Facebook's "clear and convincing" burden of proof in Leader v. Facebook

OPINION: One blogger's perspective

If Facebook met its burden, an ill-wind blows over innovation; offer-blocking NDA language is just one piece of evidence fatal to Facebook

December 26, 2011—All the appeal briefs are all in. The next step in Leader v. Facebook is the oral argument in this patent infringement trial now on appeal at the Federal Circuit Court of Appeals.

Understanding Facebook's trial arguments are like peeling an onion. The sealed trial arguments are finally seeing the light of day and are as discombobulated as they seemed. Leader's favorable verdicts on infringement of 11 of 11 claims and no prior art are unlikely to be changed given the volumes of evidence on both sides. Put another way, the engine running Facebook is Leader's invention.

Facebook's lone trial victory for "on sale/public disclosure bar" cast a light on the unseemly underbelly of our jury system—it reveals how Cooley Godward attorneys intent on fooling a jury with "dark arts" can frustrate justice.The layers of this onion include: (a) a new federal judge’s first jury trial; (b) adding the on sale bar claim after the close of discovery, thus preventing Leader from being able to prepare its defenses; (c) a flip-flopping Facebook expert witness presenting bad science; (d) hocus-pocus with a jury binder; (e) exploiting jury confusion over esoteric and intertwined legal concepts; (f) testimony taken out of context; (g) inventor-bashing; (h) video snippet gaming; (i) questionable uses of a jury focus group; (j) missing documents; (k) no corroborating testimony; (l) no source code; and (m) obsequious counsel.  

See Facebook's trial conduct.See also Facebook's "court room theater", Facebook's "I'm tired" tactic, No evidence? No problem. Fabricate it., Missing Facebook Documents, Expert witness practices "dark arts", Facebook's jury binder innuendo, Patent Office records disprove Facebook, Mark Zuckerberg used Leader white paper to build Facebook, and American Innovation is on the line.

Layperson's smoking gun?

In all of Facebook's machinations, is there a smoking gun from a layperson's perspective? The answer is yes. Leader NDAs (nondisclosure agreements, also known as confidentiality agreements). Facebook used the NDAs to mislead the jury as to their multiple purposes. In addition to confidentiality protections, Leader's NDAs had no-reliance clauses which are fatal to Facebook—clauses which the jury would not understand and the trial court missed as a matter of contract law.

According to Leader, they could not have offered the invention early because it did not exist prior to the filing of their provisional patent application. If Leader's story is true, then they must prove a negative. Proving a negative is always difficult. How do you prove you don't beat your children when there's evidence you got angry at them once? How do you prove you don't steal from your employer, when there's evidence that you once lost receipts in the wash? The "clear and convincing" standard is intended to stop innuendo from holding sway over the requirement for hard evidence. Therefore, Facebook's burden was to prove their accusations clearly and convincingly; beyond simply yelling "liar!

Nonetheless, it was not Leader's burden to prove that they did not offer the invention for sale. Instead, it is Facebook's "clear and convincing" burden to prove with hard evidence that the invention was offered for sale. Without such hard evidence, Facebook resorted to the "dark arts" to fool the jury with deceptive lawyering. See Leader's lawyer's dismantle Facebook's response brief, ¶2, "Muckraking."

Leader’s NDA’s trump all of Facebook's machinations. Facebook mocked these secrecy documents at trial—focusing the jury on the NDA dates on these signed promises as the only way to protect secrets (reminiscent of the Wizard of Oz's deception: "Pay no attention to that man behind the curtain."). Such NDA dates do not prove whether or not disclosures were made in any given meeting. Neither do they prove if verbal confidentiality agreements were in place, nor do they prove whether Leader used other means to protect secrecy, like need-to-know policies and the splitting of tasks. See U.S. v. Lange (deeds).[1]

Leader NDAs contained a "no-reliance" clause that is fatal to Facebook—the parties agreed that no offers for sale could be construed from their discussions. A lay jury unfamiliar with contract law can be excused for missing this, but the trial court should not have. Leader's post-trial arguments highlighted the no-reliance clause. It's basic contract law. Restatement (Second) Contracts § 21 (1981) (agreement not to be legally bound). That is, if knowledgeable parties agree that nothing they discuss will have any legal effect prior to entering into a written agreement, then that agreement blocks anything discussed from being construed as a commercial offer for sale. End of story. The on sale bar verdict is wrong as a matter of law.

Leader's NDA "no-reliance" clause blocked offers for sale contractually

While an NDA's main focus is secrecy, NDAs can contain other contractual elements, and Leader’s NDAs had a "no-reliance" clause that explicitly blocks offers for sale. It says (see also Fig. 4 below):

Table 1: Leader's NDA, Paragraph 5:

See WPAFB – Douglas W. Fleser NDA (no-reliance).
Leader JMOL, Doc. No. 627-09, ¶5;

See WPAFB – Vincent J. Russo NDA (no-reliance).
Id., Doc. No. 627-19, ¶5;

See WPAFB not a "'buyer/seller' relationship."
Id., Doc. No. 627-11, p. 17;

See Facebook's Hail Mary attempt to discredit the Vincent J. Russo NDA in its Red Brief. New "Phantom NDA" Debunked;

See The Limited – Len Schlesinger NDA (no-reliance).
Id., Doc. No. 627-20, ¶5.

