on Dr. Kosak -- Mr. Kosak's deposition Your Honor, object to the leading.

Objection sustained.

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testimony in forming your opinion regarding commercial embodiment? A. Q. A. I did. It's in my report, yes.

And what did you rely on? Well, his deposition testimony -- if you're asking me

what I remember about his deposition testimony, it was that there was not a commercialized product that practiced the claim teachings of the patents-in-suit. Q. And you were here for Mr. Kosak's testimony at trial,

correct? A. Q. Yes. And did you hear him testify on cross -MR. SHERWOOD: MR. WILSON: THE COURT: Object to the leading again. Just asking -As long as your answer doesn't suggest He testified to what he

to him what he did testify to. recalls. MR. WILSON:

The question was, do you recall

Mr. Kosak testifying about commercial implementation of the patent-in-suit? Do you recall that? Yes.

THE WITNESS: BY MR. WILSON: Q. A. Okay.

And what do you recall regarding that testimony?

I recall Mr. Kosak testifying about some attempts to

implement the product, but at least my personal recollection

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was that there was no commercialization of such a product. Q. And is that -- how does that comport with your opinion

regarding commercial embodiment? A. Q. That is what I was trying to explain, yes. You were also asked about your opinion that Lycos faced Do you recall that

serious business difficulties in 2004. line of testimony? A. Q. Yes.

And you were directed to Paragraph 74 of your report.

Do

you recall that? A. Q. Yes. So why don't you get that out. MR. SHERWOOD: Your Honor, I'm going to object to

any testimony that seeks to elicit from the witness what's in his report. MR. WILSON: THE COURT: technique here. Well, Your Honor -Well, you know, we are all talking about

Let's find out what the question is first.

Let's find out what the question is. MR. WILSON: BY MR. WILSON: Q. You were asked a variety of questions about what you All right.

relied on in connection with reaching your opinion, correct? A. Q. Yes. Besides the -- well, what did you rely on in connection

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with forming your opinion regarding Lycos's commercial success or lack thereof in 2004? A. Well, there was the deposition testimony of the

representative of Lycos, and there was also research we had done from financial news web sites that contained information that I also incorporated into my report, and those are referenced in that section of my report. Q. Okay. And so for the deposition testimony, what did you

rely on in connection with your conclusion that Lycos was having business problems in 2004? MR. SHERWOOD: Your Honor, I object to this. This

is testimony that is related to no personal knowledge. THE COURT: this. Well, the Court, I think, has been over

To the extent it is on something the Court has

previously ruled on, we are not going to get to that point. I quite frankly, Counsel, the Court doesn't know what his answer is going to be. statement. That is just a precautionary

I made it before. All right. Let me ask another

MR. WILSON: question, Your Honor. THE COURT: MR. WILSON: BY MR. WILSON: Q.

That would be wise. Thank you.

Did you, besides deposition testimony, did you rely on

anything else in connection with your conclusion that Lycos

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was having business difficulties? A. Yes. There was some, I called them independently There were some documents we obtained in

obtained documents. our research, yes. Q. A. Q. A.

And did you also rely on any opinions of Dr. Becker? With respect to? In Paragraph 74 of your expert report? The ones I remember -- well, there were some things that

Dr. Becker had in his report, and I think he did talk a little bit about sort of the prominence of Lycos in the overall scheme of the companies that Lycos was a part of. Q. Okay. And the companies that Lycos was a part of in

2004, that was the Terra companies? A. Yes. MR. SHERWOOD: again. THE COURT: BY MR. WILSON: Q. And you mentioned publicly available sources in forming What Sustained. Your Honor, I object to the leading

your opinion regarding Lycos's business difficulties. did you rely on? A.

Well, there was some financial news, web sites that had

information. Q. I'd like to put up DX-254. And if you can take a look at 891379. Do you

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recognize that, Dr. Becker? A. Q. A. Q. A. yes. MR. SHERWOOD: Your Honor, I don't know if this has This is hearsay, object to any Keith Ugone, but -I apologize. Yes, I do. Okay. And what is it? Do you recognize this?

This appears to be the article that I was relying upon,

been published to the jury. showing it to the jury. THE COURT:

It is not being published to the jury.

Has this document been admitted into evidence? MR. WILSON: THE COURT: evidence. MR. WILSON: on -THE COURT: Listen, he can testify to what he relied But, Your Honor, he was cross-examined It has not been admitted. It is not going to be admitted into

on, but I've said consistently in here, your impeachment document is not going to be admitted into evidence. witness has indicated he relied on this source. it before. This

He has said

And the fact that you are going over it is He said it before the jury, and he

nothing but repetition. said it again.

Now let's not keep repeating what he said.

We count

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on the jury to remember it. MR. WILSON: Honor. BY MR. WILSON: Q.

Okay.

So let's move on. Thank you, Your

We will count on it.

So, Dr. Ugone, you were also asked about Google's success Do you recall those lines of questions?

in 2004. A. Q. Yes.

