Lucent Technologies, Inc. et al v. Gateway, Inc. et al

MEMORANDUM OF CONTENTION OF FACTS AND LAW

S.D. Cal.January 14, 2008

LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 David A. Hahn, SBN 125784 HAHN & ADEMA 501 West Broadway, Suite 1600 San Diego, California 92101-3595 Telephone (619) 235-2100 Facsimile (619) 235-2101 Attorneys for Lucent Technologies Inc. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) LUCENT TECHNOLOGIES INC. and MULTIMEDIA PATENT TRUST, Plaintiffs and Counterclaim-Defendants, v. GATEWAY, INC. and GATEWAY COUNTRY STORES LLC, GATEWAY COMPANIES, INC., GATEWAY MANUFACTURING LLC and COWABUNGA ENTERPRISES, INC., Defendants and Counter-claimants, and MICROSOFT CORPORATION, Intervenor and Counter-claimant, Case No. 07-CV-2000 H (CAB) consisting of matters severed from consolidated cases: 02-CV-2060 B (CAB) 03-CV-0699 B (CAB) 03-CV-1108 B (CAB) LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT AND LAW Date: February 20, 2008 Time: 9:00 A.M. Courtroom: 13, 5th Floor Honorable Marilyn L. Huff MICROSOFT CORPORATION, Plaintiff and Counter-Defendant, v. LUCENT TECHNOLOGIES INC., Defendant and Counter-claimant., LUCENT TECHNOLOGIES INC. and MULTIMEDIA PATENT TRUST, Plaintiffs, v. DELL INC., Defendant. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 1 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT i Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 TABLE OF CONTENTS TABLE OF AUTHORITIES ......................................................................................................... iii INTRODUCTION ...........................................................................................................................1 LUCENT’S CONTENTIONS OF MATERIAL FACT ..................................................................1 I. The Parties ...........................................................................................................................1 II. The Fleming ‘759 Patent......................................................................................................3 A. The Teaching Of The Asserted Claims Of The Fleming ‘759 Patent......................3 B. Infringement Of The Asserted Claims Of The Fleming ‘759 Patent.......................6 C. Validity Of The Asserted Claims Of The Fleming ‘759 Patent.............................23 D. Enforceability Of The Asserted Claims Of The Fleming ‘759 Patent...................28 III. The Day ‘356 Patent ..........................................................................................................30 A. The Teaching Of The Asserted Claims Of The Day ‘356 Patent ..........................30 B. Infringement Of The Asserted Claims Of The Day ‘356 Patent ...........................35 C. Validity Of The Asserted Claims Of The Day ‘356 Patent. ..................................51 IV. The Agulnick ‘295 Patent ..................................................................................................57 A. The Teaching Of The Asserted Claims Of The ‘295 Patent ..................................57 B. Infringement of the Asserted Claims Of The Agulnick ‘295 Patent .....................59 C. Validity of the Asserted Claims of the Agulnick ‘295 Patent ...............................72 V. Validity Of Multimedia Patent Trust .................................................................................78 A. Lucent’s Decision Not To Participate In MPEG-LA.............................................78 B. Lucent’s Attempts To License The Defendants To The Video Coding Patents....79 C. Alcatel Makes An Independent Decision To Join MPEG LA...............................79 D. Lucent’s Merger With Alcatel ...............................................................................80 E. The Formation Of MPT .........................................................................................82 F. The Structure And Operation Of MPT ..................................................................84 VI. Damages.............................................................................................................................86 A. Damages For Infringement Of The Fleming ‘759 Patent ......................................89 B. Damages For Infringement Of The Day ‘356 Patent.............................................92 C. Damages For Infringement Of The Agulnick ‘295 Patent.....................................95 AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) POINTS OF LAW .........................................................................................................................98 Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 2 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT ii Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 VII. Issues On Which Lucent Bears The Burden Of Proof.......................................................98 A. Infringement...........................................................................................................98 B. Damages...............................................................................................................104 VIII. Issues On Which Defendants Bear The Burden Of Proof ...............................................110 A. Validity ................................................................................................................110 B. Enforceability.......................................................................................................127 C. Trust-Related State-Law Claims..........................................................................132 ABANDONED ISSUES..............................................................................................................136 EXHIBITS TO BE OFFERED BY LUCENT.............................................................................136 WITNESSES TO BE OFFERED BY LUCENT.........................................................................136 AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 3 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT i Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 TABLE OF AUTHORITIES CASES A.B. Dick Co. v. Burroughs Corp., 713 F.2d 700 (Fed. Cir. 1983)..................................................................................................99 A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020 (Fed. Cir. 1992)........................................................................................ passim ABB Robotics, Inc. v. GMFanuc Robotics Corp., 828 F. Supp. 1386 (E.D. Wis. 1993), aff’d, 52 F.3d 1062 (Fed. Cir. 1995) ..........................128 ACS Hospital Sys., Inc. v. Montefiore Hospital, 732 F.2d 1572 (Fed. Cir. 1984)..............................................................................................109 Ajinomoto Co., Inc. v. Archer-Daniels-Midland Co., 1996 WL 621830 (D. Del. Oct. 21, 1996), aff’d, 228 F.3d 1338 (Fed. Cir. 2000)................109 Ajinomoto Co. v. Archer-Daniels-Midland Co., 1998 WL 151411 (D. Del. Mar. 13, 1998) ....................................................................113, 114 Akron Polymer Container Corp. v. Exxel Container, Inc., 148 F.3d 1380 (Fed. Cir. 1998)..............................................................................................126 Alpex Computer Corp. v. Nintendo Co. Ltd., 102 F.3d 1214 (Fed. Cir. 1996)................................................................................................98 Am. Standard Inc. v. Pfizer Inc., 722 F.Supp. 86 (D. Del. 1989)...............................................................................................114 American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350 (Fed. Cir. 1984)......................................................................................109, 110 Amgen Inc. v. Hoescht Marion Roussel, Inc., 314 F.3d 1313 (Fed. Cir. 2003)..............................................................................................111 Amstar Corp. v. Envirotech Corp., 730 F.2d 1476 (Fed. Cir. 1984), cert. denied, 469 U.S. 924 (1984)........................................99 Ashland Oil, Inc. v. Delta Resins & Refractories, Inc., 776 F.2d 281 (Fed. Cir. 1985)................................................................................................122 AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Atlas Powder Co. v. E.I. DuPont De Nemours, 750 F.2d 1569 (Fed. Cir. 1984)..............................................................................................111 Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 4 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT ii Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 Autogiro Co. of Am. v. United States, 384 F.2d 391 (Ct. Cl. 1967) .....................................................................................................96 Bandag, Inc. v. Gerrard Tire Co., 704 F.2d 1578 (Fed. Cir. 1983)..............................................................................................107 Bardin v. Daimler-Chrysler Corp., 39 Cal. Rptr. 3d 634 (Cal. Ct. App. 2006) .............................................................................133 Beckman Instruments, Inc. v. LKB Produkter AB, 892 F.2d 1547 (Fed. Cir. 1989)..............................................................................................108 Bell Communications Research Inc. v. Vitalink Communications Corp., 55 F.3d 615 (Fed. Cir. 1995)..................................................................................................100 In re Ben Franklin Assocs., 186 F.3d 301 (3d Cir. 1999)...................................................................................................131 Bio-Technology Gen. CgM. v. Genentech, Inc., 80 F.3d 1553 (Fed. Cir. 1996)................................................................................................130 Bowen v. Ziasun Tech., Inc., 11 Cal. Rptr. 3d 522 (Cal. App. Ct. 2004) .............................................................................133 Brucklemeyer v. Ground Heaters, Inc., 445 F.3d 1374 (Fed. Cir. 2006)..............................................................................................114 Budde v. Harley-Davidson, Inc., 250 F.3d 1369 (Fed. Cir. 2001)..............................................................................................109 Burroughs Wellcome Co. v. Barr Lab., Inc., 40 F.3d 1223 (Fed. Cir. 1994)................................................................................................116 C.R. Bard, Inc. v. M3 Systems, Inc., 157 F.3d 1340 (Fed. Cir. 1998)..............................................................................................126 Canon Computer Sys., Inc. v. Nu-Kote Int’l, Inc., 134 F.3d 1085 (Fed. Cir. 1998)..............................................................................................100 Catalina Lighting, Inc v. Lamps Plus, Inc., 295 F.3d 1277 (Fed. Cir. 2002)..............................................................................................126 Coleman v. Dines, 754 F.2d 353 (Fed. Cir. 1985)........................................................................................113, 129 Colorado v. New Mexico, 467 U.S. 310 (1984)...............................................................................................................109 AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Constant v. Advanced Micro-Devices, Inc., 848 F.2d 1560 (Fed. Cir. 1988)..............................................................................................114 Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 5 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT iii Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 Continental Can Co. v. Monsanto Co., 948 F.2d 1264 (Fed. Cir. 1991)......................................................................................120, 123 Cooper v. Goldfarb, 154 F.3d 1321 (Fed. Cir. 1998)........................................................................................ passim Corning Glass Works v. Sumitomo Elec. U.S.A., Inc., 868 F.2d 1251 (Fed. Cir. 1989)..........................................................................................96, 97 Correge v. Murphy, 705 F.2d 1326 (Fed. Cir. 1983)..............................................................................................119 Credle v. Bond, 25 F.3d 1566 (Fed. Cir. 1994)................................................................................................124 In re Cronyn, 890 F.2d 1158 (Fed. Cir. 1989)......................................................................................113, 114 Crown Operations Int’l Ltd. v. Solutia, Inc., 289 F.3d 1367 (Fed. Cir. 2002)......................................................................................111, 120 Crystal Semiconductor Corp. v. Tritech Microelectronics Int’l, Inc., 246 F.3d 1336 (Fed. Cir. 2001)..............................................................................................104 Cytologix Corp, v. Ventana Med. Sys., 424 F.3d 1168 (Fed. Cir. 2005)................................................................................................98 Daugherty v. Am. Honda Motor Co., 51 Cal. Rptr. 3d 118 (Cal. Ct. App. 2007) .............................................................................133 Demaco Corp. v. F. Von Langsdorff Licensing Ltd., 851 F.2d 1387 (Fed. Cir. 1988)......................................................................................122, 123 Dow Chem. Co. v. Sumitomo Chem. Co., 257 F.3d 1364 (Fed. Cir. 2001)................................................................................................99 Drexelbrook Controls, Inc. v. Magnetrol Int’l, Inc., 720 F. Supp. 397 (D. Del. 1989), aff’d, 904 F.2d 45 (Fed. Cir. 1990) ............................98, 101 DSU Medical Corp. v. JMS Co., Ltd., 471 F.3d 1293 (Fed. Cir. 2006) (en banc) .............................................................................101 Eagle Comtronics, Inc. v. Arrow Communications Labs., Inc., 305 F.3d 1303 (Fed. Cir. 2002), cert. denied, 537 U.S. 1172 (2003)....................................100 eBay Inc. v. MercExchange, L.L.C., 126 S.Ct 1837 (U.S. 2006).....................................................................................................106 AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Ecolab, Inc. v. Envirochem, Inc., 264 F.3d 1358 (Fed. Cir. 2001)................................................................................................97 Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 6 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT iv Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 Elk Corp. of Dallas v. GAF Bldg. Materials Corp., 168 F.3d 28 (Fed.Cir.1999)....................................................................................................125 In re Elsner, 381 F.3d 1125 (Fed. Cir. 2004)..............................................................................................114 Enzo Life Sciences, Inc. v. Digene Corp., 270 F.Supp.2d 484 (D. Del. 2003).........................................................................................125 Estee Lauder v. L’Oreal, S.A., 129 F.3d 588 (Fed. Cir. 1997)........................................................................................117, 118 Exxon Research and Eng’g Co. v. United States, 265 F.3d 1371 (Fed. Cir. 2001)..............................................................................................124 Finnigan Corp. v. Int’l Trade Comm’n, 180 F.3d 1354 (Fed. Cir. 1999)......................................................................................109, 116 Foster v. Am. Mach. & Foundry Co., 492 F.2d 1317 (2d Cir. 1974).................................................................................................106 In re Fritch, 972 F.2d 1260 (Fed. Cir. 1992)..............................................................................................121 Fujikawa v. Wattanasin, 93 F.3d 1559 (Fed. Cir. 1996)................................................................................................118 Gasser Chair Co., Inc. v. Infanti Chair Mfg. Corp., 60 F.3d 770 (Fed. Cir. 1995)..................................................................................................128 General Motors Corp. v. Devex Corp., 461 U.S. 648 (1983)...............................................................................................................105 Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970).......................................................................................104 Glaverbel Societe Anonyme v. Northlake Mktg. & Supply, Inc., 45 F.3d 1550 (Fed. Cir. 1995)................................................................................................120 Glaxo Inc. v. Novopharm Ltd., 52 F.3d 1043 (Fed. Cir. 1995)................................................................................................110 Glenayre Elec., Inc. v. Jackson, 443 F.3d 851 (Fed. Cir. 2006)................................................................................................104 Graham v. John Deere Co., 383 U.S. 1 (1966)............................................................................................................. passim AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Hahn v. Wong, 892 F.2d 1028 (Fed. Cir. 1989)..............................................................................................116 Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 7 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT v Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 Harbinger Capital Partners Master Fund I, Ltd. v. Granite Broad. Corp., 906 A.2d 218 (Del. Ch. 2006)................................................................................................131 In re Hayes Microcomputer Prods. Patent Litig., 982 F.2d 1527 (Fed. Cir. 1992)................................................................................................96 Heidelberg Harris, Inc. v. Mitsubishi Heavy Industries, Ltd., 1996 WL 680243 (N.D.Ill. 1996) ..........................................................................................126 Heighley v. J.C. Penney Life Ins. Co., 257 F. Supp. 2d 1241 (C.D. Cal. 2003) .................................................................................133 Hemstreet v. Computer Entry Sys. Corp., 972 F.2d 1290 (Fed. Cir. 1992)..............................................................................................129 Hewlett-Packard Co. v. Bausch & Lomb Inc., 909 F.2d 1464 (Fed. Cir. 1990)..............................................................................................102 Hilgraeve Corp. v. Symantec Corp., 265 F.3d 1336 (Fed. Cir. 2001)................................................................................................96 Hoechst Celanese Corp. v. BP Chemicals Ltd.,78 F.3d 1575 (Fed. Cir. 1996) ....................................................................................................110 Horwath v. Lee, 564 F.2d 948 (C.C.P.A. 1977) ...............................................................................................119 Hybritech Inc. v. Monclonal Antibodies, Inc., 802 F.2d 1367 (Fed. Cir. 1986)..............................................................................109, 112, 113 Imagexpo L.L.C. v. Microsoft Corp., 284 F. Supp. 2d 365 (E.D. Va. 2003) ....................................................................................102 IMX, Inc. v. Lendingtree, LLC, No. Civ.03 1067 SLR, 2007 WL 1232184 (D. Del. April 25, 2007).....................................105 Innovative Scuba Concepts, Inc. v. Feder Industries, Inc., 26 F.3d 1112 (Fed. Cir. 1994)................................................................................................112 Int’l Glass Co. v. United States, 408 F.2d 395 (Ct. Cl. 1969) ...................................................................................................119 Intel Corp., v. U.S. Int’l Trade Comm’n, 946 F.2d 821 (Fed. Cir. 1991)................................................................................................109 Intel Corp. v. Via Technologies., Inc., 319 F.3d 1357 (Fed. Cir. 2003)..............................................................................................124 AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Intertech Licensing Corp. v. Brown & Sharpe Mfg. Co., 708 F. Supp. 1423 (D. Del. 1989)..........................................................................................129 Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 8 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT vi Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 Intervet Am., Inc. v. Kee-Vet Lab., Inc., 887 F.2d 1050,1055 (Fed. Cir. 1989).................................................................................97, 98 Itron, Inc. v. Benghiat, No. Civ.99-501.......................................................................................................................105 Izumi Prods. Co. v. Kononklijke Philips Elec N.V., 315 F. Supp. 2d 589 (D. Del. 2004).......................................................................................115 Johns Hopkins Univ. v. Cellpro, 894 F. Supp. 819 (D. Del. 1995)............................................................................................101 Jones v. Hardy, 727 F.2d 1524 (Fed. Cir. 1984)........................................................................................97, 109 In re Kahn, 441 F.3d 977 (Fed. Cir. 2006)................................................................................................121 Karlin Tech. Inc. v. Surgical Dynamics, Inc., 177 F.3d 968 (Fed. Cir. 1999)..................................................................................................97 Kemco Sales, Inc. v. Control Papers Co., 208 F.3d 1352 (Fed. Cir. 2000)................................................................................................97 Kimberly-Clark Corp. v. Johnson & Johnson, 745 F.2d 1437 (Fed. Cir. 1984)..............................................................................................118 King Instruments Corp. v. Perego, 65 F.3d 941 (Fed. Cir. 1995)..................................................................................................103 Kingsdown Medical Consultants v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988)................................................................................................125 In re Klopfenstein, 380 F.3d 1345 (Fed. Cir. 2004)..............................................................................................114 Koito Mfg. Co., Ltd. v. Turn-Key-Tech, LLC, 381 F.3d 1142 (Fed. Cir. 2004)..............................................................................................110 Kopp, Inc. v. United Tech., Inc., 539 A.2d 309 (N.J. Super. 1988) ...........................................................................................134 In re Kotzab, 217 F.3d 1365 (Fed. Cir. 2000)..............................................................................................121 Kridl v. McCormick, 105 F.3d 1446 (Fed. Cir. 1997)......................................................................................116, 117 AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) KSR Int’l. Co. v. Teleflex Inc., --- U.S. ---, 127 S. Ct. 1727 (2007)........................................................................120, 121, 122 Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 9 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT vii Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 Laitram Corp. v. Rexnord, Inc., 939 F.2d 1533 (Fed. Cir. 1991)................................................................................................99 Lamorte Burns & Co. v. Walters, 770 A.2d 1158 (N.J. 2001).....................................................................................................134 Leopold v. Tuttle, 549 A.2d 151 (Pa. Super. 1988).............................................................................................132 Lighting World, Inc. v. Birchwood Lighting, Inc., 382 F.3d 1354 (Fed. Cir. 2004)................................................................................................99 Lisle Corp., v. A.J. Mfg. Co., No. 02 C 7024, 2004 WL 765872 (N.D. Ill. April 7, 2004) ..................................................105 Lock v. Schreppler, 426 A.2d. 856 (Del. Super. Ct. 1981) ....................................................................................132 Lozano v. AT&T Wireless Servs., 504 F.3d 718 (9th Cir. 2007) .................................................................................................133 Lucent Technologies Inc. v. Newbridge Networks Corp., 168 F. Supp. 2d 181 (D. Del. 2001).......................................................................................102 Lutzker v. Plet, 843 F.2d 1364 (Fed. Cir. 1988)..............................................................................................118 Mahurkar v. C.R. Bard Inc., 79 F.3d 1572 (Fed. Cir. 1996)........................................................................112, 113, 115, 117 Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544 (Fed. Cir. 1990)................................................................................................101 Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995), aff’d, 517 U.S. 370 (1996) .................................................97, 98 McGinley v. Franklin Sports, Inc., 262 F.3d 1339 (Fed. Cir. 2001)..............................................................................109, 110, 120 Med. Alert Ambulance, Inc. v. Atl. Health Sys., Inc., 2007 WL 2297335 (D.N.J. Aug. 6, 2007) .............................................................................134 Metro. Wire Corp. v. Falcon Prods. Inc., 528 F. Supp. 897 (E.D. Pa. 1981) ..........................................................................................127 Meyers v. Brooks Shoe, Inc., 912 F.2d 1459 (Fed. Cir. 1990), overruled ............................................................................129 AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Mikohn Gaming Corp. v. Acres Gaming, Inc., No. CV-S-97-1383-EJW, 2001 WL 34778689 (D. Nev. Aug. 2, 2001) ...............................105 Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 10 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT viii Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 Miles Lab., Inc. v. Shandon Inc., 997 F.2d 870 (Fed. Cir. 1993)................................................................................................124 Minco. Inc. v. Combustion Eng’g. Inc., 903 F. Supp. 1204 (E.D. Tenn. 1995), aff’d, 95 F.3d 1109 (Fed. Cir. 1996) ........................128 Minnesota Mining & Mfg. Co. v. Johnson & Johnson Orhopaedics, Inc., 976 F.2d (Fed. Cir. 1992).................................................................................................97, 110 Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261 (Fed. Cir. 1986), cert. denied, 479 U.S. 1030 (1987)......................99, 101, 102 Motorola, Inc. v. Interdigital Tech. Corp., 121 F.3d 1461 (Fed. Cir. 1997)..............................................................................................111 nCube v. Sea Change Int’l, Inc., 313 F. Supp. 2d 361 (D. Del. 2004).......................................................................................102 Newkirk v. Lulejian, 825 F.2d 1581 (Fed. Cir. 1987)..............................................................................................118 North Am. Vaccine, Inc. v. American Cyanamid Co., 7 F.3d 1571 (Fed. Cir. 1993)..................................................................................................124 Northern Telecom Inc. v. Datapoint Corp., 23 U.S.P.Q.2d 1881 (N.D. Tex. 1992)...................................................................................129 Oak Indus., Inc. v. Zenith Electronics Corp., 726 F. Supp. 1525 (N.D. Ill. 1989) ........................................................................................119 Odetics Inc. v. Storage Tech. Corp., 185 F.3d 1259 (Fed. Cir. 1999)........................................................................................99, 100 Okajima v. Bourdeau, 261 F.3d 1350 (Fed. Cir. 2001)..............................................................................................120 Oney v. Ratliff, 182 F.3d 893 (Fed. Cir. 1999)................................................................................................109 Paice LLC v. Toyota Motor Corp., No. 2:04-CV-211-DF, 2006 WL 2385139 (E.D. Tex. Aug. 16, 2006)..................................107 Paper Converting Mach. Co. v. Magna-Graphics Corp., 745 F.2d 11 (Fed. Cir. 1984)..................................................................................................100 Pennwalt Corp. v. Durand-Wayland, Inc., 83 F.2d 931 (Fed. Cir. 1987)....................................................................................................99 AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Pentec, Inc. v. Graphic Controls Corp., 776 F.2d 309 (Fed. Cir. 1985)................................................................................................122 Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 11 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT ix Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 Playtex Products, Inc. v. Procter & Bamgle Co., 400 F.3d 901 (Fed. Cir. 2005)..................................................................................................97 Potash Co. of Am. v. International Minerals & Chem. Corp., 213 F.2d 153 (10th Cir. 1954) ...............................................................................................129 PPG Indus., Inc. v. Guardian Indus. Corp., 75 F.3d 1558 (Fed. Cir. 1996)................................................................................................111 Preemption Devices, Inc. v. Minnesota Mining & Mfg. Co., 803 F.2d 1170 (Fed. Cir. 1986)..............................................................................................102 Price v. Symsek, 988 F.2d 1187 (Fed. Cir. 1993)......................................................................................112, 113 R2 Med. Sys., Inc. v. Katecho, Inc., 931 F. Supp. 1397 (N.D. Ill.1996) .........................................................................................129 Ralston Purina Co. v. Far-Mar-Co, 772 F.2d 1570 (Fed. Cir. 1985)..............................................................................................108 RCA Corp. v. Data Gener. Corp., 701 F. Supp. 456 (D. Del. 1988)............................................................................................128 Read Corp. v. Portec, Inc., 970 F.2d 816 (Fed. Cir. 1992)..................................................................................................98 Refac Int’l, Ltd. v. IBM, 798 F.2d 459 (Fed. Cir. 1986)................................................................................................102 Regents of University of California v. Eli Lilly & Co., 119 F.3d 1559 (Fed. Cir. 1997)..............................................................................................125 Richardson v. Suzuki Motor Co., Ltd., 868 F.2d 1226 (Fed. Cir. 1989)......................................................................................110, 111 Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995)........................................................................................103, 105 Ruiz v. A.B. Chance Co., 234 F.3d 654 (Fed. Cir. 2000)................................................................................................122 Scognamillo v. Credit Suisse First Boston, LLC, No. C03-2061 THE, 2005 U.S. Dist. LEXIS 20221 (N.D. Cal. Aug. 25, 2005)...................133 Scripps Clinic & Research Found. v. Genentech, Inc., 927 F.2d 1565 (Fed. Cir. 1991)......................................................................................110, 125 AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Seal-Flex, Inc. v. Athletic Track & Court Construction, 172 F.3d 836 (Fed. Cir. 1999)............................................................................................96, 98 Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 12 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT x Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 Sewall v. Walters, 21 F.3d 411 (Fed Cir. 1994)...........................................................................................112, 117 Shatterproof Glass Corp. v. Libbey-Owens Ford Co., 758 F.2d 613 (Fed. Cir. 1985)........................................................................................106, 124 Speedplay Inc. v. Bebop Inc., 211 F.3d 1245 (Fed. Cir. 2000)..............................................................................................126 SRI Int’l, Inc. v. Advanced Tech. Lab., Inc., 127 F.3d 1462 (Fed. Cir. 1997)......................................................................................107, 108 SRI Intern. v. Matsushita Elec. Corp., 775 F.2d 1107 (Fed. Cir. 1985)................................................................................................98 Stephenson v. Capano Dev., Inc., 462 A.2d 1069 (Del. 1983) ....................................................................................................132 Stiftung v. Renishaw PLC, 945 F.2d 1173 (Fed. Cir. 1991)................................................................................................99 Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d 1530 (Fed. Cir. 1983)..............................................................................................122 Stryker Corp. v. Davol, Inc., 75 F. Supp. 2d 741 (W.D. Mich. 1999) .................................................................................100 Stryker Corp. v. Davol, Inc., 75 F. Supp. 2d 746 (W.D. Mich. 1999) .........................................................................105, 106 Symbol Techs., Inc. v. Opticon, Inc., 935 F.2d 1569 (Fed. Cir. 1991)..............................................................................................123 Takeda Chem. Indus., LTD v. Alphapharm PTY., Ltd., 492 F.3d 1350 (Fed. Cir. 2007)......................................................................................120, 121 Tec Air, Inc. v. Denso Mfg. Mich. Inc., 192 F.3d 1353 (Fed. Cir. 1999)..............................................................................................105 Teleflex, Inc. v. Ficosa N. Am. Corp., 299 F.3d 1313 (Fed. Cir. 2002)..............................................................................................111 Terarecon, Inc. v Fovia, Inc., 2006 WL 2691405 (N.D. Cal. Sep. 20, 2006) .......................................................................133 Texas Instruments, Inc. v. United States Int’l Trade Comm’n., 988 F.2d 1165 (Fed. Cir. 1993)..............................................................................................123 AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) The Liposome Co. v. Vestar Inc., 36 U.S.P.Q.2d 1295 (D. Del. 1994) .......................................................................................124 Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 13 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT xi Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 Union Oil Co. v. Atlantic Richfield Co., 208 F.3d 989 (Fed. Cir. 2000)..................................................................................................97 Unisplay S.A. v. American Elec. Sign Co., 69 F.3d 512 (Fed. Cir. 1995)..................................................................................................104 United States v. Adam, 383 U.S. 39 (1966).................................................................................................................121 Valutron N.V. v. NCR Corp., 33 U.S.P.Q. 2d 1986 (S.D. Ohio 1992), aff’d without op., 5 F.3d 1506 (Fed. Cir. 1993) .....128 Vess v. Ciba-Geigy Corp., USA, 317 F.3d 1097 (9th Cir. 2003) ...............................................................................................133 Voda v. Cordis Corp., No. CIV-03-1512-L, 2006 WL 2570614 (W.D. Okla. Sept. 5, 2006)...........................106, 107 W.L. Gore & Assocs., Inc. v. Garlock, Inc., 721 F.2d 1540 (Fed. Cir. 1983)..............................................................................................119 Wafer Shave, Inc. v. Gillette Co., 857 F. Supp. 112 (D. Mass. 1993), aff’d without op., 26 F.3d 140 (Fed. Cir. 1994).............128 Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 901 A.2d 106 (Del. 2006) ......................................................................................................132 Wang Lab., Inc. v. Mitsubishi Elec. Am. Inc., 30 U.S.P.Q.2d 1241 (C.D. Cal. 1993)....................................................................................112 Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17 (1997).........................................................................................................100, 101 Water Tech. Corp. v. Calco, Ltd., 850 F.2d 660 (Fed. Cir. 1988)................................................................................................101 Woodland Trust v. Flowertree Nursery, Inc., 148 F.3d 1368 (Fed. Cir. 1998)......................................................................................113, 115 Z4 Technologies, Inc. v. Microsoft Corp., 507 F.3d 1340 (Fed. Cir. 2007)..............................................................................................113 z4 Techs., Inc. v. Microsoft Corp., 434 F. Supp. 2d 437 (E.D. Tex. 2006)...........................................................................106, 107 Zenith Lab., Inc. v. Bristol-Myers Squibb Co., 19 F.3d 1418 (Fed. Cir. 1994)..................................................................................................98 AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) STATUTES Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 14 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT xii Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 6 Del. Code Ann. § 1301(3) and (4) ............................................................................................131 Del. Code Ann. § 1304(a)(1) .......................................................................................................131 Del. Code Ann. § 1304(a)(2) .......................................................................................................130 6 Del. Code Ann. § 1305(a) and (b).............................................................................................131 12 Del. Code Ann. § 3806(a) .........................................................................................................82 28 U.S.C. § 1961..........................................................................................................................105 28 U.S.C. § 2201..........................................................................................................................107 35 U.S.C. § 102...................................................................................................................... passim 35 U.S.C. § 103....................................................................................................................120, 121 35 U.S.C. § 112...................................................................................................................... passim 35 U.S.C. § 271(a) ................................................................................................................. passim 35 U.S.C. § 271(b) ......................................................................................................................101 35 U.S.C. § 271(c) ................................................................................................................. passim 35 U.S.C. § 271(f)....................................................................................................................36, 37 35 U.S.C. § 282...................................................................................................................... passim 35 U.S.C. § 283............................................................................................................................106 35 U.S.C. § 284....................................................................................................................103, 105 35 U.S.C. § 285............................................................................................................................108 35 U.S.C. § 286............................................................................................................................127 35 U.S.C. § 287......................................................................................................................85, 107 AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 15 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 1 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 I. INTRODUCTION Under Local Rule 16.1(f)(2) and this Court’s scheduling orders, Lucent Technologies Inc. (“Lucent”) hereby submits its Memorandum of Contentions of Fact and Law, which include its pretrial disclosures under Federal Rule of Civil Procedure 26(a)(3). Lucent also incorporates by reference its briefs on summary judgment concerning the Fleming ‘759 patent, the Day ‘356 patent, the Agulnick ‘295 patent, and trust-related claims and defenses. Lucent notes that it has prepared this Memorandum without the benefit of any pretrial disclosures from the Defendants. Accordingly, Lucent reserves the right to amend or supplement this Memorandum in response to Defendants’ disclosures. LUCENT’S CONTENTIONS OF MATERIAL FACT The Parties 1. Lucent is a corporation organized under the laws of the state of Delaware with its principal place of business at 600 Mountain Avenue, Murray Hill, NJ 07974. On November 30, 2006, Lucent became a wholly owned subsidiary (now indirect) of Alcatel SA, a corporation organized under the laws of the Republic of France. On the same day, Alcatel SA changed its name to Alcatel-Lucent. 2. Lucent, now doing business under the umbrella of Alcatel-Lucent, is a leading global supplier of communications equipment, including data, software, voice, and wireless-networking technologies. Researchers at Lucent’s Bell Laboratories have developed a wide variety of key innovations that have greatly enhanced the capabilities and utility of personal computers. Common features such as video display, video compression and decompression, and user interfaces have all benefited from Lucent’s research and development efforts. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 3. Lucent owns U.S. Patent No. 4,439,759 (“the Fleming ‘759 patent”); U.S. Patent No. 4,763,356 (“the Day ‘356 patent”); and 5,347,295 (“the Agulnick ‘295 patent”), with the right to sue for past infringement. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 16 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 2 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 4. Multimedia Patent Trust (“MPT”) is a Delaware Statutory Trust organized under the Delaware Statutory Trust Act, 12 Del. C. §§ 3801 et seq., having as trustee Mr. Gerard A. deBlasi, an individual having a business address of 991 Route 22 West, Bridgewater, NJ 08807. 5. MPT was formed on November 28, 2006 pursuant to a Trust Agreement executed on November 21, 2006. On November 28, 2006, Lucent and MPT executed a Patent Assignment by which Lucent assigned its entire right, title, and interest in and to the Trust Patents, along with the right to sue for past infringement (including all current and future claims and causes of action). The Trust Patents include U.S. Patent No. 4,383,272 (“the Netravali ‘272 patent”) and U.S. Patent No. 4,958,226 (“the Haskell ‘226 patent”). On October 1, 2007 this Court held as a matter of law that this assignment was valid and effective. See October 1, 2007 Order. 6. Microsoft Corporation is a corporation organized under the laws of the state of Washington with its principal place of business at One Microsoft Way, Redmond, Washington 98052. Microsoft makes, uses, sells, and offers for sale in the United States, and imports into the United States, software for computer systems, components, and accessories. 7. Dell Inc. is a corporation organized under the laws of the state of Delaware with its principal place of business at One Dell Way, Round Rock, Texas 78682. Dell makes, uses, sells, and offers for sale in the United States, and imports into the United States, computer systems, components, software, and accessories. 