Fig. 1 - Doc. No. 627-09 WPAFB (Douglas W. Fleser) NDA #1 containing a "no-reliance" clause that blocks offers for sale contractually.	Fig. 2 - Doc. No. 627-19 WPAFB (Vincent J. Russo) NDA #2 containing a "no-reliance" clause that blocks offers for sale contractually.	Fig. 3 - Doc. No. 627-20 The Limited (Len Schlesinger) NDA containing a "no-reliance" clause that blocks offers for sale contractually.

Fig. 4 — Leader NDA ¶5—"No-reliance" clause (see also Table 1 above) where the parties agree not to be legally bound by their discussions prior to entering into a definitive agreement. In other words, they agreed in advance that nothing they discussed could have any legal effect prior to a definitive signed agreement. See Restatement (Second) of Contracts § 21 (1981)(agreement not to be legally bound). This no-reliance clause is contained in the multiple WPAFB and The Limited NDAs. In effect, the no-reliance clause mutes Facebook's on sale/public disclosure bar claim since the parties agreed that nothing they discussed could be interpreted as a contractual offer. The other Facebook accusation of an offer for sale was for Boston Scientific where a similar no-reliance agreement was in place. The other "evidence" is a couple of internal Leader emails about the first Boston Scientific meeting attended by Professor James P. Chandler—one of the world's foremost authorities on intellectual property whom Leader had engaged as counsel and a director. Facebook never challenged the Leader NDA "no-reliance" clauses. This is fatal.

Contracts (and contract offers) are a "meeting of the minds." They're situations where a "willing seller" and a "willing buyer" come to terms and form a binding relationship by the affirmative acts of the parties. If the parties choose, they can agree to exclusionary no-reliance NDA language like "nothing discussed shall have any legal effect" and "solely for evaluation" to explicitly avoid having anything discussed from being construed as an offer or a sale. Leader did that consistently, and no Facebook evidence disproves this uniform practice.

Congressional testimony dramatically refutes Facebook’s Hail Mary attempt to present Vincent J. Russo’s signed NDA as fabricated. Although Facebook claims that Mr. McKibben lied in saying that Mr. Russo was associated with WPAFB, Congressional testimony shows that Mr. Russo was indeed the Executive Director of the Aeronautical Systems Center at Wright-Patterson on April 2, 2001, a fact that Facebook could easily have confirmed. See New "Phantom NDA" Debunked.

The no-reliance clause in Leader's NDA says the parties are going to explore potential business relationships, but that nothing discussed can be construed as a sale, or even an offer for a sale (no legal effect) (even if numbers and terms are explored). In other words, until the parties have a signed contract, nothing they discuss is binding at any level of contract law. It appears the jury and the Court missed this matter of law completely.  

See Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041,1047, 59 USPQ2d 1121, 1126 (Fed. Cir. 2001) ("As a general proposition, we will look to the Uniform Commercial Code ('UCC') to define whether . a communication or series of communications rises to the level of a commercial offer for sale.") citing MPEP 2133.03(b).

"No legal effect" and "solely for evaluation" meant offers for sale could not happen by mutual agreement; therefore Facebook's willing-seller / willing-buyer theory is debunked

Leader highlighted the "no-reliance" clauses in their JMOL (Judgement as a Matter of Law) stating:

"In addition, The Limited's executed NDA contained a "non-reliance" clause that made it clear that any Leader information exchanged between the parties prior to a formal written agreement shall have no "legal effect." Fig. 3; See also Linear Tech. Corp. v. Micrel, Inc., 275 F.3d 1040,1050 (Fed. Cir. 2001)("such communications cannot be considered offers, because they do not indicate LTC's intent to be bound, as required for a valid offer")(citing Restatement (Second) of Contracts § 26 (l981)("A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.”). Leader JMOL 17.

Another provision of the Restatement (Second) of Contracts § 21, cmt. (b) reinforces the concept of an "agreement not to be legally bound."

The no-reliance NDA clauses mute Facebook's on sale bar argument.

Boston Scientific's NDA no-reliance language restricted use of the information "solely" for evaluation

The Boston Scientific NDA also included similar limiting no-reliance language. Its purpose was solely to explore mutual interests. Merriam-Websters defines "solely" as "exclusively." In other words, the information shared could exclusively not be used to define a contract that could be construed as an offer. Such terms blocked use of the information for anything other than evaluation, and is another form of no-reliance clause. This evidence is also fatal to Facebook.