And you were asked specifically about a Google S-1 Do you recall that?

statement. A. Q. Yes.

And we went through some of the pages of that.

Did you

rely on any Google SEC filings in connection with reaching your opinions regarding Google's success? A. Well, they were part of the documents that I reviewed,

including the S-1 statements. Q. And did you review -- actually go to some of the So if you go to Page 20 of

paragraphs that you referred to. your expert report. A. Q. A. I'm on Page 20.

And you see Paragraphs 33 of 35? Yes. A lot of that information came from the Google,

what is called their 10(k), which is an annual. MR. SHERWOOD: I object to this, too. It is really

just asking the witness to read from this report. THE COURT: Well, I think you can ask the witness a

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question.

To the extent the witness does not recall, he

certainly can refresh his recollection by going to the report. now. But don't use the report the way you're doing it If he doesn't recall

You can ask him the question.

whether he relied on that information in his report, you clearly can use his report to refresh his recollection. MR. WILSON: BY MR. WILSON: Q. So just for the purposes of the jury's information, what Okay.

is the form 10(k)? A. It's a filing with the Securities and Exchange Commission

that public companies that are traded on stock exchanges have to file annually, and it gives, in a sense, the annual performance of the company so investors that are thinking about investing in the company know something about the financial performance of the company. Q. And did you rely on Google's form 10(k) in forming your

opinions regarding Google's success? A. Yes, I did get a lot of information from their form

10(k). Q. Okay. Let's move to the Carl Meyer agreement. You were

asked several questions. back.

You can put your expert report

You were asked several questions about your reliance Do you recall that?

on Carl Meyer. A. I do.

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Q.

Okay.

And you had testified that you used the Carl Meyer

agreement in one other case involving Google? A. Q. Yes. Okay. And did you consider whether the Carl Meyer

agreement was comparable to the hypothetical negotiation in this case? A. Q. A. Yes. What did you do? Well, with respect to the technical aspects of the Carl

Meyer patents, I was relying on the testimony of Dr. Ungar. Q. And did you rely on the economic framework of the Carl

Meyer agreement in connection with your analysis of the hypothetical negotiation here? MR. SHERWOOD: cumulative. Your Honor, I believe this is

He's covered that. I will sustain the objection to the

THE COURT:

extent that the Court believes it is leading. MR. WILSON: THE COURT: leading. MR. WILSON: BY MR. WILSON: Q. How, if at all, did you rely on the Carl Meyer agreement Okay, Your Honor. Sorry? The Court believes the question is

with respect to your analysis of the hypothetical negotiation and the result of that negotiation?

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A.

Okay.

So it's really a two-part analysis.

Once Dr.

Ungar gave me input there was a comparable technology to the patents-in-suit, then I looked at the economics of that purchase agreement and saw that Google had purchased those patents, the Carl Meyer patents for a lump sum amount of $3.55 million. Q. Okay. And you also -- there was some questions about

whether or not the Carl Meyer agreement was an arm's length transaction. A. Q. Yes. And do you recall Dr. Becker testified about that issue Do you recall that?

at his deposition? A. Q. Yes. And what do you recall regarding Dr. Becker's testimony

regarding whether the Carl Meyer agreement was arm's length? A. In his deposition he agreed that it was an arm's length

negotiation. Q. Okay. And did that factor into your opinion regarding

the use of the Carl Meyer agreement in the context of the hypothetical negotiation? A. Well, it meant that two parties had -- it is called an

arm's length, so it meant that two parties had negotiated and that was the outcome of the negotiations. So that was the

value both parties put on that license agreement. Q. You were also asked about the charts from the draft

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revenue force document that Dr. Becker relied on. recall those lines of questions? A. Q. I do.

Do you

And you were asked about the deposition of Nick Fox, who Do you recall those

was on the revenue force team at Google. questions? A. Q. Yes, I do.

And you reviewed Nick Fox's deposition in connection with

forming your opinions? A. Q. Yes. And that was plaintiff's deposition of Google employee,

correct? A. Yes. MR. SHERWOOD: THE COURT: BY MR. WILSON: Q. Do you recall a single question that plaintiff's counsel Object to the leading, Your Honor.

Sustained.

asked Mr. Fox about the draft revenue force document that Dr. Becker relied on? MR. SHERWOOD: MR. WILSON: THE COURT: MR. WILSON: Object to the leading, Your Honor. I'm asking -What is the question? The question is does he recall a single

question that plaintiff's counsel asked Mr. Fox about the draft revenue force agreement?

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THE COURT:

Can you answer that? Yes, sir, I can answer it this way,

THE WITNESS:

that I don't recall any questions at all dealing with the chart that Dr. Becker was relying upon. BY MR. WILSON: Q. Okay. And did that surprise you in your review of

Mr. Fox's deposition? THE COURT: Don't answer that. That is

argumentative, calls for speculation. MR. WILSON: THE COURT: MR. WILSON: BY MR. WILSON: Q. You were also asked a line of questions about Google's Do you recall that? I'll move on. I'll give you about four more minutes. Your Honor, I'm just about done.

services agreements. A. Q. Yes.