8. Gateway, Inc. is a company organized under the laws of the state of Delaware with its principal place of business at 7565 Irvine Center Drive, Irvine, CA 92618. 9. Gateway Country Stores LLC is a company organized under the laws of the state of Delaware with its principal place of business at 7565 Irvine Center Drive, Irvine, CA 92618. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 10. Gateway Companies, Inc. is a company organized under the laws of the state of Delaware with a place of business at 7565 Irvine Center Drive, Irvine, CA 92618. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 17 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 3 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 II. A. 11. Gateway Manufacturing LLC is a company organized under the laws of the state of Delaware with a place of business at 7565 Irvine Center Drive, Irvine, CA 92618. 12. Cowabunga Enterprises, Inc. is a company organized under the laws of the state of Delaware with a place of business at 7565 Irvine Center Drive, Irvine, CA 92618. 13. Gateway, Inc.; Gateway Country Stores LLC; Gateway Companies, Inc.; Gateway Manufacturing LLC; and Cowabunga Enterprises, Inc. (collectively, “Gateway”) make, use, sell, and offer for sale in the United States, and import into the United States, computer systems, components, software, and accessories. The Fleming ‘759 Patent The Teaching Of The Asserted Claims Of The Fleming ‘759 Patent 14. Lucent is the owner of the Fleming ‘759 patent with the right to sue for past infringement. 15. The Fleming ‘759 patent relates to a digital image display system that makes use of three modes of access to color data values, one where color is directly specified and two others where colors are specified as indexes into a color memory. (See, e.g., ‘759 patent, claim 1) The inventions of the Fleming ‘759 patent provide display device independence that enables content providers to create graphics content portable to a variety of display devices regardless of the particular hardware configuration of the devices. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 16. Before the inventions of the Fleming ‘759 patent in the early 1980’s, most commercial information display systems were textual in nature, representing information solely using text characters. The desire to present information graphically on such display systems led to the use of blocky graphical characters called “block mosaics” from which extremely crude graphical imagery could be constructed. These initial systems required specific display hardware configurations, and content was therefore limited to those configurations, with each vendor having their own specific, Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 18 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 4 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 fixed configuration incompatible with that of other vendors. Display devices tended to be single function, single resolution devices, operating in a particular manner and no other. If one wanted to increase the resolution or increase the number of colors, one had to physically modify the hardware. 17. Recognizing the limitations of these systems, the inventors of the Fleming ‘759 patent invented the technology of the Fleming ‘759 patent at AT&T Bell Labs. One application for the inventions of the Fleming ‘759 patent was videotex systems. As the Fleming ‘759 patent explains, videotex systems enabled customers to access a remote host computer and associated database with a digital image display terminal. (Fleming ‘759 patent, col. 1, lns. 39-42) The technology of the Fleming ‘759 patent became the basis of the North American Presentation Layer Protocol Syntax (NAPLPS), the display device independent videotex protocol used in North America that allowed content providers to create graphics content portable across any device that supported the protocol. 18. Asserted claim 1 of the Fleming ‘759 patent reads as follows: 1. In a digital image display system: a memory for storing color data values; processing means responsive to a predetermined command and data sequence comprising at least one command, the processing means decoding the predetermined command and data sequence, the predetermined command and data sequence selecting one of a plurality of modes of access to color data values, the modes comprising a first mode of access wherein an in-use foreground color is directly specified as a color data value; a second mode of access wherein the in-use foreground color is specified as an index into the color memory; and a third mode of access wherein the in-use foreground color and an in-use background color are specified as indexes into the color memory; and display means responsive to the processing means, the display means displaying the colors associated with the color data values accessed by the selected mode. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 19 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 5 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 19. Claim 1 thus includes a number of different elements. First, claim 1 includes a memory, or color memory, for storing color data values. Second, claim 1 includes a processing means responsive to a predetermined command and data sequence comprising at least one command, which selects one of a plurality of modes of access to color data values. In a first mode of access, an in-use foreground color is directly specified as a color data value; in a second mode of access, the in-use foreground color is specified as an index into a color memory; and in a third mode of access, the in- use foreground color and an in-use background color are specified as indexes into the color memory. The court construed the terms “memory” and “color memory” as “a color map that stores a table of color data values indexed by numbers,” construed the term “in-use foreground color” as “a color that will be used as the foreground color for subsequently received text and graphics drawing commands until changed,” and construed the term “in-use background color” as “a color that will be used as the background color for subsequently received text and graphics drawing commands until changed.” The court also construed the “processing means” to have the following corresponding structure under 35 U.S.C. § 112, ¶ 6: Data processor 1 programmed to perform the algorithm of boxes 301, 302, and 303 of Figure 3 and boxes 401, 402, 403, 404, 405, 407, 408, and 411 of Figure 4 (See, Col.5, line 60 - Col.6, line 19, Col.6, lines 20-23 (except for “and for setting foreground and background in-use colors for two of these modes”), lines 24-29, 29-32 (except for “and the background and foreground color”), lines 33- 43) 20. Asserted claim 2 of the Fleming ‘759 patent reads as follows: 2. A digital image display system comprising: a color memory for storing color data values; processing means responsive to predetermined command and data sequences, the processing means, responsive to a first command, selecting a mode of access to the color memory; and responsive to a second command, setting a color data value in the color memory; and AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 20 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 6 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 B. display means responsive to the processing means, the display means displaying a color associated with the color data value accessed by the selected mode. 21. Claim 2 includes a color memory as claim 1, and also includes a processing means responsive to predetermined command and data sequences that selects a mode of access to the color memory and sets a color data value in the color memory. The Court construed the corresponding structure for the mode-selecting function of claim 2 to be the same as the corresponding structure for the mode-selecting function of claim 1. The Court construed the corresponding structure for the color-setting function of claim 2 as follows: Data processor 1 programmed to perform the algorithm shown in Fig. 5: boxes 501, 504, 506, 508, and 510 (See, Col. 7, lines 1except for “The 4-17 (except for “or (2) in color mode 0, for setting”), Col. 7, lines 53-64 (sequence of boxes 501, 504, 506, 508, and 510 is”)). 22. Asserted claim 3 depends from claim 2 and includes the following additional limitation: “wherein the processing means responsive to a second command sets plural color data values in color memory.” The Court construed the corresponding structure for the color-setting function of claim 3 as: Data processor 1 programmed to perform the algorithm shown in Fig. 5: Boxes 501, 504, 506, 508, and 510 and the line exiting box 510 (See, Col. 7 Lns. 14-17 [except for “or (2) in color mode 0, for setting”], Col. 7, lines 53-65. Infringement Of The Asserted Claims Of The Fleming ‘759 Patent AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 23. Lucent contends that all computer systems made, used, sold or offered for sale in the United States, or imported into the United States, by Gateway and Dell between 1998 and May 19, 2001, and that included a Windows operating system (collectively the “Accused Products”) contained each and every element of claims 1 through 3 of the ‘759 patent and therefore literally infringed those claims. Additionally, Dell and Gateway induced and contributed to the infringement of claims 1-3 to the extent they sold computers without displays. These computers as sold included Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 21 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 7 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 all of the elements of claims 1-3 other than a display, but were ready for connection, and were intended by Gateway or Dell to be connected, to a standard display, and therefore constituted, and were known by Dell and Gateway to constitute, a material part of the invention especially made and adapted for use in an infringement of claims 1-3 with no substantial noninfringing uses. Dell and Gateway also encouraged their customers to connect their computers to displays. Dell and Gateway knew, or should have known, that their actions would induce actual infringements, and acted with affirmative intent to cause direct infringement. 24. Regarding claim 1, each of the Accused Products includes one or more color memories that store one or more color look-up tables, for example a color look-up table stored in memory in the graphics subsystem, or in system memory as a Windows system or logical palette. Each of the Accused Products also includes a processor (e.g., the CPU) that can select, based on predetermined BIOS and GDI command and data sequences, one of three modes of access to color data values: a first mode wherein the in-use foreground color is directly specified as a color data value; a second mode wherein the in-use foreground color is specified as an index into the color memory; and a third mode wherein the in-use foreground and background colors are specified as indexes into the color memory. These predetermined command and data sequences include patterns of BIOS functions and register values, or Windows GDI commands and parameters. The Accused Products also include, or are intended to be used with, a display for displaying the colors associated with the mode selected by the processor. Regarding claims 2 and 3, each of the Accused Products can also set one or more color data values in a color memory in response to BIOS or GDI command and data sequences. 25. Dells’ infringement is more particularly explained in the following claim charts, and in the March 31, 2006 Expert Report of Jake Richter: AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) U.S. Patent No. 4,439,759 Dell Accused Products 1. In a digital image display system: The Accused Products are digital image display systems. The Accused Products are compatible with the video Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 22 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 8 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 U.S. Patent No. 4,439,759 Dell Accused Products AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) graphics array (VGA) standard (see, e.g., DELL 171883-84, 184294, DELL 260275-76; LUC 1246197-198, LUC 1246170, LUC 1248250, LUC 1284006, LUC 1284865, LUC 1285849; MSLT_1061320, MSLT_0123091; Decker Tr. at 73-80, 85-86, 99, 121, 222-223; Chiappini Tr. at 2050-2051, Chiappini Exs. 4-8; Louie Tr. at 53-54, Louie Exs. 7-25; NVIDIA 00024, 00145, 00285; CREATIVE 000025-26, 000055-56, 000090, 000116, 000135, 000155; Bjernfalk Ex. 6; INTEL 00663, 00677, 01180) and include the Windows Graphics Device Interface (GDI). (See, e.g., DELL 171883-84, DELL 184294, DELL 260276, DELL 232419, DELL 272230, DELL 231100-03; LUC 1246197- 98, LUC 1283987-89, LUC 1284006, LUC 1284865, LUC 1285849; MSLT_1061320, MSLT_0123091; Decker Tr. at 64-71; Sykes Tr. at 71; Wong Tr. at 23; Wong Ex. 2.) a memory for storing color data values; The Accused Products include a graphics subsystem having at least one color map memory. (See, e.g., DELL 184650, 260239; Decker Tr. at 98-100, 123-124; LUC 1288923.) This memory includes a color map that stores a table of color data values (e.g., the red, green, and blue (RGB) color components) indexed by numbers. For example, the Accused Products store color look-up tables or palettes in memory in the video hardware or in system memory as Windows system or logical palettes. (Id.; see also, e.g., LUC 1281057, 1283964; Sykes Tr. at 155-161, 171-173; Wong Tr. at 67-72.) processing means responsive to a predetermined command and data sequence comprising at least one command, the processing means decoding the predetermined command and data sequence, the predetermined command and data sequence selecting one of a plurality of modes of access to color data values, the modes comprising The Accused Products include a processor, such as a central processor and/or a graphics processor, responsive to predetermined command and data sequences, for selecting one of a plurality of modes of access to color data values. (See, e.g., DELL 262572, 264688, 266914.) These predetermined command and data sequences include patterns of BIOS interrupt commands and register values, or GDI commands and parameters, executed by a processor in the infringing system running BIOS or Microsoft Windows. (Id.; see, e.g., Decker Tr. at 91-96; LUC 1281049-81, LUC 1288921-22.) This structure is equivalent to the corresponding structure for the processing means disclosed in the patent specification (a data processor programmed to perform the algorithm of boxes 301, 302, and 303 of Figure 3 and boxes 401, 402, 403, 404, 405, 407, 408, and 411 of Figure 4), and any differences are insubstantial. In the Accused Products, a processor runs an algorithm that decodes the software commands and evaluates the associated data sequences to select one of a number of different modes of access to color data values, thus Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 23 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 9 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 U.S. Patent No. 4,439,759 Dell Accused Products AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) performing the claimed function. For example, the Accused Products support numerous display modes, such as various indexed color, direct color, true color, and alphanumeric display modes. (See, e.g., Decker Tr. at 86-88, 90-91, 100- 101; LUC 1270873, LUC 1273246, LUC 1278107-09, LUC 1281046-82, LUC 1288921-22.) These display modes constitute modes of access to color data values because they determine manners of retrieving color data values from memory. The Accused Products include various predetermined command and data sequences for selecting one of the available display modes, for example, through the BIOS software, Microsoft GDI software, and/or video device driver software. For example, the BIOS “Set Video Mode” command may be specified with Interrupt 10h with the AH register set to 00h, in which the data value in the AL register specifies the mode number. (See, e.g., LUC 1273246-50.) As another example, the VESA “Set Extended Video Mode” command may be specified by an application using routines similar to the “SetVBEMode” subroutine in the VESA VBE specification, in which the display mode is specified as a parameter to the subroutine, for example, the value “mode” in the call SetVBEMode(mode). (See, e.g., GW-LT 263528-29, GW- LT 263544; see also, e.g., VESA BIOS Extension (VBE) Core Functions Standard, Version: 3.0, Sep. 16, 1998 at LUC 1278107-09, LUC 1278129-32.) As another example, the Windows command “ChangeDisplaySettings” may be used to select a display mode specified by the “lpDevMode” parameter. (See, e.g., LUC 1281046-48; see also, e.g., “ChangeDisplaySettingsEx” at LUC 1281059-62.) Different modes of access to color data values may also be selected with GDI command and data sequences that specify colors as RGB values or index values, including sequences that use the “SetBkMode,” “SetBkColor,” “SetTextColor,” “SetDCPenColor,” or “SetDCBrushColor” commands. (See, e.g., LUC 1281049-81; Sykes Exs. 7-10.) Exemplary illustrations of the above command and data sequences are described below. a first mode of access wherein an in-use foreground color is directly specified as a color data value; The Accused Products include a mode of access to color data values in which an in-use foreground color may be directly specified as a color data value. For example, a sequence of GDI commands may be executed in Windows that specifies an in-use foreground color as an RGB color value with the “SetTextColor,” “SetDCBrushColor,” and “SetDCPenColor” GDI commands. (See, e.g., LUC 1281049-081.) One exemplary GDI command and data Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 24 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 10 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 U.S. Patent No. 4,439,759 Dell Accused Products AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) sequence includes the following pattern where a transparent background is set and an in-use foreground color with the RGB values “150,100,200” is specified: SetBkMode(hdc, TRANSPARENT ); SetTextColor(hdc, PALETTERGB( 150, 100, 200)) Any text drawn after the in-use foreground color is set using either of the exemplary command and data sequences above, via the TextOut() function of Windows for example, will be drawn using the directly specified in-use foreground color of 150, 100, 200 (R,G,B) until changed. Discovery provided by Dell, Microsoft, and Gateway demonstrate that the Accused Products support these GDI commands and this mode of access. (See, e.g., Decker Tr. at 69-70, 146-147; Sykes Tr. at 71, 184; Sykes Exs. 7-10; Wong Tr. at 23; Wong Ex. 2; Pike Tr. at 42-43; Anderson Tr. at 141-144.) a second mode of access wherein the in-use foreground color is specified as an index into the color memory; and The Accused Products also include a mode of access to color data values in which an in-use foreground color may be specified as an index into the color memory. For example, in a 256-color graphics display mode, the “Write Character and Attribute” BIOS command, specified with Interrupt 10h with the AH register set to 09h, specifies an in-use foreground color in the BL register as an index value into the color memory. (See, e.g., LUC 1270448-53, 1270467, 1273246-50, 1273252-53.) Similarly, in a 16- color graphics display mode operating in write-mode 3, an in-use foreground color is specified as an index value when loaded into the Set-Reset Register. (See, e.g., LUC 1270507-08, 1270513-14.) As another example, a Windows program may execute a sequence of GDI commands that specifies an in-use foreground color as an index value into the color memory with GDI commands such as “SetTextColor,” “SetDCBrushColor,” or “SetDCPenColor.” (See, e.g., LUC 1281049-81; Sykes Tr. at 183-184, 189; Wong Tr. at 94.) One exemplary GDI command and data sequence includes the following pattern where a transparent background is set and an in-use foreground color with an index value “3” is specified: SetBkMode(hdc, TRANSPARENT ); SetTextColor(hdc, PALETTEINDEX( 3 )) Any text drawn after the in-use foreground color is set using the exemplary command and data sequence above, via the TextOut() function of Windows for example, will be drawn using the specified in-use foreground color that has an index of 3 until changed. Discovery provided by Dell, Microsoft, and Gateway demonstrate that the Accused Products support these GDI commands and this mode of access. (See, e.g., Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 25 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 11 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 U.S. Patent No. 4,439,759 Dell Accused Products Decker Tr. at 69-70, 146-147; Sykes Tr. at 71, 184; Sykes Exs. 7-10; Wong Tr. at 23; Wong Ex. 2; Pike Tr. at 42- 43; Anderson Tr. at 141-144.) a third mode of access wherein the in-use foreground color and an in-use background color are specified as indexes into the color memory; and The Accused Products also include a mode of access to color data values in which an in-use foreground color and an in-use background color are specified as indexes into the color memory. For example, in an alphanumeric VGA display mode, the “Write Character and Attribute” BIOS command, specified with Interrupt 10h with the AH register set to 09h, specifies an in-use foreground color and an in-use background color as index values into the color memory. (See, e.g., LUC 1270445-47, 1270456, 1273246-50, 1273252-53.) As another example, a Windows program may execute a sequence of GDI commands that specifies in-use foreground and background colors as index values into the color memory with GDI commands such as “SetBkMode”, “SetBkColor”, or “SetTextColor.” (See, e.g., LUC 1281049-081; Sykes Tr. at 183-184,187-189.) One exemplary GDI command and data sequence includes the following pattern where an opaque background is set and in- use foreground and background colors are specified with index values of “3” and “6” respectively: SetBkMode(hdc, OPAQUE ); SetTextColor(hdc, PALETTEINDEX( 3 )); SetBkColor(hdc, PALETTEINDEX( 6 ) ) Any text drawn after the in-use foreground and background colors are set using the exemplary command and data sequence above, via the TextOut() function of Windows for example, will be drawn using the specified in-use foreground color that has an index of 3 and the specified in- use background color that has an index of 6 until changed. Discovery provided by Dell, Microsoft, and Gateway demonstrate that the Accused Products support these GDI commands and this mode of access. (See, e.g., Decker Tr. at 69-70, 146-147; Sykes Tr. at 71, 184-190; Sykes Exs. 7- 10; Wong Tr. at 23; Wong Ex. 2; Pike Tr. at 42-43; Anderson Tr. at 141-144.) display means responsive to the processing means, the display means displaying the colors associated with the color data values accessed by the selected mode. The Accused Products include a display that is the same as a computer monitor, TV, video projection system, LCD, or an LED display, that is responsive to the processing means, and that displays the colors associated with the color data values accessed by the selected mode. (See, e.g., Dell’s Second Supplemental Response to Lucent’s Interrogatory No. 17; DELL 182996, DELL 263038; LUC 1048717-788; Decker Tr. at 223.) AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 26 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 12 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) U.S. Patent No. 4,439,759 Dell Accused Products 2. A digital image display system comprising: The Accused Products are digital image display systems. The Accused Products are compatible with the video graphics array (VGA) standard (see, e.g., DELL 171883-84, 184294, DELL 260275-76; LUC 1246197-198, LUC 1246170, LUC 1248250, LUC 1284006, LUC 1284865, LUC 1285849; MSLT_1061320, MSLT_0123091; Decker Tr. at 73-80, 85-86, 99, 121, 222-223; Chiappini Tr. at 2050-2051, Chiappini Exs. 4-8; Louie Tr. at 53-54, Louie Exs. 7-25; NVIDIA 00024, 00145, 00285; CREATIVE 000025-26, 000055-56, 000090, 000116, 000135, 000155; Bjernfalk Ex. 6; INTEL 00663, 00677, 01180) and include the Windows Graphics Device Interface (GDI). (See, e.g., DELL 171883-84, DELL 184294, DELL 260276, DELL 232419, DELL 272230, DELL 231100-03; LUC 1246197- 98, LUC 1283987-89, LUC 1284006, LUC 1284865, LUC 1285849; MSLT_1061320, MSLT_0123091; Decker Tr. at 64-71; Sykes Tr. at 71; Wong Tr. at 23; Wong Ex. 2.) a color memory for storing color data values; The Accused Products include a graphics subsystem having at least one color map memory. (See, e.g., DELL 184650, DELL 260239; Decker Tr. at 98-100, 123-124; LUC 1288923.) This memory includes a color map that stores a table of color data values (e.g., the red, green, and blue (RGB) color components) indexed by numbers. For example, the Accused Products store color look-up tables or palettes in memory in the video hardware or in system memory as Windows system or logical palettes. (Id.; see also, e.g., LUC 1281057, LUC 1283964; Sykes Tr. at 155- 161, 171-173; Wong Tr. at 67-72.) processing means responsive to predetermined command and data sequences, the processing means, responsive to a first command, selecting a mode of access to the color memory; The Accused Products include a processor, such as a central processor and/or a graphics processor that, responsive to predetermined command and data sequences, selects a mode of access to color memory. (See, e.g., DELL 262572, DELL 264688, DELL 266914.) These predetermined command and data sequences include patterns of BIOS interrupt commands and register values, or GDI commands and parameters, executed by a processor in the infringing system running BIOS or Microsoft Windows. (Id.; see, e.g., Decker Tr. at 91-96; LUC 1281049-81, LUC 1288921-22.) This structure is equivalent to the corresponding structure disclosed in the patent specification (a data processor programmed to perform the algorithm of boxes 301, 302, and 303 of Figure 3 and boxes 401, 402, 403, 404, 405, 407, 408, and 411 of Figure 4), and any differences are insubstantial. In the Accused Products, a processor runs an algorithm that decodes the software commands and Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 27 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 13 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 U.S. Patent No. 4,439,759 Dell Accused Products AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) evaluates the associated data sequences to select one of a number of different modes of access to color data values. In response to a first command, the processor selects one of a number of different modes of access to the color memory, thus performing the claimed function. For example, the Accused Products support numerous display modes, such as various indexed color and alphanumeric display modes. (See, e.g., Decker Tr. at 86-88, 90-91, 100-101; LUC 1270873, LUC 1273246, LUC 1278107-09, LUC 1281046- 82; LUC 1288921-22.) These display modes constitute modes of access to color memory because they determine manners of retrieving color data values from color memory. The Accused Products include various command and data sequences for selecting one of the available display modes, including, for example, through Microsoft operating system software, BIOS software, and/or video device driver software. For example, the BIOS “Set Video Mode” command may be specified with Interrupt 10h with the AH register set to 00h, in which the data value in the AL register specifies the mode number. (See, e.g., LUC 1273246-50.) As another example, the VESA “Set Extended Video Mode” command may be specified by an application using routines similar to the “SetVBEMode” subroutine in the VESA VBE specification, in which the display mode is specified as a parameter to the subroutine, for example, the value “mode” in the call SetVBEMode(mode). (See, e.g., GW-LT 263528-29, 263544; see also, e.g., VESA BIOS Extension (VBE) Core Functions Standard, Version: 3.0, Sep. 16, 1998 at LUC 1278107-09, LUC 1278129-32.) As another example, the Windows command “ChangeDisplaySettings” may be used to select a display mode specified by the “lpDevMode” parameter. (See, e.g., LUC 1281046-48; see also, e.g., “ChangeDisplaySettingsEx” at LUC 1281059- 62.) Different modes of access may also be selected with GDI command and data sequences that specify colors as RGB values or index values, including sequences that use the “SetBkMode,” “SetBkColor,” “SetTextColor,” “SetDCPenColor,” or “SetDCBrushColor” commands. (See, e.g., LUC 1281049-81; Sykes Exs. 7-10.) and responsive to a second command, setting a color data value in the color memory; and In response to a second command and data sequence the processor sets a color data value in the color memory. The Accused Products the processor runs an algorithm that decodes the software commands and evaluates the associated data sequences to set a color data value in the color memory. This structure is equivalent to the corresponding structure disclosed in the patent specification Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 28 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 14 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 U.S. Patent No. 4,439,759 Dell Accused Products (a data processor programmed to perform the algorithm shown in boxes 501, 504, 506, 508, and 510 of Figure 5), and any differences are insubstantial. In the Accused Products, a processor runs an algorithm that decodes the software commands and evaluates the associated data sequences to set a color data value in the color memory, thus performing the claimed function. For example, the BIOS “Set Individual Palette Register” command may be specified with Interrupt 10h with the AH register set to 10h and the AL register set to 00h. (See, e.g., LUC 1273255-59.) The “Set Individual Palette Register” command sets an individual color palette register with a color data value. Alternatively, the BIOS “Set All Palette Registers and Overscan Register” command may be specified with Interrupt 10h with the AH register set to 10h and the AL register set to 02h. (Id.) The “Set All Palette Registers and Overscan Registers” command sets the color palette with color data values. Alternatively, the BIOS “Set Block of Color Registers” command may be specified with Interrupt 10h with the AH register set to 10h and the AL register set to 12h. (Id.) The “Set Block of Color Registers” command sets one or more color registers with color data values. Another example is the GDI “SetPaletteEntries” command which can set an individual palette entry with a color data value specified by the “*lppe” parameter. (See, e.g., LUC 1281057.) display means responsive to the processing means, the display means displaying a color associated with the color data value accessed by the selected mode. The Accused Products include a display that is the same as a computer monitor, TV, video projection system, LCD, or an LED display, that is responsive to the processing means, and that displays the colors associated with the color data values accessed by the selected mode. (See, e.g., Dell’s Second Supplemental Response to Lucent’s Interrogatory No. 17; DELL 182996, DELL 263038; LUC 1048717-788; Decker Tr. at 223.) AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) U.S. Patent No. 4,439,759 Dell Accused Products 3. A display system as recited in claim 2, wherein the processing means responsive to a second command sets plural color data values in color memory. See Claim 2 Chart above. In response to the second command, the processor may set plural color data values in the color memory. This structure is at least equivalent to the corresponding structure disclosed in the patent specification (a data processor programmed to perform the algorithm of boxes 501, 504, 506, 508, 510, and the line exiting box 510 of Figure 5), and any differences are insubstantial. In the Accused Products a processor runs an algorithm that Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 29 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 15 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 U.S. Patent No. 4,439,759 Dell Accused Products decodes the software commands and evaluates the associated data sequences to set plural color data values in the color memory. For example, the BIOS “Set All Palette Registers and Overscan Register” instruction may be specified with Interrupt 10h with the AH register set to 10h and the AL register set to 02h. (See, e.g., LUC 1273255- 59.) The “Set All Palette Registers and Overscan Registers” instruction sets the color palette with color data values. (See, e.g., LUC 1273255-59.) Alternatively, the BIOS “Set Block of Color Registers” instruction may be specified with Interrupt 10h with the AH register set to 10h and the AL register set to 12h. (See, e.g., LUC 1273255-59.) The “Set Block of Color Registers” instruction sets one or more color registers with color data values. Another example is the GDI “SetPaletteEntries” command which can set plural palette entries with a color data values specified by the “*lppe” parameter. (See, e.g., LUC 1281057.) 26. Gateway’s infringement is more particularly explained in the following claim charts, and in the March 31, 2006 Expert Report of Jake Richter: AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) U.S. Patent No. 4,439,759 Gateway Accused Products 1. In a digital image display system: The Accused Products are digital image display systems. The Accused Products are compatible with the video graphics array (VGA) standard (see, e.g., GW-LT 120249, GW-LT 150159, GW-LT 150655-56, GW-LT 148840-41, GW-LT 046945, GW-LT 049095, GW-LT 131188, GW-LT 140886; LUC 1246197-198, LUC 1246170, LUC 1248250, LUC 1284006, LUC 1284865, LUC 1285849; MSLT_1061320; Decker Tr. at 85-86, 222-223; Schindler Tr. at 220-222; Chiappini Tr. at 2050-2051, Chiappini Exs. 4-8; Louie Tr. at 53-54, Louie Exs. 7-25; NVIDIA 00024, 00145, 00285; CREATIVE 000025-26, 000055-56, 000090, 000116, 000135, 000155; Bjernfalk Ex. 6; INTEL 00663, 00677, 01180) and include the Windows Graphics Device Interface (GDI). (See, e.g., GW-LT 120290, GW-LT 148840-41, GW-LT 150160-62, GW-LT 150656, GW-LT 049095, GW-LT 007367; LUC 1246197-98, LUC 1283990-93, LUC 1283997-99, LUC 1284006, LUC 1284865, LUC 1285849; MSLT_1061320; Anderson Tr. at 55-57, 140-144; Chiappini Tr. at 2080-2081; Sykes Tr. at 71; Wong Tr. at 23; Wong Ex. 2.) a memory for storing color data values; The Accused Products include a graphics subsystem having at least one color map memory. (See, e.g., GW-LT 122438, Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 30 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 16 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 U.S. Patent No. 4,439,759 Gateway Accused Products AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 122136, 120304, 110524; Decker Tr. at 98-100, 123-124; LUC 1288923.) This memory includes a color map that stores a table of color data values (e.g., the red, green, and blue (RGB) color components) indexed by numbers. For example, the Accused Products store color look-up tables or palettes in memory in the video hardware or in system memory as Windows system or logical palettes. (Id.; see also, e.g., LUC 1281057, 1283964; Sykes Tr. at 155-161, 171-173; Wong Tr. at 67-72.) processing means responsive to a predetermined command and data sequence comprising at least one command, the processing means decoding the predetermined command and data sequence, the predetermined command and data sequence selecting one of a plurality of modes of access to color data values, the modes comprising The Accused Products include a processor, such as a central processor and/or a graphics processor, responsive to predetermined command and data sequences, for selecting one of a plurality of modes of access to color data values. (See, e.g., GW-LT 120304, GW-LT 110524; LUC 009531; Anderson Tr. at 157.) These predetermined command and data sequences include patterns of BIOS interrupt commands and register values, or GDI commands and parameters, executed by a processor in the infringing system running BIOS or Microsoft Windows. (Id.; see, e.g., GW- LT 218860, GW-LT 120290; Anderson Tr. at 55-57, 141, 172-173; Decker Tr. at 91-96; LUC 1281049-81, LUC 1288921-22.) This structure is equivalent to the corresponding structure for the processing means disclosed in the patent specification (a data processor programmed to perform the algorithm of boxes 301, 302, and 303 of Figure 3 and boxes 401, 402, 403, 404, 405, 407, 408, and 411 of Figure 4), and any differences are insubstantial. In the Accused Products, a processor runs an algorithm that decodes the software commands and evaluates the associated data sequences to select one of a number of different modes of access to color data values, thus performing the claimed function. For example, the Accused Products support numerous display modes, such as various indexed color, direct color, true color, and alphanumeric display modes. (See, e.g., Decker Tr. at 86-88, 90-91, 100- 101; LUC 1270873, LUC 1273246, LUC 1278107-09, LUC 1281046-82, LUC 1288921-22.) These display modes constitute modes of access to color data values because they determine manners of retrieving color data values from memory. The Accused Products include various predetermined command and data sequences for selecting one of the available display modes, for example, through the BIOS software, Microsoft GDI software, and/or video device driver software. For example, the BIOS “Set Video Mode” command may be specified with Interrupt 10h with the AH register set to 00h, in which the data value in the AL Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 31 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 17 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 U.S. Patent No. 4,439,759 Gateway Accused Products AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) register specifies the mode number. (See, e.g., LUC 1273246-50.) As another example, the VESA “Set Extended Video Mode” command may be specified by an application using routines similar to the “SetVBEMode” subroutine in the VESA VBE specification, in which the display mode is specified as a parameter to the subroutine, for example, the value “mode” in the call SetVBEMode(mode). (See, e.g., GW-LT 263528-29, GW- LT 263544; see also, e.g., VESA BIOS Extension (VBE) Core Functions Standard, Version: 3.0, Sep. 16, 1998 at LUC 1278107-09, LUC 1278129-32.) As another example, the Windows command “ChangeDisplaySettings” may be used to select a display mode specified by the “lpDevMode” parameter. (See, e.g., LUC 1281046-48; see also, e.g., “ChangeDisplaySettingsEx” at LUC 1281059-62.) Different modes of access to color data values may also be selected with GDI command and data sequences that specify colors as RGB values or index values, including sequences that use the “SetBkMode,” “SetBkColor,” “SetTextColor,” “SetDCPenColor,” or “SetDCBrushColor” commands. (See, e.g., LUC 1281049-81; Sykes Exs. 7-10.) Exemplary illustrations of the above command and data sequences are described below. a first mode of access wherein an in-use foreground color is directly specified as a color data value; The Accused Products include a mode of access to color data values in which an in-use foreground color may be directly specified as a color data value. For example, a sequence of GDI commands may be executed in Windows that specifies an in-use foreground color as an RGB color value with the “SetTextColor,” “SetDCBrushColor,” and “SetDCPenColor” GDI commands. (See, e.g., LUC 1281049-081.) One exemplary GDI command and data sequence includes the following pattern where a transparent background is set and an in-use foreground color with the RGB values “150,100,200” is specified: SetBkMode(hdc, TRANSPARENT ); SetTextColor(hdc, PALETTERGB( 150, 100, 200)) Any text drawn after the in-use foreground color is set using either of the exemplary command and data sequences above, via the TextOut() function of Windows for example, will be drawn using the directly specified in-use foreground color of 150, 100, 200 (R,G,B) until changed. Discovery provided by Gateway, Microsoft, and Dell demonstrate that the Accused Products support these GDI commands and this mode of access. (See, e.g., Anderson Tr. at 141-144; Sykes Tr. at 71, 184; Sykes Exs. 7-10; Wong Tr. at 23; Wong Ex. 2; Pike Tr. at 42-43; Decker Tr. at 69-70, 146-147.) Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 32 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 18 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 U.S. Patent No. 4,439,759 Gateway Accused Products AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) a second mode of access wherein the in-use foreground color is specified as an index into the color memory; and The Accused Products also include a mode of access to color data values in which an in-use foreground color may be specified as an index into the color memory. For example, in a 256-color graphics display mode, the “Write Character and Attribute” BIOS command, specified with Interrupt 10h with the AH register set to 09h, specifies an in-use foreground color in the BL register as an index value into the color memory. (See, e.g., LUC 1270448-53, 1270467, 1273246-50, 1273252-53.) Similarly, in a 16- color graphics display mode operating in write-mode 3, an in-use foreground color is specified as an index value when loaded into the Set-Reset Register. (See, e.g., LUC 1270507-08, 1270513-14.) As another example, a Windows program may execute a sequence of GDI commands that specifies an in-use foreground color as an index value into the color memory with GDI commands such as “SetTextColor,” “SetDCBrushColor,” or “SetDCPenColor.” (See, e.g., LUC 1281049-81; Sykes Tr. at 183-184, 189; Wong Tr. at 94.) One exemplary GDI command and data sequence includes the following pattern where a transparent background is set and an in-use foreground color with an index value “3” is specified: SetBkMode(hdc, TRANSPARENT ); SetTextColor(hdc, PALETTEINDEX( 3 )) Any text drawn after the in-use foreground color is set using the exemplary command and data sequence above, via the TextOut() function of Windows for example, will be drawn using the specified in-use foreground color that has an index of 3 until changed. Discovery provided by Gateway, Microsoft, and Dell demonstrate that the Accused Products support these GDI commands and this mode of access. (See, e.g., Anderson Tr. at 141-144; Sykes Tr. at 71, 184; Sykes Exs. 7-10; Wong Tr. at 23; Wong Ex. 2; Pike Tr. at 42-43; Decker Tr. at 69-70, 146-147.) a third mode of access wherein the in-use foreground color and an in-use background color are specified as indexes into the color memory; and The Accused Products also include a mode of access to color data values in which an in-use foreground color and an in-use background color are specified as indexes into the color memory. For example, in an alphanumeric VGA display mode, the “Write Character and Attribute” BIOS command, specified with Interrupt 10h with the AH register set to 09h, specifies an in-use foreground color and an in-use background color as index values into the color memory. (See, e.g., LUC 1270445-47, 1270456, 1273246-50, 1273252-53.) As another example, a Windows program may execute a sequence of GDI commands that specifies in-use foreground and background colors as index values into the Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 33 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 19 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 U.S. Patent No. 4,439,759 Gateway Accused Products color memory with GDI commands such as “SetBkMode”, “SetBkColor”, or “SetTextColor.” (See, e.g., LUC 1281049-081; Sykes Tr. at 183-184,187-189.) One exemplary GDI command and data sequence includes the following pattern where an opaque background is set and in- use foreground and background colors are specified with index values of “3” and “6” respectively: SetBkMode(hdc, OPAQUE ); SetTextColor(hdc, PALETTEINDEX( 3 )); SetBkColor(hdc, PALETTEINDEX( 6 ) ) Any text drawn after the in-use foreground and background colors are set using the exemplary command and data sequence above, via the TextOut() function of Windows for example, will be drawn using the specified in-use foreground color that has an index of 3 and the specified in- use background color that has an index of 6 until changed. Discovery provided by Gateway, Microsoft, and Dell demonstrate that the Accused Products support these GDI commands and this mode of access. (See, e.g., Anderson Tr. at 141-144; Sykes Tr. at 71, 184; Sykes Exs. 7-10; Wong Tr. at 23; Wong Ex. 2; Pike Tr. at 42-43; Decker Tr. at 69-70, 146-147.) display means responsive to the processing means, the display means displaying the colors associated with the color data values accessed by the selected mode. The Accused Products include a display that is the same as a computer monitor, TV, video projection system, LCD, or an LED display, that is responsive to the processing means, and that displays the colors associated with the color data values accessed by the selected mode. (See, e.g., Gateway’s Third Supplemental Response to Lucent’s Interrogatory No. 16; GW-LT 120252; LUC 009531, 010904, 011337; Decker Tr. at 223.) AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) U.S. Patent No. 4,439,759 Gateway Accused Products 2. A digital image display system comprising: The Accused Products are digital image display systems. The Accused Products are compatible with the video graphics array (VGA) standard (see, e.g., GW-LT 120249, GW-LT 150159, GW-LT 150655-56, GW-LT 148840-41, GW-LT 046945, GW-LT 049095, GW-LT 131188, GW-LT 140886; LUC 1246197-198, LUC 1246170, LUC 1248250, LUC 1284006, LUC 1284865, LUC 1285849; MSLT_1061320; Decker Tr. at 85-86, 222-223; Schindler Tr. at 220-222; Chiappini Tr. at 2050-2051, Chiappini Exs. 4-8; Louie Tr. at 53-54, Louie Exs. 7-25; NVIDIA 00024, 00145, 00285; CREATIVE 000025-26, 000055-56, 000090, 000116, 000135, 000155; Bjernfalk Ex. 6; INTEL 00663, Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 34 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 20 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 U.S. Patent No. 4,439,759 Gateway Accused Products AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 00677, 01180) and include the Windows Graphics Device Interface (GDI). (See, e.g., GW-LT 120290, GW-LT 148840-41, GW-LT 150160-62, GW-LT 150656, GW-LT 049095, GW-LT 007367; LUC 1246197-98, LUC 1283990-93, LUC 1283997-99, LUC 1284006, LUC 1284865, LUC 1285849; MSLT_1061320; Anderson Tr. at 55-57, 140-144; Chiappini Tr. at 2080-2081; Sykes Tr. at 71; Wong Tr. at 23; Wong Ex. 2.) a color memory for storing color data values; The Accused Products include a graphics subsystem having at least one color map memory. (See, e.g., GW-LT 122438, GW-LT 122136, GW-LT 120304, GW-LT 110524; Decker Tr. at 98-100, 123-124; LUC 1288923.) This memory includes a color map that stores a table of color data values (e.g., the red, green, and blue (RGB) color components) indexed by numbers. For example, the Accused Products store color look-up tables or palettes in memory in the video hardware or in system memory as Windows system or logical palettes. (Id.; see also, e.g., LUC 1281057, LUC 1283964; Sykes Tr. at 155-161, 171-173; Wong Tr. at 67- 72.) processing means responsive to predetermined command and data sequences, the processing means, responsive to a first command, selecting a mode of access to the color memory; The Accused Products include a processor, such as a central processor and/or a graphics processor that, responsive to predetermined command and data sequences, selects a mode of access to color memory. (See, e.g., GW-LT 120304, GW-LT 110524; LUC 009531; Anderson Tr. at 157.) These predetermined command and data sequences include patterns of BIOS interrupt commands and register values, or GDI commands and parameters, executed by a processor in the infringing system running BIOS or Microsoft Windows. (Id.; see, e.g., GW-LT 218860, GW-LT 120290; Anderson Tr. at 55-57, 141, 172-173; Decker Tr. at 91-96; LUC 1281049-81, LUC 1288921-22.) This structure is equivalent to the corresponding structure disclosed in the patent specification (a data processor programmed to perform the algorithm of boxes 301, 302, and 303 of Figure 3 and boxes 401, 402, 403, 404, 405, 407, 408, and 411 of Figure 4), and any differences are insubstantial. In the Accused Products, a processor runs an algorithm that decodes the software commands and evaluates the associated data sequences to select one of a number of different modes of access to color data values. In response to a first command, the processor selects one of a number of different modes of access to the color memory, thus performing the claimed function. For example, the Accused Products support numerous display modes, such as various indexed color and alphanumeric display modes. (See, e.g., Decker Tr. at 86-88, 90-91, 100- Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 35 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 21 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 U.S. Patent No. 4,439,759 Gateway Accused Products AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 101; LUC 1270873, LUC 1273246, LUC 1278107-09, LUC 1281046-82, LUC 1288921-22.) These display modes constitute modes of access to color memory because they determine manners of retrieving color data values from color memory. The Accused Products include various command and data sequences for selecting one of the available display modes, including, for example, through Microsoft operating system software, BIOS software, and/or video device driver software. For example, the BIOS “Set Video Mode” command may be specified with Interrupt 10h with the AH register set to 00h, in which the data value in the AL register specifies the mode number. (See, e.g., LUC 1273246-50.) As another example, the VESA “Set Extended Video Mode” command may be specified by an application using routines similar to the “SetVBEMode” subroutine in the VESA VBE specification, in which the display mode is specified as a parameter to the subroutine, for example, the value “mode” in the call SetVBEMode(mode). (See, e.g., GW-LT 263528-29, 263544; see also, e.g., VESA BIOS Extension (VBE) Core Functions Standard, Version: 3.0, Sep. 16, 1998 at LUC 1278107-09, LUC 1278129-32.) As another example, the Windows command “ChangeDisplaySettings” may be used to select a display mode specified by the “lpDevMode” parameter. (See, e.g., LUC 1281046-48; see also, e.g., “ChangeDisplaySettingsEx” at LUC 1281059-62.) Different modes of access may also be selected with GDI command and data sequences that specify colors as RGB values or index values, including sequences that use the “SetBkMode,” “SetBkColor,” “SetTextColor,” “SetDCPenColor,” or “SetDCBrushColor” commands. (See, e.g., LUC 1281049-81; Sykes Exs. 7-10.) and responsive to a second command, setting a color data value in the color memory; and In response to a second command and data sequence the processor sets a color data value in the color memory. The Accused Products the processor runs an algorithm that decodes the software commands and evaluates the associated data sequences to set a color data value in the color memory. This structure is equivalent to the corresponding structure disclosed in the patent specification (a data processor programmed to perform the algorithm shown in boxes 501, 504, 506, 508, and 510 of Figure 5), and any differences are insubstantial. In the Accused Products, a processor runs an algorithm that decodes the software commands and evaluates the associated data sequences to set a color data value in the color memory, thus performing the claimed function. For example, the BIOS Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 36 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 22 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 U.S. Patent No. 4,439,759 Gateway Accused Products “Set Individual Palette Register” command may be specified with Interrupt 10h with the AH register set to 10h and the AL register set to 00h. (See, e.g., LUC 1273255-59.) The “Set Individual Palette Register” command sets an individual color palette register with a color data value. Alternatively, the BIOS “Set All Palette Registers and Overscan Register” command may be specified with Interrupt 10h with the AH register set to 10h and the AL register set to 02h. (Id.) The “Set All Palette Registers and Overscan Registers” command sets the color palette with color data values. Alternatively, the BIOS “Set Block of Color Registers” command may be specified with Interrupt 10h with the AH register set to 10h and the AL register set to 12h. (Id.) The “Set Block of Color Registers” command sets one or more color registers with color data values. Another example is the GDI “SetPaletteEntries” command which can set an individual palette entry with a color data value specified by the “*lppe” parameter. (See, e.g., LUC 1281057.) display means responsive to the processing means, the display means displaying a color associated with the color data value accessed by the selected mode. The Accused Products include a display that is the same as a computer monitor, TV, video projection system, LCD, or an LED display, that is responsive to the processing means, and that displays the colors associated with the color data values accessed by the selected mode. (See, e.g., Gateway’s Third Supplemental Response to Lucent’s Interrogatory No. 16; GW-LT 120252; LUC 1048717-788; Decker Tr. at 223.) AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) U.S. Patent No. 4,439,759 Gateway Accused Products 3. A display system as recited in claim 2, wherein the processing means responsive to a second command sets plural color data values in color memory. See Claim 2 Chart above. In response to the second command, the processor may set plural color data values in the color memory. This structure is at least equivalent to the corresponding structure disclosed in the patent specification (a data processor programmed to perform the algorithm of boxes 501, 504, 506, 508, 510, and the line exiting box 510 of Figure 5), and any differences are insubstantial. In the Accused Products a processor runs an algorithm that decodes the software commands and evaluates the associated data sequences to set plural color data values in the color memory. For example, the BIOS “Set All Palette Registers and Overscan Register” instruction may be specified with Interrupt 10h with the AH register set to 10h and the AL register set to 02h. (See, e.g., LUC 1273255- 59.) The “Set All Palette Registers and Overscan Registers” instruction sets the color palette with color data values. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 37 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 23 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 U.S. Patent No. 4,439,759 Gateway Accused Products (See, e.g., LUC 1273255-59.) Alternatively, the BIOS “Set Block of Color Registers” instruction may be specified with Interrupt 10h with the AH register set to 10h and the AL register set to 12h. (See, e.g., LUC 1273255-59.) The “Set Block of Color Registers” instruction sets one or more color registers with color data values. Another example is the GDI “SetPaletteEntries” command which can set plural palette entries with a color data values specified by the “*lppe” parameter. (See, e.g., LUC 1281057.) C. Validity Of The Asserted Claims Of The Fleming ‘759 Patent 27. Defendants contend that claims 1-3 of the Fleming ‘759 patent are anticipated or rendered obvious by a number of references. As an initial matter, Defendants must prove by clear- and-convincing evidence that each of the references upon which they rely qualifies as prior art under 35 U.S.C. § 102. To the extent Defendants can carry their burden on this issue, claims 1-3 of the Fleming ‘759 patent are not anticipated by or obvious in view of the references relied upon by Defendants. Lucent’s validity positions are set forth in detail in the Rebuttal Expert Report of Jake Richter dated May 12, 2006, the Supplemental Rebuttal Expert Report of Jake Richter dated October 12, 2007, and the Second Supplemental Rebuttal Expert Report of Jake Richter dated November 12, 2007. None of the prior art references relied upon by Defendants — alone or in combination — disclose all three modes of access of claim 1, which are also required by claims 2 and 3 by virtue of the Court’s construction of the “processing means” of those claims, or numerous other required elements of those claims. Nor would such elements have been obvious to one of ordinary skill in the art. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 28. A person of ordinary skill in the art pertinent to the Fleming ‘759 patent in the early 1980s would have had at least a Bachelor of Science degree in electrical engineering, computer engineering, or computer science with at least 2 years of experience in the field of computer Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 38 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 24 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 graphics, or, alternatively, a person of ordinary skill in the art would have been an engineer holding a Master of Science degree in electrical engineering, computer engineering, or computer science who had pursued a course of study relating to computer graphics technology. 29. Defendants rely on “Raster Graphics Extensions to the Graphics Compatibility System (GCS)” (“Foley”). But Foley fails to disclose any of the three modes of access of claim 1. Foley also fails to disclose the processing means and display means of claim 1, the processing means of claims 2 and 3, or the setting of plural values in a color memory as required by claim 3. 30. Defendants also rely on “Some Raster Graphics Extensions to the CORE System” (referred to by Dr. Wedig as “GSPC-1”) and “Status Report of the Graphic Standards Planning Committee” (referred to as “GSPC-2”). Like Foley, however, GSPC-1 and GSPC-2 do not disclose the three modes of access of claim 1, the processing means and display means of claim 1, or the processing means of claims 2 and 3. 31. Defendants also rely on “AED 512 Color Graphics Terminal – Terminal Command Protocol” (“AED512”) and “AED512 Color Graphics & Imaging Terminal” (“AED512-2”) But AED512 and AED512-2 do not disclose the three modes of access of claim 1, the processing means and display means of claim 1, or the processing means or display means of claims 2 and 3. 32. Defendants also rely on an article titled “Color Map Techniques” (“Sloan”) with respect to claims 2 and 3. But Sloan does not disclose the three modes of access of claim 1, and therefore does not disclose the processing means or display means of claim 2, which require the three modes of access of claim 1. Sloan also does not disclose any command and data sequences as required by claims 2 and 3, nor does it render obvious any of those command and data sequences. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 33. Defendants also rely on the “Ramtek Programming Manual 9000 Series (RM 9100, 9200, 9300) Graphic Display System” (“Ramtek”) with respect to claims 2 and 3. But Ramtek does not disclose the three modes of access of claim 1, and therefore also does not disclose the processing Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 39 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 25 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 means or display means of claim 2. Further, Ramtek does not disclose any predetermined command and data sequences for “selecting a mode of access to a color memory” as required by claims 2 and 3. 34. Defendants also rely on “ADI User’s Guide – LIGHT 50” (“ADI”). ADI does not disclose the three modes of access of claim 1, and therefore does not invalidate claims 2 or 3, which require the three modes of access of claim 1. ADI also does not disclose any predetermined command and data sequences for selecting a mode of access to a color memory as required by claims 2 and 3, or the processing and display means of claims 2 and 3. ADI also does not disclose the setting of multiple color data values in a color memory. 35. Defendants also rely on U.S. Patent No. 4,213,189 to Mueller et al. (“Mueller”), contending that Mueller anticipates claims 2 and 3 of the ‘759 patent and in combination with Foley renders obvious claim 1. Mueller, like Foley, fails to disclose the three modes of access required by claim 1, at least because it fails to disclose direct color specification, in-use colors, or any text and graphics drawing commands that could make use of any in-use foreground or background colors. Mueller also does not disclose any predetermined command and data sequences for selecting one of a plurality of modes of access to color data values required by claim 1, nor does Mueller disclose any predetermined command and data sequences for “selecting a mode of access to the color memory” as required by claims 2 and 3. Mueller also does not disclose the processing means or display means of claims 1-3, or the command and data sequences required by claims 2 and 3. One of ordinary skill in the art would also not have been led to combine Mueller and Foley as suggested by Defendants given their different subject matter. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 36. Defendants also rely on “Image I/O Device for Image Processing: Color TV Display and TV Camera Input” purportedly written by Toshiyuki Sakai and Isao Kanade (“Kanade”) with respect to claims 2 and 3. Kanade fails to disclose the three modes of access of claim 1, which are required Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 40 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 26 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 by claims 2 and 3 as discussed previously. Because Kanade does not disclose the modes of access required by claim 2, it necessarily does not disclose the processing means or display means of claim 2 either. Furthermore, even assuming that these modes of access were disclosed, Kanade does not disclose any predetermined command and data sequence for selecting a mode of access to the color memory as required by claims 2 and 3. Kanade also fails to disclose any command and data sequences for setting color values in a color memory as required by claims 2 and 3. Defendants also rely on other articles allegedly co-authored by at least one of the authors of the Kanade reference, but those articles fail to disclose all of the elements of claims 2 and 3 for the same reasons the Kanade alone fails to disclose all of the elements of claims 2 and 3. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 37. Defendants also contend that claims 1-3 are anticipated or rendered obvious by Recommendation S.100. Recommendation S.100 does not disclose a color memory or the use of indexed color specification, and therefore does not disclose the second and third modes of access required by claim1 (and claims 2 and 3). Recommendation S.100 also fails to disclose an in-use background color. Defendants seek to supply these missing elements from alleged admissions in the patent concerning the Antiope and Prestel systems, but there is no admission in the patent that the second and third modes of access are prior art. Further, even if the second and third modes were prior art, the particular combination of claim 1 would have not have been obvious to one of ordinary skill in the art, given the fact that systems that combined direct and indexed color specification were unpredictable, as well as market and design trends that weighed against a combination of indexed color and direct color specification. There would also have been no reasonable expectation of success had the combination been attempted. With respect to claims 2 and 3, Recommendation S.100 fails to disclose a color memory, and thus does not disclose setting color data values in a color memory. Defendants seek to combine the Recommendation S.100 with an article by Crowther, but one of ordinary skill in the art would not have been led to combine Crowther with Recommendation Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 41 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 27 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 S.100 given the fact that Recommendation S.100 does not disclose a color memory and given the market and design trends against the combination of direct color and indexed color specification. Further, neither Recommendation S.100 nor Crowther discloses identical or equivalent corresponding structure for the color-setting functions of claims 2 and 3, nor would such structure have been obvious. 38. Defendants also contend that “CRC Technical Note No. 699-E, Picture Description Instructions PDI for the Telidon Videotex System” (“CRC 699-E”) renders obvious claims 1-3 in combination with the Antope Specification. But neither CRC 699-E nor the Antiope Specification discloses the required color memory of claim 1, nor do they disclose the second and third modes of access of claim 1. Furthermore, one of ordinary skill in the art would not have been led to combine CRC 699-E with Antiope given their fundamentally different underlying technologies and the market trends at the time. Defendants also seek to invalidate claims 2-3 by combining CRC 699-E and the Antiope Specification and Crowther, but none of these references disclose the corresponding structure for the setting function of the processing means of claims 2 and 3. Nor would one of ordinary skill in the art have been led to combine these references for the same reasons discussed above with respect to the combination of Crowther and Recommendation S.100. 39. Defendants also contend that claims 1-3 are anticipated by or rendered obvious in view of the NASA Report. The NASA Report was not published prior to the invention date of the Fleming ‘759 patent, and is therefore not prior art. Further, the NASA Report fails to disclose the first and third modes of access required by claims 1-3, and those modes would not have been obvious to one of ordinary skill in the art. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 40. Secondary considerations of non-obviousness also support a finding that the asserted claims of the Fleming ‘759 patent are not invalid for obviousness, including the industry acceptance of the patented Fleming technology during the years following its invention. The Fleming ‘759 Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 42 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 28 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 D. Patent forms the basis of the color display capabilities specified by the North American Presentation Level Protocal Syntax (NAPLPS) which was widely adopted shortly after and in the years following the inventions. 41. On December 17, 2007, almost two years after the close of fact discovery in this case, Defendants served a supplemental response to Lucent Interrogatory No. 1, alleging that claims 1-3 of the Fleming patent are invalid “under 35 U.S.C. § 102(f) and/or 102(f)/103 because the persons named on the face of the patent did not invent the subject matter claimed in the Fleming Patent and/or the subject matter claimed in the Fleming Patent is obvious in view of subject matter presented to the persons named on the face of the Fleming Patent.” Defendants’ untimely invalidity theories — which, in any event, are without merit — have prejudiced Lucent, and Lucent has therefore moved in limine to preclude Defendants from pursuing these theories at trial. Enforceability Of The Asserted Claims Of The Fleming ‘759 Patent 42. Defendants contend that claims of the Fleming ‘759 patent are unenforceable due to inequitable conduct. Defendants contend that the inventors or prosecuting attorneys of the Fleming ‘759 patent breached the duty of candor and good faith to the Patent Office by not disclosing GSPC- 2 during prosecution. GSPC-2, however, is not material to the patentability of the claims of the Fleming ‘759 patent. Further, there is no evidence that anyone associated with the prosecution of the Fleming ‘759 patent was aware of GSPC-2 or the allegedly material information in GSPC-2 during prosecution, nor is there any evidence of intent to withhold GSPC-2 on the part of anyone associated with the prosecution of the Fleming ‘759 patent. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 43. The Patent Office’s granting of a reexamination does not render GSPC-2 or any other reference material. The Patent Office historically grants over 90% of requests for reexamination. Only a small fraction of reexamined patent claims have historically been determined to be unpatentable. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 43 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 29 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 44. Defendants also asserted during fact discovery a number of other inequitable conduct theories, including theories based on U.S. Patent No. 4,262,302, “Principles of Interactive Computer Graphics” by Newman and Sproull, “Color Table Animation” by Richard Shoup, and unidentified materials in unidentified “draft standards and documents authored by the inventors of the ‘759 patent.” Defendants, however, abandoned these additional theories during expert discovery. None of these references is material to the patentability of the claims of the Fleming ‘759 patent, there is no evidence that anyone associated with the prosecution of the Fleming ‘759 patent was aware of these references or their alleged materiality, and there is no evidence of any intent to withhold any of these references from the Patent Office on the part of anyone associated with the prosecution of the Fleming ‘759 patent. 45. On October 9, 2007, almost two years after the close of fact discovery in this case, Defendants served a supplemental response to Lucent Interrogatory No. 2 disclosing for the first time a theory that the Fleming ‘759 patent is unenforceable because of the alleged failure of the inventors or prosecuting attorneys to disclose Recommendation S.100 to the Patent Office. This theory is untimely, however, and Lucent has filed a motion in limine to preclude it. Moreover, Recommendation S.100 was not material to the patentability of the claims of the Fleming ‘759 patent, there is no evidence that anyone associated with the prosecution of the Fleming ‘759 patent was aware of the alleged materiality of Recommendation S.100, and there is no evidence of any intent to withhold Recommendation S.100 from the Patent Office on the part of anyone associated with the prosecution of the Fleming ‘759 patent. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 46. On December 17, 2007, almost two years after the close of fact discovery in this case, Defendants served a supplemental response to Lucent Interrogatory No. 2 asserting four new grounds of unenforceability. First, Defendants contend that “Lucent lacks standing to enforce the Fleming Patent as a sole plaintiff because of its lack of complete ownership of the Fleming Patent,” Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 44 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 30 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 III. A. citing the alleged co-ownership by alleged co-inventor and Gateway consultant Douglas O’Brien. Second, Defendants contend that “because all of the owners of the Fleming Patent are not joined as plaintiffs in this suit, this Court lacks jurisdiction to hear Lucent’s suit to enforce the Fleming ‘759 Patent.” Third, Defendants contend that “[t]he Fleming Patent is also unenforceable due to the inequitable conduct of [the inventors]. Specifically, none of the named inventors disclosed to the United States Patent and Trademark Office that claims 1-3 of the Fleming ‘759 Patent were at least partially derived by Mr. O’Brien.” And fourth, Defendants contend that “the Fleming Patent is unenforceable due to [the inventors’] failure to disclose that Mr. O’Brien was at least a joint inventor of the alleged invention claimed in Claims 1-3 of the Fleming Patent.” Defendants’ untimely unenforceability theories — which are, in any event, without merit — have prejudiced Lucent, and Lucent therefore has moved in limine to preclude Defendants from pursuing these theories at trial. The Day ‘356 Patent The Teaching Of The Asserted Claims Of The Day ‘356 Patent 47. Lucent is the owner of the Day ‘356 patent with the right to sue for past infringement. 48. The Day ‘356 patent relates to form entry systems that use certain types of overlaid or pop-up window tools that are associated with information fields of the form entry system. The inventions of the Day ‘356 patent allow a user to point to or touch the on-screen display keys of the predefined tools, such that the information selected or composed by the tool would be inserted into the proper associated information field. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 49. These types of on-screen tools were novel and pioneering inventions. Before the inventions of the Day ‘356 patent in the early 1980’s, computer users would generally need to manually move between data entry fields, and manually input data into each field, for example, by using a computer keyboard. (‘356 Patent at 1:8-22) People such as securities traders, sales people, and nurses spent an inordinate amount of time on a daily basis manually inputting information into Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 45 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 31 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 electronic forms. Id. Thus, the inventors of the ‘356 patent identified a need for more user-friendly and time-saving data-entry interfaces. (‘356 Patent at 1:24-48) 50. As a result, the inventors of the ‘356 patent conceived of many of the time-saving computer pop-up windows and overlay data-entry tools that we take for granted today. (‘356 Patent at cols. 15-18) The invention of the ‘356 patent used graphical displays and menus—like the graphical window displays now used in many Microsoft Windows applications. The ‘356 patent specification describes some of the user-friendly and time-saving aspects of the invention with respect to entering information into a hypothetical automobile sales form: When a form is first brought up on panel 15, one of the fields in the form is illustratively highlighted and, in accordance with the invention, the predefined tool for filling in that field is concurrently displayed illustratively as a window overlaying the form. (‘356 Patent at 3:42-46) 51. To meet these identified needs, the inventors of the ‘356 patent conceived of a time- saving form-entry system that uses predefined data entry tools that are associated with respective data information fields. (‘356 Patent at cols. 15-18) After pointing to or selecting a field for data entry, the form-entry system allows for the display of a predefined tool that is associated with that field in a separate and overlaying window. Figure 3, below, shows an example of a predefined tool—here, a menu—associated with the “Model” field of a hypothetical form entry system used by a car salesman: AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 46 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 32 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 52. Another critical time-saving aspect described in the ‘356 patent is that one may simply “point to one of the entries” on the pop-up tool “overlay (window),” after which, the form entry system may “bring[] up the corresponding tool” pop-up window predefined for that field. (‘356 Patent at 3:63-4:2) The ‘356 patent discloses a “keyboard tool” that can be used to enter text data, and a “number entry tool” that can be used to enter numeric data. (‘356 Patent at 4:25; 5:3-5 and Figs. 5 and 7) The ‘356 patent also discloses other similar tools such as date composition tools. Id. The ‘356 patent discloses how these different tools may be used, for example, the ‘356 patent discloses that the user may “point” to various fields to bring up the appropriate predefined and associated tool. (‘356 Patent at 4:35) In the sample car salesman form shown in the ‘356 patent, when “the user points” at various fields, he may point and select entries such as the “CONVERTIBLE model” automobile. (Id. at 3:64) 53. Likewise, when the “Customer Name” field is pointed to or selected, the form-entry system may bring up a keyboard tool which was the predefined tool associated with that field. (‘356 Patent at 5:3-5) The salesperson would then point to the appropriate letters, spell the name, and then point to the “E/S” (enter/skip) key, which would cause the name to be input into the “Customer Name” field. (‘356 Patent at 5:12-15) Similarly, the ‘356 patent discloses a number entry tool that may be used to compose numerical data. (‘356 Patent at 4:13-56) For example, when the “Quantity” field is pointed to or selected, the form-entry system may bring up a number entry tool which was the predefined tool associated with that field. Id. The salesperson would then point to the appropriate number, compose a number, and then point to the “E” (enter) or “E/S” (enter/skip) key, which would cause the number to be input into the “Quantity” field. Id. Figures 5 and 7 below show examples of keyboard and number entry tools: AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 47 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 33 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 54. The ‘356 patent makes clear that some of the time-saving aspects of the invention include the ability of the user to (1) “point” to display key buttons or fields on the screen to call up the associated predefined tools in overlaid windows, and (2) “point” to display key buttons or selections on the overlaid tools that cause the selection to be entered into the appropriate field in the form entry system. (‘356 Patent at cols. 3-7) 55. Asserted claim 19 of the Day ‘356 patent reads as follows: 1. A method for use in a computer having a display comprising the steps of displaying on said display a plurality of information fields, identifying for each field a kind of information to be inserted therein, indicating a particular one of said information fields into which information is to be inserted and for concurrently displaying a predefined tool associated with said one of said fields, said predefined tool being operable to supply information of the kind identified for said one field, said tool being selected from a group of predefined tools including a tool adapted to supply an individual entry from a menu of alternatives and at least a tool adapted to allow said user to compose said information, and AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 48 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 34 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 inserting in said one field information that is derived as a result of said user operating said displayed tool. 56. Claim 19 thus includes a number of different elements. First, claim 19 is a method claim—not an apparatus or structure claim. Accordingly, claim 19 may be infringed by showing that one practices the claimed steps by using a form entry system that incorporates the claimed elements. Second, the claim makes clear that the method is practiced on a computer having a display—thus requiring a computer device and display to practice this claim. Third, claim 19 makes clear that there must be displayed a “plurality of information fields” such as the information fields used in form entry programs and applications. Fourth, the claim requires that the system “identify[]” the information fields used in the form entry system, for example by using field labels, words, or otherwise. Fifth, the claim requires that the form entry system “indicat[e]” which field information is to be inserted into—or in other words, which field is active. The active field may be indicated, for example, by a blinking cursor or highlighted text. 57. Next, the claim requires a predefined tool that is “concurrently displayed” with the form entry system when the tool is selected for the appropriate information field. The court construed the term “concurrently displaying” to mean “displaying at the same time, as by a window overlaying the form.” The court construed the phrase “predefined tool associated with said one of said fields” to mean “a tool specified by the system as an appropriate tool for filling in the information called for by that field.” Accordingly, the claim requires the tool to be (1) predefined by the form entry system, (2) associated with an information field, and (3) specified by the form entry system as an appropriate tool for providing information called for by that field. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 58. Further, the claim requires that the form entry system must use “a group” of such predefined tools, whereby at least one tool is a “menu of alternatives” tool, and whereby at least one tool is a “tool adapted to allow said user to compose said information”—or composition tool. The court construed the latter phrase to mean “a graphical keyboard tool or a graphical number keypad Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 49 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 35 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 B. tool, which allows the user to compose information by pointing to the display keys of that tool.” In other words, the claim requires a composition tool that (1) is either an on-screen keyboard or number keypad (such as a calendar or calculator), (2) is graphical (as opposed to text-based), and (3) allows a user to compose information by pointing to the display keys—or onscreen buttons—of the composition tool. 59. Finally, the claim requires that the tool “insert[]” the appropriate information into the appropriate information field. 60. Asserted claim 21 of the Day ‘356 patent reads as follows: 21. The method set forth in claim 19 wherein the step of displaying said pattern includes the step of displaying one or more of said information fields as a bit-mapped-graphics field. 61. Thus, claim 21 includes the same form entry system and tool requirements of claim 19, and also requires at least one information field to be “a field into which a user is to enter information by writing on a touch sensitive screen by using a stylus” as construed by the court. Infringement Of The Asserted Claims Of The Day ‘356 Patent AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 62. Lucent contends that Microsoft indirectly infringes claim 19, under 35 U.S.C. § 271(b) and (c), by making, using, selling, offering for sale in the United States, distributing, and/or importing into the United States, Microsoft Money and Microsoft Outlook software (including Microsoft Outlook with Business Manager) to be run on computer systems, as well as by making, using, selling, offering for sale in the United States, distributing, and/or importing into the United States, Microsoft Windows Mobile (or Pocket PC operating system) software, and Microsoft Word Mobile (or Pocket Word) software to be run on Pocket PC, PDA, and/or smartphone devices. Lucent contends that Microsoft induces infringement of claim 19 by supplying these products to customers and providing manuals, tutorials, help files, documentation, and other product support to customers that provide information on how to use these products, including the accused capabilities. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 50 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 36 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 This software, as sold, when run as intended on a computer or device with a display, leads to the practice of all of the elements of claim 19. Microsoft encouraged its customers to run this software on a computer or device with display as intended. Microsoft knew, or should have known, that its actions would induce actual infringements, and acted with affirmative intent to cause direct infringement. Lucent further contends that Microsoft's sale, offer to sell, and/or importation of this software contributes to the infringement of claim 19, as the software constitutes a material or apparatus for use in practicing a patented process, constituting a material part of the invention, and Microsoft knew that the infringing components of such software, used as intended, were especially made for use in practicing a patented process, and are not a staple article or commodity of commerce suitable for substantial noninfringing use. 63. Lucent also contends that Microsoft indirectly infringes claim 19 under 35 U.S.C. § 271(f) by inducing or contributing to the use of software and computers containing such software in a manner outside the United States that would infringe under 35 U.S.C. § 271(a) if in the United States. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 64. Lucent also contends that Microsoft indirectly infringes claim 21, under 35 U.S.C. § 271(b) and (c), by making, using, selling, offering for sale in the United States, distributing, and/or importing into the United States, Microsoft Windows Mobile (or Pocket PC operating system) software, and Microsoft Word Mobile (or Pocket Word) software to be run on Pocket PC, PDA, or smartphone devices, as well as Microsoft Money and/or Microsoft Outlook software to be run on Tablet PCs or stylus-based devices. Lucent contends that Microsoft induces infringement of claim 21 by supplying these products to customers and providing manuals, tutorials, help files, documentation, and other product support to customers that provide information on how to use these products, including the accused capabilities. Microsoft knew, or should have known, that its actions would induce actual infringements, and acted with affirmative intent to cause direct infringement. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 51 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 37 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 Lucent further contends that Microsoft's sale, offer to sell, and/or importation of this software contributes to the infringement of claim 21, as the software constitutes a component for use in practicing a patented process, constituting a material part of the invention, and Microsoft knew that the infringing components of such software, used as intended, were especially made for use in practicing a patented process, and are not a staple article or commodity of commerce suitable for substantial noninfringing use. 65. Lucent also contends that Microsoft indirectly infringes claim 21 of the ’356 patent under 35 U.S.C. § 271(f) by inducing or contributing to the use of software and computers containing such software in a manner outside the United States that would infringe under 35 U.S.C. § 271(a) if in the United States. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 66. Lucent contends that Dell and Gateway indirectly infringe claim 19, under 35 U.S.C. § 271(b) and (c), by making, using, selling, offering for sale in the United States, distributing, and/or importing into the United States, computer systems, computer devices, and/or smartphones running Microsoft Money software, Microsoft Outlook software (including Microsoft Outlook with Business Manager), Intuit Quicken software, Windows Mobile (or Pocket PC operating system) software, and Microsoft Word Mobile (or Pocket Word) software. Lucent contends that Dell and Gateway induce infringement of claim 19 by supplying these products to customers and providing manuals, tutorials, help files, documentation, and other product support to customers that provide information on how to use these products, including the accused capabilities. This software, as sold, when run as intended on a computer or device with a display, leads to the practice of all of the elements of claim 19. Dell and Gateway encouraged their customers to run this software on a computer or device with display as intended. Dell and Gateway knew, or should have known, that their actions would induce actual infringements, and they acted with affirmative intent to cause direct infringement. Lucent further contends that Dell and Gateway's sale, offer to sell, and/or importation of this software Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 52 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 38 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 contributes to the infringement of claim 19, as the software constitutes a material or apparatus for use in practicing a patented process, constituting a material part of the invention, and Dell and Gateway knew that the infringing components of such software, used as intended, were especially made for use in practicing a patented process, and are not a staple article or commodity of commerce suitable for substantial noninfringing use. 67. Lucent also contends that Dell and Gateway indirectly infringe claim 21, under 35 U.S.C. § 271(b) and (c), by making, using, selling, offering for sale in the United States, distributing, and/or importing into the United States, computer devices, PDAs, and/or smartphones running Microsoft Windows Mobile (or Pocket PC operating system) software, and/or Microsoft Word Mobile (or Pocket Word) software, as well as Tablet PCs or stylus-based devices running Microsoft Money, Microsoft Outlook, and/or Intuit Quicken software. Lucent contends that Dell and Gateway induce infringement of claim 21 by supplying these products to customers and providing manuals, tutorials, help files, documentation, and other product support to customers that provide information on how to use these products, including the accused capabilities. Dell and Gateway knew, or should have known, that their actions would induce actual infringements, and they acted with affirmative intent to cause direct infringement. Lucent further contends that Dell and Gateway's sale, offer to sell, and/or importation of this software contributes to the infringement of claim 21, as the software constitutes a component for use in practicing a patented process, constituting a material part of the invention, and Dell and Gateway knew that the infringing components of such software, used as intended, were especially made for use in practicing a patented process, and are not a staple article or commodity of commerce suitable for substantial noninfringing use. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 68. Defendants’ infringement is more particularly explained below and in the following claim charts, and in the March 31, 2006 Expert Report of Bruce Tognazzini. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 53 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 39 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 69. Microsoft Money, running on a computer system. Microsoft Money is a software application that provides tools to allow users to manage finances. At the most basic level, Money provides tools to organize and track a user’s finances. For example, Money provides spreadsheets, ledgers, and other accounting tools to help users manage accounts and bills. Money is set up to facilitate easy and efficient entry of financial data. Once the data is entered, Money helps organize the data into an organized and easy to use format. Money provides a graphical user interface for users to enter data. For example, in the Accounts feature, Money provides a transaction entry form, with a plethora of information fields into which users may enter their information. Money also provides a number of tools associated with the information fields to facilitate the data entry. For example, Money provides a drop down menu tool for use with the “Categories” field, a calendar tool for use with the “Date” field, and a calculator tool for use with the “Amount” field. By way of example, and without limitation to evidence establishing infringement, the following claim chart more particularly describes how Microsoft Money, running on a computer, infringes claims 19 and 21. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) ‘356 Patent Claim 19 Microsoft Money 19. A method for use in a computer having a display comprising the steps of Microsoft Money software is an arrangement for use in a computer with a display, which performs a method. See for example, Microsoft Money software produced at MSLT_0962767-68, MSLT_0962770-72, and MSLT_0959120- 25, for use in a computer with a computer monitor, e.g., a display. displaying on said display a plurality of information fields, Microsoft Money displays the transaction form. See, e.g., J.S. Stamps Dep. Tr. 38. The form has a plurality of information fields, such as “NUM,” “DATE,” “PAYEE,” “PAYMENT,” “DEPOSIT,” etc. See, e.g., Id. 39-40. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 54 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 40 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 ‘356 Patent Claim 19 Microsoft Money AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) identifying for each field a kind of information to be inserted therein, Each field has a heading, which identifies the kind of information to be inserted therein. See, e.g., Id. 42 (stating that a user would input a date for the transaction in the “DATE” field and input the amount of the transaction in the amount field, etc.). indicating a particular one of said information fields into which information is to be inserted and for concurrently displaying a predefined tool associated with said one of said fields, said predefined tool being operable to supply information of the kind identified for said one field, said tool being selected from a group of predefined tools including a tool adapted to supply an individual entry from a menu of alternatives and at least a tool adapted to allow said user to compose said information, and Microsoft Money is a software program for use in a computer. Money provides a blinking cursor, a dotted border, and/or highlighted text to indicate a particular information field into which information will be inserted. See, e.g., Id. 47-48. Money provides a tool appropriate for filling in the type of information needed for the field. For example, Money provides a calendar tool for filling in the date, a number keypad/calculator tool for filling in numbers, and a list of related possible items to fill in various other fields. See, e.g., Id. 43 (stating that Money provides a number pad/calculator tool to fill in the AMOUNT field, a calendar tool to fill in the DATE field, and a list of related possible items to select to fill in the NUM field). In this way, Money provides a group of predefined tools, such as those described above, for use with various fields in the transaction form. Also, the list of related items to select provides an individual entry from a menu, and the number pad/calculator and/or calendar tools allow the user to compose information. Microsoft Money displays the tools above at the same time as displaying the transaction form, whereas the tools overlay the transaction form. See, e.g., J.S. Stamps Dep. Tr. 87-88, Ex. 2, p. 19. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 55 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 41 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 ‘356 Patent Claim 19 Microsoft Money inserting in said one field information that is derived as a result of said user operating said displayed tool. Microsoft Money provides, for example, a number pad/calculator tool, which inserts the information derived as a result of a user using the tool, e.g., when a user clicks with a mouse pointer on the number “1” of the number pad, a “1” would get entered into the active field associated with the tool. See, e.g., Id. 63-64. Once the information fields are filled in the transaction form, the information can be transferred to a second set of fields in the ledger form by simply hitting the “enter” key. See, e.g., Id. 46. Microsoft Money is a software program for use in a computer having an algorithm to facilitate the above-described steps. ‘356 Patent Claim 21 Microsoft Money 21. The method set forth in claim 19 wherein the step of displaying said pattern includes the step of displaying one or more of said information fields as a bit-mapped-graphics field. Versions of Microsoft Money run on Windows XP Tablet PC edition, which when used with, e.g., a tablet PC, are capable of receiving information, in other words, working with Tablet PC and the handwriting recognition on a tablet PC. See, e.g., Id. 75. 70. Defendants’ infringement with respect to Money is more particularly explained in the March 31, 2006 Expert Report of Bruce Tognazzini. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 71. Microsoft Outlook, running on a computer system. Microsoft Outlook is a software application promoted as Microsoft’s “personal information manager and communications program.” Microsoft claims that “Outlook 2003 provides an integrated solution for managing and organizing e- mail messages, schedules, tasks, notes, contacts, and other information. Outlook 2003 delivers innovations you can use to manage your communications, organize your work, and work better with others—all from one place.” By way of example, and without limitation to evidence establishing Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 56 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 42 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 infringement, the following claim chart more particularly describes how Microsoft Outlook, running on a computer, infringes claims 19 and 21. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) ‘356 Patent Claim 19 Microsoft Outlook 19. A method for use in a computer having a display comprising the steps of Microsoft Outlook software includes a method for use in a computer having a user interface, e.g., a computer monitor display. See, e.g., Microsoft Outlook software produced at MSLT_0959121, MSLT_0959126, for use in a computer with a computer monitor. displaying on said display a plurality of information fields, Microsoft Outlook displays a pattern, e.g., the Appointment Creation form having a plurality of information fields. See, e.g., W. Kennedy Rough Dep. Tr., Ex. 2. The information fields include, e.g., a start time field, with a label in front of the field to indicate to the user the kind of information to be inserted in the field. See., e.g., Id., Ex. 2, p. 4. identifying for each field a kind of information to be inserted therein, The Appointment Creation form has a plurality of other information fields, such as “Subject,” “Location,” etc. Outlook precedes each information field with an identifier or label that identifies a kind of information to be inserted into each field, such as “Subject,” “Location,” etc. See, e.g., Id. 48. indicating a particular one of said information fields into which information is to be inserted and for concurrently displaying a predefined tool associated with said one of said fields, said predefined tool being operable to supply information of the kind identified for said one field, said tool being selected from a group of predefined tools including a tool adapted to supply an individual entry from a menu of alternatives and at least a tool adapted to allow said user to compose said information, and Microsoft Outlook indicates a particular one of said information fields into which information is to be inserted by, for example, a very light dotted line surrounding the field, a highlighted field, and a blinking overstrike bar (cursor). See, e.g., Id. 27-28. Outlook concurrently displays, for example, a calendar composition tool, associated with the Appointment Creation form date field. See, e.g., Id., Ex. 2, p. 4. The calendar composition tool allows a user to compose information by pointing to various selections on the tool with a mouse pointer, such as day, month, and year. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 57 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 43 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 ‘356 Patent Claim 19 Microsoft Outlook AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Outlook also provides on the Appointment Creation field a time drop down menu associated with the time field. See, e.g., Id. 32, Ex. 2, p. 4. The time drop down is adapted to supply an individual entry from a menu of alternatives. To do so, a user would click using the mouse on the drop down area that is next to the time field and select a time from the list that is shown. See, e.g., Id. 33, Ex. 2, p. 6. The Outlook tools discussed above, the calendar composition tool and drop down menu, appear as an overlay image on the Appointment Creation form, in other words, the tools are displayed concurrently with the underlying form. See, e.g., Id. 57. Outlook is designed for use with a computer, having a microprocessor, hard disk, memory management circuitry, ROM, and a display. Versions of Outlook are compatible with a Tablet PC having a touch sensitive screen, and an on-screen graphical keyboard. The graphical keyboard allows a user to compose information. See, e.g., Id. 19, 23, 31. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 58 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 44 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 ‘356 Patent Claim 19 Microsoft Outlook inserting in said one field information that is derived as a result of said user operating said displayed tool. As discussed above, Outlook provides, e.g., a calendar composition tool, and a drop down menu. Both tools, when operated properly, provide means for inserting information from the tool into the field. For example, the calendar composition tool inserts the date into the associated field when the user, using, for example, a mouse pointer, clicks on the date button for the desired date. In a similar way, the drop down menu inserts the information chosen with by the user using the mouse clicker into the associated field. Also, when used with a Tablet PC, Outlook receives information from the system indicating that a particular key was pressed on the graphical keyboard, and the information is inserted into the associated field. See, e.g., Id. 54. ‘356 Patent Claim 21 Microsoft Outlook 21. The method set forth in claim 19 wherein the step of displaying said pattern includes the step of displaying one or more of said information fields as a bit-mapped-graphics field. Versions of Microsoft Outlook are usable or in other words compatible with a Tablet PC having a touch sensitive screen and accept input from a user using a pen or stylus on a bit map graphics field. See, e.g., Id. 19, 58. Bit map graphics fields allow a user to compose information by writing on the field, with for example, a stylus. 72. Defendants’ infringement with respect to Outlook is more particularly explained in the March 31, 2006 Expert Report of Bruce Tognazzini. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 73. Windows Mobile (or Pocket PC operating system), running on a Pocket PC, smartphone, or other PDA device. Pocket PC and/or Windows Mobile for Pocket PC is the operating system software which is designed to run on palmtop computing devices such as smartphones and PDAs. Microsoft states that “Windows Mobile software powers advanced, easy- Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 59 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 45 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 to-use devices that allow you to send and receive e-mail, browse the Internet, and work on mobile versions of familiar Office software.” By way of example, and without limitation to evidence establishing infringement, the following claim chart more particularly describes how Microsoft Windows Mobile, running on Pocket PC, smartphone, PDA, or other computer devices, infringes claims 19 and 21. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) ‘356 Patent Claim 19 Windows Mobile 19. A method for use in a computer having a display comprising the steps of Windows Mobile OS is an arrangement for use in a PDA or other hand held device such as a Pocket PC or smartphone, and performs a method. displaying on said display a plurality of information fields, Windows Mobile Calendar appointment entry form provides a number of information fields, such as “Subject,” “Location,” “Starts,” “Sensitivity,” etc. identifying for each field a kind of information to be inserted therein, Each field is preceded by an identifying word that identifies the kind of information to be inserted into each field, such as “Subject,” “Location,” “Starts,” “Sensitivity,” etc. indicating a particular one of said information fields into which information is to be inserted and for concurrently displaying a predefined tool associated with said one of said fields, said predefined tool being operable to supply information of the kind identified for said one field, said tool being selected from a group of predefined tools including a tool adapted to supply an individual entry from a menu of alternatives and at least a tool adapted to allow said user to compose said information, and Windows Mobile uses, for example, a blinking cursor or highlighted text to indicate the particular field into which info is to be inserted. Concurrently, the calendar offers a drop down menu for the field, a drop down calendar, or displays at the bottom of the screen additional tools, such as a keyboard, block recognizer, or letter recognizer. Pocket PC concurrently displays a predefined tool such as a calendar or a drop-down menu or a letter recognizer or block recognizer as appropriate tools for filling in dates or the appropriate information for the associated field. Further, for example, the drop down menu supplies an individual entry from a menu of alternatives and the keyboard, block recognizer, or letter recognizer allow the user to compose information. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 60 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 46 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 ‘356 Patent Claim 19 Windows Mobile inserting in said one field information that is derived as a result of said user operating said displayed tool. Windows Mobile is designed for use with a PDA, or other hand held device such as a Pocket PC or smartphone. Pocket PCs include, for example, a microprocessor and controller. When a user utilizes one of the tools mentioned above, the information derived from using the tool is inserted from the tool into a field. For example, once the user taps on a date in the Calendar tool, the date selected is inputted into the field. Additionally, for example, a drop down menu provides information for the field that is associated with it once the user taps on a selection from the list with the stylus. ‘356 Patent Claim 19 Windows Mobile 21. The method set forth in claim 19 wherein the step of displaying said pattern includes the step of displaying one or more of said information fields as a bit-mapped-graphics field. As discussed above, Windows Mobile is designed for use with a PDA or other Pocket PC or smartphone device. PDA, Pocket PC, and smartphone devices include a display with a touch-sensitive screen overlaying the display. Such devices include, for example, a letter recognizer and/or a block recognizer, which are bit map graphics fields allowing the user to compose information by writing with a stylus. 74. Defendants’ infringement with respect to Windows Mobile is more particularly explained in the March 31, 2006 Expert Report of Bruce Tognazzini. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 75. Word Mobile (or Pocket Word), running on a Pocket PC, smartphone, or other PDA device. Pocket Word and/or Word Mobile for Windows Mobile is a word processing application for use with Pocket PC devices. Pocket Word provides users, for example, the ability to create and edit documents. Microsoft states that, “Similar to the popular desktop application you know so well, Pocket Word is a handy way to view and edit Microsoft Word attachments that you receive in e-mail.” By way of example, and without limitation to evidence establishing Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 61 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 47 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 infringement, the following claim chart more particularly describes how Microsoft Word Mobile, running on Pocket PC, smartphone, PDA, or other computer devices, infringes claims 19 and 21. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) ‘356 Patent Claim 19 Pocket Word 19. A method for use in a computer having a display comprising the steps of Microsoft Pocket Word software is a method for use in a computer having a user interface, e.g., a computer monitor display associated therewith. displaying on said display a plurality of information fields, Microsoft Pocket Word has a Format dialogue window for displaying on a display with numerous information fields, e.g., “Font,” and “Size” identified by a heading to indicate the kind of information for that field. See, e.g., M. Nielson Dep. Tr. 30-31, 33, 67-68. identifying for each field a kind of information to be inserted therein, Microsoft Pocket Word has a Format dialogue window for displaying on a display with numerous information fields, e.g., “Font,” and “Size” identified by a heading to indicate the kind of information for that field. See, e.g., M. Nielson Dep. Tr. 30-31, 33, 67-68. indicating a particular one of said information fields into which information is to be inserted and for concurrently displaying a predefined tool associated with said one of said fields, said predefined tool being operable to supply information of the kind identified for said one field, said tool being selected from a group of predefined tools including a tool adapted to supply an individual entry from a menu of alternatives and at least a tool adapted to allow said user to compose said information, and Pocket Word highlights the field to indicate a particular one of the fields into which the information is going to be inserted. See, e.g., Id. 36-37, 67. Pocket Word provides a drop down tool associated with the font field in the format dialogue. The drop down town is adapted to supply an individual entry from a menu of alternatives. See, e.g., Id. 39. When a d Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 62 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 48 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 ‘356 Patent Claim 19 Pocket Word Pocket Word displays on, for example, the Font dialogue window, through a sub- routine call, an on-screen graphical keyboard, adapted to allow a user to compose information. See, e.g., Id. 31-32. In the same way, Pocket Word provides an on-screen graphical number pad. See, e.g., Id. 35, 59. When the drop down tool or the on-screen graphical keyboard or number pad appear, the font dialogue, or background, does not disappear. Accordingly, the tools are concurrently displayed with the menu. See, e.g., Id. 83-84. Pocket Word also provides a transcriber tool, which allows a user to use the stylus to write on the screen, and that information is converted into virtual keys to input the data into information fields. See, e.g., Id. 75-76. The graphical keyboard provides a user the means to compose information by, for example, using a stylus and tapping on a letter on the keyboard. See, e.g., Id. 42-47. inserting in said one field information that is derived as a result of said user operating said displayed tool. Pocket Word inserts the information from the tool automatically into the field when the user, for example, taps the screen with the stylus, hits return on the electronic keyboard, or taps the okay button. See, e.g., Id. 67-68. Pocket Word is designed for use with, for example, a PDA, smartphone, or other hand held device. The PDA provides a microprocessor and controller necessary to run the Pocket Word software. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 63 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 49 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 ‘356 Patent Claim 19 Pocket Word 21. The method set forth in claim 19 wherein the step of displaying said pattern includes the step of displaying one or more of said information fields as a bit-mapped-graphics field. As mentioned above, Pocket Word is sold for use with a PDA, smartphone, or other hand held device such as a Pocket PC. A Pocket PC provides, for example, a touch sensitive screen, with a letter recognizer and/or a block recognizer, also known as a bit map graphics field. A letter recognizer or a block recognizer allow a user to compose information by writing on the bit map field. See, e.g., Id. 69-70, 82. 76. Defendants’ infringement with respect to Word Mobile is more particularly explained in the March 31, 2006 Expert Report of Bruce Tognazzini. 77. Intuit Quicken, running on a computer system. Intuit Quicken is a software application that provides tools to allow users to manage finances. Quicken provides tools to organize and track a user’s finances. For example, Quicken provides spreadsheets, ledgers, and other accounting tools to help users manage accounts and bills. Quicken is set up to facilitate easy and efficient entry of financial data. Once the data is entered, Quicken helps organize the data into an organized and easy to use format. Quicken provides a graphical user interface for users to enter data. For example, Quicken provides a transaction entry form, with a plethora of information fields into which users may enter their information. Quicken also provides a number of tools associated with the information fields to facilitate the data entry. For example, Quicken provides a drop down menu tool for use with the “Category” field, a calendar tool for use with the “Date” field, and a calculator tool for use with the “Amount” field. By way of example, and without limitation to evidence establishing infringement, the following claim chart more particularly describes how Intuit Quicken, running on a computer, infringes claims 19 and 21. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) ‘356 Patent Claim 19 Intuit Quicken 19. A method for use in a computer having a display comprising the steps of As programmed with Intuit Quicken, a Gateway computer with a display performs a method comprising the following steps. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 64 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 50 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 ‘356 Patent Claim 19 Intuit Quicken displaying on said display a plurality of information fields, As programmed with Intuit Quicken, the computer displays an account register with multiple information fields, such as the check number, the date of payment, the person paid, the amount paid, the category of payment, etc. identifying for each field a kind of information to be inserted therein, As programmed with Intuit Quicken, the computer identifies the kind of information to be inserted into each field, such as by the labels “Number,” “Date,” “Pay to,” “Amount,” “Category,” etc. indicating a particular one of said information fields into which information is to be inserted and for concurrently displaying a predefined tool associated with said one of said fields, said predefined tool being operable to supply information of the kind identified for said one field, said tool being selected from a group of predefined tools including a tool adapted to supply an individual entry from a menu of alternatives and at least a tool adapted to allow said user to compose said information, and As programmed with Intuit Quicken, the computer indicates which field is active and displays at the same time the tool for filling in that field. For example, the computer highlights the active “Category” field and displays at the same time a drop- down menu with category information, such as “Bank Charges,” “Clothing,” “Dry Cleaning,” etc. The tool is selected from a group of predefined tools, such as a calendar, a calculator, and a drop-down menu. A drop-down menu supplies an individual entry from a list of entries for filling in that field. There is also a tool that allows a user to compose information. For example, the calculator tool allows a user to calculate an amount for the “Amount” field. inserting in said one field information that is derived as a result of said user operating said displayed tool. As programmed with Intuit Quicken, the computer inserts into the active field information that is derived from a user operating a tool. For example, when the user operates the calendar tool, the computer inserts a date into the “Date” field. ‘356 Patent Claim 19 Intuit Quicken 21. The method set forth in claim 19 wherein the step of displaying said pattern includes the step of displaying one or more of said information fields as a bit-mapped-graphics field. As programmed with Intuit Quicken, a computer with a touch screen displays an information field as a bit-mapped-graphics field. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 65 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 51 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 C. 78. Defendants’ infringement with respect to Quicken is more particularly explained in the March 31, 2006 Expert Report of Bruce Tognazzini. Validity Of The Asserted Claims Of The Day ‘356 Patent. 79. Defendants contend that claims 19 and 21 of the Day ‘356 patent are anticipated or rendered obvious by a number of references. As an initial matter, defendants must prove by clear- and-convincing evidence that each of the references upon which they rely qualifies as prior art under 35 U.S.C. § 102. To the extent defendants can carry their burden on this issue, claims 19 and 21 of the Day ‘356 patent are not invalid in view of the references cited by defendants. Lucent’s validity positions are set forth in detail in the rebuttal expert report of Bruce Tognazzini dated May 12, 2006, the supplemental rebuttal expert report of Bruce Tognazzini dated October 12, 2007, the declaration of Bruce Tognazzini dated December 14, 2007, and any other relevant declarations and/or deposition testimony. In summary, none of the prior art references relied upon by defendants — alone or in combination — disclose all of the limitations of claim 19, which are also required by claim 21. 80. None of the references cited by defendants, alone or in combination, anticipate or render obvious to one of ordinary skill in the art claims 19 or 21 of the Day ‘356 patent. At the time of the invention of the ‘356 patent in the mid 1980s, a person of ordinary skill in the art pertinent to the Day ‘356 patent would have had three to five years working in the area of human-computer interaction, or specific training at one of two primary “schools” where one could have learned graphical user interface design, namely Xerox Palo Alto Research Center (Xerox PARC) and Apple Computer, Inc. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 81. For example, defendants rely on “The Home Accountant and Financial Planner” for the Apple Macintosh computer (“Home Accountant”). But the Home Accountant fails to disclose any “predefined tool associated with said one of said fields” as construed by this court to require the concurrent display of “a tool specified by the system as an appropriate tool for filling in the Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 66 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 52 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 information called for by that field.” Nor would it have been obvious to one of ordinary skill in the art to modify the teachings of the Home Accountant alone, or with the teachings of any other prior art references, to arrive at the claimed inventions of the ‘356 patent. 82. Defendants also rely on the “Xerox Star” system. Like Home Accountant, the Xerox Star system fails to disclose any “predefined tool associated with said one of said fields” as construed by this court to require the concurrent display of “a tool specified by the system as an appropriate tool for filling in the information called for by that field.” Nor does Xerox Star disclose any “tool adapted to supply an individual entry from a menu of alternatives.” Further, the Xerox Star uses an older system of “tiling,” where display objects are laid side-by-side and cannot be windowed or otherwise concurrently displayed. Nor would it have been obvious to one of ordinary skill in the art to modify the teachings of the Xerox Star alone, or with the teachings of any other prior art references, to arrive at the claimed inventions of the ‘356 patent. 83. Defendants also rely on the “Apple Lisa” computer system. Again, like Home Accountant and Xerox Star, the Apple Lisa system fails to disclose any “predefined tool associated with said one of said fields” as construed by this court to require the concurrent display of “a tool specified by the system as an appropriate tool for filling in the information called for by that field.” Nor would it have been obvious to one of ordinary skill in the art to modify the teachings of the Apple Lisa alone, or with the teachings of any other prior art references, to arrive at the claimed inventions of the ‘356 patent. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 84. Defendants also contend that the ‘356 patent is rendered obvious by the Meridian M3000 Touchphone, although defendants fail to identify which claim limitations they contend are present or missing in the M3000. However, the M3000 does not render claim 19 or 21 obvious or otherwise invalid. The M3000 was an obscure touch-screen telephone missing most of the limitations of the asserted claims, including any “predefined tool associated with said one of said fields” as construed Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 67 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 53 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 by this court to require the concurrent display of “a tool specified by the system as an appropriate tool for filling in the information called for by that field.” It would not have been obvious to one of ordinary skill in the art to modify the teachings of the M3000 alone, or with the teachings of any other prior art references to arrive at the claimed inventions of the ‘356 patent. 85. Defendants also contend that the ‘356 patent is rendered obvious by the HP 150 system, although defendants fail to identify which claim limitations they contend are present or missing in the HP 150. However, the HP 150 does not render claim 19 or 21 obvious or otherwise invalid. The HP 150 is missing several limitations, including any “predefined tool associated with said one of said fields” as construed by this court to require the concurrent display of “a tool specified by the system as an appropriate tool for filling in the information called for by that field.” It would not have been obvious to one of ordinary skill in the art to modify the teachings of the HP 150 alone, or with the teachings of any other prior art references, to arrive at the claimed inventions of the ‘356 patent. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 86. Defendants also point to various other references that they contend disclose “writing on a bit mapped graphics field” such as the “Koalapad” and disclosures in IEEE Spectrum, vol. 21, no.1, January 1984. However, defendants fail to identify which claim limitations they contend are present or missing in these references. These references do not render claim 19 or 21 obvious or otherwise invalid. These references are missing several limitations, including any “predefined tool associated with said one of said fields” as construed by this court to require the concurrent display of “a tool specified by the system as an appropriate tool for filling in the information called for by that field.” It would not have been obvious to one of ordinary skill in the art to modify the teachings of the Koalapad or disclosures in IEEE Spectrum, vol. 21, no.1, January 1984, alone, or with the teachings of any other prior art references, to arrive at the claimed inventions of the ‘356 patent. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 68 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 54 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 87. Defendants also contend that the ‘356 patent is rendered obvious by the “Your Money Manager” financial program designed for the IBM PC (“YMM”), in combination with other references. However, YMM does not disclose any “tool adapted to allow said user to compose said information” as construed by this court to require “a graphical keyboard tool or a graphical number keypad tool, which allows the user to compose information by pointing to the display keys of that tool.” Nor would it have been obvious to one of ordinary skill in the art to modify the teachings of YMM alone, or with the teachings of any other prior art references, to arrive at the claimed inventions of the ‘356 patent. 88. Defendants also contend that the ‘356 patent is rendered obvious by a system purportedly developed by Chemical Bank called “Foreign Exchange Front End” (“FXFE”) as purportedly described in an article (“the Tyler Article”), in combination with other references. FXFE is not prior art because it was not publicly used in the United States prior to the invention of the ‘356 patent. Moreover, FXFE does not disclose each of the limitations of the asserted claim, including “indicating a particular one of said information fields into which information is to be inserted and for concurrently displaying a predefined tool associated with said one of said fields” as construed by this court. Nor would it have been obvious to one of ordinary skill in the art to modify the teachings of FXFE or the Tyler Article alone, or with the teachings of any other prior art references, to arrive at the claimed inventions of the ‘356 patent. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 89. Defendants also contend that the ‘356 patent is rendered obvious by U.S. Patent 4,756,706, (“the ‘706 patent”) in combination with other references. However, the ‘706 patent does not disclose several limitations, including any “indicat[ors]” or any “tool adapted to allow said user to compose said information” as construed by this court to require “a graphical keyboard tool or a graphical number keypad tool, which allows the user to compose information by pointing to the display keys of that tool.” Nor would it have been obvious to one of ordinary skill in the art to Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 69 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 55 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 modify the teachings of the ‘706 patent alone, or with the teachings of any other prior art references, to arrive at the claimed inventions of the ‘356 patent. 90. Defendants also contend that the ‘356 patent is rendered obvious by Japanese Publication No. JP 60-50589 (“the Japanese ‘589 reference”) in combination with other references. However, the Japanese ‘589 reference does not disclose several limitations, including any “indicat[ors]” or any “tool adapted to allow said user to compose said information” as construed by this court to require “a graphical keyboard tool or a graphical number keypad tool, which allows the user to compose information by pointing to the display keys of that tool.” Nor would it have been obvious to one of ordinary skill in the art to modify the teachings of the Japanese ‘589 reference alone, or with the teachings of any other prior art references, to arrive at the claimed inventions of the ‘356 patent. 91. Defendants also point to various other references that they contend disclose “indicating information fields” such as Microsoft Windows 1.01, an IBM Technical Disclosure Bulletin, a reference by Pickering entitled “Touch Sensitive Screens,” a reference by Newman & Sproul entitled “Principles of Interactive Computer Graphics,” and a reference by Moreland entitled “Human Factors Guidelines.” However, defendants fail to identify which claim limitations they contend are present or missing in these references. These references do not render claim 19 or 21 obvious or otherwise invalid. These references are missing virtually all of the claim limitations, including any “predefined tool associated with said one of said fields” as construed by this court to require the concurrent display of “a tool specified by the system as an appropriate tool for filling in the information called for by that field.” It would not have been obvious to one of ordinary skill in the art to modify the teachings of any of these unrelated references, alone, or with the teachings of any other prior art references, to arrive at the claimed inventions of the ‘356 patent. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 92. Defendants also point to various other references that they contend disclose “menu tools” such as Microsoft Windows 1.01 and a reference by Pickering entitled “Touch Sensitive Screens.” Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 70 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 56 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 However, defendants fail to identify which claim limitations they contend are present or missing in these references. These references do not render claim 19 or 21 obvious or otherwise invalid. These references are missing virtually all of the claim limitations, including any “predefined tool associated with said one of said fields” as construed by this court to require the concurrent display of “a tool specified by the system as an appropriate tool for filling in the information called for by that field.” Objects such as the scrolling lists in Microsoft Windows 1.01 or the “menu list” disclosed in the Pickering reference do not have the attributes of the claimed tools. It would not have been obvious to one of ordinary skill in the art to modify the teachings of any of these unrelated references, alone, or with the teachings of any other prior art references, to arrive at the claimed inventions of the ‘356 patent. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 93. Defendants also point to various other references that they contend disclose “composition tools” such as Microsoft Windows 1.01, certain Xerox patents, a Xerox manual, U.S. Patent No. 4,587,630, U.S. Patent No. 4,509,526, U.S. Patent No. 4,570,217, and a Donkey Kong Arcade game. However, defendants fail to identify which claim limitations they contend are present or missing in these references. These references do not render claim 19 or 21 obvious or otherwise invalid. These references are missing virtually all of the claim limitations, including any “predefined tool associated with said one of said fields” as construed by this court to require the concurrent display of “a tool specified by the system as an appropriate tool for filling in the information called for by that field.” For example, the Xerox references disclose only screen-level or frame-level composition objects. Likewise, the “soft keyboard” discussed in the ‘630 patent, the “alphanumeric keyboard” discussed in the ‘526 patent, and the “keypad” discussed in the ‘217 patent are all screen- level composition objects, not composition tools within the meaning of the ‘356 patent. And the on- screen calculator in Windows 1.01 was not predefined by any form entry system or associated with any information fields. It would not have been obvious to one of ordinary skill in the art to modify Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 71 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 57 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 IV. A. the teachings of any of these unrelated references, alone, or with the teachings of any other prior art references, to arrive at the claimed inventions of the ‘356 patent. 94. Secondary considerations of non-obviousness also support a finding that the asserted claims of the Day ‘356 patent are not invalid for obviousness, including the industry acceptance of the patented technology during the years following its invention. The pre-defined and associated on- screen tools of the ‘356 patent are widely used and commercially successful, for example, in Microsoft applications such as Microsoft Outlook, Microsoft Money, and other programs. The identification and long-felt need of a known problem, and the skepticism and failure of others to succeed at arriving at the invention of the ‘356 patent are other identified considerations. 95. Defendants rely on various other references and combinations to allege that the asserted claims of the ‘356 patent are obvious. However, none of these combinations render claim 19 or 21 obvious for the additional reasons discussed in the rebuttal expert report of Bruce Tognazzini dated May 12, 2006, the supplemental rebuttal expert report of Bruce Tognazzini dated October 12, 2007, the declaration of Bruce Tognazzini dated December 14, 2007, and any other relevant declarations and/or deposition testimony. 96. On November 30, 2007, almost two years after the close of fact discovery in this case, defendants alleged that claim 19 of the Day ‘356 patent is invalid for anticipation under 35 U.S.C. §§ 102(b) and 102(g). Defendants’ untimely anticipation theories—which, in any event, are without merit and beyond the scope of supplemental obviousness discovery— have prejudiced Lucent, and Lucent therefore has moved in limine to preclude Defendants from pursuing these theories at trial. The Agulnick ‘295 Patent The Teaching Of The Asserted Claims Of The ‘295 Patent AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 97. Lucent is the owner of the Agulnick ‘295 patent with the right to sue for past infringement. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 72 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 58 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 98. The Agulnick ‘295 patent discloses technology relating to a pen computer or tablet pc and the use of gestures for controlling the computer. At the time of the ’295 patent invention, most computers were operated, with rare exception, by a keyboard and a mouse. Pen-based computers, where the user inputs information by marking on the screen with a stylus, had been introduced, but the technology was unrefined and the operation and design presented many challenges. People in the industry were addressing the problem of handwriting to replace the keyboard for text input inside specific applications, but no one had considered controlling the computer overall with a stylus and gestures, let alone the many problems presented by such a concept. 99. The '295 patent disclosed a new class of computer that is controlled by a stylus executing gestures on the computer screen. (Ex. 3, '295 Patent Abstract; col. 1:6-9; FIG. 1) For example, the computer is controllable both inside applications and at the operating system level through gestures and printed characters drawn on the display screen using the electronic stylus. (Id. at col. 7:4-6) This new type of computer used an electronically sensed pen or stylus and digitizer to track the location of the pen or stylus as the primary input device. (Id.) The primary means of controlling the computer was a set of numerous gestures drawn with the stylus over almost any object visible on the display and recognized by a handwriting recognition algorithm. (Id. at col. 3:22-24) AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 100. The claims of the '295 patent cover many different inventions covering different aspects and features of a pen computer system. For instance, one of the elements of independent claim 1 requires “implementing means including means for performing a predetermined action associated with each said predefined shape, said predetermined action being determined by the context in which said gesture was used.” The court has construed this to mean “the system’s designs allow[s] use of a single set of gestures for identical executable commands at both the operating system level and the application level.” Additionally, one of the elements of independent claim 39 requires "recognizing at least a first gesture, a second gesture, and a third gesture comprising said Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 73 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 59 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 B. first and second gestures," which, generally speaking, relates to a type of compound gesture recognition. Independent claim 41 requires a "detecting means for detecting a direction of motion of the creation of said gesture," which, again generally speaking, relates to a type of directional gesture recognition. The dependent claims similarly claim various aspects of a pen computer system, including, by way of example, a "means for detecting proximity of the stylus tip to the screen" (claim 3) and a "means . . . for displaying on said screen a shape representing the actual gesture made by a user" (claim 6). 101. Further details regarding what each of the asserted claims of the Agulnick ‘295 patent covers is set forth below in Section IV.B. Infringement of the Asserted Claims Of The Agulnick ‘295 Patent 102. Lucent contends that Microsoft, Dell, and Gateway directly and/or indirectly infringe claims 1, 3, 4, 6, 12, 39-41, 43, and 46 of U.S. Patent No. 5,347,295 (“the ’295 patent”) under 35 U.S.C. §§ 271(a) and (b) by (1) making and/or using Windows XP Tablet PC Edition operating system software and/or computers containing such software; (2) selling and/or distributing software and/or computers containing such software to end users; (3) encouraging end users to use such products; and (4) providing manuals, tutorials, help files, and other product support to users utilizing the accused capabilities of such products. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 103. Lucent contends that Microsoft induces infringement of the asserted claims of the '295 patent by supplying Windows XP Tablet PC Edition operating system software, for use with stylus-based computing devices such as Tablet PCs, to customers and providing manuals, tutorials, help files, documentation, and other product support to customers that provide information on how to use these products, including the accused capabilities. This software, as sold, when run as intended on a Tablet PC computer, leads to the practice of all of the elements of the asserted claims of the '295 patent. Microsoft encouraged its customers to run this software on Tablet PCs as Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 74 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 60 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 intended. Microsoft knew, or should have known, that its actions would induce actual infringements, and acted with affirmative intent to cause direct infringement. 104. Lucent contends that Dell and Gateway directly infringe the asserted claims of the '295 patent by making, using, selling, offering for sale in the United States, distributing, and/or importing into the United States, stylus-based computing devices such as Tablet PC computer systems running Windows XP Tablet PC Edition operating system software. Lucent contends that Dell and Gateway induce infringement of the asserted claims of the '295 patent by supplying Tablet PC computers running Windows XP Tablet PC Edition operating system software to customers and providing manuals, tutorials, help files, documentation, and other product support to customers that provide information on how to use these products, including the accused capabilities. The Tablet PC computers running Windows XP Tablet PC Edition operating system software, as sold, running as intended in normal use, lead to the practice of all of the elements of the asserted claims of the '295 patent. Dell and Gateway encouraged its customers to use the Tablet PC computers running this software as intended. Dell and Gateway knew, or should have known, that their actions would induce actual infringements, and acted with affirmative intent to cause direct infringement. 105. The accused products for the Agulnick ‘295 Patent include: Microsoft Windows XP Tablet PC edition software and computers containing such software, all of which Lucent contends are stylus-based computers controlled by gestures. Lucent contends that Microsoft Windows Tablet PC Edition Operating System software running on a Tablet PC device infringes the ‘295 patent. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 106. Defendants’ infringement is explained below, set forth by each of the asserted independent claim families: (a) Claim 1 Family (claims 1, 3, 4, 6, and 12), (b) Claim 39 Family (claims 39 and 40), and (c) Claim 41 Family (claims 41, 43, and 46). Defendants’ infringement is more particularly explained in the claim charts attached as Exhibit A, and in the March 31, 2006 Expert Report of Jean Renard Ward. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 75 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 61 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 1. Claim 1 Family 107. Asserted claim 1 of the Agulnick ‘295 patent reads as follows: 1. An apparatus for controlling a computer system, the computer system comprising a screen for displaying information and a stylus having a tip for inputting information into the computer, including: first detecting means coupled to said computer for detecting a stroke of the stylus tip in contact with the screen; second detecting means coupled to said computer for detecting a departure of the stylus tip from the screen; means coupled to said computer for defining termination of a gesture comprising at least one stroke in response to said departure of the stylus tip; means coupled to said computer for recognizing a plurality of said gestures, said recognizing means including means for comparing each said gesture to at least one predefined shape; means coupled to said computer for implementing each said recognized gesture, said implementing means including means for performing a predetermined action associated with each said predefined shape, said predetermined action being determined by the context in which said gesture was used, including a first context in which said action is executed upon an operating system level object and a second context in which said action is executed upon an application level object. 108. The Court has construed the above 35 U.S.C. § 112, ¶6 “means” limitations, including the appropriate function as well as the appropriate corresponding structure. 109. The first two limitations of claim 1 are straightforward — the claim requires a “first detecting means” for the function of detecting a “stroke” of the stylus tip in contact with the screen, and a “second detecting means” for the function of detecting a departure of the stylus tip from the screen. The Court identified a pen position digitizer as the appropriate corresponding structure. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 110. The next two limitations of claim 1 are related to defining and recognizing “gestures”—which the Court has construed to mean “a symbol or mark.” First, the claim requires a means for “defining termination of a gesture” in response to the departure of the stylus tip from the Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 76 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 62 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 screen. The Court identified a pen position digitizer as well as a pen position digitizer co-processor as the appropriate corresponding structure. Next, the claim requires a means for “recognizing a plurality of said gestures” whereby such recognition includes “comparing each said gesture to at least one predefined shape.” The Court identified a pen position digitizer co-processor programmed with certain handwriting recognition algorithms as the appropriate corresponding structure. 111. The final limitation of claim 1 is related to implementing the recognized gestures by performing some predetermined action associated with the recognized gestures and shapes. Significantly, the claim requires that the predetermined action is determined by the context in which the gesture was used—specifically, a first context in which said action is executed upon an operating system level object and a second context in which said action is executed upon an application level object. In other words, the final limitation requires that the entire computer system be controlled by gestures at both the operating system and application level. The Court’s construction clarified that this limitation “claims the system’s design allowing use of a single set of gestures for identical executable commands at both the operating system level and the application level.” The Court identified a CPU programmed with algorithms for implementing gestures as the appropriate corresponding structure. 112. The dependent claims of the claim 1 family include additional limitations. For example, dependent claims 3 and 12 require the notion of “proximity” sensing, whereby the system detects “proximity of the stylus tip to the screen” even when it is not in direct contact. Dependent claim 4 requires a detecting means for detecting the direction of motion of the stylus tip. Dependent claim 6 requires the system to display back on the screen a shape representing the gesture made by the user. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 113. Tablet PC devices infringe the claim 1 family of claims of the ‘295 patent. Tablet PC devices include Microsoft Windows Tablet PC Edition Operating System software for controlling Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 77 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 63 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 the computer system. Tablet PC devices also include a screen for displaying information and a stylus with a tip for inputting information into the Tablet PC. 114. Tablet PC devices include a pen position digitizer—electromagnetic digitizer—which detects when the stylus tip is in contact with the screen. The tablet and/or stylus includes a switch or other means for detecting when the stylus tip is in contact with the screen. A force transducer, sometimes referred to as a pressure sensor, is an example of such a switch. Tablet PC Edition software running on the device detects a stroke or strokes from the point in time when the stylus touches the screen, through all its motion, until the time the stylus leaves the screen. The digitizer included with Tablet PC devices also detects a departure of the stylus tip from the screen. The stylus tip has departed contact with the screen when the digitizer no longer provides position information to the computer, or when a force-sensing transducer or a switch or equivalent functionality indicates that the stylus tip has departed contact from the screen. 115. A Tablet PC device includes the pen position digitizer mentioned above and also a co-processor or virtualization thereof which determines the specific coordinates of the stylus tip position. Tablet PC devices include a pen position digitizer and a co-processor or virtualization thereof which performs the function of defining termination of a gesture comprising at least one stroke in response to the departure of the stylus tip from the screen. Software on the computer uses the departure of the stylus tip from the screen as a signal that the gesture has terminated. The transition from the state of detecting that the stylus is in contact with the screen, to the state that is not, is used by software on the Tablet PC to determine that the stylus tip has departed the screen. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 116. The pen position co-processor is implemented in Tablet PC devices as a software virtualization of hardware. Modern CPUs in Tablet PC devices are sufficiently capable that they can handle running the software run on both the main processor (CPU 50 in the ‘295 patent) and the pen position digitizer co-processor 90 described in the ‘295 patent. Accordingly, the corresponding Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 78 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 64 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 structure (the CPUs in Tablet PC devices) is identical to pen position digitizer co processor 90; each are computational hardware programmed to interpret stylus movements as gestures (or other, non- gesture inputs). If for some reason the fact that program execution and gesture recognition algorithms were performed on different processing cores, this difference makes no difference to operation, is insubstantial, and thus the structures are at a minimum equivalent. The Tablet PC gesture recognition code programs the general purpose CPUs of Tablet PC devices to define termination of a gesture comprising at least one stroke in response to the departure of the stylus tip from the screen. This implementation of software running on a CPU is at a minimum the equivalent to Pen position digitizer co processor 90. 117. Tablet PC devices include a pen position digitizer, and a pen position digitizer co- processor or virtualization thereof. The devices include Tablet PC Edition software, which includes recognition software for comparing the actual gesture to a predefined shape, which is based on a definition of the properties of that pre-defined shape. Tablet PC Edition software includes two recognizers or recognition modules, one of which makes a comparison of an actual gesture with definitions of specific pre-defined shapes based on rules, and a second which utilizes neural network or similar technology which makes a comparison with shapes. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 118. The gesture recognition algorithms used in Tablet PC devices are identical structures to alternatives described in “Automatic Recognition of the Handprinted Characters -- The State of Art,” Proceedings of the IEEE, pages 469-487, Vol. 68, No. 4, April 1980, one of the three references cited by the Court’s claim construction as corresponding structure for this limitation. The “rule-based” component is identical in structure to the relatively rigid structural recognizers described in the reference. The “neural net” recognizer is identical in structure to the adaptive and learning nets types of recognizers described in the reference. Tablet PC devices programmed with the software described above recognize numerous gestures. Tablet PC devices perform specific Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 79 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 65 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 predetermined actions in response to a specific gesture in which the action is further defined in terms of the context in which the gesture is used. There are numerous examples of such gestures used by the Tablet PC. 119. Tablet PC devices allow for the entire computer system be controlled by gestures at both the operating system and application level. Tablet PCs implement predetermined actions based on the context in which the gesture is used, including a first context in which the action is executed upon an operating system level object and a second context in which said action is executed upon an application level object. For example, at the operating system level, the system recognizes the "Tap" and "Double Tap" gestures to operate in one context such as locating and launching applications. At the application level, such as a word processing application, the system recognizes those same gestures in a second context, such as to select and highlight text. There are other gestures that are recognized in one context at the operating system leval and a second context at the application level, such as the "Drag" gesture. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 120. With respect to dependent claims 3 and 12, Tablet PC devices include a digitizer with the functionality of “hover,” which is a terminology for technology for sensing proximity of the stylus tip to the screen and the position of the stylus tip over the screen when the stylus tip is sufficiently near the screen but not in contact with the screen. The stylus in a Tablet PC device may include a radio frequency inductor/capacitor circuit and switch. The Tablet PC software further provides an indicator, for example a special cursor whose presence and motion indicates the position that is reported for the stylus in proximity near or over the display. This cursor is independent of and visually distinct from other cursors such as the cursor for text input location in a word processing document or text field. When the stylus is out of proximity range, the digitizer does not report the position of the stylus. Further, when the stylus is out of proximity range, software in the Tablet PC device no longer updates, changes or repositions the special cursor whose motion indicates the Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 80 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 66 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 2. proximity of the stylus. The fact that this special cursor is no longer moving in response to motion of the stylus indicates that the stylus is no longer in proximity. Thus the display of the indicator has been terminated. 121. With respect to dependent claim 4, software on the Tablet PC CPU or co-processor determines the direction of motion of the stylus based on the changes in the position in a sequence of points. The recognizers make use of this information to determine the direction of motion of the gesture. For example, a horizontal stroke gesture made left to right may be identified by the recognizer as the gesture “Right” and is further associated with the predetermined action of “space”, whereas an identical horizontal stroke gesture made in the direction from right to left may be identified by the recognizer as the gesture “Left” and is associated with the predetermined action of “backspace.” 122. With respect to dependent claim 6, Tablet PC devices further display on the screen a visible representation of the actual gesture or mark made by the user when the user writes a stroke or gesture in the form of electronic ink. An example of this functionality is exhibited by the Soft Input Panel. For example, in the boxed or “combed” mode, the display shows a representation of the gesture consisting of all the electronic ink marked in the area until the user lifts the stylus or the gesture is completed. For example, making a “Scratchout” gesture or other gesture in the Soft Input Panel shows a representation of the actual gesture in the form of electronic ink. This representation may then be removed and replaced by a character if the gesture was a handwriting character gesture. Claim 39 Family 123. Asserted claim 39 of the Agulnick ‘295 patent reads as follows: 39. An apparatus for controlling a computer system, the computer system comprising a screen for displaying information and a stylus having a tip for inputting information into the computer, including: AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) detecting means coupled to said computer for detecting a stroke of the stylus tip in contact with the screen; Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 81 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 67 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 means coupled to said computer for recognizing a gesture comprising at least one stroke and an event indicating termination of the gesture, said recognizing means including means for comparing said gesture to at least one predefined shape and being for recognizing at least a first gesture, a second gesture, and a third gesture comprising said first and second gestures; and implementing means coupled to said computer for implementing each recognized gesture, said implementing means including means for performing a first predetermined action associated with said first gesture, a second predetermined action associated with said second gesture, and a third predetermined action associated with said third gesture. 124. As with claim 1, the Court has construed the above 35 U.S.C. § 112, ¶6 “means” limitations, including the appropriate function as well as the appropriate corresponding structure. 125. The first two limitations of claim 39 are similar to those in claim 1 - the claim requires a “detecting means” for the function of detecting a “stroke” of the stylus tip in contact with the screen. The Court identified a pen position digitizer as the appropriate corresponding structure. 126. The next limitation of claim 39 — again similar to claim 1 — is related to recognizing gestures. The first part of this limitation requires a means for “recognizing” a gesture whereby such recognition includes “comparing said gesture to at least one predefined shape.” The Court identified a pen position digitizer co-processor programmed with certain handwriting recognition algorithms as the appropriate corresponding structure. This limitation further requires that the system recognize at least a “first” gesture, a “second” gesture, and a “third” gesture “comprising said first and second gestures.” The parties have referred to this as the “compound gesture” requirement. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 127. The final limitation of claim 39 — like claim 1 — is related to implementing the recognized gestures by performing some predetermined action associated with each of the “first,” “second,” and “third” gestures. This limitation recognizes that the “third” gesture is the “compound gesture” (combination of the first two gestures), and requires a different predetermined action. The Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 82 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 68 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 3. Court identified a CPU programmed with algorithms for implementing gestures as the appropriate corresponding structure. 128. The dependent claim of the claim 39 family include additional limitations. Dependent claim 40 claims the situation where the shapes of the “first” and “second” gestures are substantially identical. 129. Tablet PC devices infringe the claim 39 family of claims of the ‘295 patent. The claim 39 family of claims include many of the same limitations of the claim 1 family. This section addresses the limitations not addressed above with respect to the claim 1 family. The claim charts attached as Exhibit A and March 31, 2006 Expert Report of Jean Renard Ward further explain Defendants’ infringement. 130. Tablet PC devices include Tablet PC Edition software which determines termination of a gesture through a combination of the stylus tip departing contact with the screen, and/or leaving the active area of the touch screen, and/or a timeout after the stylus tip has left the touch screen or gone out of the active area, or the stylus going out of proximity with the digitizer or screen, which are functionalities described in the ‘295 patent. 131. As mentioned above with respect to the claim 1 family, Tablet PC devices recognize numerous gestures including a first gesture, a second gesture, and a third gesture comprising the first two gestures which has come to be referred to as compound gestures in the context of the claim 39 family. For example, Tablet PC devices recognize the “Tap,” “DoubleTap,” “Up,” “Down,” and “UpDown” gestures. Tablet PC devices perform different predetermined actions for each of these separate gestures. And with respect to dependent claim 40, some of these compound gestures include circumstances where the first and second gestures are substantially identical. Claim 41 Family AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 132. Asserted claim 41 of the Agulnick ‘295 patent reads as follows: Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 83 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 69 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 41. An apparatus for controlling a computer system, the computer system comprising a screen for displaying information and a stylus having a tip for inputting information into the computer, including: first detecting means coupled to said computer for detecting a stroke of the stylus tip in contact with the screen; means coupled to said computer for recognizing a gesture comprising at least one stroke and an event indicating termination of the gesture, said recognizing means including means for comparing said gesture to at least one predefined shape, each stroke of said gesture being located in substantially the same area of the screen: second detecting means for detecting a direction of motion of the creation of said gesture, wherein the predefined shape of said recognized gesture also represents said direction of motion; and implementing means coupled to said computer for implementing said recognized gesture, said implementing means including means for performing a predetermined action associated with said predefined shape. 133. As with claim 1, the Court has construed the above 35 U.S.C. § 112, ¶6 “means” limitations, including the appropriate function as well as the appropriate corresponding structure. 134. The first two limitations of claim 41 are similar to those in claims 1 and 39 — the claim requires a “detecting means” for the function of detecting a “stroke” of the stylus tip in contact with the screen. The Court identified a pen position digitizer as the appropriate corresponding structure. 135. The next limitation of claim 41 — again similar to claims 1 and 39 — is related to recognizing gestures. The first part of this limitation requires a means for “recognizing” a gesture whereby such recognition includes “comparing said gesture to at least one predefined shape.” The Court identified a pen position digitizer co-processor programmed with certain handwriting recognition algorithms as the appropriate corresponding structure. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 136. The next limitation of claim 41 is a second detecting means for detecting the direction of motion of the creation of the gesture, where the predefined shape of the recognized gesture also Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 84 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 70 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 represents the direction of motion. The Court identified a pen position digitizer and pen position digitizer co-processor as the appropriate corresponding structures. 137. The final limitation of claim 41 — like claim 1 — is related to implementing the recognized gestures by performing some predetermined action associated with the predefined shape and gesture. The Court identified a CPU programmed with algorithms for implementing gestures as the appropriate corresponding structure. 138. The dependent claims of the claim 41 family include additional limitations. For example, dependent claim 43 (like dependent claim 6) requires the system to display back on the screen a shape representing the gesture made by the user. And dependent claim 46 requires that the direction of the motion be associated with a predetermined action. 139. Tablet PC devices infringe the claim 41 family of claims of the ‘295 patent. The claim 41 family of claims includes many of the same limitations of the claim 1 and 39 families. This section addresses the limitations not addressed above with respect to the claim 1 and 39 families. The claim charts attached as Exhibit A and March 31, 2006 Expert Report of Jean Renard Ward further explain Defendants’ infringement. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 140. Tablet PC Edition software includes an element referred to as the SIP (“Soft Input Panel”) which defines a special area on the screen. When the Soft Input Panel, specifically in the non-boxed “combless” mode, is operational, gestures such as a “Right”, which is associated with the predetermined action of the character “space”, the gesture being a horizontal mark made left to right, must be made within this special area, which is the same area of the screen. The same gesture made outside of this area, and thus not in the same area, such as in the text area of a word processing application, will not be recognized as the gesture “Right”, or will not perform the predetermined action of a “space.” Further, the “Scratchout” gesture if made in this special area, which is the same area of the screen, will be recognized as a gesture for erasing ink and text but the same gesture made Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 85 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 71 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 in the area of the word processing document will not be so recognized, or in any case does not carry out the same predetermined action. 141. In the Soft Input Panel functionality of a Tablet PC device, a horizontal stroke gesture made from left to right is recognized as the gesture “Right” and is associated with the predetermined action of the character “space,” whereas an identical horizontal stroke gesture made from right to left is recognized as the gesture “Left” and is associated with the predetermined action of the character “backspace.” 142. With respect to dependent claim 43 (as with dependent claim 6), Tablet PC devices further display on the screen a visible representation of the actual gesture or mark made by the user when the user writes a stroke or gesture in the form of electronic ink. An example of this functionality is exhibited by the Soft Input Panel. For example, in the boxed or “combed” mode, the display shows a representation of the gesture consisting of all the electronic ink marked in the area until the user lifts the stylus or the gesture is completed. For example, making a “Scratchout” gesture or other gesture in the Soft Input Panel shows a representation of the actual gesture in the form of electronic ink. This representation may then be removed and replaced by a character if the gesture was a handwriting character gesture. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 143. With respect to dependent claim 46, software on the Tablet PC CPU or co-processor determines the direction of motion of the stylus based on the changes in the position in a sequence of points. The recognizers make use of this information to determine the direction of motion of the gesture. For example, a horizontal stroke gesture made left to right may be identified by the recognizer as the gesture “Right” and is further associated with the predetermined action of “space”, whereas an identical horizontal stroke gesture made in the direction from right to left may be identified by the recognizer as the gesture “Left” and is associated with the predetermined action of “backspace.” Likewise, the "UpRightLong" gesture is recognized and associated with the Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 86 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 72 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 C. 1. predetermined action of inserting a tab character, whereas the "DownLeftLong" gesture (identical but made in a different direction) is associated with the predetermined action of inserting a new line. Validity of the Asserted Claims of the Agulnick ‘295 Patent 144. Defendants claim that the asserted claims of the Agulnick ‘295 Patent are anticipated or rendered obvious by a number of references either alone or in combination. As an initial matter, Defendants must prove by clear and convincing evidence that each of the references upon which they rely qualifies as prior art under 35 U.S.C. § 102. To the extent that Defendants can carry their burden on this issue, the asserted claims of the Agulnick ‘295 Patent are not invalid in view of the references cited by Defendants. 145. A person of ordinary skill in the art at the time of the invention would have a BS degree in computer science or equivalent technical knowledge, plus 2-4 years experience in software development including at least 2 years experience in pen computing development. 146. Lucent’s validity positions are set forth in detail in the Rebuttal Expert Report of Mr. Jean Renard Ward dated May 12, 2006 and the Supplemental Rebuttal Expert Report of Mr. Jean Renard Ward dated October 12, 2007. As set forth below, none of the prior art references relied on by Defendants—alone or in combination—anticipate and/or render obvious the asserted claims of the ‘295 patent. The Kim Paper AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 147. The Kim Paper is a description of text editing technology. The Kim Paper does not disclose controlling the operating system with gestures. The Kim Paper does not disclose working on operating system objects with gestures. The Kim Paper does not disclose compound gestures combining a first gesture and a second gesture because it refers only to single stroke gestures and single gestures. The Kim Paper does not disclose the composition of a first gesture and a second gestures into a third gesture. The Kim Paper does not disclose the corresponding structure (pen Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 87 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 73 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 2. 3. position digitizer co-processor) necessary to perform the functions of defining termination of a gesture and recognizing a plurality of gestures. It would not have been obvious to modify the teachings of the Kim Paper alone, or with the teachings of any of the many references suggested by defendants, to arrive at the claimed invention. PLI 148. Defendants rely on four separate sources, three papers and a video when they refer to the Paper-Like Interface System (“PLI”). These four separate sources discussing the Paper-Like Interface System describe different applications, employ different recognizers, are not by the same authors, and describe different capabilities and different user interface designs. The three papers describe only the application set forth in each. 149. The PLI references are a description of a small number of separate editing applications, such as text editing for word processing, text editing for a spreadsheet application, and musical notation editing. The PLI references do not disclose working on operating system objects with gestures. The PLI references do not disclose compound gestures combining a first gesture and a second gesture but instead refer to a dialogue interpreter for composing command sequences by grammar. The PLI references refer to single stroke gestures and single gestures. The PLI references do not disclose the composition of a first gesture and a second gesture into a third gesture. The PLI references do not disclose the corresponding structure (pen position digitizer co-processor) necessary to perform the functions of defining termination of a gesture and recognizing a plurality of gestures. It would not have been obvious to modify the PLI references alone, or with the teachings of any of the many references suggested by the defendants, to arrive at the claimed invention. FIDS AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 150. Defendants appear to rely on two separate sources, the FIDS paper and the Proof Correction Standard - SFS 2324 (“SFS 2324”) when they refer to FIDS. The FIDS paper and SFS Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 88 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 74 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 4. 5. 2324 are separate sources, one discussing a flat-panel interactive display system and the other a set of Finish national proofreading standards. 151. The Flat Panel Interactive Display System reference (“FIDS”) describes a prototype tablet (flat panel display with front-mounted digitizer) and a prototype text editing application. FIDS does not disclose working on operating system objects with gestures. FIDS does not disclose compound gestures. FIDS does not disclose the corresponding structure (pen position digitizer co- processor) necessary to perform the functions of defining termination of a gesture and recognizing a plurality of gestures. It would not have been obvious to modify FIDS alone, or with the teachings of any of the many references suggested by Defendants, to arrive at the claimed invention. Oed & Doster 152. The Oed paper and the Doster paper are two references and are separate sources, one discussing a user friendly man-machine interface and the other discussing word processing. The Oed and Doster references describe a prototype consisting of a separate tablet and display for input into application programs (e.g. word processing) as a replacement for a keyboard. The Oed & Doster references do not disclose working on operating system objects with gestures. The Oed & Doster references do not disclose compound gestures. And they do not disclose the corresponding structure (pen position digitizer co-processor) necessary to perform the functions of defining termination of a gesture and recognizing a plurality of gestures. It would not have been obvious to modify the Oed & Doster references alone, or with the teachings of any of the many other references suggested by Defendants, to arrive at the claimed invention. Inagaki AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 153. Inagaki does not disclose an apparatus for controlling a computer system within the meaning of the ‘295 patent. Specifically, Inagaki fails to disclose a single integrated screen for displaying the stroke of the stylus tip in contact with the screen. Inagaki fails to disclose means Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 89 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 75 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 6. 7. coupled to said computer for detecting a stroke of the stylus tip in contact with the screen. Inagaki fails to disclose means coupled to said computer for comparing said gesture to at least one predefined shape. Further, Inagaki does not disclose the function of detecting a stroke of the stylus tip in contact with the screen. It would not have been obvious to modify Inagaki alone, or with the teachings of any of the many other references suggested by Defendants, to arrive at the claimed invention. Coleman 154. Coleman does not disclose means coupled to said computer for recognizing a gesture … “said recognizing means including means for comparing said gesture to at least one predefined shape.” Coleman does not disclose means for detecting a stroke or for recognizing a gesture within the meaning of the ‘295 patent. Coleman fails to disclose a pen position digitizer co-processor programmed with the various recognition techniques set forth in the Court’s claim construction for recognizing a gesture. It would not have been obvious to modify Coleman alone, or with the teachings of any of the many other references suggested by Defendants, to arrive at the claimed invention. Sklarew AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 155. Sklarew was considered by the patent Examiner of the ‘295 patent who determined that Sklarew did not invalidate any of the asserted claims. Sklarew does not disclose an apparatus for controlling a computer system within the meaning of the ‘295 patent. Sklarew does not disclose a third gesture comprising said first and second gestures, or compound gestures. It would not have been obvious to modify Sklarew alone, or with the teachings of any of the many other references suggested by Defendants, to arrive at the claimed invention. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 90 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 76 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 8. 9. 10. Admitted Known Systems 156. Defendants discuss an undefined group of alleged prior art references they refer to as “Admitted Known Systems.” To the extent these systems are those referred to in the specification of the Agulnick ‘295 patent, these systems were considered by the patent Examiner of the ‘295 patent who concluded none of these alone or in combination invalidated any of the asserted claims of the ‘295 patent. It would not have been obvious to modify any of these Admitted Known Systems, alone or in combination with other systems, to arrive at the claimed invention. Macintosh Computer With A MicroTouch UnMouse 157. The Macintosh computer with an UnMouse fails to disclose: a stylus which acts on the screen for displaying information; detecting a stroke of the stylus tip in contact with the screen; detecting a departure of the stylus tip from the screen; termination of gestures comprising at least one stroke in response to said departure of the stylus tip; a recognition of gestures; recognizing a plurality of gestures; comparison of gestures to at least one predefined shape; any handwriting recognition algorithm in any of the references set forth in the Court’s Claim Construction Order; implementing recognized gestures; performing predetermined actions associated with a predefined shape; performing the function of predetermined actions being determined by the context in which the gesture is used; executing predetermined actions on operating system level objects in response to gestures; executing predetermined actions on application level objects in response to gestures; and strokes which are drawing movements. It would not have been obvious to modify the Macintosh and UnMouse alone, or with the teachings of any of the many other references suggested by Defendants, to arrive at the claimed invention. Casio PF-8000 Calculator AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 158. The Casio PF-8000 fails to disclose a single integrated screen for displaying information as well as for receiving the stroke of the stylus tip in contact with the same screen. The Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 91 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 77 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 11. 