International Medical Devices, Inc. v. Cornell
Oral Argument — 03/05/2026 · Case 25-1843 · 10:17
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Judge Dyk
Case this morning, number 25, 1843, International Medical Devices v. Cornell.
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Again, Mr. Puff.
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Appellant Attorney
Thank you, Your Honor.
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The Court has been very generous with its time, and I appreciate your attention,
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and so I'm going to be concise on this issue.
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Obviously, this appeal is the challenge to the cost award that follows from the underlying judgment.
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With respect to the cost, I want to make the point that I think the law is uniform,
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that in order to be a prevailing party for purposes of cost,
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a party must secure some relief on the merits that materially alters the legal relationship of the parties.
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If the Court reverses the judgment against the defendants, and in this instance,
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particularly against my client, Richard Finger,
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then there is no material alteration that would support an award of cost.
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I want to acknowledge that when we prepared the brief,
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I was relying on cases like future link from this Court that say
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the question of prevailing party status,
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under Rule 54, is a matter of federal circuit precedent.
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In preparing for the argument that occurred to me,
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you might question whether that should be a matter of regional circuit precedent,
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and to the extent that you have that question, there's no difference.
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And I'd call your attention to Miles v. the State of California,
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which is that 320 Fed Third, 986, a Ninth Circuit decision
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that establishes that same material alteration standard.
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And so the clash that arises in the briefing here is,
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one in which the plaintiffs suggest that if the judgment remains intact
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with respect to any defendant as to any claim,
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their prevailing parties, then they're entitled to all their costs.
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That's not correct.
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We cited the controlling authorities that established
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if the underlying judgment is reversed,
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the cost order must be reversed and sent back to the district court.
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The reason is that they may ultimately be prevailing parties as to some defendants,
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and then the district court could tax the appropriate costs as to those defendants.
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But with respect to my client, Richard Finger, let me be clear.
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The fact that they may have a judgment at the end of the day against the other defendants
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does not matter to my client.
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He was sued individually, he was found liable individually,
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and if he prevails on his claims against individual liability,
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the plaintiffs are not prevailing parties as to him,
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and they are not entitled to costs as to him.
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Unless the court has questions, I'll yield the rest of my time.
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Judge Dyk
Okay. Thank you. Mr. Manning.
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Appellee Attorney
Thank you, Judge Dyke.
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And I'll endeavor to be...
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...similarly briefed on the cost issue.
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So there's two issues here, the cost issue,
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and then we have the cross-appeal regarding fees,
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just to deal with costs first.
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As this court has said in Schum versus Intel,
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there's only one prevailing party.
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Parts of the judgment that have not been appealed
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relate to breach of contract, relate to copyright infringement,
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will remain the prevailing party regardless in that case.
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And so the district court's cost award should be affirmed.
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Judge Taranto
Just, I guess, if there's only going to be one prevailing party,
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why wouldn't we, if we disturb anything here in the judgment in front of us,
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maybe put aside something, anything significant, okay,
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why wouldn't we send it back to the district court to reassess,
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whether, who is the prevailing party?
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Appellee Attorney
Your Honor, I think that the reason is that there's no counterclaim.
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So there's nothing going back that's going to, you know, affect.
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I mean, if we don't prevail on our claims,
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that just means we haven't prevailed on all the claims.
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But we have prevailed on some claims that aren't appealed.
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And so, like, there's nothing in the posture of this case
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that, you know, whatever the court does...
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Judge Taranto
I guess I'm just trying to understand.
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If there's only one prevailing party in a case...
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Right.
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Even for the cost provision, let alone other fee,
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attorney's fees provisions,
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then the trial court has to look at who won how much and who lost how much.
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And if that shifts, isn't the new determination required?
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Appellee Attorney
I don't believe so, Your Honor, because I think,
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going from memory here, but I think the Love and Care case
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that came out, this court had a couple years ago,
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talked about how it remanded for certain things to be,
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I believe it was an aquaconduct that got remanded.
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But the question was, as far as prevailing party status goes,
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the claims that were being affirmed,
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or in this case, the claims that haven't been challenged,
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will still remain.
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And so, my recollection is the court affirmed the cost award there
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because nothing's going to change the fact that IMD brought claims,
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IMD has prevailed on those claims,
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and therefore it's the prevailing party.
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Judge Dyk
Okay, but there's this netting out concept.
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I'm not sure that the briefs address that,
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but there is authority that we're...
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or one party prevails on some claims,
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another party prevails on another set of claims
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as a kind of a netting out concept with respect to the cost.
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I don't mean to get into that,
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but I'm not sure that the law that says
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there's only one prevailing party
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bars that kind of netting out concept.
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Appellee Attorney
I'm not going to fight too hard on this court saying
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if it needs a sentence and costs back.