And I/P Engine doesn't have a services agreement with

Google, right? A. Q. That's correct. It doesn't operate a search engine, correct? MR. SHERWOOD: THE COURT: BY MR. WILSON: Q. Is there a difference between the services agreement and Object to the leading, Your Honor.

Sustained.

the patent license?

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A. Q. A.

Yes. What is that? Well, Google's providing services to the companies that

enter into these arrangements with them, and it has to do with the advertising that are on the various web sites and which ones there is access to, which is different from a patent license agreement where someone is getting a license to use the technology that is in a patent. Q. A. And what is the result of the hypothetical negotiation? The hypothetical negotiation deals with a patent license

agreement. MR. WILSON: THE COURT: excused, gentlemen? MR. WILSON: MR. SHERWOOD: THE COURT: permanently excused. (Witness excused.) THE COURT: MR. NELSON: Next. Your Honor, I have the proffer that I believe so, Your Honor. Yes, Your Honor. You may be No further questions, Your Honor. Step down. May he be permanently

Dr. Ugone, thank you.

we've discussed in the past for you. THE COURT: MR. NELSON: THE COURT: All right. We will file this, as well, Your Honor. You can just simply file it, take into

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the Court's consideration, you can file it. read it. MR. NELSON: THE COURT: MR. NELSON: Honor. Thank you, Your Honor. All right.

The Court will

At that point, though, we rest, Your

That is all the evidence we have right now. THE COURT: Okay. Thank you.

Ladies and gentlemen, the defendants have rested in this case. I need just a few minutes with counsel before I All rise.

determine exactly when you will be able to depart. (Jury out at 3:13 p.m.) THE COURT: done it at side bar. Second thought.

Maybe I should have The Court wanted

You may have a seat.

to determine, Mr. Brothers, Mr. Sherwood, whether there was anything else you wanted to do before this jury before we went out of here? MR. BROTHERS: Not with the jury, Your Honor. I

think that the jury can be dismissed for the day.

We have

our Rule 50 motion, which I think we can take up, and then Dr. Carbonell needs to leave now to make his 3:30 conference. THE COURT: That is fine. Thank you, Your Honor. Then we will just bring them back

MR. BROTHERS: THE COURT: in.

Okay.

I also understand there are some issues regarding some We will take

exhibits, which is next, with Dr. Carbonell.

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that up, too. MR. BROTHERS: Yes, Your Honor.

(Jury in at 3:14 p.m.) THE COURT: wait. Let the record reflect all jurors have returned to the courtroom. Does counsel agree? Yes, Your Honor. Agreed, Your Honor. All right. Ladies and gentlemen, this You may be seated. We are just going to

MR. SHERWOOD: MR. NELSON: THE COURT:

concludes the live testimony that you will receive today. The Court and counsel have a number of things we need to review that do not require that you be here. So what we are I want

going to do, we are going to excuse you for the day. you to come back tomorrow morning at 10:00. with the live witness testimony.

We will start

Remember the precaution that the Court has given you regarding discussing the case. the morning at 10:00 a.m. 9:45 so we are ready to go. Be safe and we'll see you in

You might want to get here about All rise.

(Jury out at 3:16 p.m.) THE COURT: You may be seated. I'm going to ask

that counsel file your proffer on laches, ask the clerk to file it in the record. MR. NELSON: Okay, Your Honor. I appreciate it.

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THE COURT:

Okay.

Now, Mr. Brothers, what matters

are there that you wish to take up? MR. BROTHERS: First of all, some good news for the

I believe we have resolved all the objections that

defendants had with regard to Dr. Carbonell's slides, so we won't have to take that up. A ray of light. THE COURT: I'm shocked. I thought that might please the

MR. BROTHERS:

You know, after a couple weeks maybe we can begin to I'm not holding my breath, however.

all get along together.

At this point plaintiffs wish to make a Rule 50 motion with regard to the case that defendants have submitted, specifically with regard to defendant's invalidity and laches case. As the Court knows, that under Rule 50, JMOL may be granted when a party has been fully heard on the issue, there is no legally sufficient evidentiary basis for the jury to find in that issue. With regard to the invalidity defense,

we believe that defendants cannot satisfy this clear and convincing burden regarding proof of either anticipation or obviousness, or another defense that was pled, of which no evidence has been submitted, and that relates to the lack of written description. With regard to anticipation, Dr. Ungar asserted two

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prior art references; the Bowman and the Culliss references. To show a claim is invalid for anticipation, that single prior art reference must expressly or inherently disclose each claim limitation. With regard to Bowman, defendants have not proved by clear and convincing evidence that Bowman disclosed the content, combining and filtering of both the '420 and the '664 patents. In fact, Dr. Ungar admitted that Bowman ranks

and that filtering itself does not appear in the Bowman patent and that he said ranking and filtering are different. Likewise, with regard to Culliss, there is no evidence, clear and convincing evidence that Culliss discloses the content, combining the filtering limitations in the asserted claims. Culliss considered, was considered or

rejected by the patent office, and Dr. Ungar admitted that under his view, Culliss does not invalidate the asserted claims. With regard to obviousness, Ungar, Dr. Ungar failed to set forth sufficient clear and convincing evidence to show, consistent with -- as regarded by Federal Circuit precedent, they must prove by clear and convincing evidence that a person of ordinary skill of art in the field of the invention, who knew the prior art at the time, would have come up with the invention disclosed by the asserted claims. And Dr. Ungar never connected up the pieces of prior art that

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were identified. patents.