12. Casio PF-8000 does not perform the function of detecting a stroke of the stylus tip in contact with the screen. The Casio PF-8000 fails to disclose a pen-position digitizer. It would not have been obvious to modify the Casio PF-8000 alone, or with the teachings of any of the many other references suggested by Defendants, to arrive at the claimed invention. More Patent (4,839,634) 159. The ‘634 patent was considered by the patent Examiner of the ‘295 patent who must have determined that the ‘634 patent did not invalidate any of the asserted claims. The ‘634 patent fails to disclose defining termination of a gesture as set forth by the Court’s claim construction. The character recognition algorithm as disclosed by the ‘634 patent does not fall within the realm of recognizers referenced by the Court’s claim construction. Further, the ‘634 patent fails to disclose performing an action in response to a gesture in the context of an operating system level object. It would not have been obvious to modify the ‘634 patent alone, or with the teachings of any of the many other references suggested by Defendants, to arrive at the claimed invention. X Window System User’s Guide AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 160. The X Windows reference fails to disclose a stylus having a tip for inputting information. X Windows does not include a recognizer that falls within the Court’s claim construction. X Windows fails to disclose the operation of a gesture executed on an operating system level object. X Windows does not disclose gesture within the meaning of the ‘295 patent because there is no comparison with predefined shapes. X Windows does not disclose recognition of direction of motion of a gesture. Additionally, because there are no gestures disclosed by X Windows, there can be no first gesture, or second gesture, and therefore no compound gestures. It would not have been obvious to modify X Windows alone, or with the teachings of any of the many other references suggested by Defendants, to arrive at the claimed invention. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 92 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 78 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 V. A. 161. Secondary considerations of non-obviousness also support a finding that the asserted claims of the Agulnick ‘295 patent are not invalid for obviousness, including the industry acceptance of the patented technology during the years following its invention, the recognized problem and need, and the failure of others to succeed. Validity Of Multimedia Patent Trust Lucent’s Decision Not To Participate In MPEG-LA 162. MPEG LA is a licensing association that licenses a pool of some patents deemed “essential” to the MPEG-2 compressed video standard. MPEG LA was formed in the mid-1990s by a group of independent companies, each of which voluntarily contributed its MPEG-2 essential patents to the patent pool. Thereafter, additional companies joined MPEG LA, contributing their MPEG-2 essential patents as well. MPEG LA offers companies an MPEG-2 Patent Portfolio License that provides a license to all patents in the pool for purposes of practicing the MPEG-2 standard. 163. Although Lucent participated in the working group of independent companies that initially investigated the formation of an MPEG-2 patent pool, Lucent never became a member of MPEG LA. Determining that the pool’s expected licensing terms would undervalue Lucent’s MPEG-2 essential patents, Lucent made a public business decision not to join MPEG LA when it was formed in 1997, and instead chose to license its MPEG-2 video-coding patents independently. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 164. The defendants have contended that Lucent’s decision not to join MPEG LA constitutes unclean hands. Lucent, however, was under no obligation to join. The companies that decided to pool their patents had no authority to force others to join, and, in fact, Justice Department authorization was required for the pool’s creation. Lucent’s decision not to join was in all respects proper and cannot be argued to be an unconscionable act, let alone one that bears an immediate and necessary relation to the claims here or that affects the equities between the parties to this litigation. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 93 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 79 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 B. C. Lucent’s Attempts To License The Defendants To The Video Coding Patents 165. After Lucent’s public decision not to join MPEG LA, Lucent approached a number of potential licensees to license its video-coding patents, including Dell and Gateway. Lucent first approached Gateway in April 1998 and Dell in September 1998. In both cases, this first assertion led to several years of licensing negotiations, which ultimately proved unsuccessful. Lucent filed suit against Gateway in 2002 and against Dell in 2003. Lucent filed suit against Microsoft in 2003, after Microsoft intervened in the Gateway action. 166. After Lucent initiated negotiations, each of the defendants took MPEG-2 Patent Portfolio Licenses from MPEG LA. Dell Products, L.P. took a license in December 2001 and Gateway, Inc. in January 2002. Because Lucent was not a member of MPEG LA, neither Dell nor Gateway received a license to any Lucent patent by virtue of its MPEG LA Portfolio License. Neither company had any expectation that it would ever receive such a license through MPEG LA. Neither company suggested during its negotiations or during this litigation before the Lucent/Alcatel merger that MPEG LA had provided it a license to any Lucent patent. 167. Microsoft did not take a Patent Portfolio License until February 2006, nearly three years after its litigation with Lucent had begun. Microsoft did not receive a license from MPEG LA to any Lucent patent. Microsoft had no expectation that it would ever do so. Alcatel Makes An Independent Decision To Join MPEG LA AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 168. Before 2006, Alcatel SA was one of Lucent’s primary competitors; it had no affiliation with Lucent. Although Alcatel was not an original member of MPEG LA, in March 2003 it made its own independent business decision to join that organization. In doing so, it contributed its MPEG-2 essential patents to the MPEG LA patent pool. To join MPEG LA, Alcatel entered a number of agreements, including an “Agreement Among Licensors.” Under that Agreement, Alcatel Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 94 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 80 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 D. agreed to grant a license to any MPEG-2 essential patent that the “Party and its Affiliate(s) . . . presently or in the future, have the right to license or sublicense.” Lucent’s Merger With Alcatel 169. Over three years after Alcatel joined MPEG LA — on April 2, 2006 — Alcatel and Lucent announced their intention to enter a reverse triangular merger in which Lucent would become a wholly owned subsidiary of Alcatel. On that date, Alcatel and Lucent entered into a Merger Agreement. Although the Agreement included certain reciprocal covenants from Lucent and Alcatel, the Agreement expressly permitted Lucent and Alcatel to conduct their businesses in the ordinary course without the consent of the other party, including transferring assets, entering into contracts, and settling litigations. Except for shareholders in certain circumstances, the Agreement expressly disavowed any alleged third-party beneficiary. 170. In an SEC proxy statement filed April 7, 2006, Lucent stated that “the way the proposed merger is structured, all of the patents will continue to be owned by Lucent and its subsidiaries.” That paragraph represents that Alcatel and Lucent did not intend Lucent to transfer its patent portfolio to Alcatel upon completion of the merger. To the contrary, Lucent, albeit as a subsidiary of Alcatel, would continue to own its pre-existing Bell Labs portfolio. Consistent with that representation, Lucent owns the Bell Labs patent portfolio today. The statement in the SEC proxy statement was true when made. It remains true today — the statement made no representation about transfer of individual patents. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 171. In another SEC statement filed April 4, 2006, Lucent stated that “[t]he 2 companies will combine their patent portfolios and by doing so will reinforce their strengths in innovation and the valuation of their technologies through patent licensing. We intend to continue and strengthen further their efforts in new patents creation.” This statement was true when made and remains true Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 95 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 81 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 today. While Lucent and Alcatel continue to own the patents they respectively brought with them into the merger, the two portfolios have in fact been combined for licensing purposes. 172. Shortly after entering the Merger Agreement, each company began to assess the potential impact of its merger partner’s pre-existing contractual obligations on its ongoing business. In this process, Lucent became concerned that certain Lucent video-coding and wireless patents might become subject to Alcatel’s pre-existing licensing obligations upon completion of the merger, and thereby substantially devalued. 173. At the same time, the defendants were also considering the impact of Alcatel’s contractual obligations. Soon after the potential merger was announced, the defendants moved the Court to stay the Group 1 video-coding trial until after the completion of the merger, arguing that by virtue of Alcatel’s MPEG LA agreements, Lucent’s video-coding patents would be swept into the MPEG LA patent pool upon completion of the merger. The defendants argued that not only would they become licensed to these patents going forward, but that the merger would also extinguish all past liability on these patents and render moot nearly a decade of licensing negotiations and litigation. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 174. During an August 14, 2007 hearing with the Court on the defendants’ stay request, Lucent explained that even if the merger were to be completed with Lucent still owning the Video Coding Patents-in-Suit, that circumstance would not completely extinguish the defendants’ liability. As Lucent’s counsel noted, although the MPEG LA patent license covered MPEG-2 products, Lucent was also accusing MPEG-1 and WMV-9 products not covered by the MPEG LA agreements. Lucent’s counsel also pointed out a number of provisions of the MPEG LA agreement that could prevent the Video Coding Patents-in-Suit from becoming part of the MPEG LA patent pool. Lucent’s counsel also informed the Court and the defendants that steps were being taken such that the Video Coding Patents-in-Suit would not become part of the MPEG LA patent pool, and offered Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 96 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 82 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 E. to provide the Court with an explanatory declaration. The defendants opposed Lucent’s request to submit a declaration and refused to receive this information, arguing that any such information would be useless until after the merger closed. 175. Had the defendants permitted Lucent to submit its proposed declaration, they would have learned that Lucent was considering at least two options to avoid the loss of value of its video- coding patents potentially subject to Alcatel’s MPEG LA agreements: an outright sale of the patents to a third party or the assignment of the patents to an irrevocable trust. 176. Defendants had no reasonable expectation to a license to the Netravali ‘272 or Haskell ‘226 patents by virtue of the Lucent/Alcatel merger. The Formation Of MPT 177. Lucent ultimately chose the latter option, forming Multimedia Patent Trust before completion of the merger. On November 28, 2006 — while Lucent was an independent company, with no obligation to MPEG LA — Lucent assigned nine video-coding and wireless patents to the Trust, including the Netravali ‘272 and Haskell ‘226 patents. Lucent gave up control of these patents, leaving it to the Trust to preserve and maximize their value. When Lucent became an Alcatel subsidiary on November 30, 2006, Lucent did not own these patents. 178. At the time of the transfer Lucent had no obligation to MPEG LA. The defendants were not creditors of Lucent. To the contrary, Lucent was a creditor of each of the defendants, who were liable to Lucent for patent infringement of the video-coding patents. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 179. As the Court has already held as a matter of law, MPT took the patents free of any obligation to Alcatel and free of Alcatel’s obligations to MPEG LA. Defendants are not licensed to the Netravali ‘272 and Haskell ‘226 patents, have no claim to a license, and have never had any claim to a license. Defendants were not present or future creditors at the time Lucent assigned the patents to MPT. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 97 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 83 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 180. Lucent had no actual intent to hinder, delay, or defraud a creditor in assigning the video-coding patents to MPT. To the contrary, Lucent assigned those patents to preserve their value and the value of the infringement claims in this lawsuit — which have been pending for years — for its shareholders. 181. Lucent breached no obligation in assigning the video-coding patents to MPT, nor committed any act contrary to law of accepted standards of morality. 182. Lucent was not insolvent at the time of the patent assigment to MPT, it did not become insolvent as a result of the assignment, and MPT did not have reasonable cause to believe that Lucent was insolvent or became insolvent as a result of the assigment. 183. Lucent received reasonably equivalent value for its patent assignment to MPT. 184. Lucent was not engaged and was not about to be engaged in a business or a transaction for which Lucent's remaining assets were unreasonably small in relation to the business or transaction. 185. Lucent did not intend to incur, and did not believe and reasonably should not have believed, that it would incur debts beyond its ability to pay as they became due. 186. MPT was not an insider of Lucent and Lucent did not assigment the patents to MPT for an antecedent debt. 187. After the merger closed — as defendants had requested — Lucent informed the Court and the parties of the formation of Multimedia Patent Trust and the assignment of the Video Coding Patents-in-Suit. On January 26, 2007, this Court substituted Multimedia Patent Trust for Lucent as plaintiff for those patents under Fed. R. Civ. P. 25(c). AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 188. Multimedia Patent Trust is an irrevocable Delaware Statutory Trust. Lucent is the settlor of the trust, and Lucent and Lucent Technologies Foundation, a nonprofit Delaware corporation, are the named beneficiaries of the trust. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 98 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 84 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 F. 189. The formation of Multimedia Patent Trust and transfer of the Video Coding Patents- in-Suit to Multimedia Patent Trust were valid and lawful. 190. Defendants have not suffered any injury or damages as a result of Lucent’s formation of MPT and assignment of the patents to MPT. 191. Defendants continue to enjoy the same benefits of their MPEG LA licenses that they enjoyed before the formation of MPT and Lucent’s assignment of patents to MPT. 192. Lucent made no misrepresentation to the SEC, DOJ, or FTC concerning the formation of the Trust or the assignment of patents to the Trust. Nor did Lucent engage in any conduct likely to deceive consumers regarding the video-coding patents. The Structure And Operation Of MPT AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 193. The Trust Agreement — the trust’s governing instrument under 12 Del. Code Ann. § 3806(a) — establishes three categories of trustees, each with specifically enumerated duties and powers: a Licensing Trustee, a Litigation Trustee, and an Administrative Trustee. The Licensing Trustee has “the responsibility to maximize the value of Trust assets primarily through the licensing of Trust Patents” and the “exclusive right” to license the Trust patents. Its duties and powers are set forth in Section 5.1(a). The Litigation Trustee has “the exclusive power to initiate, prosecute, defend, negotiate and settle . . . patent infringement and other Trust litigation,” and its duties and powers are set forth in Section 5.1(b). The Administrative Trustee serves an administrative role, having duties such as preparing reports, making payments of income or principal to the beneficiaries, executing and filing documents with the Delaware Secretary of State, investing funds received on behalf of Multimedia Patent Trust, and making payments to the Licensing Trustee, Litigation Trustee, and Trust Advisor for services rendered and reasonable expenses incurred, as set forth in Section 5.1(c). Gerard A. deBlasi — a former Lucent in-house counsel who left the company in 2001 and is now Executive Vice President of IPValue, an intellectual property licensing company — Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 99 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 85 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 is the Licensing Trustee and the Litigation Trustee, and Wilmington Trust Company is the Administrative Trustee. 194. The Trust Agreement also establishes the fiduciary role of Trust Advisor. Although Lucent may appoint the Trust Advisor, it may not appoint Lucent itself, any Lucent affiliate, or any director, officer, employee of, or any person subordinate to, Lucent or any Lucent affiliate. The Trust Advisor’s appointment is for a one-year term, which can be renewed for additional one-year terms. Lucent cannot terminate a Trust Advisor during his or her term. 195. Section 6.1(e) sets forth the powers of the Trust Advisor, which include directing distributions of principal in accordance with Section 3.2, removing any trustee in accordance with Section 4.3, appointing successor trustees in accordance with Section 4.4, approving invoices for services rendered and expenditures incurred by the trustees, approving litigation settlements, and monitoring the Licensing Trustee and Litigation Trustee at the Trust Advisor’s discretion. Laura Kaster is the current Trust Advisor. Ms. Kaster has never been a Lucent employee. And although she was a former in-house counsel at AT&T, she took that position after AT&T had divested Lucent in 1996. 196. The Trust Advisor may remove a trustee, with or without cause, and appoint successor trustees at any time. In contrast, Lucent may remove a trustee, but can exercise that right no more than once per calendar year, and has no power to appoint successor trustees. Under the Trust Agreement, Lucent has no right to make decisions on behalf of Multimedia Patent Trust or to direct any of the trustees or the Trust Advisor to make specific decisions on behalf of Multimedia Patent Trust. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 197. MPT is an entity independent of Lucent and operates independently of Lucent. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 100 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 86 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 VI. Damages 198. With respect to the Fleming '759 patent, Lucent provided Gateway with notice of its infringement by at least as early as April 2, 1998 at an in-person meeting at Gateway’s Headquarters between, among others, Braski, Tierney, Rosenblatt and Padnes for Lucent and Clark, Borgman and Grubbs for Gateway. Lucent confirmed its assertions to Gateway in a letter dated May 7, 1998 from Tierney to Clark. Lucent provided notice to Dell of its infringement at least as early as October 20, 1998 at a meeting between, among others, Braski and Tierney for Lucent and Garrana and Roberts for Dell. The assertions were repeated in detail on December 16, 1998 in a follow-up meeting which also involved David Rosenblatt on behalf of Lucent. Lucent has not asserted the Fleming ‘759 patent against Microsoft in this litigation. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 199. With respect to the Day '356 patent, Lucent provided Gateway with notice of its infringement by at least as early as August 7, 2001 during a telephone conference including, among others, Samuels and Indyk from Lucent and Walker and Gilly for Gateway. Lucent provided notice to Dell of its infringement by at least as early as July 31, 2001 at a meeting in Austin, Texas between, among others, Samuels for Lucent and Garrana for Dell. Lucent’s assertions were explained again at a follow-up meeting on January 10, 2002. Although Microsoft was aware of infringement beforehand by virtue of its indemnification obligations to accused computer manufacturers, Lucent provided additional notice of infringement to Microsoft on January 13, 2003 in a letter from Lucent’s licensing agent to Dan Crouse of Microsoft. On March 12, 2003, Lucent’s agent presented in detail allegations of infringement against Microsoft products to Microsoft. On March 18, 2003, Microsoft intervened in the original action against Gateway and brought declaratory judgment claims with respect to the alleged infringement of this patent. At the very latest, Microsoft’s filing is effective notice for damages purposes under 35 U.S.C. § 287. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 101 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 87 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 200. With respect to the Agulnick ‘295 patent, Lucent informed Gateway on July 14, 2003 via letter from Maxine Graham to Steven Daniels that Lucent was adding allegations of infringement to the action filed on June 20, 2002. This notice to amend the complaint serves as notice of Gateway’s infringement pursuant to 35 U.S.C. § 287. Lucent’s filing of its complaint against Dell on February 20, 2003 serves as notice of Dell’s infringement pursuant to 35 U.S.C. § 287. Although Microsoft was aware of infringement beforehand by virtue of its indemnification obligations to accused computer manufacturers, Lucent provided additional notice of infringement to Microsoft on January 13, 2003 in a letter from Lucent’s licensing agent to Dan Crouse of Microsoft. On March 12, 2003, Lucent’s agent presented in detail allegations of infringement against Microsoft products to Microsoft. 201. Each of the patents-in-suit relate to aspects of information handling. 202. For many years, IBM, was and continues to be very active in licensing patents and other intellectual property. IBM’s patent licensing practices have become guideposts in the information handling industry and have formed the basis for the licensing practices of many other companies in the industry, including Lucent. 203. IBM’s licensing rates have been modified several times, but since the late 1980s they have been set, for information handling devices and systems, at 1% of the licensee’s selling price of apparatus employing an IBM patent, for each patent employed, up to a maximum of 5%. This 1% per patent concept has become a generally accepted standard in the industry. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 204. Lucent, headquartered in Murray Hill, New Jersey, is a global supplier of telecommunications technology and equipment. Lucent was formed in 1996 as a spin-off from AT&T and includes the world-renowned Bell Laboratories. Backed by research and development at Bell Laboratories, Lucent has generated key innovations that have enhanced the capabilities and Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 102 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 88 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 utility of personal computers. Lucent’s customer base includes communications service providers, governments and enterprises worldwide. 205. Following the spin-off, Lucent became the owner of nearly 25,000 patents. The patents-in-suit are among the many patents resulting from research and development at Bell Laboratories, and/or fostered by the investment of Lucent and its predecessors. 206. To support the pioneering work of Bell Laboratories, Lucent has spent billions of dollars in research and development each year. Lucent has an intellectual property department that acquires, manages and “creates value” from Lucent’s broad portfolio of intellectual property. Lucent derives significant revenue from licensing its patents, including the patents-in-suit. 207. Like IBM, Lucent and its predecessor, AT&T, have engaged in patent licensing in an organized way. This practice has varied to some extent over the years, and at the time of Lucent’s formation, IBM’s model had been selected. With the exception of some special programs, that practice has continued to the present day. With respect to Lucent’s granting of licenses, Lucent generally requires its licensees to provide a royalty free grant back in substantially all patent licenses it grants. It is Lucent’s policy to respect the IP rights of others. However, given the strength of Lucent’s patent portfolio, it does not often enter into license agreements where it has to make a net payment to another entity. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 208. Dell and Gateway are manufacturers and distributors of, among other things, personal computer systems and related hardware and software. Microsoft sells, among other things, operating systems and various other software programs that operate with computer systems. All of these companies have engaged in licensing of various intellectual property assets in conjunction with the operation of their businesses. License agreements produced by the parties in this action reveal that Dell, Gateway and Microsoft were generally grantees or, in the case of cross-licenses, the paying party. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 103 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 89 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 A. 209. While Dell has entered into patent license agreements on an ad hoc basis, Dell has no standard licensing practice. Gateway also enters into license agreements on an ad hoc basis and does not have any standard practice. Similarly, Microsoft does not have a standard practice. The policy currently in effect states that Microsoft will generally license its patents at “fair and reasonable terms” and that royalty rates will “follow industry norms”. 210. Lucent is not a competitor of any of the three defendants, but rather derives revenue by licensing patents in the field to manufacturers such as Dell, Gateway and Microsoft. Lucent’s investment in research and technology, as well as the significant level of invention that emanated from its Bell Laboratories, were well known in the industry. Damages For Infringement Of The Fleming ‘759 Patent 211. Dell commenced infringement of the Fleming ’759 patent in or about mid-1995 when it began selling computer systems that incorporated Windows 95. 212. Gateway commenced infringement of the Fleming ’759 patent in or about mid-1995 when it began selling computer systems that incorporated Windows 95. 213. The Georgia-Pacific hypothetical negotiation is assumed to occur in the context of patents that are known to be infringed and valid. Although in real world negotiations the parties typically may compromise on a lesser royalty than would otherwise be applicable due to the possibility that the patents being discussed are either not infringed or invalid, in the hypothetical negotiation, no such discount is appropriate because the patents are assumed to be valid and infringed. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 214. At the time of the hypothetical negotiation in or around mid-1995, Lucent had an established policy with respect to patent licensing. Specifically, it was Lucent’s policy to grant licenses under its patents at rates of 1% of the fair market value of a covered product per patent up to Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 104 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 90 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 a maximum of 5%. The policy contemplated that the licensee would make a royalty-free grant back of a patent license to Lucent. 215. Each of the defendants have made substantial royalty payments for patent licenses. For example, Dell in 1988 and Gateway in 1990 entered into license agreements with IBM that included the IBM royalty approach of 1% per patent at 1% of the licensee’s selling price of apparatus employing an IBM patent, for each patent employed, up to a maximum of 5%. Those agreements also included an alternative royalty option of a running royalty of 8% on the fair market value of the patented portion of the licensed product. The general purpose of that provision was to provide an approximate apportionment of the fair market value of the licensed technology in the context of the normal product. Each of those agreements was followed by subsequent agreements that included very large balancing payments to IBM from Dell and Gateway. Dell and Gateway are parties to other notable license agreements including Dell’s and Gateway’s license agreements with Texas Instruments, and Dell’s license agreement with Tulip. 216. The patented technology of the Fleming ’759 patent is necessary to the Windows GDI, without which Windows would not be able to display information to computer users, and would not function as a commercially viable operating system. Dell and Gateway regarded the patented technology as commercially critical, as evident from the fact that they installed them on essentially all the computers they sell due to competitor and customer demand. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 217. With respect to the Fleming ’759 patent, Lucent is entitled to damages adequate to compensate for the defendants’ infringement, but in no event less than a reasonable royalty. The appropriate reasonable royalty for defendants’ infringement of the Fleming ’759 patent, the bases therefor, and the calculations of that royalty are set forth in further detail in the expert reports of Roger Smith and Wayne Hoeberlein (along with any additional supplemental reports). Specifically, applying the relevant Georgia-Pacific factors in light of applicable licensing practices and policies, Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 105 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 91 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 and in light of the documents and licenses produced by the parties in this action, the reasonable royalty adequate to compensate for defendants’ infringement of the Fleming ’759 patent should be calculated as a 1% royalty based on the selling price of the infringing system (based in particular on Lucent’s licensing policy of 1% per patent, as derived from IBM’s influential licensing policies and practices). Alternatively, in the event that the entire market value rule is deemed to prevent the parties to the hypothetical negotiation from agreeing to their preferred rate and royalty base of the infringing device, the reasonable royalty should instead be calculated as an 8% royalty based on the fair market value of the accused software. That latter calculation is based on an alternative royalty option offered by IBM—as was well-known in the industry and reflected in license agreements with Gateway and Dell—that calculated the royalty as a percentage of the value of the ‘patented portion’ of the licensed product rather than the value of the complete licensed product. Finally, as reflected in certain Lucent licensing documentation, the applicable per-unit minimum royalty in connection with the Fleming patent in any event should be no less than $2.00. 218. Lucent also seeks an accounting of damages attributable to defendants’ continuing infringement through and until expiration of the Fleming ’759 patent, including any and all additional infringing products and periods not included in defendants’ damages-related document productions to date. Lucent also seeks pre-judgment and post-judgment interest on all damages. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 219. Lucent did not unreasonably delay in bringing suit against Dell or Gateway from the time it first learned (or should of have learned) of the infringement. Any alleged delay was justified including due to ongoing efforts by Lucent to reach licensing agreements with the parties and other third-parties and other litigations involving Lucent’s assertion of the patent. Defendants have suffered no economic, evidentiary, or other prejudice as a result of any alleged delay. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 106 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 92 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 B. Damages For Infringement Of The Day ‘356 Patent 220. Microsoft commenced infringement of the ‘356 Day patent in about August of 1996 when it began selling Microsoft Money Version 5.0. 221. Dell commenced infringement of the Day ’356 patent in or about February of 1997 when it began including Microsoft Office 97, which contains Microsoft Outlook 97, in its computers. 222. Gateway commenced infringement of the Day ’356 patent on about September 30, 1997 when it began including Microsoft Pro Office 97, which contains Microsoft Outlook 97, in its computers. 223. The Georgia-Pacific hypothetical negotiation is assumed to occur in the context of patents that are known to be infringed and valid. Although in real world negotiations the parties typically may compromise on a lesser royalty than would otherwise be applicable due to the possibility that the patents being discussed are either not infringed or invalid, in the hypothetical negotiation, no such discount is appropriate because the patents are assumed to be valid and infringed. 224. At the time of the hypothetical negotiations in 1996 and 1997, Lucent had an established policy with respect to patent licensing. Specifically, it was Lucent’s policy to grant licenses under its patents at rates of 1% of the fair market value of a covered product per patent up to a maximum of 5%. The policy contemplated that the licensee would make a royalty-free grant back of a patent license to Lucent. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 225. Each of the defendants have made substantial royalty payments for patent licenses. For example, Dell in 1988 and Gateway in 1990 entered into license agreements with IBM that included the IBM royalty approach of 1% per patent at 1% of the licensee’s selling price of apparatus employing an IBM patent, for each patent employed, up to a maximum of 5%. Those Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 107 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 93 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 agreements also included an alternative royalty option of a running royalty of 8% on the fair market value of the patented portion of the licensed product. The general purpose of that provision was to provide an approximate apportionment of the fair market value of the licensed technology in the context of the normal product. Each of those agreements was followed by subsequent agreements that included very large balancing payments to IBM from Dell and Gateway. Dell and Gateway are parties to other notable license agreements including Dell’s and Gateway’s license agreements with Texas Instruments, and Dell’s license agreement with Tulip. Similarly, Microsoft has agreed to pay substantial royalties, including running royalties, for rights under the patents of others, including Stac Electronics, Apple, Hewlett-Packard, and Inprise. 226. The defendants benefits from derivative or convoyed sales from their ability to sell software which infringes the ‘356 Day patent and from their sales of infringing computer systems. 227. The ‘356 Day patent provides a form-entry system that utilizes certain tools, such as menu, date and time, and composition tools, to facilitate the entry of information into the fields of computerized forms. The patented technology enables the user to rapidly enter data into the fields of a computerized form and largely eliminates the time-consuming and error-prone task of manual data entry. The products that infringe the ‘356 Day patent have been and continue to be successful, profitable and popular. For instance, Microsoft has included Microsoft Outlook in every version of Office it has sold, and according to Microsoft, Microsoft Outlook helps substantiate the value of Microsoft Office and is included in Microsoft Office in response to customer needs. The other accused products are similarly successful, profitable, and popular. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 228. The accused products incorporate the form-entry technology of the ‘356 Day patent through the use of drop-down menus and calendars, and are promoted by defendants as easy to use. For example, Microsoft Outlook allows users to enter data into forms and has product documentation and marketing materials that refer to the fact that Microsoft Outlook has form-entry- Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 108 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 94 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 type features. In addition, Microsoft promotes and publicizes the calendaring features of Microsoft Outlook in a variety of ways and many customers use Microsoft Outlook’s calendaring feature. Similarly, Microsoft has promoted Microsoft Money as being “easy and efficient” and featuring “an elegant, intuitive user interface.” Similarly, features utilizing the patented technology of the Day ’356 Patent are pervasive in the accused software, and the ordinary intended use of that software makes use of that patented technology. For instance, with respect to Intuit Quicken, an accounting product, the technology of the Day ’356 patent features in the forms for each accounting program entry made by a user. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 229. With respect to the Day ’356 patent, Lucent is entitled to damages adequate to compensate for the defendants’ infringement, but in no event less than a reasonable royalty. The appropriate reasonable royalty for defendants’ infringement of the Day ’356 Patent, the bases therefor, and the calculations of that royalty are set forth in further detail in the expert reports of Roger Smith and Wayne Hoeberlein (along with any additional supplemental reports). Specifically, applying the relevant Georgia-Pacific factors in light of applicable licensing practices and policies, and in light of the documents and licenses produced by the parties in this action, the reasonable royalty adequate to compensate for defendants’ infringement of the Day ’356 Patent should be calculated as a 1% royalty based on the selling price of the infringing system (based in particular on Lucent’s licensing policy of 1% per patent, as derived from IBM’s influential licensing policies and practices). Alternatively, in the event that the entire market value rule is deemed to prevent the parties to the hypothetical negotiation from agreeing to their preferred rate and royalty base of the infringing device, the reasonable royalty should instead be calculated as an 8% royalty based on the fair market value of the accused software. That latter calculation is based on an alternative royalty option offered by IBM—as was well-known in the industry and reflected in license agreements with Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 109 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 95 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 C. Gateway and Dell—that calculated the royalty as a percentage of the value of the ‘patented portion’ of the licensed product rather than the value of the complete licensed product. 230. Lucent also seeks an accounting of damages attributable to defendants’ continuing infringement through and until expiration of the Day ’356 patent, including any and all additional infringing products and periods not included in defendants’ damages-related document productions to date. Lucent also seeks pre-judgment and post-judgment interest on all damages. Damages For Infringement Of The Agulnick ‘295 Patent 231. Defendants commenced infringement of the Agulnick ’295 patent in approximately 2002 when they began selling Windows XP Tablet PC Edition operating system software, and/or computers including that software. 232. The Georgia-Pacific hypothetical negotiation is assumed to occur in the context of patents that are known to be infringed and valid. Although in real world negotiations the parties typically may compromise on a lesser royalty than would otherwise be applicable due to the possibility that the patents being discussed are either not infringed or invalid, in the hypothetical negotiation, no such discount is appropriate because the patents are assumed to be valid and infringed. 233. At the time of the hypothetical negotiations in approximately 2002, Lucent had an established policy with respect to patent licensing. Specifically, it was Lucent’s policy to grant licenses under its patents at rates of 1% of the fair market value of a covered product per patent up to a maximum of 5%. The policy contemplated that the licensee would make a royalty-free grant back of a patent license to Lucent. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 234. Each of the defendants have made substantial royalty payments for patent licenses. For example, Dell in 1988 and Gateway in 1990 entered into license agreements with IBM that included the IBM royalty approach of 1% per patent at 1% of the licensee’s selling price of Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 110 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 96 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 apparatus employing an IBM patent, for each patent employed, up to a maximum of 5%. Those agreements also included an alternative royalty option of a running royalty of 8% on the fair market value of the patented portion of the licensed product. The general purpose of that provision was to provide an approximate apportionment of the fair market value of the licensed technology in the context of the normal product. Each of those agreements was followed by subsequent agreements that included very large balancing payments to IBM from Dell and Gateway. Dell and Gateway are parties to other notable license agreements including Dell’s and Gateway’s license agreements with Texas Instruments, and Dell’s license agreement with Tulip. Similarly, Microsoft has agreed to pay substantial royalties, including running royalties, for rights under the patents of others, including Stac Electronics, Apple, Hewlett-Packard, and Inprise. 235. The defendants benefits from derivative or convoyed sales from their ability to sell software which infringes the Agulnick ’295 patent and from their sales of infringing computer systems. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 236. The use of a stylus input provided for by the ‘295 Agulnick patent in the defendants’ infringing systems provides substantial benefits to users. The patented technology of the Agulnick ’295 Patent provides intuitive control of tablet PCs, PDAs and other handheld devices through the use of a position-sensitive stylus (i.e., pen-like device) and gestures, as opposed to a keyboard or mouse/tracking device at a fixed work station. For tablet-based and/or handheld computing, use of the Agulnick ’295 Patent technology is essential to a commercially viable product. In particular, stylus-based devices, which are typically of reduced-size and do not always have keyboards, need the stylus functionality to operate. Use of the stylus system and associated gestures are central to the use of PDAs and tablet PCs. The ‘295 Agulnick patent therefore provides substantial value to the end users of such computer systems, and enable defendants to meet consumer demand for devices with that functionality. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 111 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 97 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 237. Defendants’ products accept stylus input, and are advertised as such. The products that infringe the Agulnick ’295 patent have been and continue to be successful, profitable and popular. 