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Case 6:10-cv-00417-RWS Document 914 Filed 08/10/16 Page 1 of 26 PageID #: 31618

IN THE UNITED STATES DISTRICT COURT


FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION

VIRNETX INC. AND


SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION,

Civil Action No. 6:10-cv-00417-RWS

Plaintiffs,

v.

APPLE INC.

JURY TRIAL DEMANDED


Defendant.

___________________________________________________________________________
VIRNETX INC. AND
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION,
Plaintiffs,
v.
APPLE INC.
Defendant.

Civil Action No. 6:12-cv-00855-RWS

JURY TRIAL DEMANDED

VIRNETX INC.S MOTION FOR RECONSIDERATION

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TABLE OF CONTENTS


I.

INTRODUCTION ................................................................................................................... 1

II. THE COURT SHOULD RECONSIDER ITS NEW TRIAL ORDER. .................................. 1
a. The Courts Application of U.S. Surgical Relied on an Incorrect
Understanding of Critical Facts ....................................................................................... 2
b. The Court Committed a Clear Error of Law in Granting a New Trial
Based on a Waived Evidentiary Complaint ..................................................................... 4
i.

Apple Waived Any Complaint About Introduction of the Prior Verdict................ 5

ii.

At a Minimum, Apple Waived Any Objection Concerning the


Cumulative Impact of the Frequency of Prior Verdict Evidence
and Argument.......................................................................................................... 7

c. The Courts Post-Trial Rule 403 Balancing Is Itself an Abuse of Discretion ................. 9
i.

The Courts Post-Trial Rule 403 Analysis Suffers from Important


Procedural Errors .................................................................................................. 10

ii.

The Court Erred in Its Balance of Probative Value and Prejudicial Effect .......... 12

d. The Courts Decision to Vacate the Original VPNoD Damages Verdict


and the iMessage Verdict Is an Abuse of Discretion ................................................... 18
III. CONCLUSION ..................................................................................................................... 19

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TABLE OF AUTHORITIES

Cases
Applied Companies v. Lockheed Martin
37 F. Appx 865 (9th Cir. 2002) ................................................................................................. 5
Applied Medical v. U.S. Surgical Corp.
435 F.3d 1356 (Fed. Cir. 2006).......................................................................................... passim
Aspex Eyewear, Inc. v. Zenni Optical Inc.
713 F.3d 1377 (Fed. Cir. 2013)................................................................................................. 16
Blessey Marine Servs., Inc. v. Jeffboat, L.L.C.
771 F.3d 894 (5th Cir. 2014) ...................................................................................................... 7
Burks v. OConnor, Kenny Partners, Inc.
33 F. Appx 781 (6th Cir. 2002) ............................................................................................... 12
Caldarera v. Eastern Airlines, Inc.
705 F.2d 778 (5th Cir. 1983) ................................................................................................ 9, 11
Carson v. Polley
689 F.2d 562 (5th Cir. 1982) ................................................................................................ 5, 19
Coleman Motor Co. v. Chrysler Corp.
525 F.3d 1138 (3d Cir. 1975).......................................................................................... 8, 16, 17
Engquist v. Oregon Dept. of Agriculture
478 F.3d 985 (9th Cir. 2007) ...................................................................................................... 8
Espeaignnette v. Gene Tierney Co.
43 F.3d 1 (1st Cir. 1994) ........................................................................................................... 10
Francis v. Franklin
471 U.S. 307 (1985) .................................................................................................................. 10
Gregg v. Allstate Ins. Co.
126 F.3d 1080 (3d Cir. 1997)...................................................................................................... 9
Johns Hopkins University v. CellPro, Inc.
152 F.3d 1342 (Fed. Cir. 1998)................................................................................................. 17

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Kassel v. Gannet Co., Inc.


875 F.2d 935 (1st Cir. 1989) ................................................................................................. 8, 12
Lavespere v. Niagara Mach. & Tool Works, Inc.
910 F.2d 167 (5th Cir. 1990) ...................................................................................................... 1
Mendenhall v. Cedarapids Inc.
5 F.3d 1557 (Fed. Cir. 1993)........................................................................................... 8, 16, 17
Nissho-Awai Co., Ltd. v. Occidental Crude Sales Inc. (Nissho II)
848 F.2d 613 (5th Cir. 1988) ............................................................................................. passim
Nissho-Awai Ltd. v. Occidental (Nissho I)
729 F.2d 1530 (5th Cir. 1984) .................................................................................................. 12
Old Chief v. U.S.
519 U.S. 172 (1997) ............................................................................................................ 13, 14
Olitsky v. Spencer Gifts
964 F.2d 1471 (5th Cir. 1992) ............................................................................................ 11, 17
Ross v. Marshall
426 F.3d 745 (5th Cir. 2005) ...................................................................................................... 1
Rubert-Torres v. Hospital San Pablo, Inc.
205 F.3d 472 (1st Cir. 2000) .......................................................................................... 10, 13, 14
Shows v. Jamison Bedding, Inc.
671 F.2d 927 (5th Cir. 1982) ................................................................................................ 2, 13
U.S v. Alvarado-Santilano
434 F.3d 794 (5th Cir. 2004) ...................................................................................................... 5
U.S. v. Austin
57 F.3d 1070 (6th Cir. 1995) ...................................................................................................... 7
U.S. v. Homeward Residential, Inc.
2016 WL 777000 (E.D. Tex. Feb. 29, 2016) ............................................................................ 15
U.S. v. Homeward
2015 WL 7007518 (E.D. Tex. Nov. 10, 2015) ................................................................... 15, 16
U.S. v. McRae
593 F.2d 700 (5th Cir. 1979) .............................................................................................. 13, 14