He put up the five, the Lascara, the Rose

He never explained how those used in combination

with each other rendered the asserted patents obvious. Instead, he went and just referenced it and said, oh, it's obvious. Obviousness requires a combination. So there is no

evidence, let alone any clear and convincing evidence, that those combination of either Fab, Rose, Webhound, even in conjunction with Bowman and Culliss, render the claims' obviousness. He also admitted that he had not tested the asserted obvious combinations or any asserted obvious combinations to get the same results of the patents-in-suit. And the Federal

Circuit requires that before something can be found obvious, there must be testing to show that the alleged obvious combinations result in the same teachings and the same effect of the asserted claims. And in the absence of such evidence,

we believe JMOL is appropriate. With regard to defendant's pled defense of lack of written description, defendants have provided absolutely no evidence to support that affirmative defense. and they have abandoned it here at trial. I also believe that JMOL is appropriate because Dr. Ungar failed to follow the Court's claim construction ruling in six aspects, and because he failed to follow the Court's claim construction ruling, his testimony is They pled it

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inappropriate.

First, with regard to scanning a network, his He

testimony was contrary to the Court's claim construction.

interpreted scanning a network to essentially mean spidering, which this Court said was not that interpretation. And although he was careful not to use the term "spidering," he admitted during his testimony he had no other opinions for scanning a network that did not include what spidering was because that is all he disclosed in his report. He said in his testimony, all it could be is scanning of information on the Internet, which is the same thing as spidering. Dr. Ungar testified, his construction of

collaborative feedback data, it was inconsistent with this Court's claim construction. He improperly read in the mind

pools limitation of other nonasserted claims to try and interpret and limit the meaning of collaborative feedback data. Mind pools were a different embodiment in the claims And Dr. Ungar's repeated

not asserted in this case.

references to mind pools in trying to interpret collaborative feedback data was inappropriate. Likewise, he attempted to read in claims with respect to wires, which are, again, claims not asserted in this case. And limitations and embodiments relating to wires

to limit and interpret collaborative feedback data is contrary to the Court's claim construction. With respect to the claims of the '664 patent,

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Dr. Ungar improperly imported the collaborative feedback data limitation of the '420 patent into the '664. In fact,

Dr. Ungar admitted that under his interpretation of the '664 patent, as he was attempting to import that collaborative feedback data limitation, it would exclude the preferred embodiment of the '664 patent, and that is contrary to Federal Circuit law. Dr. Ungar's evidence that he offered, his testimony were an improper attempt to reargue claim construction, and based upon that his testimony with respect to invalidity, quite frankly, as well as noninfringement, has suffused his entire testimony, and we believe that judgment as a matter of law against defendants is appropriate on that. Finally, the last claim construction was Dr. Ungar's attempt to improperly interpret the preamble as a limitation. This Court repeatedly ruled the preamble is not a limitation. The jury was permitted to hear some evidence which the Court later struck. Dr. Ungar's testimony that the preamble is a

limitation, substantive limitation is inconsistent with this Court's claim construction and contrary to Federal Circuit case law. We also move, with regard to the laches, affirmative defense. To prevail on laches defendants must show that

plaintiff delayed in a reasonable and excusable time in filing suit, and that the delay resulted in material

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prejudice to the defendant. And as this Court knows, the plaintiff's delay in filing suit is measured from the time that the patentee knew or reasonably should have known of the defendant's alleged infringement. The reasonableness of delay must be judged based upon the patentee's knowledge at the time of the delay, and there is no evidence that the defendants offered that I/P Engine or Lycos, for that matter, knew or should have known that Google's system infringed more -- they had that knowledge more than six years prior to the date of filing suit. The one document the defendants introduced into evidence, Plaintiff's Exhibit 176, which was referenced by Mr. Alferness, that was a document the plaintiffs had -- I'm sorry, the defendants had previously identified as a laches-related document. It is from July 2005. He said that it

Mr. Alferness disavowed that document.

contained inaccurate description of Google's AdWords system and that one could not rely upon that document to understand how the system worked. Thus, there is no evidence whatsoever That fact in and

to support the laches affirmative defense. of itself is fatal.