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I mean, I think on the netting out point,
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the one thing I would note, though, is I can't tell you
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if all those cases, but certainly it matters
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if there are counterclaims being addressed, too.
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So, I mean, the netting out may be one party wins on its claims
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and the other party wins on its claims,
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and then you have to figure this out.
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There are no counterclaims that are issued here.
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It's only our claims, and we don't have to prevail
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on all of our claims in order to be the prevailing party.
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Just one brief word on the attorney's fees issues.
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We note in our brief we think the court focusing on
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attorney's fees being duplicative of exemplary damages
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was just the wrong standard because attorney's fees,
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certainly, are not duplicative of exemplary damages.
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They serve a different purpose than exemplary damages.
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In essence, the court was treating them
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as another form of exemplary damages,
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as the Tenth Circuit case, Clear One Communications case,
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I think makes clear.
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Attorney's fees in the trade secret context
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serve a different purpose.
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They're not a form of exemplary damages.
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Judge Dyk
Yeah, but the judge also said there was no bad faith there, right?
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Appellee Attorney
Yes, but bad faith is under the attorney's fee statute.
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That's a separate ground for attorney's fees.
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It's a separate ground for attorney's fees.
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If a claim was brought in bad faith
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or if there was willful and malicious misappropriation,
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the court can award attorney's fees.
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So focusing on the bad faith only focused on part of the statute
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that goes to looking at whether the claim was brought
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or resisted in bad faith.
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Willful misappropriation is a separate ground.
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At the very least, if the court decides to disturb,
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which we urge the court not to,
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but if the court decides to disturb the exemplary damages finding,
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then that's a separate ground.
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At the very least, we should go back
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because that was the basis for the district court's order,
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and so it's now changed the basis for her to deny fees to begin with.
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Let's go to the other questions.
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I thank you, Your Honor, for your time.
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Judge Dyk
Thank you, Mr. Post.
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Anything further?
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Appellant Attorney
Thank you, Your Honor.
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I will not address the cost issue further.
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I will speak to the cross-appeal on the attorney's fees.
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The first point that I want to make is that in the main appeal,
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I made the point that there is certainly no evidence of malicious conduct
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by my client.
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That would be a predicate to an award of attorney's fees
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as much as it's a predicate to an award of exemplary damages.
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That's an independent basis on which you could not reverse on this issue.
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The second point I would make, Judge Taranto,
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I wanted to speak to the question.
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Judge Taranto
Sorry, just so I'm clear.
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Yes.
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You're saying that maliciousness is a necessary requirement?
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It is.
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Appellant Attorney
It is, yes.
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And so I would call your attention, Your Honor.
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I pointed to these cases earlier, but the applied medical case
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and the champion systems case from the California Court of Appeals
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says willful and malicious under the California Uniform Traits Act
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is a two-part test.
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Evidence of willful conduct is not enough.
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There must also be evidence of malicious conduct.
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And because there's no evidence here that Mr. Finger did anything malicious,
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they couldn't get fees from him just as they can't get exemplary damages from him.
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That's the first point.
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The second point is I wanted to respond to the question you asked
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about the pretrial order because it's material here as well.
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You questioned whether the pretrial order had actually omitted
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the claim for exemplary damages, and as counsel pointed out,
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it not only omitted the claim for exemplary damages,
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it omitted the issue of willful and malicious prosecution.
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And if you look at the...
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Judge Dyk
I'm getting back into the first appeal.
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Appellant Attorney
I'm not trying to for this purpose, Your Honor,
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but what I am saying is if you look at the Supreme Court's decision in Rockwell,
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that court accepted the proposition that claims and issues,
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that are omitted from the pretrial order, are out of the case.
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And so the willful and malicious issue was out of the case
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when it was omitted from the pretrial order.
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And therefore, it's out of the case for attorney's fees purposes
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as much as it's out of the case for purposes of exemplary damages.
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And it was not resurrected by a stipulation that referred only to reasonable royalty.
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Third point is that the argument that counsel is making today,
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that the district court erred in some respect by failing to award fees,
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based on the conduct of the litigation,
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is not an argument that was preserved below.
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They committed to the proposition that they could be entitled to attorney's fees
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on the basis of the willful and malicious finding that the court made.
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They're now making a different argument that they did not preserve below.
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And you can see that at pages 10-569 and at pages 11-965 to 66 of the appendix.
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And Judge Dyke, as you pointed out, at page 11 of the appendix,
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the district court found there was no indication that the defendant's litigation was vexatious or in bad faith.
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So there's no basis for any remand on attorney's fees.
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Judge Dyk
I appreciate your time.
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I thank both counsel.
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The case is submitted.
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That concludes our session for this morning.