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U.S. v. Mehanna
735 F.3d 32 (1st Cir. 2013) ......................................................................................... 7, 8, 13, 14
U.S. v. Mills
704 F.2d 1553 (11th Cir. 1983) ................................................................................................ 13
U.S. v. Roberts
88 F.3d 872 (10th Cir. 1992) ...................................................................................................... 7
U.S. v. Powers
578 F. Appx 763 (10th Cir. 2014) ............................................................................................. 5
U.S. v. Stella
448 F.3d 522 (9th Cir. 1971) ...................................................................................................... 9
Versata Software Group v. SAP America
717 F.3d 1255 (Fed. Cir. 2013)................................................................................................. 15
Weingart v. Allen & OHara, Inc.
654 F. 2d 1096 (5th Cir. 1981) ................................................................................................. 12
Winter v. Brenner Tank
926 F.2d 468 (5th Cir. 1991) .................................................................................................... 11
Rules
Fed R. Civ. P. 59 ............................................................................................................................. 2
Fed R. Civ. P. 61 ............................................................................................................................. 2
Fed R. Evid. 103 ............................................................................................................................. 6
Fed. R. Evid. 403 ................................................................................................................... passim

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I.

INTRODUCTION

After an eight-day trial and years of prior litigation leading up to it, an impartial jury
rendered a unanimous verdict in favor of VirnetX. That work has now been set aside.
VirnetX agrees that all parties before the Court deserve fair trials. But here there is no
question that Apple received one. As established below, the Courts New Trial Order relied on a
number of inadvertent but critical mistakes of both fact and law in concluding otherwise. If left
uncorrected these mistakes, both individually and collectively, would constitute a reversible
abuse of discretion under settled procedural and evidentiary precedent. Because the Courts
New Trial Order, if not reconsidered, will ultimately be reversed by the Federal Circuit, this
Court should avoid the burden on itself and the parties from four unnecessary re-trials,
reconsider its New Trial Order, and re-instate the jurys original verdict.
II.

THE COURT SHOULD RECONSIDER ITS NEW TRIAL ORDER.


Reconsideration is appropriate to correct manifest errors of law or fact and to prevent

manifest injustice. Ross v. Marshall, 426 F.3d 745, 763 (5th Cir. 2005). Generally, in
exercising its discretion to reconsider any prior ruling, the Court is free to reconsider and
reverse its decision for any reason it deems sufficient. Lavespere v. Niagara Mach. & Tool
Works, Inc., 910 F.2d 167, 185 (5th Cir. 1990).
Here, the Court should reconsider its prior ruling for at least three reasons. First, the Courts
analysis of the most relevant authorityApplied Medical v. U.S. Surgical Corp., 435 F.3d 1356 (Fed.
Cir. 2006)is factually inaccurate. When that inaccuracy is corrected, there is no meaningful way to
distinguish U.S. Surgical, and that decision conclusively establishes that the Courts original rulings
concerning consolidation and reference to the prior proceedings were within its discretion. Second,
the Court committed reversible error by granting a new trial based on alleged error that Apple did not

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preserve. Finally, the Courts post-trial Rule 403 rebalancing of the probative value and prejudicial
impact of the prior verdict was flawed and constituted an independent abuse of discretion.
The Courts discretion in Rule 59 and evidentiary rulings is typically broad. But where, as
here, a court considers setting aside a jury verdict, its discretion is significantly limited in recognition
that the deference to [the district judge] is in opposition to the deference due the jury. Shows v.

Jamison Bedding, Inc., 671 F.2d 927, 930 (5th Cir. 1982). In balancing this tension, the Fifth
Circuit, applying the Federal Rules, has placed substantive and procedural limits on a courts
discretion to grant a new trial, which the Courts New Trial Order overlooked. E.g., FED. R. CIV. P.
61 (new trials may be granted only on errors that affect substantial rights). These limits recognize
that on occasion district courts may unwittingly but unlawfully deprive a successful litigant of its
lawful right to a favorable jury verdict based on well-intentioned but incorrect post-trial hindsight.
Here, under settled Fifth Circuit law, the Courts New Trial Order exceeded the limits of its
discretion. The Court should reconsider it.

a. The Courts Application of U.S. Surgical Relied on an Incorrect


Understanding of Critical Facts.
In U.S. Surgical, the Federal Circuit affirmed a district courts decision to admit evidence
concerning a prior verdict because the evidence was clearly relevant to willfulness. 435 F.3d
at 1366. This decision is directly applicable to the present issue, and it conclusively establishes
that the Courts original rulings were correct and within the Courts discretion.
In its New Trial Order, the Court reasoned that U.S. Surgical was distinguishable from
this case because of the sheer number of times Apple I was raised in the consolidated trial, Dkt.
No. 500 at 11, and that U.S. Surgical may have been decided based on the infringers failure to
adequately argue the concerns the Court raises here. Id. (citing opinions statement that U.S.
Surgical has not shown that its probative value was outweighed by the danger of unfair
prejudice.). Review of the U.S. Surgical proceedings, however, contradicts the Courts points
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of distinction. Namely, in U.S. Surgical, the prior trial was mentioned at least twenty-four
timesin opening, closing, and with eleven different witnessesby the plaintiff alone. Ex. A at
*10 n.3. These referencesmade over repeated trial objectionsinclude testimony that went
well beyond the argument and testimony regarding Apple I in this case. See Ex. B at *53. (citing
plaintiff testimony that the jury found for us on 28 out of 28 issues); id. at *24 (describing
repeated objections ultimately leading to stipulation of error preservation). U.S. Surgical was
even able to disclose to the jury that the prior case resulted in a willful infringement verdict. As
U.S. Surgical argued on appeal:
Applied I absolutely dominated the trial. Applied I was raised with virtually every
trial witness, in many cases gratuitously, for no reason other than its prejudicial
impact. Like a mantra, the jury heard over and over again that another jury had
previously found that U.S. Surgical willfully infringed the 553 Patent.
Ex. B at *23 (emphasis added).
Indeed, although the Courts Order faults portions of VirnetXs presentation (that Apple
deemed unworthy of an objection), Applied Medicals presentation was far more aggressive:
First, go to the patent office; claim you are the first inventor; lose. Then go to the
Eastern District of Virginia, pretend the patent is invalid; say you dont infringe;
defend the willfulness charge; lose, lose, lose. Appeal. Lose. Seek reconsideration.
Lose. Go to the United States Supreme Court. Rejected. Get enjoined. Make
another product and litigate that to the hilt. Seek reconsideration in this court.
Appeal again. And lose, lose, lose.
Id. at *24 (citing closing argument). Even on this record, the Federal Circuit affirmed the
district courts admission of the prior litigation and verdict.
On facts directly applicable to the present issue, the ruling in U.S. Surgical was not
even close. As this Courts district court colleague stated in its pre-trial ruling on this issue:
[The prior verdict] was influencing the activities and the actions of U.S. Surgical
Corp. in getting legal opinions, in trying to go around the clock doing this redesign
effort. I mean, it was part of their mindset. Because of what happened in [the prior
case], that is what they did, according to your own people. . . . And then to say that,