But defendants must also show, even if there was evidence that Lycos knew or should have known prior to

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September 15th, 2005, that Google was infringing, defendants must also show that the delay resulted in economic or evidentiary prejudice. point. There is no showing that Google or any of the other defendants had any monetary losses that could have been prevented by an earlier suit, because that loss must be caused by a change in the economic position with the alleged infringer during the period of delay. Not only was there no There has been no showing on either

period of delay, the evidence is that Google would have been done doing what it was doing all along. So there is

absolutely no evidence of economic prejudice on the record. Likewise, there is no evidence of evidentiary prejudice such as the death of a key witness or other loss of evidence. Finally, again moves for judgment as a matter of law on the damages testimony that it has just heard from Dr. Ugone. Dr. Ugone testified that his -- at deposition

that his 3 to 5 million, that number was based on his yardstick or his comparable result, a method that this Court has excluded. With regard to the specific data points, there is the same in October or -- yeah, October 2004 of Lycos to the Korean Company, Daum. Dr. Ungar acknowledged that was not in It cannot be found

his Georgia-Pacific chart, and it is not.

in his Appendix A identifying that as a Georgia-Pacific

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factor.

So that testimony can and should be disregarded.

It

was used solely as the data point for a comparable or a yardstick. With regard to the Meyer agreement, there was no allegation of infringement to Google as a result and no evidence of use by Google, and as a result using that as comparable agreement is improper under Georgia-Pacific. if the technology may be comparable, the facts were completely different. With regard to the $3.2 million purchase price of the patents in 2011, that is legally irrelevant as a matter of law. It is undisputed that Lycos made no inquiry into Even

Google's infringement at the time of the sale, and the sale price does not equal under the statute a measure of damages because under Section 284 damages are measured by the use, i.e., of infringers of the patents. For example, if the

patents had been inherited or purchased at bankruptcy for a hundred dollars, that is absolutely not probative of the value of those patents. The proper measure of damages under the law are the defendant's infringing uses. And for those reasons we

believe that judgment as a matter of law under Rule 50 is appropriate. Thank you. Thank you. Thank you, Your Honor. So let me take

THE COURT: MR. NELSON:

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them in the order it was addressed.

I believe initially

there was, with respect to the anticipation references, there was a motion regarding Bowman and Culliss saying there could be no anticipation as a matter of law. With respect to Bowman, I believe there were two arguments. He said that there was no testimony that Bowman

does filtering because the word "filtering" never appeared. Last I checked, that's not the law. The words don't have to

appear in the reference for there to be -- for it to have the disclosure. In fact, Dr. Ungar testified at length why filtering was, in fact, disclosed in Bowman. Among many other things,

there is a thresholding described where there is a ranking value that is determined for the particular item, and there is a threshold set. not displayed. And if it's below that threshold, it is It

If it is above that threshold, it is.

might sound familiar because that's exactly what they are using infringement in the case with the LTD score. Ungar explained that at length. So Dr.

He explained a number of So you only take the

other things where a set of n is shown.

top values, which would be filtering as well. In terms of the content, again, Your Honor, he's testified at -- he testified at length why it does, in fact, disclose content filtering. Some of the examples are

descriptions in the Bowman reference where there is matching

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of the query terms to terms that appear in the item and the score is adjusted based upon that. Therefore -- and what he

testified is that function is a content-based function because it takes a comparison of the query to words content of the item and adjusts the score accordingly. So for those reasons, the -- there is no merit to a judgment as a matter of law on the Bowman reference. As to the Culliss reference, the only thing that I heard was the idea that it didn't disclose content filtering. In fact, it does, and Dr. Ungar explained at length why it does disclose content-based filtering. In fact, the tables

that he referenced in Bowman that are updated with apparently what plaintiff agrees is feedback data are initialized with content data based upon, among other things, that he testified, the frequency of the terms in the articles that are being indexed. Therefore, that is a disclosure of the

content-based filtering with a combination of collaborative filtering. Now, there was some testimony that he didn't apply the Court's claim construction. occurred. That is not actually what

He testified at length in both in direct and under

cross-examination that he applied exactly the Court's claim construction to the prior art when he was doing his anticipation analysis. There was some testimony as to

whether he was applying the construction as Dr. Frieder

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applied them for purposes of infringement analysis, which, of course, is entirely appropriate. He applied the constructions, he applied the appropriate clear and convincing evidence standard -- I believe Your Honor heard that testimony -- and said that I am looking at the prior art and applying the same analysis that Dr. Frieder did for purposes of his infringement analysis. So to suggest that he did not apply the claim constructions and did not agree that these anticipated, under the plaintiff's application of those to the accused products, is simply incorrect. record. Now, as to obviousness, there were several statements with respect to obviousness, that there was no combination that was referenced. correct. In fact, that is not That testimony is very clear in the

What Dr. Ungar did first and foremost was to

address the Graham factors, which is, of course, the most important factors of the obviousness analysis and show how the claims, the asserted claims in this case were obvious in light of those Graham factors. He addressed KSR, and he talked about the specific combinations that were -- he showed the disclosure in the prior art, and, for example, there was some cross-examination that with the Webhound reference, for example, that that did not show filtering with respect to the query. And Dr. Ungar