238. With respect to the Agulnick ’295 patent, Lucent is entitled to damages adequate to compensate for the defendants’ infringement, but in no event less than a reasonable royalty. The appropriate reasonable royalty for defendants’ infringement of the Agulnick ’295 patent, the bases therefor, and the calculations of that royalty are set forth in further detail in the expert reports of Roger Smith and Wayne Hoeberlein (along with any additional supplemental reports). Specifically, applying the relevant Georgia-Pacific factors in light of applicable licensing practices and policies, and in light of the documents and licenses produced by the parties in this action, the reasonable royalty adequate to compensate for defendants’ infringement of the Agulnick ’295 patent should be calculated as a 1% royalty based on the selling price of the infringing system (based in particular on Lucent’s licensing policy of 1% per patent, as derived from IBM’s influential licensing policies and practices). AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 239. Lucent also seeks an accounting of damages attributable to defendants’ continuing infringement through and until entry of an injunction enjoining that infringement in this action, including any and all additional infringing products and periods not included in defendants’ damages-related document productions to date. Lucent also seeks pre-judgment and post-judgment interest on all damages and a compulsory ongoing reasonable royalty to be paid by the defendants if the Court’s judgment does not enjoin defendants’ continued infringement. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 112 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 98 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 VII. A. 1. POINTS OF LAW Issues On Which Lucent Bears The Burden Of Proof Infringement Direct Infringement 240. 35 U.S.C. § 271(a) states: Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent. 241. Infringement is a question of fact. Hilgraeve Corp. v. Symantec Corp., 265 F.3d 1336, 1341 (Fed. Cir. 2001); In re Hayes Microcomputer Prods. Patent Litig., 982 F.2d 1527, 1541 (Fed. Cir. 1992). “The [patent owner] has the burden of proving infringement by a preponderance of the evidence.” Id; see Seal-Flex, Inc. v. Athletic Track & Court Construction, 172 F.3d 836, 842 (Fed. Cir. 1999). 242. The claims of the patent define the scope of the patented invention. “‘The claims . . . provide the concise formal definition of the invention.’” Corning Glass Works v. Sumitomo Elec. U.S.A., Inc., 868 F.2d 1251, 1258 (Fed. Cir. 1989) (quoting Autogiro Co. of Am. v. United States, 384 F.2d 391, 395-96 (Ct. Cl. 1967)). The claims provide “the metes and bounds of the right which the patent confers on the patentee to exclude others from making, using, or selling the protected invention.” Corning Glass Works, 868 F.2d at 1257. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 243. “It is well-established that each claim in a patent constitutes a separate invention.” Union Oil Co. v. Atlantic Richfield Co., 208 F.3d 989, 1003 (Fed. Cir. 2000); Jones v. Hardy, 727 F.2d 1524, 1528 (Fed. Cir. 1984). “A patent is infringed if a single claim is infringed.” Intervet Am., Inc. v. Kee-Vet Lab., Inc., 887 F.2d 1050,1055 (Fed. Cir. 1989). “A determination of patent infringement under 35 U.S.C. § 271(a) requires a two step analysis — first, the language of the claim at issue must be interpreted to define its proper scope and, second, the evidence before the Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 113 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 99 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 court must be examined to ascertain whether the claim has been infringed, whether the claim ‘reads on’ the accused product or process. The first inquiry is a question of law for the court while the second is a question of fact.” Minnesota Mining & Mfg. Co. v. Johnson & Johnson Orhopaedics, Inc., 976 F.2d at 1559, 1570 (Fed. Cir. 1992). 244. A patent claim defines the scope of a patentee’s statutory protection. Playtex Products, Inc. v. Procter & Bamgle Co., 400 F.3d 901, 906 (Fed. Cir. 2005). The proper construction of terms and phrases within a patent claim is a question of law. See Markman v. Westview Instruments, Inc., 52 F.3d 967, 979 (Fed. Cir. 1995), aff’d, 517 U.S. 370 (1996). The Court’s construction governs the jury’s ultimate determination of whether the patent claim has been infringed. Id. Here, the Court has issued claim-construction Orders for the Fleming ‘759 patent, Day ‘356 patent, and Agulnick ‘295 patent. (D.I. 371, D.I. 1552, D.I. 172, all in 02-CV-2060) 245. “After claim construction, the next step in an infringement analysis is comparing the properly construed claims with the allegedly infringing devices or methods. This comparison is a question of fact.” Ecolab, Inc. v. Envirochem, Inc., 264 F.3d 1358, 1369 (Fed. Cir. 2001) (citing Kemco Sales, Inc. v. Control Papers Co., 208 F.3d 1352, 1360 (Fed. Cir. 2000)); see also Karlin Tech. Inc. v. Surgical Dynamics, Inc., 177 F.3d 968, 974 (Fed. Cir. 1999) (“The second step of the infringement analysis, i.e., comparing the properly construed claims to the device accused of infringing, is a question of fact.”). AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 246. Infringement occurs when each limitation of a properly interpreted claim is found in the accused product or process. Seal-Flex, 172 F.3d at 842; Read Corp. v. Portec, Inc., 970 F.2d 816, 821 (Fed. Cir. 1992), abrogated on other grounds; Markman v. Westview Instruments, Inc., 52 F.3d 967, 975 (Fed. Cir. 1995) (en banc). “It is axiomatic that the parameters of a patent right are defined by the claims of the patent, and that if the accused matter falls within the claims, literal Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 114 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 100 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 infringement is made out.” Drexelbrook Controls, Inc. v. Magnetrol Int’l, Inc., 720 F. Supp. 397, 405 (D. Del. 1989), aff’d, 904 F.2d 45 (Fed. Cir. 1990). 247. “Infringement . . . is determined by comparing an accused product not with a preferred embodiment described in the specification . . . but with the properly and previously construed claims in suit.” SRI Intern. v. Matsushita Elec. Corp., 775 F.2d 1107, 1121 (Fed. Cir. 1985). “[C]laims are infringed, not specifications.” Id. The Federal Circuit has repeatedly stated that “it is error for a court to compare in its infringement analysis the accused product or process with the patentee’s commercial embodiment or other version of the product or process; the only proper comparison is with the claims of the patent.” Zenith Lab., Inc. v. Bristol-Myers Squibb Co., 19 F.3d 1418, 1423 (Fed. Cir. 1994); Intervet Am., 887 F.2d at 1055. 248. To establish infringement of a “means plus function” claim under 35 U.S.C. § 112, paragraph 6, the patentee must prove: (1) that the accused product performs the function recited in each “means plus function” claim limitation; and (2) that the accused product does so using a structure that is identical or equivalent to the structure disclosed in the specification for performing the claimed function, as construed by the Court. Cytologix Corp, v. Ventana Med. Sys., 424 F.3d 1168, 1178 (Fed. Cir. 2005); Alpex Computer Corp. v. Nintendo Co. Ltd., 102 F.3d 1214, 1222 (Fed. Cir. 1996); Laitram Corp. v. Rexnord, Inc., 939 F.2d 1533, 1536 (Fed. Cir. 1991); Pennwalt Corp. v. Durand-Wayland, Inc., 83 F.2d 931, 933-34 (Fed. Cir. 1987). 249. The individual components, if any, of an overall structure that corresponds to the claimed function are not claim limitations. Rather, the claim limitation is the overall structure corresponding to the claimed function. Odetics Inc. v. Storage Tech. Corp., 185 F.3d 1259, 1268 (Fed. Cir. 1999) (emphasis added). AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 250. If each element recited in the claims is found in the accused product, the manufacturer of the accused product cannot avoid infringement merely by adding additional Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 115 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 101 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 elements. Stiftung v. Renishaw PLC, 945 F.2d 1173, 1178 (Fed. Cir. 1991) (quoting A.B. Dick Co. v. Burroughs Corp., 713 F.2d 700, 703 (Fed. Cir. 1983)) (“It is fundamental that one cannot avoid infringement merely by adding elements if each element recited in the claims is found in the accused device. For example, a pencil structurally infringing a patent claim would not become noninfringing when incorporated into a complex machine that limits or controls what the pencil can write. Neither would infringement be negated simply because the patentee failed to contemplate use of the pencil in that environment.”). “Making improvements on a patented invention by adding features to a claim device beyond those recited in the patent does not avoid infringement.” Lighting World, Inc. v. Birchwood Lighting, Inc., 382 F.3d 1354, 1365 (Fed. Cir. 2004); see also Amstar Corp. v. Envirotech Corp., 730 F.2d 1476, 1482 (Fed. Cir. 1984) (citation omitted), cert. denied, 469 U.S. 924 (1984) (“An accused device cannot escape infringement by merely adding features, if it otherwise has adopted the basic features of the patent.”). Similarly, an accused method “does not avoid literally infringing a method claim . . . simply because it employs additional steps.” Dow Chem. Co. v. Sumitomo Chem. Co., 257 F.3d 1364, 1380 (Fed. Cir. 2001) (emphasis in original) (citing Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261, 1271 (Fed. Cir. 1986), cert. denied, 479 U.S. 1030 (1987)). The structure is viewed as a whole — its individual elements are not claim limitations. Odetics Inc. v. Storage Tech. Corp., 185 F.3d 1259, 1268 (Fed. Cir. 1999) (“The individual components, if any, of an overall structure that corresponds to the claimed function are not claim limitations. Rather, the claim limitation is the overall structure corresponding to the claimed function.”) (emphasis added). AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 251. Additionally, an accused product infringes even if it does not always infringe when it is used. See Canon Computer Sys., Inc. v. Nu-Kote Int’l, Inc., 134 F.3d 1085, 1089 (Fed. Cir. 1998) (“Even assuming that Nu-Kote’s video establishes that its cartridge will not infringe under a Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 116 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 102 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 2. particular set of controlled circumstances . . . this has little bearing on whether its cartridge will avoid infringement under other foreseeable operating conditions.”) 252. “An accused product that ‘imperfectly’ or ‘sometimes, but not always’ embodies a claimed element or method nonetheless infringes.” Stryker Corp. v. Davol, Inc., 75 F. Supp. 2d 741, 743 (W.D. Mich. 1999) (quoting Bell Communications Research Inc. v. Vitalink Communications Corp., 55 F.3d 615, 622-23 (Fed. Cir. 1995)), aff’d, 234 F.3d 1252 (Fed. Cir. 2000); Paper Converting Mach. Co. v. Magna-Graphics Corp., 745 F.2d 11, 20 (Fed. Cir. 1984) (“That the machine was not operated in its optimum mode is inconsequential: imperfect practice of an invention does not avoid willful infringement.”). 253. “[A] product or process that does not literally infringe upon the express terms of a patent claim may nonetheless be found to infringe if there is ‘equivalence’ between the elements of the accused product or process and the claimed elements of the patented invention.” Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 21 (1997). Equivalence is found where there are “insubstantial differences” between the accused product or process and the elements of the patent claims. Hilton Davis Chem. Co. v. Warner-Jenkinson Co., 62 F.3d 1512, 1517 (Fed. Cir. 1996), rev’d on other grounds, 520 U.S. 17 (1997); see also Eagle Comtronics, Inc. v. Arrow Communications Labs., Inc., 305 F.3d 1303, 1315 (Fed. Cir. 2002), cert. denied, 537 U.S. 1172 (2003). “[T]he proper time for evaluating equivalence . . . is at the time of infringement, not at the time the patent was issued.” Warner-Jenkinson, 520 U.S. at 37. “The better view . . . is that intent plays no role in the application of the doctrine of equivalents.” Id. at 36. Inducement of Infringement 254. 35 U.S.C. § 271(b) states: AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Whoever actively induces infringement of a patent shall be liable as an infringer. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 117 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 103 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 255. To establish liability under Section 271(b), a patent holder must prove that once the defendant knew of the patent they “‘actively and knowingly aid[ed] and abet[ed] another’s direct infringement.’” DSU Medical Corp. v. JMS Co., Ltd., 471 F.3d 1293, 1305 (Fed. Cir. 2006) (en banc) (quoting Water Tech. Corp. v. Calco, Ltd., 850 F.2d 660, 668 (Fed. Cir. 1988)) (emphasis in original). To prove inducement, “[t]he plaintiff has the burden of showing that the alleged infringer’s actions induced infringing acts and that he knew or should have known his actions would induce actual infringements.” Id. at 17 (quoting Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 553 (Fed. Cir. 1990)) (emphasis in original). “The requisite intent to induce infringement may be inferred from all of the circumstances.” Water Techs., 850 F.2d at 669; see also Drexelbrook Controls v. Magnetrol Intern., Inc., 720 F.Supp. 397, 407 (D. Del. 1989). “‘While proof of intent is necessary, direct evidence is not required; rather, circumstantial evidence may suffice.’” DSU, 471 F.3d at 1305 (quoting Water Tech., 850 F.2d at 668.) AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 256. In order to induce infringement “the actions of the party said to have been induced to infringe [must] constitute direct infringement.” Johns Hopkins Univ. v. Cellpro, 894 F. Supp. 819, 835 (D. Del. 1995). Direct infringement, however, may be inferred from circumstantial proof. Moleculon Research, 793 F.2d at 1272 (holding that patentee satisfied its burden of showing direct infringement with circumstantial evidence of extensive sales and dissemination of an instruction sheet teaching the patented method); Oxford Gene Tech., 444 F. Supp. 2d at 464 (citing Moleculon Research, citing Moleculon Research, v. CBS, Inc., 793 F.2d 1261, 1272 (Fed. Cir. 1986)); nCube v. Sea Change Int’l, Inc., 313 F. Supp. 2d 361, 375 (D. Del. 2004) (same); Lucent Technologies Inc. v. Newbridge Networks Corp., 168 F. Supp. 2d 181, 208-09 (D. Del. 2001) (finding that evidence of sales of the accused products and distribution of product manuals containing instructions on how to configure the products in an infringing manner constituted adequate circumstantial evidence that there was direct infringement). Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 118 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 104 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 3. B. 1. Contributory Infringement 257. 35 U.S.C. § 271(c) states in pertinent part: Whoever sells a component of . . . manufacture . . . or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer. 258. To establish contributory infringement under Section 271(c), only proof of a defendant’s knowledge, and not intent, that his activity causes infringement is required. See Hewlett-Packard Co. v. Bausch & Lomb Inc., 909 F.2d 1464, (Fed. Cir. 1990). Section 271(c) further requires a showing that a product useful in carrying out a patented method is not a staple article suitable for substantial noninfringing use. See Preemption Devices, Inc. v. Minnesota Mining & Mfg. Co., 803 F.2d 1170 (Fed. Cir. 1986). Additional functions in a patented device which are performed simultaneously with the patented method do not substantiate a non-infringing use for the purposes of § 271(c). Imagexpo L.L.C. v. Microsoft Corp., 284 F. Supp. 2d 365, 368 (E.D. Va. 2003). Though proof of “direct infringement is essential to proving contributory infringement,” Refac Int’l, Ltd. v. IBM, 798 F.2d 459, 460 (Fed. Cir. 1986), as with inducing infringement, such proof may be circumstantial in nature. See Moleculon Research, 793 F.2d at 1272. Damages Damages 259. 35 U.S.C. § 284 states in pertinent part: Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 260. The assessment of damages is a question of fact, and is decided by the jury when trial is to a jury. “Section 284 imposes no limitation on the types of harm resulting from infringement Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 119 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 105 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 that the statute will redress. The section’s broad language awards damages for any injury as long as it resulted from the infringement.” King Instruments Corp. v. Perego, 65 F.3d 941, 947 (Fed. Cir. 1995). 261. Under 35 U.S.C. § 284, Lucent is entitled to damages adequate to compensate for the infringement, but in no event less than a reasonable royalty. “The royalty may be based upon an established royalty, if there is one, or if not, upon the supposed result of hypothetical negotiations between the plaintiff and defendant.” Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1554 (Fed. Cir. 1995). “The hypothetical negotiation requires the court to envision the terms of a licensing agreement reached as the result of a supposed meeting between the patentee and the infringer at the time infringement began.” Id. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 262. The following evidentiary facts may be relevant to the determination of the amount of a reasonable royalty for a patent license: (1) the royalties received by the patentee for the licensing of a patent in suit, proving or tending to prove an established royalty; (2) the rates paid by the licensee for use of other patents comparable to the patent in suit; (3) the nature and scope of the license, as exclusive or non-exclusive or as territory restricted or non-restricted; (4) the licensor’s established policy and marketing program to maintain his patent monopoly by not licensing others to use the invention or by granting licenses under special conditions designed to preserve that monopoly; (5) the commercial relationship between the licensor and licensee, such as whether they are competitors or inventor/promoter; (6) the extent of derivative or convoyed sales for either the licensee or licensor; (7) the duration of the patent and the term of the license; (8) the established profitability of the product made under the patent; (9) the utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results; (10) the nature of the patented invention including the character of the commercial embodiment and the benefits to those who have used the invention; (11) the extent to which the infringer has made Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 120 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 106 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 use of the invention; (12) the portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions; (13) the portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer; (14) the opinion testimony of qualified experts, and; (15) the amount that a licensor and a licensee would have agreed upon if both had been reasonably and voluntarily trying to reach an agreement. Unisplay S.A. v. American Elec. Sign Co., 69 F.3d 512, 517 n.7 (Fed. Cir. 1995) (citing Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970)). 263. “A party that induces or contributes to infringement is jointly and severally liable with the direct infringer for all general damages.” Crystal Semiconductor Corp. v. Tritech Microelectronics Int’l, Inc., 246 F.3d 1336, 1361 (Fed. Cir. 2001); see also Glenayre Elec., Inc. v. Jackson, 443 F.3d 851, 858-89 (Fed. Cir. 2006). (“Where a patentee alleges that a manufacturer contributes to and induces infringement by its customers simply because it sells infringing products to its customers, damages assessed for indirect infringement normally will be the same as damages that would be assessed had the patentee sued and obtained a judgment against the customers….Indeed, in most cases damages assessed for indirect infringement will be equal to damages assessed for the underlying direct infringement.”) AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 264. The entire market value rule “permits recovery of damages based on the value of the entire apparatus containing several features, where the patent related feature is the basis for customer demand.” Tec Air, Inc. v. Denso Mfg. Mich. Inc., 192 F.3d 1353, 1362 (Fed. Cir. 1999). “The entire market value rule is appropriate where both the patented and unpatented components together are ‘analogous to components of a single assembly,’ ‘parts of a complete machine,’ or ‘constitute a functional unit,’ but not where the unpatented components have essentially no functional Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 121 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 107 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 relationship to the patented invention and . . . may have been sold with an infringing device only as a matter of convenience or business advantage.’” Tec Air, 192 F.3d at 1362 (citing Rite-Hite, 56 F.3d at 1550). 265. Once damages are quantified, “prejudgment interest should be awarded under § 284 absent some justification for withholding such an award.” General Motors Corp. v. Devex Corp., 461 U.S. 648, 657 (1983). Similarly, judgment interest should be awarded under 28 U.S.C. § 1961. 266. It is “standard practice” in patent infringement actions to order a post-verdict accounting for any infringing sales not included in the jury’s verdict. Mikohn Gaming Corp. v. Acres Gaming, Inc., No. CV-S-97-1383-EJW, 2001 WL 34778689, at *18 (D. Nev. Aug. 2, 2001); see also IMX, Inc. v. Lendingtree, LLC, No. Civ.03 1067 SLR, 2007 WL 1232184, at *2 (D. Del. April 25, 2007) (ordering accounting for defendant’s continued infringing activities during trial); Lisle Corp., v. A.J. Mfg. Co., No. 02 C 7024, 2004 WL 765872, at *1 (N.D. Ill. April 7, 2004) (granting plaintiff’s request to include an accounting for sales through injunction); Itron, Inc. v. Benghiat, No. Civ.99-501 (JRT/FLN), 2003 WL 22037710, at *15 (D. Minn. Aug. 29, 2003) (“Courts ‘routinely grant motions for further accounting’ where the jury did not consider certain periods of infringing activity.”); Stryker Corp. v. Davol, Inc., 75 F. Supp. 2d 746, 748 (W.D. Mich. 1999) (granting accounting for period between the verdict and entry of a permanent injunction). In determining the amount of supplemental damages, courts apply the reasonable royalty rate determined by the jury in reaching the verdict. See id. at 747. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 267. 35 U.S.C. § 283 provides that “[t]he several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any rights secured by patent, on such terms as the court deems reasonable.” Under “well-established principles of equity, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief.” eBay Inc. v. MercExchange, L.L.C., 126 S.Ct 1837, 1839 (U.S. 2006). Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 122 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 108 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 To meet this burden, the patentee must demonstrate: “(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for the injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.” Id. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 268. Courts have granted a compulsory license where the defendant continues to infringe the patents-in-suit following the judgment, and under circumstances in which a permanent injunction was said to be inappropriate. See Shatterproof Glass Corp. v. Libbey-Owens Ford Co., 758 F.2d 613, 628 (Fed. Cir. 1985) (affirming district court grant of a compulsory license at jury-determined royalty rate for continuing sales); Foster v. Am. Mach. & Foundry Co., 492 F.2d 1317, 1324 (2d Cir. 1974) (affirming district court grant of a compulsory license in form of royalties); Voda v. Cordis Corp., No. CIV-03-1512-L, 2006 WL 2570614, at *6 (W.D. Okla. Sept. 5, 2006) (finding that where the defendant continues to infringe post-verdict, the court must fashion a remedy for the continuing harm to the patentee); z4 Techs., Inc. v. Microsoft Corp., 434 F. Supp. 2d 437, 441 (E.D. Tex. 2006) (finding that the patentee could be compensated for Microsoft’s future infringement by calculating a reasonable royalty for Microsoft’s continued use). The courts have recognized that the rate of such a license can easily be determined where the jury has made a clear determination of the reasonable royalty due to the infringement. z4 Techs, Inc. v. Microsoft Corp., 434 F. Supp. 2d 437, 442 (E.D. Tex. 2006) (finding that the calculation of future damages can be based on the same reasonable royalty calculation used by the jury at trial and by referring to Microsoft’s internal records showing sales of infringing products); Voda, 2006 WL 2570614, at *6 (finding that post-verdict damages are “simple mathematical calculations based on defendant’s sales” and ordering defendant to file quarterly sales reports); Paice LLC v. Toyota Motor Corp., No. 2:04-CV-211-DF, 2006 WL 2385139, at *5 (E.D. Tex. Aug. 16, 2006) (finding that the patentee’s losses from defendant’s Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 123 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 109 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 2. postjudgment sales of infringing products can be remedied by monetary damages in accordance with the reasonable royalty set by the jury); see also Paice LLC v. Toyota Motor Corp., 504 F.3d 1293, 1314-16 (Fed. Cir. 2007). Notice 269. “35 U.S.C. § 287 prescribes that, on penalty of having their damages limited to times subsequent to actual notice, patentees and their agents shall mark any “patented article,” thereby giving notice “to the public that the same is patented.” (Emphasis ours) In addition to the clear language of the statute, it is, as noted by the district court, also settled in the case law that the notice requirement of this statute does not apply where the patent is directed to a process or method.” Bandag, Inc. v. Gerrard Tire Co., 704 F.2d 1578, 1581 (Fed. Cir. 1983). 270. “The criteria for actual notice under [35 U.S.C.] § 287(a) are not coextensive with the criteria for filing a declaratory judgment action. These statutory purposes are distinct, serve different policies, and are governed by different laws. The requirement of actual notice under § 287(a) is designed to assure that the recipient knew of the adverse patent during the period in which liability accrues, when constructive notice by marking is absent. Actual notice may be achieved without creating a case of actual controversy in terms of 28 U.S.C. § 2201.” SRI Int’l, Inc. v. Advanced Tech. Lab., Inc., 127 F.3d 1462, 1470 (Fed. Cir. 1997). AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 271. “It is not controlling whether the patentee threatens suit, demands cessation of infringement, or offers a license under the patent.” Id. “The offering of a license is actual notice.” Ralston Purina Co. v. Far-Mar-Co, 772 F.2d 1570, 1577 (Fed. Cir. 1985). “Thus, the actual notice requirement of § 287(a) is satisfied when the recipient is informed of the identity of the patent and the activity that is believed to be an infringement, accompanied by a proposal to abate the infringement, whether by license or otherwise.” SRI, 127 F.3d at 1470. “When the patentee has notified a perceived infringer of a specified patent that a license may be needed, the sufficiency of Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 124 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 110 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 3. VIII. A. the notice under § 287(a) is not negated if the proposed remedy is a license instead of cessation of activity.” Id. Attorneys’ Fees 272. The patent statute authorizes the Court “in exceptional cases” to award “reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. A court may hold a case “exceptional” even though the infringer was not guilty of willful infringement. For example, in Beckman Instruments, Inc. v. LKB Produkter AB, 892 F.2d 1547 (Fed. Cir. 1989), the Federal Circuit held that the district court did not commit clear error in finding the case “exceptional” because of the infringer’s “strategy of vexatious activity.” Id. at 1551-53. Issues On Which Defendants Bear The Burden Of Proof Validity 273. 35 U.S.C. § 282 states in pertinent part: A patent shall be presumed valid. Each claim of a patent (whether in independent, dependent, or multiple dependent form) shall be presumed valid independently of the validity of other claims; dependent or multiple dependent claims shall be presumed valid even though dependent upon an invalid claim. . . . The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 274. “A patent is presumed valid.” Oney v. Ratliff, 182 F.3d 893, 895 (Fed. Cir. 1999). “One who challenges a patent’s validity must prove invalidity by clear and convincing evidence.” Id. (citing Finnigan Corp. v. Int’l Trade Comm’n, 180 F.3d 1354, 1365 (Fed. Cir. 1999)); see also Budde v. Harley-Davidson, Inc., 250 F.3d 1369, 1376 (Fed. Cir. 2001) (“Because the claims of a patent are afforded a statutory presumption of validity, overcoming the presumption of validity requires that any facts supporting a holding of invalidity must be proved by clear and convincing evidence.”). “Clear and convincing evidence has been described as evidence which proves in the mind of the trier of fact ‘an abiding conviction that the truth of [the] factual contentions are highly Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 125 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 111 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 probable.” Intel Corp., v. U.S. Int’l Trade Comm’n, 946 F.2d 821, 830 (Fed. Cir. 1991) (quoting Colorado v. New Mexico, 467 U.S. 310, 316 (1984)) (other citation omitted). 275. “[T]he burden of persuasion is and remains always upon the party asserting invalidity.” American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1358 (Fed. Cir. 1984) (emphasis in original). “The presumption of validity is never . . . weakened,” ACS Hospital Sys., Inc. v. Montefiore Hospital, 732 F.2d 1572, 1574-75 (Fed. Cir. 1984) (emphasis in original), and “remains intact and on the challenger through the litigation, and the clear and convincing standard does not change.” Hybritech Inc. v. Monclonal Antibodies, Inc., 802 F.2d 1367, 1375 (Fed. Cir. 1986). “It is not necessary that a district court declare a patent ‘valid.’ In a proper case, it is necessary only to hold that the patent challenger failed to carry the burden assigned to it by 35 U.S.C. § 282.” Jones v. Hardy, 727 F.2d 1524, 1529 (Fed. Cir. 1984); Ajinomoto Co., Inc. v. Archer-Daniels-Midland Co., 1996 WL 621830, at *5 (D. Del. Oct. 21, 1996), aff’d, 228 F.3d 1338 (Fed. Cir. 2000). 276. Defendant’s burden is “especially heavy” when the art relied on at trial was considered by the Patent Office. See McGinley v. Franklin Sports, Inc., 262 F.3d 1339, 1353 (Fed. Cir. 2001). In that case, the party asserting invalidity “has the added burden of overcoming the deference that is due to a qualified government agency presumed to have properly done its job, which includes one or more examiners who are assumed to have some expertise in interpreting the references and to be familiar from their work with the level of skill in the art and whose duty it is to issue only valid patents.” Id. (citing American Hoist & Derrick Co. 725 F.2d at 1359). AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 277. The grant of a request for reexamination is not probative of unpatentability. Hoechst Celanese Corp. v. BP Chemicals Ltd.,78 F.3d 1575, 1584 (Fed. Cir. 1996). Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 126 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 112 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 1. Anticipation 278. Anticipation is a question of fact that must proved by clear and convincing evidence. Glaxo Inc. v. Novopharm Ltd., 52 F.3d 1043, 1047 (Fed. Cir. 1995). The burden of proving anticipation by clear and convincing evidence rests with the party asserting invalidity. See Koito Mfg. Co., Ltd. v. Turn-Key-Tech, LLC, 381 F.3d 1142, 1151 (Fed. Cir. 2004). 279. “A party asserting that a patent claim is anticipated under 35 U.S.C. § 102 ‘must demonstrate, among other things, identity of invention.’” Minnesota Mining & Mfg. v. Johnson & Johnson Orthopaedics, Inc., 976 F.2d 1559, 1565 (Fed. Cir. 1992). “Identity of invention is a question of fact, and one who seeks such a finding must show that each element of the claim in issue is found, either expressly or under principles of inherency, in a single prior art reference, or that the claimed invention was previously known or embodied in a single prior art device or practice.” Id. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 280. “Invalidity for anticipation requires that all of the elements and limitations of the claim are found within a single prior art reference. . . . There must be no difference between the claimed invention and the reference disclosure, as viewed by a person of ordinary skill in the field of the invention. Scripps Clinic & Research Found. v. Genentech, Inc., 927 F.2d 1565, 1576 (Fed. Cir. 1991) (citations omitted). “Every element of the claimed invention must be literally present [in the single prior art reference], arranged as in the claim . . . . The identical invention must be shown in as complete detail as is contained in the patent claim.” Richardson v. Suzuki Motor Co., Ltd., 868 F.2d 1226, 1236 (Fed. Cir. 1989) (citation omitted). “[A]nticipation does not permit an additional reference to supply a missing claim limitation.” Teleflex, Inc. v. Ficosa N. Am. Corp., 299 F.3d 1313, 1335 (Fed. Cir. 2002). Absence from the reference of any claimed element negates anticipation. Atlas Powder Co. v. E.I. DuPont De Nemours, 750 F.2d 1569, 1573-74 (Fed. Cir. 1984). Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 127 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 113 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 a. 281. “A claimed invention cannot be anticipated by a prior art reference if the allegedly anticipatory disclosures cited as prior art are not enabled.” Amgen Inc. v. Hoescht Marion Roussel, Inc., 314 F.3d 1313, 1354 (Fed. Cir. 2003). “To anticipate a claim, a reference must disclose every element of the challenged claim and enable one skilled in the art to make the anticipating subject matter.” PPG Indus., Inc. v. Guardian Indus. Corp., 75 F.3d 1558, 1566 (Fed. Cir. 1996). 282. “For a prior art reference to anticipate a claim, the reference must disclose each and every element of the claim with sufficient clarity to prove its existence in the prior art.” Motorola, Inc. v. Interdigital Tech. Corp., 121 F.3d 1461, 1473 (Fed. Cir. 1997). “Although this disclosure requirement presupposes the knowledge of one skilled in the art of the claimed invention, that presumed knowledge does not grant a license to read into the prior art reference teachings that are not there. An expert’s conclusory testimony, unsupported by the documentary evidence, cannot supplant the requirement of anticipatory disclosure in the prior art reference itself.” Id. “Every element of the claimed invention must be literally present [in a single prior art reference], arranged as in the claim. The identical invention must be shown in as complete detail as is contained in the patent claim.” Richardson v. Suzuki Motor Co., 868 F.2d 1226, 1236 (Fed. Cir. 1989) (citations omitted). “An anticipating reference must describe the patented subject matter with sufficient clarity and detail to establish that the subject matter existed in the prior art and that such existence would be recognized by persons of ordinary skill in the field of the invention.” Crown Operations Int’l Ltd. v. Solutia, Inc., 289 F.3d 1367, 1375 (Fed. Cir. 2002). Pre-Filing Date of Invention AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 283. A patent is presumed valid and an infringer bears the burden of establishing invalidity of the patent. Innovative Scuba Concepts, Inc. v. Feder Industries, Inc., 26 F.3d 1112, 1115 (Fed. Cir. 1994). The date when a patent application is filed is presumed to be the date of invention. Wang Lab., Inc. v. Mitsubishi Elec. Am. Inc., 30 U.S.P.Q.2d 1241, 1246 (C.D. Cal. 1993). However, Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 128 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 114 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 when an infringer cites a reference with an effective date prior to the patentee’s application date in order to show invalidity of the patent, and the patentee claims a pre-filing date of invention in order to avoid the cited reference, the infringer must prove by clear and convincing evidence that the patentee is not entitled to the pre-filing date of invention. Mahurkar v. C.R. Bard Inc., 79 F.3d 1572, 1578 (Fed. Cir. 1996); Innovative Scuba Concepts, Inc. v. Feder Inds, Inc., 26 F.3d, 1112 1115 (Fed. Cir. 1994). A patentee is entitled to a date of conception as a date of the invention if it is established that the inventor acted with due diligence in reducing the invention to practice. Price v. Symsek, 988 F.2d 1187, 1190 (Fed. Cir. 1993). 284. Conception is the “formation in the mind of the inventor, of a definite and permanent idea of the complete and operative invention, as it is hereafter to be applied in practice.” Hybritech Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1376 (Fed. Cir. 1986). Conception is complete only when the idea is so clearly defined in the inventor’s mind that only ordinary skill in the art would be necessary to reduce the invention to practice, without unduly extensive research and experimentation. Sewall v. Walters, 21 F.3d 411, 415 (Fed Cir. 1994). 285. The Federal Circuit adheres to the “rule of reason” and “totality of the circumstances” standard for corroborating evidence. E.g., Price v. Symsek, 988 F.2d 1187, 1195 (Fed. Cir. 1993). “The rule suggests a reasoned examination, analysis and evaluation of all pertinent evidence so that a sound determination of the credibility of the inventor’s story may be reached . . . . The rule of reason, however, does not dispense with the requirement for some evidence of independent corroboration.” Coleman v. Dines, 754 F.2d 353, 360 (Fed. Cir. 1985). When assessing corroborating evidence, “[a]n evaluation of all pertinent evidence must be made so that a sound determination of the credibility of the inventor’s story may be reached.” Price, 988 F.2d at 1195. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 286. “‘In order to establish an actual reduction to practice, the inventor must prove that: (1) he constructed an embodiment or performed a process that met all the limitations . . . and (2) he Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 129 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 115 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 b. determined that the invention would work for its intended purpose.’” Z4 Technologies, Inc. v. Microsoft Corp., 507 F.3d 1340, 1352 (Fed. Cir. 2007) (quoting Cooper v. Goldfarb, 154 F.3d 1321, 1327 (Fed. Cir. 1998)). “Constructive reduction to practice occurs when a patent application on the claimed invention is filed.” Hybritech, 802 F.2d at 1376. 35 U.S.C. § 102(a),(b) 287. “[I]n order to invalidate a patent based on prior knowledge or use, that knowledge or use must have been available to the public.” Woodland Trust v. Flowertree Nursery, Inc., 148 F.3d 1368, 1370 (Fed. Cir. 1998). “[P]rior knowledge or use by others may invalidate a patent under § 102(a) if the prior knowledge or use was accessible to the public.” Id. Where the public accessibility of a student thesis or other library paper is at issue, courts look not only to whether the thesis was shelved in a public library, but also whether the thesis was “cataloged or indexed in a meaningful way.” In re Cronyn, 890 F.2d 1158, 1161 (Fed. Cir. 1989); Ajinomoto Co. v. Archer- Daniels-Midland Co. 1998 WL 151411 (D. Del. Mar. 13, 1998) (“The key to determining whether the [alleged prior art] thesis was publicly available is whether the thesis was indexed, cataloged, and shelved on the critical date.”) 288. “[U]nder Section 102(a), a document is prior art only when published before the invention date.” Mahurkar, 79 F.3d at 1576. To constitute a publication, a document must be publicly accessible. A document is publicly accessible if it is “‘disseminated or otherwise made available to the extent that persons interested and ordinarily skilled in the subject matter or art exercising reasonable diligence, can locate it and recognize and comprehend therefrom the essentials of the claimed invention without need of further research or experimentation.’” Brucklemeyer v. Ground Heaters, Inc., 445 F.3d 1374, 1378 (Fed. Cir. 2006) (citations omitted). AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 289. In determining whether a reference qualifies as a “printed publication” under § 102(b), “the key inquiry is whether or not a reference has been made ‘publicly accessible.’” In re Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 130 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 116 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 c. Klopfenstein, 380 F.3d 1345, 1348 (Fed. Cir. 2004). “[A]ccessibility goes to the issue of whether interested members of the relevant public could obtain the information if they wanted to.” In re Elsner, 381 F.3d 1125, 1131 (Fed. Cir. 2004), quoting Constant v. Advanced Micro-Devices, Inc., 848 F.2d 1560, 1569 (Fed. Cir. 1988). Where the public accessibility of a student thesis is at issue, courts look not only to whether the thesis was shelved in a public library, but also whether the thesis was “cataloged or indexed in a meaningful way.” In re Cronyn, 890 F.2d 1158, 1161 (Fed. Cir. 1989); Ajinomoto Co. v. Archer-Daniels-Midland Co. 1998 WL 151411 (D. Del. Mar. 13, 1998) (“The key to determining whether the [alleged prior art] thesis was publicly available is whether the thesis was indexed, cataloged, and shelved on the critical date.”) 290. Under Section 102(b), any description of the claimed invention in a printed publication prior to the critical date, i.e., one year before the effective filing date of the patent, is a statutory bar. See 35 U.S.C. § 102(b). Courts apply the same standards for determining whether a document is a printed publication and whether an invention is described in a printed publication under both 35 U.S.C. § 102(a) and § 102(b). See, e.g., 2-6 Chisum on Patents § 6.02[4] (2006). 291. “In addition to identity of invention, anticipation [under § 102] requires that the prior art reference must be enabling, thus ‘placing the allegedly disclosed matter in the possession of the public.’” Am. Standard Inc. v. Pfizer Inc., 722 F.Supp. 86, 109 (D. Del. 1989) (citation omitted). 35 U.S.C. § 102(g) AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 292. Under 35 U.S.C. § 102(g), a patent claim is anticipated if the claimed invention was first made by in the United States by someone other than the inventor who did not abandon, suppress, or conceal the invention. 35 U.S.C. § 102(g)(2). The person who first reduces an invention to practice is prima facie the first inventor. See Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572, 1577 (Fed. Cir. 1996). However, the first to conceive of an invention but second to reduce to practice will be deemed the first inventor if he was diligent in reducing the invention to practice. Id. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 131 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 117 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 293. There are two ways to establish reduction to practice of an invention: constructive reduction to practice and actual reduction to practice. The date of constructive reduction to practice of an invention is simply the filing date of a patent application that includes a claim covering the invention. See Cooper v. Goldfarb, 154 F.3d 1321, 1327 (Fed. Cir. 1998). Actual reduction to practice, on the other hand, requires proof that: (1) the inventor constructed an embodiment or performed a process that met all of the claim limitations; and (2) the inventor determined that the invention would work for its intended purpose. Id. at 1327. By statute, where a party is asserting invalidity of a patent — including under 35 U.S.C. § 102(g) — the party must prove reduction to practice of the alleged prior invention by clear and convincing evidence. 