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okay, although it was the primary motivating factor that drove what they did, you
cant consider [it], . . . that makes no conceptual sense to me.
Ex. C at *64 (citing district court ruling) (emphasis added).
The Courts remaining point of distinctionthat liability was undisputed in
U.S. Surgicaldoes not change this clear analysis. Dkt. No. 500 at 11. Regardless of
whether there was a verdict question about infringement concerning the U.S. Surgical redesign, willfulness necessarily depends on the underlying infringement and the
reasonableness of an infringers actions with respect to it. Thus, the jury was still tasked
with evaluating subtle distinctions between the old product and the new one in
determining whether infringement via the re-design was willful. Under the Courts logic,
this would still have given rise to the possibility of juror confusion because, in
evaluating the disputed willfulness and damages questions, the similarities between the
original design (involving determined willful infringement) and the re-design (involving
disputed willful infringement) could have been difficult to distinguish. This was not a
legitimate concern in U.S. Surgical, just as it was not a legitimate concern here, because
juries are fully capable of sorting through such distinctions.
The Courts critical mistakes in analyzing this opinionan opinion that
conclusively negates any concern that the Courts prior evidentiary and consolidation
rulings were reversible erroralone warrant reconsideration.
b. The Court Committed a Clear Error of Law in Granting a New Trial Based
on a Waived Evidentiary Complaint.
To the extent the Courts Order relies not on the possibility that its prior rulings were
reversible, but instead on a mere re-evaluation of the exercise of its discretion, the Court has no

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authority to do so. Absent plain error,1 district courts have no authority to grant new trials based
on waived arguments. See Carson v. Polley, 689 F.2d 562, 570 (5th Cir. 1982) (A party may
not be heard to argue on a motion for a new trial that the jury improperly considered
inadmissible evidence if the party failed to object to the admission of that evidence at trial.);
Nissho-Awai Co., Ltd. v. Occidental Crude Sales Inc. (hereinafter Nissho II), 848 F.2d 613,
619 (5th Cir. 1988) (reversing new trial granted based on attorney argument to which appellant
failed to object); Applied Companies v. Lockheed Martin, 37 F. Appx 865, 866 (9th Cir. 2002)
(reversing grant of new trial because evidence was admitted without objection and no plain error
occurred). Here, Apple failed to adequately object to the alleged error on which the Courts
Order is based. These arguments were therefore waived.
i. Apple Waived Any Complaint About Introduction of the Prior Verdict.
Apples motion in limine seeking preclusion of any reference to the previous trial was
insufficient as a matter of law to preserve error concerning introduction of this evidence. Under
Federal Rule of Evidence 103(b), a pre-trial evidentiary ruling preserves error only if it was ruled
on definitively on the record. Otherwise, a party must object at trial. The Courts New Trial
Order itself acknowledges that its denial of Apples motion in limine was not a definitive
evidentiary ruling. Dkt. No. 500 at 3 ([A] lot of this were just going to have to flesh out at
trial.). Therefore, this ruling was insufficient to preserve Apples assertion of error. See U.S. v.
Powers, 578 F. Appx 763, 776-77 (10th Cir. Sept. 29, 2014) (holding that district courts pretrial ruling that evidence was admissible subject to foundation being laid was not sufficiently

As the result in U.S. Surgical makes clear, there can be no plain error here. See U.S v. AlvaradoSantilano, 434 F.3d 794, 795 (5th Cir. 2004) (plain error relief available only where mistake is
clear or obvious, affected substantial rights, and the error, if unchanged, would have a serious
effect on the fairness, integrity, or public reputation of judicial proceedings).

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definite absent further objection at trial). This is so regardless of whether Apple misunderstood
the nature of the Courts ruling because Rule 103(b) imposes the obligation on counsel to
clarify whether an in limine or other evidentiary ruling is definitive when there is doubt on that
point. 2000 Adv. Comm. Notes, FED. R. EVID. 103
At trial, Apple made no objection to the prior litigation or verdict coming in as evidence.
Although the Court credits Apple with making an objection once after opening arguments, this
conclusion is based on a factual mistake. Dkt. No. 500 at 5. Apple never objected; the portion
of the transcript quoted in the Order pertained to VirnetXs request for a curative instruction.
When trying to justify its improper opening arguments, counsel for Apple merely alluded to how
its motion in limine was rejected. 1/26/2016 TT 12:6-8 (MR. AROVAS: I understand we lost
that. But, you know, when we lost that, the Court said, look, if that door is opened . . .). In any
event, even if there was any ambiguity concerning this objection, before voir dire began,
Apple proposed that the Court expressly instruct on the prior verdict. Ex. D at 8 (Apple
proposed instruction: there are, however, certain claims of two patents that a prior jury found
were infringed. . . . (emphasis added)). This proposal was offered without any reference to
Apples prior in limine motion or any renewed objection. Not only does this action highlight that
the statement which the Courts New Trial Order concluded was an objection was no objection at
all, it also provides an additional, independent basis for waiver.2 Cf. Blessey Marine Servs., Inc.