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stated very clearly that when he combined that with the Bowman reference, which plaintiff does not dispute, that that shows filtering with respect to the query. You have

obviousness for that, and he did that with respect to a number of other combinations. If you want me to, I can go

through all those at length, Your Honor, but those would be some examples. Now, as to -- there was some statement as to the law that testing of the combination is required. law. That's not the

I'm not sure what case they're referring to, but the

law is, as I just said, is the Graham v. John Deere case, the KSR case, and he's addressed both of those standards. So I'm

not actually sure what I/PE's counsel is talking about with respect to that additional requirement. Now, as to written description, we are not pursuing a written description offense. So unlike the IP's argument

with respect to doctrine of equivalents, we can take that out of the case right now, Your Honor. With respect to then -- I'm not sure exactly what we are talking about in the motion with respect to the claim construction. I don't know if that was intended to be an

additional support for the anticipation or obviousness or what it was. one by one. So with respect to scanning and network, IP's But let me just address the claim constructions

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counsel said that Dr. Ungar did not apply the Court's claim construction. That is incorrect. He put the Court's claim

construction up.

He testified under the Court's claim

construction, and for about 45 minutes on cross-examination he testified about the scanning/network limitation under the Court's claim construction. In fact, it was on cross-examination where I/PE's counsel put up something that was not the Court's claim construction in an attempt to cross-examine him on that. In

terms of this notion that spidering is what he said, scanning a network limitation was, the word "spidering" never came out of his mouth. So I'm not sure where that comes from. He

applied the Court's claim construction, and there is no basis for that. To the collaborative feedback element, again, he put up the Court's claim construction. claim construction. He applied the Court's

As to the statements that he imported

limitations from the embodiments, as Your Honor knows, there were several side bars and several discussions. There was

never a statement made by Dr. Ungar that the construction was limited by the embodiments, rather, they're illustrative examples of the patents. He was very clear on that. So

there was no limiting instruction that said, yes, these are limited to mind pools. So he applied the Court's claim construction. As to

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wires, I'm not even sure what they are talking about, Your Honor, so it becomes a little bit difficult to address. would challenge them to find anywhere in Dr. Ungar's testimony where he referenced wires with respect to the collaborative feedback element and said that they were limited to wires. They were not. The only time wires came I

up was a discussion in the invalidity section responding to plaintiff's suggestion that the patent office had already considered various things, and there was a discussion of the final office action and the notice for allowance which showed that the patent office focused on the element of wires. there was no testimony that the Court's collaborative feedback claim construction was limited to wires, and, in fact, he applied the Court's claim construction. As to the '664, the testimony that I/P's counsel referenced doesn't apply to the collaborative feedback element, it wasn't even in reference to the collaborative feedback element. There was some testimony that the But

noninfringement argument that was being made and the way the claim was applied may not be shown in embodiments in the patent. And the testimony was that neither experts's

application was. So, again, he applied the Court's claim construction, and there is no evidence that he didn't. In

terms of the preamble not being a limitation, as you know,

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Your Honor, you kept -- policed that very carefully. was no noninfringement argument made to that regard.

There In

fact, the only testimony and the only box checking has been on plaintiff's side with respect to that. So this is not --

certainly not a factor in the invalidity case, which is what I believe the motion was directed to. With that, Your Honor, I believe that deals with the invalidity stuff. With your permission, I would like to have

one of my colleagues, Mr. Sohn, address the laches motion, if Your Honor is okay with that? THE COURT: That is fine. I will say this before

you start your arguing.

You can go on and argue it but the

Court is not going to rule certainly on -- the Court is not going to rule on any of these motions this afternoon. The

Court wants an opportunity to address these motions, plus the Court wants an opportunity to read your submission on laches. So you'll have to get my decision on all of these things tomorrow morning. The Court needs time to digest some of these documents. So I'll hear your argument on laches, though. Okay. Thank you, Your Honor. As I

MR. SOHN:

understand it, plaintiff has made two arguments for why they deserve judgment as a matter of law on laches. First, they

argued that there is no evidence this suit was delayed for more than six years after they knew or should have known of

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the infringement.

I understand that they are raising that It was

argument to say there is no presumption of laches. simply delayed -- there is a presumption of laches.

Secondly, they argue there is no affirmative evidence of prejudice that defendants have put into the record. fraud. We respectfully submit that both these arguments are Let me speak to the presumption first. So the

presumption of laches arises if there's delays more than six years after the actual or constructive notice, and the Federal Circuit is very clear that published inscriptions of the allegedly infringing technology or technology similar to the allegedly infringing technology are sufficient for constructive notice. Now, plaintiff referenced there has been a July 2005 blog post by Google put into evidence, Plaintiff's Exhibit Number 176, and this describes quality score in exactly the same terms that it was described in plaintiff's own complaint. I'll just very briefly quote from that document.