35 U.S.C. § 282; see also Izumi Prods. Co. v. Kononklijke Philips Elec N.V., 315 F. Supp. 2d 589, 608 (D. Del. 2004) (“the party alleging prior invention must establish prior invention by clear and convincing evidence”). 294. Where an allegation of actual reduction to practice is based on inventor testimony, such testimony must be corroborated by independent evidence. See Woodland Trust v. Flowertree Nursery, Inc., 148 F.3d 1368, 1371 (Fed. Cir. 1998) (“Throughout the history of the determination of patent rights, oral testimony by an alleged inventor asserting priority over a patentee’s rights is regarded with skepticism, and as a result, such inventor testimony must be supported by some type of corroborating evidence.”) Inventor testimony concerning alleged invalidating activity must be corroborated whether or not the inventor is a party to the action. See Finnigan Corp. v. United States Int’l Trade Comm., 180 F.3d 1354, 1367-68 (Fed. Cir. 1999). Independent corroborating evidence “may consist of testimony of a witness, other than an inventor, to the actual reduction to practice or it may consist of evidence of surrounding facts and circumstances independent of information received from the inventor.” Hahn v. Wong, 892 F.2d 1028, 1032-33 (Fed. Cir. 1989). AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 295. For activity of “another” to be prior art against a patentee’s claims under § 102(g), the other’s activity must satisfy the requirements of § 102(g) for making an invention. “[P]riority of Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 132 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 118 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 invention [under § 102(g)] goes to the first party to reduce an invention to practice unless the other party can show that it was the first to conceive of the invention and that it exercised reasonable diligence in later reducing that invention to practice.” Cooper v. Goldfarb, 154 F.3d 1321, 1327 (Fed. Cir. 1998). “Priority therefore depends upon conception and reduction to practice. Priority, conception, and reduction to practice are questions of law which are based on subsidiary factual finding.” Id. 296. “Conception is the formation ‘in the mind of the inventor of a definite and permanent idea of the complete and operative invention, as it is therefore to be applied in practice.’” Kridl v. McCormick, 105 F.3d 1446, 1449 (Fed. Cir. 1997) (citations omitted). “Conception is the touchstone of inventorship, the completion of the mental part of invention . . . . Conception is complete only when the idea is so clearly defined in the inventor’s mind that only ordinary skill would be necessary to reduce the invention to practice, without extensive research or experimentation.” Burroughs Wellcome Co. v. Barr Lab., Inc., 40 F.3d 1223, 1227 (Fed. Cir. 1994) (citations omitted). 297. “A reduction to practice can be either a constructive reduction to practice, which occurs when a patent application is filed, or an actual reduction to practice.” Cooper, 154 F.3d at 1327. “In order to establish an actual reduction to practice, the inventor must prove that: (1) he constructed an embodiment or performed a process that met all the limitations of the [claim]; and (2) he determined that the invention would work for its intended purpose.” Id. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 298. “Depending on the character of the invention and the problem it solves, determining that the invention will work for its intended purpose may require testing. When testing is necessary, the embodiment relied upon as evidence of priority must actually work for its intended purpose. In addition, the inventor must contemporaneously appreciate that the embodiment worked and that it met all the limitations of the [claim].” Id. (citations omitted). Where an invention “‘includes a Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 133 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 119 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 structural feature recited as a positive limitation, conception and reduction to practice of that invention require a contemporaneous recognition of that feature.’” Id. at 1328 (citations omitted). 299. “In the United States, the person who first reduces an invention to practice is ‘prima facie the first and true inventor.’” Mahurkar, 79 F.3d at 1577 (citation omitted). 300. “Conception, and consequently inventorship, are questions of law . . . .” Sewall, 21 F.3d at 415.” Conception must be proved by corroborating evidence which shows that the inventor disclosed to others his ‘complete thought expressed in such clear terms as to enable those skilled in the art’ to make the invention.” Kridl, 105 F.3d at 1449-50 (citations omitted). “However ‘there is no single formula that must be followed in proving corroboration.’” Id. (citation omitted). “Under a rule of reason analysis, an inventor’s uncorroborated testimony that he conceived a utility for his invention may be accepted if there exists other corroborated evidence to indicate that the inventor’s testimony is credible.” Id. at 1451. “Under a rule of reason analysis, ‘[a]n evaluation of all pertinent evidence must be made so that a sound determination of the credibility of the inventor’s story may be reached.’” Mahurkar, 79 F.3d at 1577 (citation omitted). 301. “Reduction to practice follows conception.” Id. at 1578. “Reduction to practice is ultimately a legal question, which is based on underlying factual determinations.” Estee Lauder v. L’Oreal, S.A., 129 F.3d 588, 592 (Fed. Cir. 1997). AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 302. “[A]ctual reduction to practice, which constitutes in law the final phase of invention, cannot be established absent a showing of practical utility.” Fujikawa v. Wattanasin, 93 F.3d 1559, 1563 (Fed. Cir. 1996). “It is well established . . . that proof of actual reduction to practice requires demonstration that the embodiment relied upon as evidence of priority actually worked for its intended purpose.” Newkirk v. Lulejian, 825 F.2d 1581, 1582 (Fed. Cir. 1987). “To prove actual reduction to practice, an inventor must establish that he “‘actually prepared the composition and Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 134 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 120 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 knew it would work.’” Estee Lauder, 129 F.3d at 592 (citations omitted). “[R]eduction to practice requires ‘the discovery that an invention actually works.’” Id. (citation omitted). 303. “[W]here testing is required to establish utility . . . [there must] be some recognition of successful testing prior to the critical date for an invention to be reduced to practice . . . .” Id. at 593. “[A] reduction to practice does not occur until an inventor, or perhaps his agent, knows that the invention will work for its intended purpose.” Id. “[W]hen testing is necessary to establish utility, there must be recognition and appreciation that the tests were successful for reduction to practice to occur.” Id. at 594-95. “While evidence of in-house testing may be prima facie evidence of conception, reduction to practice requires that an invention be sufficiently tested to demonstrate that it will work for its intended purpose.” Kimberly-Clark Corp. v. Johnson & Johnson, 745 F.2d 1437, 1445 (Fed. Cir. 1984). “‘When the invention has not quite passed beyond experiment and has not quite attained certainty and has fallen short of demonstrating the capacity to produce the desired result, the invention itself is still inchoate.’” Id. (citation omitted). 304. One who challenges a patent under 35 U.S.C. § 102(g) must show that the alleged prior invention was not “abandoned, suppressed, or concealed.” “‘[W]hether there was suppression [or] concealment under the statute is an ultimate conclusion of law.’” Lutzker v. Plet, 843 F.2d 1364, 1366 (Fed. Cir. 1988) (citation omitted). The party asserting that a patent is invalid under § 102(g) bears the burden of proving by clear and convincing evidence that the alleged prior invention was not abandoned, suppressed or concealed. Oak Indus., Inc. v. Zenith Electronics Corp., 726 F. Supp. 1525, 1530-31 (N.D. Ill. 1989). AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 305. “‘The courts have consistently held that an invention, though completed, is deemed abandoned, suppressed, or concealed if, within a reasonable time after completion, no steps are taken to make the invention publicly known.’” Correge v. Murphy, 705 F.2d 1326, 1330 (Fed. Cir. 1983) (citation omitted). “[F]ailure to file a patent application; to describe the invention in a publicly Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 135 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 121 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 2. disseminated document; or to use the invention publicly have been held to constitute abandonment, suppression or concealment.” Int’l Glass Co. v. United States, 408 F.2d 395, 403 (Ct. Cl. 1969) (citations omitted). “[S]ome step is required to be taken by the prior inventor which allows the public to learn of the method to satisfy section 102(g) (even if the inventors wanted to keep the invention secret).” Levi Strauss & Co. v. Golden Trade, S.r.L., Nos. 92 CIV. 1667 (RPP), 90 CIV. 6291 (RPP), 90 CIV. 6292 (RPP), 1995 WL 710822, at *18 (S.D.N.Y. Dec. 1, 1995). 306. A prior method or process is deemed suppressed or concealed if kept secret even if the product of that process is disclosed to the public. W.L. Gore & Assocs., Inc. v. Garlock, Inc., 721 F.2d 1540, 1550 (Fed. Cir. 1983). “As between a prior inventor who benefits from a process by selling its product but suppresses, conceals, or otherwise keeps the process from the public, and a later inventor who promptly files a patent application from which the public will gain a disclosure of the process, the law favors the latter.” Id. “[I]t is the simple rule that the property right shall reside in the second inventor who disclosed and not in the first inventor who concealed, i.e., the law prefers and will reward earlier disclosure over earlier invention.” Horwath v. Lee, 564 F.2d 948, 950 (C.C.P.A. 1977). 307. A prior process is considered suppressed or concealed when it is kept secret and a purchaser of a product would not be able to “discover the process merely by looking at the product.” Levi Strauss, 1995 WL 710822, at *18. Obviousness 308. 35 U.S.C. § 103 states in pertinent part: AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) A patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. patentability shall not be negatived by the manner in which the invention was made. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 136 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 122 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 309. Obviousness is a question of law based upon underlying questions of facts. Okajima v. Bourdeau, 261 F.3d 1350, 1354 (Fed. Cir. 2001); Continental Can Co. v. Monsanto Co., 948 F.2d 1264, 1270 (Fed. Cir. 1991). 310. “Invalidity based on obviousness of a duly issued patent must be established by clear and convincing evidence.” Glaverbel Societe Anonyme v. Northlake Mktg. & Supply, Inc., 45 F.3d 1550, 1555 (Fed. Cir. 1995); Takeda Chem. Indus., LTD v. Alphapharm PTY., Ltd., 492 F.3d 1350, 1355 (Fed. Cir. 2007). “Throughout the obviousness determination, a patent retains its statutory presumption of validity, see 35 U.S.C. § 282, and the movant retains the burden to show the invalidity of the claims by clear and convincing evidence as to underlying facts.” McGinley v. Franklin Sports, Inc., 262 F.3d 1339, 1349 (Fed. Cir. 2001); Takeda, 492 F.3d at 1355. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 311. The underlying factual issues to be considered in an obviousness analysis include “four general types, all of which must be considered by the trier of fact: (1) the scope and content of the prior art; (2) the level of ordinary skill in the art; (3) the differences between the claimed invention and the prior art; and (4) any objective indicia of nonobviousness.” Crown Operations Int’l, Ltd. v. Solutia Inc.. 289 F.3d 1367, 1376 (Fed. Cir. 2002). The United States Supreme Court reaffirmed the primacy of those factors in determining whether a patent is invalid for obviousness. See KSR Int’l. Co. v. Teleflex Inc., --- U.S. ---, 127 S. Ct. 1727, 1734 (2007) (citing Graham v. John Deere Co., 383 U.S. 1, 17-18 (1966)). “Under § 103, the scope and content of the prior art are to be determined; differences between the prior art and the claims at issue are to be ascertained; and the level of ordinary skill in the pertinent art resolved. Against this background the obviousness or nonobviousness of the subject matter is determined.” Id. (quoting Graham v. John Deere Co., 383 U.S. 1, 17-18 (1966)). Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 137 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 123 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 312. “[W]hen the prior art teaches away from combining certain known elements, discovery of a successful means of combining them is more likely to be nonobvious.” KSR, 127 S.Ct. at 1740 (citing United States v. Adam, 383 U.S. 39 (1966)). 313. “[R]ejections on obviousness grounds cannot be sustained by mere conclusory statements; instead, there must be some articulated reasoning with some rational underpinning to support the legal conclusion of obviousness.” KSR, 127 S. Ct. at 1741 (quoting In re Kahn, 441 F.3d 977, 988 (Fed. Cir. 2006)). The Supreme Court in KSR “acknowledged the importance of identifying ‘a reason that would have prompted a person of ordinary skill in the relevant field to combine the elements in the way the claimed new invention does’ in an obviousness determination.” Takeda, 492 F.3d 1350, 1356-57 (Fed. Cir. 2007) (quoting KSR, 127 S. Ct. at 1731). “This is so because inventions in most, if not all, instances rely upon building blocks long since uncovered, and claimed discoveries almost of necessity will be combinations of what, in some sense, is already known.” KSR, 127 S.Ct. at 1741; see also In re Kotzab, 217 F.3d 1365, 1369-70 (Fed. Cir. 2000). (“[I]dentification in the prior art of each individual part claimed is insufficient to defeat patentability of the whole claimed invention.”). Indeed, “a patent is not proved obvious merely by demonstrating that each of its elements was, independently, known in the prior art.” KSR, 127 S. Ct. at 1731. That is, decomposing an invention into its constituent elements, finding each element in the prior art, and then claiming that it is easy to reassemble these elements into the invention, is a forbidden ex post analysis. E.g., In re Fritch , 972 F.2d 1260, 1265-66 (Fed. Cir. 1992). AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 314. “Such secondary considerations as commercial success, long felt but unsolved needs, failure of others, etc., might be utilized to give light to the circumstances surrounding the origin of the subject matter sought to be patented.” KSR, 127 S. Ct. at 1734 (quoting Graham v. John Deere Co., 383 U.S. 1, 17-18 (1966)); Ruiz v. A.B. Chance Co., 234 F.3d 654, 663 (Fed. Cir. 2000); Ashland Oil, Inc. v. Delta Resins & Refractories, Inc., 776 F.2d 281, 306 (Fed. Cir. 1985); Pentec, Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 138 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 124 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 Inc. v. Graphic Controls Corp., 776 F.2d 309, 315 (Fed. Cir. 1985). “[E]vidence of secondary considerations may often be the most probative and cogent evidence in the record. It may often establish that an invention appearing to have been obvious in light of the prior art was not. It is to be considered as part of all the evidence, not just when the decisionmaker remains in doubt after reviewing the art.” Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d 1530, 1538-39 (Fed. Cir. 1983). “The commercial response to an invention is significant to determinations of obviousness, and is entitled to fair weight.” Demaco Corp. v. F. Von Langsdorff Licensing Ltd., 851 F.2d 1387, 1391 (Fed. Cir. 1988). “The rationale for giving weight to the so-called ‘secondary considerations’ is that they provide objective evidence of how the patented device is viewed in the marketplace, by those directly interested in the product.” Id. 315. “When a patentee asserts that commercial success supports its contention of nonobviousness, there must of course be a sufficient relationship between the commercial success and the patented invention. The term ‘nexus’ is often used, in this context, to designate a legally and factually sufficient connection between the proven success and the patented invention, such that the objective evidence should be considered in the determination of nonobviousness. The burden of proof as to this connection or nexus resides with the patentee.” Id. at 1392. 316. “In meeting its burden of proof, the patentee in the first instance bears the burden of coming forward with evidence sufficient to constitute a prima facie case of the requisite nexus . . . . A prima facie case of nexus is generally made out when the patentee shows both that there is commercial success, and that the thing (product or method) that is commercially successful is the invention disclosed and claimed in the patent.” Id. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 317. “When the patentee has presented a prima facie case of nexus, the burden of coming forward with evidence in rebuttal shifts to the challenger . . . . It is thus the task of the challenger to Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 139 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 125 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 3. adduce evidence to show that the commercial success was due to extraneous factors other than the patented invention, such as advertising, superior workmanship, etc.” Id. at 1393. 318. “[W]hen differences that may appear technologically minor nonetheless have a practical impact, particularly in a crowded field, the decision maker must consider the obviousness of the new structure in this light. Such objective indicia as commercial success, or filling an existing need, illuminate the technological and commercial environment of the inventor, and aid in understanding the state of the art at the time the invention was made.” Continental Can Co. v. Monsanto Co., 948 F.2d 1264, 1273 (Fed. Cir. 1991). 319. “[L]ong-felt need is analyzed as of the date of an articulated identified problem and evidence of efforts to solve that problem.” Texas Instruments, Inc. v. United States Int’l Trade Comm’n., 988 F.2d 1165, 1178 (Fed. Cir. 1993). 320. “Nonobviousness is suggested by the failure of others to ‘find a solution to the problem which the patent[s] in question purport[ ] to solve. Such evidence shows indirectly the presence of a significant defect [in the prior art] . . . .’” Symbol Techs., Inc. v. Opticon, Inc., 935 F.2d 1569, 1578-79 (Fed. Cir. 1991) (citation omitted). 321. In light of the above principles, and against the factual record in this case, defendants cannot meet their burden of showing that the asserted claims of any of the Fleming ‘759, Day ‘356, or Agulnick ‘295 patents are obvious. Definiteness 322. 35 U.S.C. § 112, Para. 2 states: The specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 323. “Compliance with the second paragraph of section 112 is generally a question of law . . . .” Shatterproof Glass Corp. v. Libbey-Owens Ford Co., 758 F.2d 613, 624 (Fed. Cir. 1985). Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 140 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 126 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 The accused infringer has the burden of showing by clear and convincing evidence that the claims are invalid for indefiniteness under § 112, second paragraph. North Am. Vaccine, Inc. v. American Cyanamid Co., 7 F.3d 1571, 1579 (Fed. Cir. 1993). “A determination of claim indefiniteness is a legal conclusion that is drawn from the Court’s performance of its duty as the construer of patent claims.” Intel Corp. v. Via Technologies., Inc., 319 F.3d 1357, 1365 (Fed. Cir. 2003) (quoting Personalized Media Communications, LLC v. Int’l Trade Comm’n, 161 F.3d 696, 705 (Fed. Cir. 1998)). 324. “Determining whether a claim is indefinite requires an analysis of ‘whether one skilled in the art would understand the bounds of the claim when read in light of the specification . . . . If the claims read in light of the specification reasonably apprize those skilled in the art of the scope of the invention, [section] 112 demands no more.’” Credle v. Bond, 25 F.3d 1566, 1576 (Fed. Cir. 1994) (citing Miles Lab., Inc. v. Shandon Inc., 997 F.2d 870, 875 (Fed. Cir. 1993)). “To determine whether a claim is indefinite, the court looks to whether one of skill in the art, after reviewing the claims and the specification, would understand what is being claimed.” The Liposome Co. v. Vestar Inc., 36 U.S.P.Q.2d 1295, 1315 (D. Del. 1994). See also Exxon Research and Eng’g Co. v. United States, 265 F.3d 1371, 1375 (Fed. Cir. 2001). There is no objective criteria used to determine whether a claim is definite. Rather, “[t]he amount of detail required to be included in claims depends on the particular invention and the prior art . . . .” Shatterproof Glass, 758 F.2d at 624. Courts can require only that the claim language be “as precise as the subject matter permits.” Id. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 325. The asserted claims of the Fleming ‘759, Day ‘356, and Agulnick ‘295 patents are not indefinite, as evidenced by the Court’s construction of those claims. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 141 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 127 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 B. 1. Enforceability Inequitable Conduct 326. Defendants have not alleged inequitable conduct concerning the Day ‘356 and Agulnick ‘295 patents, only the Fleming ‘759 patent. 327. To establish that inequitable conduct occurred in the prosecution of a patent, the party raising the issue must prove by clear and convincing evidence that: (1) the information is material; (2) the knowledge of the information and its materiality can be charged to the patent applicant; and (3) the patent applicant’s failure to disclose the information (or submission of false information) resulted from an intent to mislead the United States Patent and Trademark Office (“PTO”). See Kingsdown Medical Consultants v. Hollister Inc., 863 F.2d 867, 872 (Fed. Cir. 1988); Enzo Life Sciences, Inc. v. Digene Corp., 270 F.Supp.2d 484, 489 (D. Del. 2003) (JJF). Inequitable conduct is an equitable defense; thus, the ultimate question of whether inequitable conduct has occurred is a question for the Court, not a jury. See Kingsdown Medical, 863 F.2d at 876. 328. “Information is deemed material if there is a substantial likelihood that a reasonable Examiner would have considered the material important in deciding whether to issue the application as a patent.” Enzo Life Sciences, 270 F.Supp.2d at 489 (citing Elk Corp. of Dallas v. GAF Bldg. Materials Corp., 168 F.3d 28, 31 (Fed.Cir.1999)). AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 329. But a reference cannot be considered material if it is merely cumulative to other references that were already before the examiner, i.e., “if the reference teaches no more than what a reasonable examiner would consider to be taught by the prior art already before the USPTO.” See Regents of University of California v. Eli Lilly & Co., 119 F.3d 1559, 1574-75 (Fed. Cir. 1997); Scripps Clinic & Research Foundation v. Genetech, Inc., 927 F.2d 1565, 1582 (Fed. Cir. 1991) (“A reference that is simply cumulative to other references does not meet the threshold of materiality that is predicate to a holding of inequitable conduct.”) See Heidelberg Harris, Inc. v. Mitsubishi Heavy Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 142 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 128 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 2. Industries, Ltd., 1996 WL 680243, at *6 (N.D.Ill. 1996) (holding references cited in another reference already before the Examiner to be cumulative). 330. Additionally, “[a] party alleging that a patent is unenforceable because of the patentee’s failure to disclose material information to the PTO must offer clear and convincing evidence that the patentee intended to mislead the PTO. [citation omitted] The omission must be made with the specific intent to mislead, not merely from carelessness in the performance of a duty.” Speedplay Inc. v. Bebop Inc., 211 F.3d 1245, 1259 (Fed. Cir. 2000); Akron Polymer Container Corp. v. Exxel Container, Inc., 148 F.3d 1380, 1384 (Fed. Cir. 1998) (“Without a factual basis to establish a threshold level of deceitful intent, the inequitable conduct analysis is at an end.”). 331. Intent to deceive cannot be inferred solely from the fact that information was not disclosed to the examiner; there must be an independent factual basis for a finding a deceptive intent. See Catalina Lighting, Inc v. Lamps Plus, Inc., 295 F.3d 1277, 1288-89 (Fed. Cir. 2002); C.R. Bard, Inc. v. M3 Systems, Inc., 157 F.3d 1340, 1365 (Fed. Cir. 1998) (“Deceptive intent is not inferred simply because information was in existence that was not presented to the examiner.”). Laches 332. This Court has already granted summary judgment of no laches with respect to the Day ‘356 and Agulnick ‘295 patents. 333. The equitable issue of laches is for the Court, not the jury, to decide. A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1028 (Fed. Cir. 1992). AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 334. Laches is an equitable defense, the application of which falls within the sound discretion of the Court. Aukerman, 960 F.2d at 1028. To establish laches, the defendant must prove by a preponderance of the evidence that (1) the plaintiff delayed filing suit for an unreasonable and inexcusable length of time from the time the plaintiff knew or reasonably should have known of its Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 143 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 129 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 claim against the defendant, and (2) the delay operated to the prejudice or injury of the defendant. Id. at 1032. A successful laches defense only bars pre-filing damages. Id. at 1028 335. Because laches is an equitable defense, courts have “borrowed” the six-year damages limitation period set out in 35 U.S.C. § 286 as a guideline for determining when a claim should be equitably barred. Id. at 1034. The six-year limitation period for laches begins with a patentee’s actual or constructive knowledge of the alleged infringement and then counts forward. Id. If the patentee had knowledge of the infringement more than six years before bringing suit, the law imposes a rebuttal presumption of laches which “has the effect of shifting the burden of going forward with evidence, not the burden of persuasion.” Id. at 1028. The presumption disappears if the patentee can introduce sufficient evidence to create a genuine issue that rebuts any of the laches factors. Id. at 1038. Once the laches presumption disappears, the burden of going forward with the evidence and the burden of persuasion rest on the defendant. Id. at 1038-39. 336. Any “delay” in filing suit must be measured from the point in time when the patentee knew or should have know of the infringement, not merely the accused products. Aukerman, 960 F.2d at 1032; Metro. Wire Corp. v. Falcon Prods. Inc., 528 F. Supp. 897, 902 & n.4 (E.D. Pa. 1981) (knowledge of accused products by corporate employees not relevant to laches where it could not be shown that employees had “detailed knowledge” of the patent-in-suit and basis for claim of infringement). AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 337. Assuming that the presumption of laches arises, “the patentee may offer proof directed to rebutting the laches factors. Such evidence may be directed to showing either that the patentee’s delay was reasonable or that the defendant suffered no prejudice or both. By raising a genuine issue respecting either factual element of a laches defense, the presumption of laches is overcome.” Aukerman, 960 F.2d at 1038 (citations omitted). Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 144 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 130 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 338. The Federal Circuit imposes a duty upon courts to “consider and weigh any justification offered by the plaintiff for its delay” in filing an infringement suit. Id. at 1033. The Federal Circuit has recognized “negotiations with the accused” infringer and considered the “extent of infringement” to determine whether the patentee’s delay was justifiable. Id. 339. It is well settled that bilateral licensing negotiations, that are progressing and appear to have a fair chance of success, excuse a patentee’s delay in filing suit. Id. at 1033; RCA Corp. v. Data Gener. Corp., 701 F. Supp. 456, 476 (D. Del. 1988). Accordingly, the laches period for the duration of negotiations is tolled and excluded from the calculation of the laches period. Wafer Shave, Inc. v. Gillette Co., 857 F. Supp. 112, 127-28 (D. Mass. 1993), aff’d without op., 26 F.3d 140 (Fed. Cir. 1994); Valutron N.V. v. NCR Corp., 33 U.S.P.Q. 2d 1986, 1991-93 (S.D. Ohio 1992), aff’d without op., 5 F.3d 1506 (Fed. Cir. 1993). 340. The second element of laches requires that defendant demonstrate that it suffered “material prejudice” as a result of the plaintiff’s alleged delay in filing suit. Aukerman, 960 F.2d at 1033. The prejudice may be either economic or evidentiary. Id. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 341. To establish material economic prejudice, the defendant must prove that there is a nexus between its investment and the plaintiff’s alleged delay in filing suit. “[T]he court’s inquiry is not whether there is evidence of capital investment. Rather, the key is whether there is a nexus between the delay and the infringer’s decision to expand the infringing activity. . . . No economic prejudice can be established if this nexus is absent.” ABB Robotics, Inc. v. GMFanuc Robotics Corp., 828 F. Supp. 1386, 1395 (E.D. Wis. 1993) (emphasis added), aff’d, 52 F.3d 1062 (Fed. Cir. 1995); Gasser Chair Co., Inc. v. Infanti Chair Mfg. Corp., 60 F.3d 770, 775 (Fed. Cir. 1995) (reversing summary judgment of laches because lower court did not require proof of a nexus between the investment and the delay); Minco. Inc. v. Combustion Eng’g. Inc., 903 F. Supp. 1204, 1221 (E.D. Tenn. 1995), aff’d, 95 F.3d 1109 (Fed. Cir. 1996) (denying laches where defendant Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 145 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 131 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 3. unable to show expenditures attributable to delay, as opposed to routine business expansion); Northern Telecom Inc. v. Datapoint Corp., 23 U.S.P.Q.2d 1881, 1893 (N.D. Tex. 1992); see also Hemstreet v. Computer Entry Sys. Corp., 972 F.2d 1290, 1294 (Fed. Cir. 1992); R2 Med. Sys., Inc. v. Katecho, Inc., 931 F. Supp. 1397, 1408 (N.D. Ill.1996). Moreover, damages arising from the alleged infringer’s continuing sales of the challenged device that would have been avoided by an earlier suit do not establish material prejudice. To prove economic harm, a mere change in position by investing in production of the challenged device during the period of delay is insufficient. “If such damages necessarily constituted prejudice, then practically every patent claim would establish material prejudice.” Id. “It is not enough that the alleged infringer changed his position — i.e., invested in production of the allegedly infringing device. The change must be because of and as a result of the delay, not simply a business decision to capitalize on a market opportunity.” Hemstreet, 972 F.2d at 1294; see also Meyers v. Brooks Shoe, Inc., 912 F.2d 1459, 1463 (Fed. Cir. 1990) (no economic prejudice shown because the defendant would have continued the development and sales activities regardless of what the patentee “did or did not do”), overruled in part on other grounds, Aukerman, 960 F.2d 1020 (Fed. Cir. 1992). 342. Courts consistently reject a defendant’s laches defense when “the party which advances the defense of laches is responsible for the delay or contributes substantially to it.” Potash Co. of Am. v. International Minerals & Chem. Corp., 213 F.2d 153, 155 (10th Cir. 1954); see also Intertech Licensing Corp. v. Brown & Sharpe Mfg. Co., 708 F. Supp. 1423, 1439 (D. Del. 1989) (laches denied “where the one asserting the defense of laches was responsible for the plaintiff’s delay”); Coleman, 619 F. Supp. at 955. Unclean Hands AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 343. This Court has already granted summary judgment of no unclean hands with respect to the Day ‘356 and Agulnick ‘295 patents. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 146 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 132 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 C. 1. 344. The defendant then has the burden to demonstrate the plaintiff’s inequitable conduct and must also demonstrate that the plaintiff’s inequitable conduct is immediately and necessarily related to the equity that the plaintiff seeks in the litigation. Bio-Technology Gen. CgM. v. Genentech, Inc., 80 F.3d 1553, 1565 (Fed. Cir. 1996). The unclean hands doctrine only applies where some unconscionable act of one coming for relief has immediate and necessary relation to the equity that he seeks in respect of the matter in litigation. Id. Trust-Related State-Law Claims Delaware Uniform Fraudulent Transfers Act 345. Each of the Defendants alleges that Lucent violated the Delaware Uniform Fraudulent Transfer Act, 6 Del. Code Ann. §§ 1301 et seq. (“DUFTA”), when Lucent created Multimedia Patent Trust and assigned the Video Coding Patents-in-Suit to the Trust on November 28, 2006. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 346. Claims under DUFTA can be premised on either Section 1304 or Section 1305 of the Act. Under Section 1304(a)(1), which addresses actual fraud, “a transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation with actual intent to hinder, delay or defraud any creditor of the debtor.” 6. Del. Code Ann. § 1304(a)(1) (emphasis added). Section 1304(a)(2), on the other hand, addresses constructive fraud, and deems fraudulent as to a creditor a transfer made by a debtor that is made “without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor (a) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or (b) intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.” 6. Del. Code Ann. § 1304(a)(2). Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 147 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 133 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 347. Section 1305, which is limited to alleged claims that arose before the purported fraudulent transfer was made, deems that a transfer “by a debtor is fraudulent as to a creditor” where “the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation,” or where “the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time and the insider had reasonable cause to believe that the debtor was insolvent.” 6 Del. Code Ann. § 1305(a) and (b) (emphasis added) 348. Under DUFTA, a creditor is “a person who has a claim against a debtor,” where “claim” is defined as a “right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured.” 6 Del. Code Ann. § 1301(3) and (4) (emphasis added). 349. An obligation not reducible to a monetary payment cannot constitute a “claim.” In Harbinger Capital Partners Master Fund I, Ltd. v. Granite Broad. Corp., 906 A.2d 218 (Del. Ch. 2006), the court found that preferred shareholders were not creditors of the corporation because, even though the corporation owed them contractual legal obligations, their preferred shares provided no guaranteed right of payment. Id. at 224, 230. And this holding is consistent with the holding of the Third Circuit in In re Ben Franklin Assocs., 186 F.3d 301 (3d Cir. 1999), which found that an equitable right to reinstatement in a partnership was not a “claim” under the Bankruptcy Code because it was not reducible to a monetary payment. Id. at 304-05, 308. Thus, to qualify as a creditor, a plaintiff must have a claim to the transferor’s money: AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) The operative phrase in the definition is ‘right to payment. Unless the plaintiff has a legal ‘right,’ he does not hold a ‘claim’ and, therefore, is not a ‘creditor.’ Granted, ‘claim’ can be, and often is, broadly construed to encompass virtually very type of demand raised by a plaintiff, regardless of the legal theory employed. While such broad construction may be acceptable in common parlance, it is inappropriate under UFTA. . . . [T]he only people who are ‘creditors’ are those who have a ‘right’ to a Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 148 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 134 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 2. 3. transferor’s money, and the only persons who are restrained by UFTA are ‘debtors’ who are ‘liable on a claim.’ JOHN E. SULLIVAN III, FUTURE CREDITORS AND FRAUDULENT TRANSFERS: WHEN A CLAIMANT DOESN’T HAVE A CLAIM, WHEN A TRANSFER ISN’T A TRANSFER, WHEN FRAUD DOESN’T STAY FRAUDULENT, AND OTHER IMPORTANT LIMITS TO FRAUDULENT TRANSFERS LAW FOR THE ASSET PROTECTION PLANNER, 22 DEL. J. CORP. L. 955, 976-77 (1977). 350. Consistent with DUFTA’s requirement that a creditor have a right to payment, a “‘future creditor’ does not exist unless a conveying party can reasonably foresee incurring the costs of a claim or judgment at the time of the conveyance.” Leopold v. Tuttle, 549 A.2d 151, 154 (Pa. Super. 1988). Common-Law Fraud 351. The elements of common law fraud under Delaware law are: 1) a false representation, usually one of fact; 2) the defendant’s knowledge or belief that the representation was false, or was made with reckless indifference to the truth; 3) an intent to induce the plaintiff to act or to refrain from acting; 4) the plaintiff’s action or inaction taken in justifiable reliance upon the representation; and 5) damage to the plaintiff as a result of such reliance. Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 901 A.2d 106, 115 (Del. 2006). Fraud may also occur through deliberate concealment of material facts. Stephenson v. Capano Dev., Inc., 462 A.2d 1069, 1074 (Del. 1983). But whether a fraud claim is based on false representation or deliberate concealment, “both require an intentional deception of the plaintiff by the defendant, which the plaintiff relies upon to his detriment.” See, e.g., Lock v. Schreppler, 426 A.2d. 856, 861 (Del. Super. Ct. 1981). California Business and Professions Code § 17200 et seq. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 352. California Business and Professions Code § 17200 et seq. (“Section 17200”) defines “unfair competition” as including “any unlawful, unfair or fraudulent business act or practice.” Cal Bus. & Prof. Code § 17200. Because Gateway’s Section 17200 claim against Lucent is grounded in Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 149 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 135 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 4. the fraud prong of Section 17200, Gateway must prove that Lucent made a misrepresentation, and that the public, i.e., consumers, are likely to be deceived by Lucent’s misrepresentation. Vess v. Ciba-Geigy Corp., USA, 317 F.3d 1097, 1106 (9th Cir. 2003); see Terarecon, Inc. v Fovia, Inc., 2006 WL 2691405 at *2 (N.D. Cal. Sep. 20, 2006); Bardin v. Daimler-Chrysler Corp., 39 Cal. Rptr. 3d 634, 636 (Cal. Ct. App. 2006). In Bardin, a Section 17200 fraud claim was dismissed because the Defendants asserted unsupported, conclusory statements that the public was likely to be deceived. Id. at 647-48; see Daugherty v. Am. Honda Motor Co., 51 Cal. Rptr. 3d 118, 127-28 (Cal. Ct. App. 2007) (dismissing a Section 17200 claim where complainant failed to show that the defendant “gave any information . . . which could have the likely effect of misleading the public. . .”). 353. Therefore, to prevail on its Section 17200 claim, Gateway must “demonstrate by extrinsic evidence, such as consumer survey evidence, that the challenged statements tend to mislead consumers.” Heighley v. J.C. Penney Life Ins. Co., 257 F. Supp. 2d 1241, 1260 (C.D. Cal. 2003). 354. Statements made to the SEC, even if false or misleading, cannot form the basis of a Section 17200 claim; section 17200 does not apply to securities transactions as a matter of law. See, e.g., Bowen v. Ziasun Tech., Inc., 11 Cal. Rptr. 3d 522, 533 (Cal. App. Ct. 2004); Scognamillo v. Credit Suisse First Boston, LLC, No. C03-2061 THE, 2005 U.S. Dist. LEXIS 20221, at *36-*37 (N.D. Cal. Aug. 25, 2005). 355. Under recently enacted Proposition 64, to have standing a Section 17200 plaintiff must suffer (1) injury in fact and (2) pecuniary loss, both as a result of the alleged unfair competition. See, e.g., Lozano v. AT&T Wireless Servs., 504 F.3d 718, 731-32 (9th Cir. 2007). Tortious Interference With Prospective Economic Advantage AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 356. The elements of a claim for tortuous interference with prospective economic advantage or business expectancy are (1) an economic relationship containing the probability of future economic benefit to plaintiff; (2) knowledge by defendant of the relationship; (3) intentional Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 150 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT 136 Case No. 07-CV-2000 H (CAB), consisting of matters severed 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 26 27 28 acts by the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) damages to plaintiff proximately caused by defendants’ acts. Med. Alert Ambulance, Inc. v. Atl. Health Sys., Inc., 2007 WL 2297335, *14 (D.N.J. Aug. 6, 2007). 357. To sustain a claim for tortious interference with prospective economic advantage, Defendants must prove malice, “harm [that] was inflicted intentionally and without justification of excuse.” Lamorte Burns & Co. v. Walters, 770 A.2d 1158, 1170 (N.J. 2001). The act of interference must be independently wrongful: “conduct that is fraudulent, dishonest, or illegal and thereby interferes with a competitor’s economic advantage.” Id. 358. The alleged malicious conduct must be both injurious and transgressive of generally accepted standards of common morality and of law.” Id. at 1170-71. Conduct that is not wrongful or in breach of an obligation is not malicious — “[t]hat which one has a right to do cannot become a tort when it is done.” Kopp, Inc. v. United Tech., Inc., 539 A.2d 309, 315 (N.J. Super. 1988). ABANDONED ISSUES 359. Lucent has not abandoned any issues raised by its pleadings. EXHIBITS TO BE OFFERED BY LUCENT 360. Lucent incorporates by reference Plaintiffs’ Combined Trial Exhibit List, filed concurrently herewith. WITNESSES TO BE OFFERED BY LUCENT 361. Lucent incorporates by reference Plaintiffs’ Combined Trial Witness List, filed concurrently herewith. AND LAW from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 151 of 152 LUCENT’S MEMORANDUM OF CONTENTIONS OF FACT AND LAW 137 Case No. 07-CV-2000 H (CAB), consisting of matters severed from consolidated cases: 02-CV-2060 B (CAB), 03-CV-0699 B (CAB), 03-CV-1108 B (CAB) 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 26 27 28 Dated: January 14, 2008 By: s/David A. Hahn David A. Hahn, SBN 125784 HAHN & ADEMA 501 West Broadway, Suite 1600 San Diego, California 92101-3595 Telephone: (619) 235-2100 Facsimile: (619) 235-2101 John M. Desmarais (admitted pro hac vice) Robert A. Appleby (admitted pro hac vice) James Marina (admitted pro hac vice) Michael P. Stadnick (admitted pro hac vice) KIRKLAND & ELLIS LLP 153 East 53rd Street New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 Attorneys for Lucent Technologies Inc. Case 3:07-cv-02000-H-CAB Document 238 Filed 01/14/2008 Page 152 of 152