Similarly, as the Courts Order recognizes, Apples original opposition to VirnetXs Motion to
Consolidate failed to preserve error on issues related to discussion of the verdict. Apple did not
indicate that a consolidated proceeding would deprive it of a fair trial; it stated only that it
prefer[red] separate trials, but that it was amenable to consolidation. -417 Dkt. No. 870 at 12. Further, the Courts Order itself recognizes that consolidation alone was not an appropriate
basis for reversal. Dkt. No. 500 at 14.

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v. Jeffboat, L.L.C., 771 F.3d 894, 899-900 (5th Cir. 2014) (party waived objection where Court
denied motion in limine and party was subsequently first to introduce the challenged evidence).
ii. At a Minimum, Apple Waived Any Objection Concerning the
Cumulative Impact of the Frequency of Prior Verdict Evidence and
Argument.
Moreover, there is no argument that Apple objected on the grounds relied upon by the
Court in its Order: the frequency of reference to the prior proceedings.3 A pre-trial motion in
limine is insufficient to preserve error concerning the cumulative impact of reference to a topic
because such objections are discrete from admissibility in the abstract.4
The need for a specific, separate trial objection to preserve cumulative impact
complaints is paramount. Due to the nature of the objection, such issues present impossibly
difficult line-drawing issues,5 and accordingly should be presented to the Court during trial so
that it may carefully rule on an issue that necessarily depends on continually evolving
circumstances. Requiring objections provides notice to both the parties and the Court, enabling
the Court to provide any necessary relief to address any creeping concerns.
This principle is illustrated in the First Circuits Mehanna decision. 735 F.3d 32. At a
criminal trial involving terrorist activity, the Government presented hours of testimony
concerning decapitations, terrorist propaganda videos, and images of the World Trade Center
attack. Before any cumulative impact line was crossed, the district court provided express

Dkt No. 500 at 10 (The parties . . . should not have referred to Apple I with such frequency.).

See U.S. v. Austin, 57 F.3d 1070 (6th Cir. 1995) (unpub.) (reviewing cumulative impact issue
for plain error where no cumulative impact objection was made); see also U.S. v. Roberts, 88
F.3d 872, 881 (10th Cir. 1992) (requiring district court to address cumulative impact of prior
bad acts evidence separately for each witness testifying as to those acts).
5

U.S. v. Mehanna, 735 F.3d 32, 63 (1st Cir. 2013) (The point at which relevant and admissible
evidence lapses into relevant but cumulative (and therefore inadmissible) evidence is murky.).

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notice to the parties that at some point the evidence becomes so cumulative that the unfair
prejudice outweighs the probative value, and the defendant subsequently objected. Id. at 63.
The parties were thus able to plan their trial strategies without concern that vigorous advocacy
could secretly creep into reversible error. This nuanced approach is impossible if, like here, no
objection is made at any point during trial.
The procedural circumstances of this case made the need for an additional, specific
cumulative impact objection particularly critical. Before trial, Apple moved in limine to
exclude any reference to the prior trial, Dkt. No. 308 (emphasis added), a facially overbroad
all or nothing request. Mendenhall v. Cedarapids Inc., 5 F.3d 1557, 1575 (Fed. Cir. 1993)
(criticizing plaintiffs all or nothing proffer). When that motion was denied in part, Apple
affirmatively chose to spar with VirnetX on what the jury should take from the verdict and
appeal, 1/25/2016 TT at 12:6-8,6 rather than to seek more limited or nuanced evidentiary relief
related to its use.7 Indeed, as the Court acknowledges, Apple discussed the verdict more than
VirnetX. Dkt. 500 at 4. By choosing this litigation strategy, regardless of the Courts views on
this evidences ultimate effect, Apple failed to allow this Court to discharge its legal duty to
evaluate any changing evidentiary calculus as this topic moved along the 403 spectrum. See

(MR. AROVAS: And the reason [VirnetX] wanted to [defend against a construction of secure
communication link including anonymity] is because [VirnetX] know[s] its a problem.)
7