It says, quote, the quality score is simply a new name for the predicted CTR, which is determined based on the CTR of your keyword, the relevance of your ad text, the historical keyword performance and other relevancy factors." So what

Google is saying in this blog post is quality score is based on ad text to relevance and CTR, and, Your Honor, that is exactly how they described quality score when this complaint

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was ultimately filed in September 2011, more than six years after that blog post is published, and I'll just very briefly quote from Paragraph 43 of their complaint. It says,

"Google's search advertising systems filter advertisers by using a quality score, which is a combination of an advertisement content relevant to a search query, e.g., the relevance of the keyword and the matched advertisement to the search query and click-through rate from prior users relative to that advertisement, e.g., the historical click-through rate of the keyword and the matched advertisement." So this 2005 disclosure prestages the same infringement allegations plaintiff made in his complaint. Therefore, the complaint could have been filed as early as 2005. Now, plaintiff's counsel alleged that Mr. Alferness disavowed Plaintiff's Exhibit 176, his blog post. Honor, certainly Google does not believe that the descriptions in its blog post are a technically accurate depiction of how the system works. The point is that being Well, Your

near the allegations of other systems that plaintiff made in his complaint. So plaintiff was on notice of its infringement allegations as early as July 2005 because the quality score was described in July 2005, the same way plaintiff described it more than six years later.

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So for that reason, Your Honor, we submit that the delay was more than six years, the laches presumption does apply. So, of course, once the presumption applies, it is

plaintiff that bears the burden of rebutting either the unreasonable delay upon laches or the prejudice part of laches. Now, plaintiff didn't say anything in their presentation about the unreasonable delay prong, and we respectfully submit that there is no evidence of a valid excuse that's been raised to excuse the six plus year delay. As the prejudice prong, plaintiff said that defendants haven't affirmatively introduced their own evidence of prejudice. Well, Your Honor, that has it backwards. Once the

presumption applies, it's plaintiff's burden to come forward with evidence that defendants have not suffered prejudice, and they haven't done so. defendant lacked prejudice. There has been no evidence that That being the case, as we

referred to earlier, defendants are submitting a proffer, proffer of evidence showing that the memories have faded, documents have been lost, and therefore we do believe that defendants have affirmatively shown prejudice. However, on the down side, it is not the defendants' It is plaintiff's burden to rebut the prejudice, and

they have absolutely failed to do so.

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So for all those reasons, Your Honor, we respectfully submit that laches certainly does apply. THE COURT: Let me ask you a hypothetical question.

Let's assume hypothetically if the Court believes that the presumption had not arisen of laches, such that the plaintiff would be required to rebut it, what evidence of any would you cite? You said you have -- you made a reference to loss -What evidence would you cite

memory loss or something else.

if you were in that position showing prejudice to the defendant by virtue of the delay? MR. SOHN: So the evidence in our proffer, I will be

happy to run through some of the specifics. THE COURT: MR. SOHN: the Court. It is already in your transcripts? It is in the proffer that we submitted to

I'd be happy to run through it. The Court will read it. The Court will

THE COURT:

read what you have submitted. MR. SOHN: THE COURT: stand here. MR. NELSON: Do you want Mr. Wilson to address the Thank you, Your Honor. All right, gentlemen. Here is where we

It's not really a defense, Your Honor. THE COURT: MR. WILSON: Oh, okay. They made some arguments, Your Honor. I can be brief.

I'm happy to address them.

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THE COURT: MR. WILSON:

All right.

Go on.

So, Your Honor, the first argument that

Mr. Brothers made relates to the 3 to $5 million and the proxy yardstick method. I think we've been over that with In fact, I pointed him to

regard to Dr. Ugone's testimony.

additional portion, the earlier portion of his deposition where he testified that the 3 to $5 million comes from his evaluation of the hypothetical negotiation. on that point. of law. It is clear from his report and his presentation where he evaluated each one of the Georgia-Pacific factors, and that he did testify that the 3 to 5 million came from his evaluation of hypothetical negotiation. The second point that plaintiffs seem to make is they criticize each of the main transactions that Dr. Ugone relied on in comparing to Dr. Becker's analysis, and those are the Daum transaction, the Meyer agreement and the 2011 sale, as you heard. Plaintiff has this exactly opposite. everything upside down. They turn They had crossed

That is not a basis for judgment as a matter

Their damages expert comes in and

relies on agreements that don't involve the patents-in-suit, they are after the date of the hypothetical negotiation, and they don't involve any of the parties in suit. Dr. Ugone's reliance on these transactions relate

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to, for instance, in the Daum transaction in 2004, that involved the patents-in-suit. The Carl Meyer transaction,

that is a licensed -- or a purchase of comparable technology that involves Google, one of the parties in suit. And similarly, the 2011 transaction involves, again, the patents-in-suit and the purchase and sale agreement. that's exactly what the Federal Circuit says that experts should be relying on in reference to licenses or purchase transactions that are pulled out that go beyond the scope of the parties and the patents that are involved in the case. So, you know, more than being just not a basis for JMOL on their part, it actually revealed the fundamental flau really with their entire damages analysis. And then finally, we keep hearing this idea that somehow the reasonable royalty must be sufficient to compensate the patentee for the alleged infringer's use. And, you know, we look at the statute language, and what plaintiffs seem to be arguing and implying to the jury is that if you don't have a running royalty, if it's not directly tied to a running royalty format, then that is not tied to use. And we heard a lot of cross-examination today with Dr. Ugone, and he dealt with those questions, but it's clear that as a matter of law you don't have to have a running royalty as a reasonable royalty. A lump sum is equally So

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acknowledged by the Federal Circuit.