For example, compare Dkt. No. 308 at 1 (seeking to exclude any reference to trial) with
Engquist v. Oregon Dept. of Agriculture, 478 F.3d 985, 1010 (9th Cir. 2007) (excluding prior
verdict involving different plaintiff but same defendant but admitting all testimony from prior
trial); id. at 1008 (evidence allowed from prior trial for impeachment purposes, referred to as a
prior proceeding); Mendenhall, 5 F.3d at 1575 (excluding prior judicial opinion, but reasoning
that prior litigation was rightly admitted to combat assertion of litigiousness and implying
judgment but not judicial opinion could have been admissible to prove validity); Kassel v. Gannet
Co., Inc., 875 F.2d 935, 952 (1st Cir. 1989) (concluding court abused discretion by excluding
entire appellate brief when portions of brief were clearly admissible); Coleman Motor Co. v.
Chrysler Corp., 525 F.3d 1138, 1350 (3d Cir. 1975) (granting new trial but reasoning that prior
verdict appropriately admissible as to bias).
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supra Note 4-5, 7. Having consciously chosen this specific litigation strategy, Apple should not
be heard now to complain about the cumulative impact of its result.
Fundamentally, a party should not be permitted to request overbroad relief, and, once that
relief is denied, acquiesce in and encourage the use of that evidence; but then, after receiving an
adverse verdict, receive a new trial based not on the evidences admissibility per se but instead
on the frequency of its use. Justice requires that Apple must police any cumulative impact
concerns itself. Cf. Caldarera v. Eastern Airlines, Inc., 705 F.2d 778, 782 (5th Cir. 1983) (new
trial inappropriate due to failure to move for a mistrial; contrary rule would allow party
chance to see the verdict and then to seek to overturn it.); see also Nissho II, 848 F.2d at 619.
By requiring specific objections before granting district courts the extraordinary power to
vacate a verdict, the Fifth Circuit ensures that verdicts are not overturned merely by evidence
that seems more prejudicial after-the-fact due to the losing litigants trial strategy and the jurys
ultimate result. Cf. U.S. v. Stella, 448 F.3d 522, 524 (9th Cir. 1971) (Posttrial hindsight,
induced by regret, may be worse, not better, than pre-trial foresight.). Similarly, courts require
cumulative impact objections to enable parties to vigorously litigate their case without worrying
that verdicts will be overturned based on creeping, secret error. In overlooking these rules, the
Court committed a reversible error.
c. The Courts Post-Trial Rule 403 Balancing Is Itself an Abuse of Discretion.
The Court also has no discretion to grant a new trial based on post-trial evidentiary
analysis that is itself an abuse of discretion. See Gregg v. Allstate Ins. Co., 126 F.3d 1080, 1082
(3d Cir. 1997) (reversing courts grant of new trial because evidence on which the new trial was
based was admissible as a matter of law). The Courts 403 analysis committed such an abuse.
A courts discretion in Rule 403 matters is broad but not unfettered. In general, [a]buse
occurs when a material factor deserving significant weight is ignored, when an improper factor is
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relied upon, or when all proper and no improper factors are assessed, but the court makes a
serious mistake in weighing them. Espeaignnette v. Gene Tierney Co., 43 F.3d 1, 5 (1st Cir.
1994). Here, the Courts post-trial 403 analysis (1) suffered from critical procedural
deficiencies; and (2) incorrectly minimized the probative value of the prior verdict and
misanalysed the prejudicial effect. When weighing all relevant considerations, the Courts posttrial analysis concerning admissibility of these facts was reversibly flawed.
i. The Courts Post-Trial Rule 403 Analysis Suffers from Important
Procedural Errors.
The Courts 403 analysis in the New Trial Order suffers from at least three critical
procedural flaws:
1. The Court Erred by Failing to Consider the Effect of Its Own Instructions. In the Fifth
Circuit, courts may abuse their discretion by failing to adequately consider curative measures.
Nissho II, at 848 F.2d at 620; see also Rubert-Torres, 205 F.3d at 479. Here, the Courts New
Trial Order failed to adequately consider, or even address, the effect of its instructions.
Specifically, before closing arguments, the Court instructed the jury:
Additionally, a prior jury determined that Apple infringed certain claims of two
patents via its VPN On Demand feature . . . However, all other infringement
allegations are contested and you must determine whether those claims are
infringed. You may not assume or infer that the other patents and claims are
infringed simply because of this prior finding of infringement.
TT 2/2/2016 at 145:5-19; see also id. at 144:10-11 (jury to consider only the evidence in this
case). These instructionswhich the Court must assume the jury followed, Francis v. Franklin,
471 U.S. 307, 324 n.9 (1985)were adequate as a matter of law to cure any undue prejudice.
Indeed, in a similar situation, the Fifth Circuit has expressly held that a curative instruction was
sufficient to cure any prejudice from erroneous introduction of a prior verdict, even when, in

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the damages re-trial of the same case, the jury was informed that the overturned prior verdict was
for a large amount of money. Olitsky v. Spencer Gifts, 964 F.2d 1471, 1476 (5th Cir. 1992).
Also, the Court cannot grant a new trial because, in retrospect, it wishes the instruction
had been more specific, or that, for example, the instruction addressed the effect of the Original
FaceTime verdict. Again, the Fifth Circuit allows courts to grant new trial only upon adequate
objection. Winter v. Brenner Tank, 926 F.2d 468, 473 (5th Cir. 1991) (finding acquiescence in
curative instruction significant); Caldarera, 705 F.2d at 782 (same); Nissho II, 848 F.2d at 620
(noting that appellant failed to object to Courts answers to jurors questions). Here, without
discussion, Apple agreed to this instruction as given. See generally 2/1/2016 TT at 289:9333:17; 2/2/2016 TT at 104:8-121:5. And although the instruction would have also addressed
the Original FaceTime verdict, it did not at Apples insistence. See 2/1/1/2016 TT at 291:4296:1 (Apple requested that no instruction be given for FaceTime based on its view of the scope
of the -417 mandate). Apple cannot now claim that the Courts instruction should have
addressed that issue. The failure to consider the curative effect of this instruction was error.
2. The Court Erred by Addressing the Frequency of Evidence Rather than Conducting the
Requisite Individual, Contextualized Balancing. The Court also erred by engaging in a 403
balancing analysis based on only the total aggregate effect of all testimony and argument about
the prior proceedings. This was error because courts must consistently evaluate admissibility as
evidence on a topic moves along the 403 spectrum and becomes more probative or prejudicial
depending on the evolving context of trial. See supra Notes 4-5, 7. If, for example, a reference
to the verdict was necessary to correct a misleading statement, or to provide relevant
background, or any other legitimate reason, the Court must analyze it in that appropriate

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context.8 Cf. Kassel, 875 F.2d at 952 (abuse of discretion to exclude entire appellate brief when
portions were admissible). The Courts Order granting a new trial based on frequency generally,
rather than such an incremental analysis, was additional error.
3. The Court Erred by Granting a New Trial Based on the Mere Possibility of Juror
Confusion. Finally, the Court erred by granting a new trial based on the mere possibility of juror
confusion. While the possibility of juror confusion may be a relevant consideration in
addressing admissibility and consolidation issues pre-trial, the Fifth Circuit does not permit new
trials based on mere possibility after a verdict. Rather, a court must have actual, objective
evidence to support the inference of confusion (from, for example, the verdict form or juror
questions). See Nissho-Awai Ltd. v. Occidental (hereinafter Nissho I), 729 F.2d 1530, 1538
(5th Cir. 1984) (inconsistent jury responses and foreman admitted confusion); Weingart v. Allen
& OHara, Inc., 654 F. 2d 1096, 1106 (5th Cir. 1981) (inconsistent jury responses); Nissho II,
848 F.2d at 619 (objective evidence of confusion nevertheless insufficient to grant new trial in
light of countervailing considerations). The Court erred in granting a new trial based on that
mere possibility. Burks v. OConnor, Kenny Partners, Inc., 33 F. Appx 781, 784 (6th Cir. 2002)
(reversing grant of new trial based on speculation, reasoning that [t]his kind of if we had some
ham, we could have a ham sandwich if we had some bread finding falls far short of the finding
of prejudicial error required to upset a jury verdict).
ii. The Court Erred in Its Balance of Probative Value and Prejudicial Effect.

For example, although the Court reasons that VirnetXs rebuttal closing contained a gratuitous
reference to the prior trial, that reference was directly responsive to Apples closing accusation
that VirnetX fought tooth and nail to keep anonymity out of the claim construction because
FaceTime was not anonymous. Compare 2/2/2016 TT at 199:10-20 (Apple Closing), with id.
242:7-8 (VirnetX Rebuttal). Whatever its incremental prejudicial effect, this argument had high
probative value as a direct response to Apples argument.
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Rule 403 questions must start from a fundamental premise: all evidence is meant to be
prejudicial. Mehanna, 735 F.2d at 64. [I]t is only unfair prejudice, U.S. v. McRae, 593 F.2d
700, 707 (5th Cir. 1979)evidence with an undue tendency to suggest decision on an improper
basis, Old Chief v. U.S., 519 U.S. 172, 189 (1997)substantially outweighing probative value
which permits exclusion. McRae, 592 F.2d at 707 (emphasis added). In applying these general
principles, it is a difficult matter indeed to show that any prejudice is undue when the
evidence relates to issues central to a case. Rubert-Torres, 205 F.3d at 479.
Because application of the rule deprives the jury of relevant evidence, its use must be
cautious and sparing, id.a general reluctance made even more appropriate in circumstances,
like this one, where a post-verdict re-evaluation conflicts with the deference owed to a jurys
verdict. Cf. Jamison Bedding, Inc., 671 F.2d at 930. The rule does not permit district courts to
even out a trial, or conduct a trial on unreal facts tailored and sanitized to the occasion. Id.
Yet, here, this is precisely what the Court has ordereda series of new trials that are premised
on unreal facts and sanitized to Apples benefit. Putting aside the procedural flaws in its
analysis, the Court erred by failing to apply these considerations correctly in balancing probative
value and potential prejudicial effect.
1. The Court Erred by Overlooking that This Category of Evidence Was Highly
Probative of All Central Issues. The prior verdict was not only potentially relevant. See Dkt.
No. 500 at 11 (Although a prior verdict may be relevant . . . .). The evidence was, as a matter
of law, clearly relevant to Apples willful state of mind, damages, and the factual
circumstances surrounding the new versions of the accused features, especially in light of
Apples actual and planned litigation conduct. See U.S. v. Mills, 704 F.2d 1553, 1560 (11th Cir.
1983) (considering defendants litigation strategy in evaluating probative value of evidence).

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Related to willfulness, the prior verdict was the most probative data point concerning
Apples specious design arounds and Apples opinion of counsel defense of innocent action.
Again, where, as here, a prior verdict is a primary motivating factor and drove what [an
infringer] did, that evidence is so highly probative that exclusion makes no conceptual sense.
Ex. C at *64; see also Rubert-Torres, 205 F.3d at 479; Mehanma, 735 F.3d at 64 ([E]vidence
which tends to rebut defendants claim of innocent action is unlikely to be unduly prejudicial.).
Concerning other issues, the verdict was also the best (and perhaps only) evidence to
rebut Apples planned trial strategy of expressing or at least implying that it agreed that VPN
on Demand infringed, that the re-designs were voluntary changes, and that Apple takes
responsibility for its infringement when it infringesall with the aim of bolstering its remaining
defenses.9 Further, the incredibl[e] similarity between the adjudicated-infringing and disputed
features further establishes the significant probative nature of this category of evidence; if the
jury sees little difference between an adjudicated infringing feature and a disputed one, it is hard
to imagine more significant evidence for infringement and willfulness. There is simply no point
at which evidence becomes too probative (or favors one party too heavily) that it crosses over
into being prejudicial. See McRae, 593 F.2d at 707 (exclusion under Rule 403 inappropriate to
make a contest where there is little or none). The Court should reconsider the weight given to
the probative value of this category of evidence.
2. The Court Erred by Conducting a Flawed Undue Prejudice Analysis. The Courts
403 analysis also weighed prejudice incorrectly. First, the Court viewed the incredibl[e]