It is well recognized

as an alternative, and lump sums and running royalties stand side by side as potential frameworks for the reasonable royalty. Most recent case on that that I can think of is

LaserDynamics and I believe also Unilock addresses that, but, anyway, it is a fundamental point that goes way beyond those cases. THE COURT: Thank you. You're not back again for

more argument, are you? MR. NELSON: No, no more argument, but at this point

in time I'm renewing our Rule 50(a) motions that we argued to you last week, I believe it was Wednesday, Your Honor. have made a written submission to Your Honor so you have that. If you would like any more argument on any of those, I We

am perfectly happy to address those now. THE COURT: You don't need to do that. You made a

written submission on it, so you have given me plenty to digest. MR. NELSON: MR. BROTHERS: Thank you, Your Honor. Thank you, Your Honor. We responded This morning

verbally to their Rule 50(a) motion last week. they filed essentially the same thing. response? THE COURT:

You require written

I don't require written response.

I

think we recall where you went.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Honor. that.

MR. BROTHERS: THE COURT:

Thank you, Your Honor. In terms of where we are going to

Okay.

be going tomorrow, the Court's anticipating that we may get to the closing arguments tomorrow in this case. So you

should prepare in that sense, because we are estimating, if I make it to the lunchtime with completion of the testimony, we will take probably about an hour, won't take me no more than an hour, to go through these jury instructions, and sometime tomorrow afternoon we will get to closing arguments in this case. That is what the Court anticipates. That may not

happen. it.

But be prepared in case we say we are going to do

MR. NELSON:

So on that point, Your Honor, I don't

think we have discussed yet the length. THE COURT: Well, I'm sure you are going to get to

I'm here so let me hear. MR. NELSON: Well, it is just a question, Your

THE COURT:

Okay.

The Court would anticipate -- I

think I gave each party something like an hour in the beginning, and an hour for closing is probably enough. will caution you the jury stops listening after about 30 minutes anyway, but you have an hour. enough. MR. NELSON: That is -I think an hour is I

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THE COURT: will try doing that.

You divide your time by an hour.

We

But certainly the Court will not get to We are not going to

the jury with any instructions tomorrow. do that.

And what we are going to try to do, I don't want to

waste a day, but I do not want to split up the arguments, either. We are not going to split the arguments. So we are

going to try to work it out so the arguments are on the same day. MR. NELSON: THE COURT: Okay. Thank you, Your Honor.

We will see how efficiently we can be

MR. BROTHERS:

Two points on that, Your Honor.

First, we, of course, will have rebuttal, carrying the burden of proof. I want to make sure that we understand we will

have some time to respond after the defendant's closing for our rebuttal. THE COURT: Well, I said we are not -- the Court is

not going to deprive anybody of any entitlement regarding argument. your time. MR. BROTHERS: All right. And the second point You divide your time any way you want to divide

is -- this was not something I raised with opposing counsel, but with respect to the exchange of slides for closing, I think under the pretrial order we are supposed to exchange them at 7:00 p.m. tonight if we are doing closing tomorrow.

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I would propose that we exchange an hour before closing instead of tonight, if there is no objection. THE COURT: I don't know what time you are going to

get before closing, but you can certainly start thinking about it. MR. BROTHERS: THE COURT: Sure.

It all depends on how the time works out If we finish, we break before lunch,

tomorrow on this case.

I'm send them out early to lunch, and we will try to work it. I just don't know. We will adjust it as we go along. That is fine. Thank you, Your Honor. Recess Court

MR. BROTHERS: THE COURT:

All right.

Thank you.

till tomorrow morning at 10:00. (Hearing adjourned at 3:54 p.m.) CERTIFICATION

I certify that the foregoing is a correct transcript from the record of proceedings in the above-entitled matter.

X_________________/s/_____________________x Jody A. Stewart X______10/30/2012________x Date

JODY A. STEWART, Official Court Reporter

I/P Engine, Inc. v. AOL, Inc. et al, Docket No. 2:11-cv-00512 (E.D. Va. Sept 15, 2011), Court Docket

General Information

Case Name Docket Number Court Nature of Suit Related Opinion(s)

I/P Engine, Inc. v. AOL, Inc. et al 2:11-cv-00512 United States District Court for the Eastern District of Virginia Property Rights: Patent 283 F.R.D. 322 874 F. Supp. 2d 510 2012 BL 329705

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