See 1/19/2016 Hr. Tr. 84:21-22 (MR. AROVAS: . . . But this jury is going to be told that [Apple]
agree[s], right?); Ex. E, (proposing instruction that the parties do not contest that VPNoD
infringes); Old Chief, 519 U.S. at 189 ([T]he accepted rule [is] that the prosecution is entitled to
prove its case free from any defendants option to stipulate the evidence away.).
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similar[ities] between features as a prejudicial confusion concern, Dkt. No. 500 at 9, but these
similarities harmed Apples case precisely because they were so probative of central issues. This
prejudice was not undue. And to the extent the Courts prejudice concerns stem from
skepticism concerning the institutional capacity of juries to sort through these issues, that
concern is contradicted by decades of historical precedent in patent matters. Asking juries to sort
out minor differences in competing features for an infringement analysis is commonplace, both
in consolidated trials and in garden-variety ones. As just one example, in the Versata Software
Group v. SAP America case, ultimately affirmed by the Federal Circuit, a jury rendered a verdict
in a trial involving damages for previously determined liability as well as pending questions
concerning whether re-designed products still infringed. 717 F.3d 1255, 1260 (The second trial
focused on damages. Because SAPs software patch was designed to eliminate infringement . . .
the jury was required to determine the effectiveness of the patch in avoiding infringement as part
of damages.). More broadly, juries in almost every patent case address non-infringing
alternatives, which themselves require subtle distinctions between the accused feature and a
hypothetically re-designed one. These issues are obviously not tried separately because juries
are fully equipped to deal with them together.
U.S. v. Homeward Residential, Inc., 2016 WL 777000, at *3 (E.D. Tex. Feb. 29, 2016)
does not support the Courts conclusion to the contrary. That case involved multiple defendants,
entirely different government programs, different statutory frameworks governing those
programs, and only one Defendant shared between the two proposed consolidated cases. Id.; see
also U.S. v. Homeward, 2015 WL 7007518, at *1 (E.D. Tex. Nov. 10, 2015) (describing
differences between defendants liability and complicated statutory framework). Numerous
relevant employees had even hopped between companies during the relevant time frame. Here,

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unlike Homeward, Apples roles and reasons for liability in the consolidated cases involve
different features but they are not distinct. To the contrary, Apples reasons for liability in the
-855 case are informed significantly by facts previously determined by the prior verdict.
Accordingly, weighing the incredibly similar issues between the consolidated cases as a
ground for vacating a verdict was error.
Second, the Court erred in analyzing the type of confusion that serves as the typical
basis for exclusion. Here, the Court reasoned that the jury may have decided the case on
evidence not before it. Dkt. No. 500 at 9. But although that concern is legitimate in the cases
where it applies, it simply does not apply here; there was no risk that the jury would defer based
on evidence not before it because the findings of the prior jury were binding on the
consolidated one.10 See 2/2/2016 TT at 145:9-15. It is neither unduly prejudicial nor confusing
to offer evidence and argument demonstrating that conclusively determined issues were, in fact,
conclusively determined. The nature and effect of the jurys prior -417 findingsconcerning
both the original VPNoD and original FaceTimeis a critical distinction between this case and
those cases, relied upon by Apple, in which verdicts were found to be excludable.
For example, in Coleman and Mendenhall, the prior verdicts had both decided literally
the identical issue that the subsequent jury was tasked with resolving.11 Coleman, 525 F.2d at
1350-51 (antitrust violation concerning same facts); Mendenhall, 5 F.3d 1573-75 (validity).

10

This is true as to both the VPNoD findings and the FaceTime findings. Although the FaceTime
liability finding was reversed in part, the jurys affirmed findings remained binding in both
consolidated cases under the law of the case doctrine for the 417 case and issue preclusion for the
-855. See Aspex Eyewear, Inc. v. Zenni Optical Inc., 713 F.3d 1377, 1382 (Fed. Cir. 2013) (issue
preclusion applies to different product as applied to different claim where there was no dispute
that new product operated identically as old one as related to limitation at issue).

11

The Federal Circuit in Mendenhall also indicated that the plaintiff was rightly allowed to
mention a prior judgment to combat an assertion of litigiousnessan assertion made by Apple in
this casenoting also that the Court permitted testimony that he prevailed. 5 F.3d at 1573.
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These circumstances pose a significant risk that a jury may decide such cases by simply
deferring to prior verdicts, which were reached based on different arguments and evidence.
In contrast to Coleman and Mendenhall, the jury here was not tasked with re-evaluating
any question decided by the prior verdict; the prior verdict findings mentioned at trial were
conclusive as to Original VPNoD and FaceTime, while the prior damages and validity verdicts
were never mentioned.12 Further, based on the Courts instruction, the evidence presented by the
parties, and the arguments of counsel, the jury was also acutely aware that the disputed
infringement issuesincluding whether the original FaceTime was anonymoushad never been
tried. Cf. Olitsky, 964 F.2d at 1476 (describing effectiveness of instruction concerning effect of
prior verdict testimony); see also 1/25/2016 TT at 64:12-20 (MR. WARD: My question for you
is this, would yall agree with me that it would not be fair to say Apple infringed before they
must infringe now? That wouldnt be fair, would it?). And while the jury may have used the
established VPNoD and FaceTime findings as helpful guideposts, that is a function of the
probative nature of the evidencenot of improper deference. See, e.g., Ex. F, 5/10/2011 TT at
84:8-89:9, in Versata Software v. SAP Am., Inc., 07-cv-153 (E.D. Tex.) (presenting infringement

12

The Johns Hopkins University v. CellPro, Inc., 152 F.3d 1342, 1362-64 (Fed. Cir. 1998),
decision is distinguishable on its facts. Although the Federal Circuit affirmed the exclusion of
evidence based on potential confusion, in light of a changed claim construction, it did so in a
fundamentally different scenario. First, the evidence had literally no probative value. See id. at
1362-63 (The 1995 verdict had no bearing upon the willfulness of CellPros infringement
because it had received notice of plaintiffs rights long before). This obviously differs significantly
from the consolidated trial. Further, the verdict had much more potential to be unduly confusing
because there were no findings from the prior verdict that were binding on the subsequent jury.
Indeed, although the defendant won the prior verdict, the district court granted summary judgment
of no invalidity and infringement in favor of the plaintiff after the changed claim construction; the
prior verdict thus directly contradicted conclusively determined factsa very confusing,
counterintuitive scenario. Id. at 1352. None of these considerations are present here.
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analysis comparing adjudicated infringing system with re-design). The Courts concern about
risk of improper deference was simply misplaced, and its conclusion was error.
To be clear, this was no anything goes trial that resulted in some fundamental
unfairness to Apple. To the contrary, although both parties discussed the prior verdict, many of
Apples most damning facts were kept from the jury. The jury never heard, for example, that
Apple tried to invalidate VirnetXs patents in the prior trial or that Apple surreptitiously paid
RPX to do the same at the patent office. They never heard that Apple was sanctioned for
discovery misconduct. They never heard that, after losing the first trial, Apple fired its experts
and hired new ones to take different (inconsistent) positions. And they never heard that Apple
grossly misrepresented the costs of its alleged design-around in the prior trial, or even the false
facts underlying that conclusion. While the errors in the Courts New Trial Order mentioned
above stand on their own, any prejudicial effect of mentioning a prior verdict at trial, when
compared to the probative value of these true, damning, and highly relevant facts that were
entirely excluded, also demonstrates that Apple received a trial that was nothing less than fair.
d. The Courts Decision to Vacate the Original VPNoD Damages Verdict and
the iMessage Verdict Is an Abuse of Discretion.
The Courts decision to vacate the Original VPNoD Damages Verdict and the iMessage
verdict is an independent abuse of discretion.
There are two reasons why the prior verdict could not have affected the Original VPNoD
damages award. First, case law on prior verdicts cautions against their use because of potential
confusion and deference to prior findings, not because of any tendency to inflame the jury. E.g.,
Dkt. No. 500 at 9. This concern does not apply here because the jury could not have deferred to
the prior damages finding because that was never before them, id. at 3, and there can be no
confusion from the consolidated jury knowing that a conclusively determined fact was

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conclusively determined. Second, to the extent the vacatur of the VPNoD verdict stems from
concerns that the prior verdict could have influenced the royalty rate simply because the jury
may have held the prior trial against Apple in this one, this concern was conclusively remedied
in the Courts final instructions. See 2/2/2016 TT at 158:20-22 (damages may not be awarded to
punish Apple or to set an example.). The Court cannot ignore this instruction.
Similarly, the Court appears to conclude that the prior verdict tainted the iMessage
liability finding merely by speculating that the jury may have found it more likely that iMessage
infringed because infringement was already established for VPNoD and most of FaceTime. But
the possibility of this type of thinking does not cause prejudicial spillover. Were it otherwise,
Apple could not receive a fair trial on the Original FaceTime in the same case with the
Original VPNoD. Similarly, if that were true, Apple could not receive a fair trial on all of
iMessage, New FaceTime, and New VPNoD because of the possibility that strong evidence on
one feature may give rise to the possibility that a juror therefore finds it more likely that the other
features also infringe. Yet cases routinely involve multiple features because the juries are
entrusted to sort through these issues. Apple was not deprived of a fair trial on iMessage.
III.

CONCLUSION
In sum, the Court should grant VirnetXs motion because the challenged evidence was

admissible under U.S. Surgical. Even if Apple had actually objected to the evidence at trial, it
would have been error for the Court to exclude it. In any event, the Court simply does not have
discretion to grant a new trial based on unpreserved error under Carson and Nissho II. VirnetX
respectfully asks that the Court re-evaluate its New Trial Order in light of the teachings of U.S.
Surgical, the evidences true probative value, the Courts instructions curative effect on any
prejudicial impact, Rule 61, and all other considerations raised above. For these reasons,
VirnetX respectfully requests that the Court grant its Motion for Reconsideration.
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DATED: August 10, 2016.

Respectfully submitted,
CALDWELL CASSADY & CURRY
/s/ Bradley W. Caldwell________________
Bradley W. Caldwell
Texas State Bar No. 24040630
Email: bcaldwell@caldwellcc.com
Jason D. Cassady
Texas State Bar No. 24045625
Email: jcassady@caldwellcc.com
John Austin Curry
Texas State Bar No. 24059636
Email: acurry@caldwellcc.com
Daniel R. Pearson
Texas State Bar No. 24070398
Email: dpearson@caldwellcc.com
Hamad M. Hamad
Texas State Bar No. 24061268
Email: hhamad@caldwellcc.com
Justin T. Nemunaitis
Texas State Bar No. 24065815
Email: jnemunaitis@caldwellcc.com
Christopher S. Stewart
Texas State Bar No. 24079399
Email: cstewart@caldwellcc.com
John F. Summers
Texas State Bar No. 24079417
Email: jsummers@caldwellcc.com
Jason S. McManis
Texas State Bar No. 24088032
Email: jmcmanis@caldwellcc.com
Warren J. McCarty, III
Illinois State Bar No. 6313452
Email: wmccarty@caldwellcc.com
CALDWELL CASSADY CURRY P.C.
2101 Cedar Springs Road, Suite 1000
Dallas, Texas 75201
Telephone: (214) 888-4848
Facsimile: (214) 888-4849
Robert M. Parker
Texas State Bar No. 15498000
Email: rmparker@pbatyler.com
R. Christopher Bunt

Case 6:10-cv-00417-RWS Document 914 Filed 08/10/16 Page 26 of 26 PageID #: 31643

Texas State Bar No. 00787165


Email: rcbunt@pbatyler.com
PARKER, BUNT & AINSWORTH, P.C.
100 East Ferguson, Suite 1114
Tyler, Texas 75702
Telephone: (903) 531-3535
Telecopier: (903) 533-9687
T. John Ward, Jr.
Texas State Bar No. 00794818
Email: jw@wsfirm.com
Claire Abernathy Henry
Texas State Bar No. 24053063
Email: claire@wsfirm.com
WARD, SMITH & HILL, PLLC
1507 Bill Owens Parkway
Longview, Texas 75604
Telephone: (903) 757-6400
Facsimile: (903) 757-2323
ATTORNEYS FOR PLAINTIFF
VIRNETX INC.
CERTIFICATE OF SERVICE
The undersigned certifies that a true and correct copy of the foregoing document was
served on all counsel of record via the Courts electronic filing system on August 10, 2016.
/s/ Bradley W. Caldwell
Bradley W. Caldwell