Fig. 5 - Boston Scientific NDA states that the Leader information was to be used "solely" for evaluating future interest. Such limiting no-reliance language blocks the discussions from "rising to the level of a commercial offer for sale" pursuant to Group One. DTX-736. See Restatement (Second) of Contracts § 21 (1981) (agreement not to be legally bound).  Doc. No. 651-13.

Another smoking gun? Facebook's Delaware jury focus group unmasked?

At the bottom of page 5 of Facebook's ostensible Boston Scientific evidence is yet another smoking gun fatal to Facebook. It dates that Leader2Leader evidence at sometime after "July 16, 2003 . . . PATENT PENDING" (p. 5, fn., line 4). That is seven months after the critical date. The date is buried in the footnote. This appears to have been a Facebook "dark arts" attempt to confuse the jury with a jumble of dates, esoteric law, and brand name references. 

Facebook appears to have attempted to associate this later use of the Leader2Leader brand name—after July 16, 2003—with the first meetings ten months earlier—before the invention was ready. This document confirms Leader's trial testimony. The trial record shows no discussion of this date, but as a matter of law, the date invalidates this alleged Facebook's evidence.

If Facebook believed this version of Leader2Leader proved on sale bar, then why didn't they produce any source code? More importantly, why did they present this evidence at all since: (a) the NDA prohibits offers, and (b) closer scrutiny of the document date supports Leader? The evident answer is obfuscation—its effect on the jury's "belief" was more important than the truth. Reliable sources say this "belief effect" was tested on a jury focus group in Delaware organized by Facebook seven months before trial. Doc. No. 651-13, p.5, fn., ln. 4 ("July 16, 2003").

[Editor: If you were a participant in this Facebook focus group, please provide comments on that experience either here or on other blogs covering this case. Please identify the date, time, location and details.

Jury focus groups intent on deceiving a jury are a breach of the Federal Rules of Evidence (tampering with evidence), Federal Rules of Civil Procedure (Rule 11 "improper purpose") and Rules of Professional Conduct (Preamble: "dishonesty, fraud, deceit or misrepresentation"). Such lawyer conduct is harmful to our jury system and should be reported. Sources indicate that the participants in the focus group signed a confidentiality agreement, however, according to the District of D.C. Appeals Court they are not bound by agreements where "manipulation of the truth-seeking process" occurred.  See In re Sealed Case, 676 F. 2d 793 (D.D.C. 1982) at 807 (confidentiality agreements cannot "be used as a tool for manipulation of the truth-seeking process.") Anonymous comments are welcomed.]

[Editor: After the original post of this blog we received an anonymous report from a participant in the Facebook focus group/mock trial. The credibility has been verified. See the Comments below.]

Leader's preeminent legal counsel oversaw protections

As if the NDAs were not enough, the first Boston Scientific meeting was arranged and attended by world-renowned intellectual property law Professor James P. Chandler, President of the National Intellectual Property Law Institute. The Congressional Record contains many references to Professor Chandler as one of the nation's preeminent advisers to Congress, the White House, and the Judiciary in the areas of trade secrets, economic espionage and intellectual property. See Footnote 2 below.[2]

Given Professor Chandler's participation, credulity is stretched to think that any disclosure rising to the level of a commercial offer for sale would have occurred during Professor Chandler's oversight of those first meetings. Facebook's accusation becomes frivolous in light of the fact that they produced no hard evidence like source code to prove their accusation. All the evidence produced by both Facebook and Leader shows Leader's consistent marking of its documents as "Proprietary & Confidential," their engagement of respected intellectual property protection experts, a need-to-know practice, in addition to the testimony of both inventors who said that the invention could not have been offered for sale when alleged since it was not ready. Nothing in the record beyond jury disbelief founded on innuendo supports Facebook. Leader JMOL, Doc. No. 627-12, 13, 14, 27.

No source code; no proof

The offer-blocking NDA language notwithstanding, Facebook's burden was to prove that the products alleged to have been offered for sale to WPAFB, The Limited and Boston Scientific contained all the elements of the invention. An offer that lacks even one of the elements fails to meet the on sale/public disclosure bar standard. No source code was proffered, even though Facebook was given access to Leader's source code. Merely showing a few documents that make reference to the Leader2Leader brand name proved nothing, but appear to have hoodwinked the jury.

Software products using the same brand name change over time. Microsoft Word in 2009 is a different product from Microsoft Word in 2002. Showing changes in the source code is the only way to prove innovative elements in software. See Leader's lawyers dismantle Facebook’s response brief, Fig. 8.1

All the alleged offers for sale were blocked by agreement (as matters of contract law); therefore, the on sale/public disclosure bar verdict must be overturned

With Facebook’s allegations of offers debunked as a matter of law, the on sale/public disclosure bar verdict must be overturned.

If Facebook prevails in the face of its deplorable trial conduct, an ill-wind blows over the face of patent law in America. Will the wind blow in the direction of Microsoft v. i4i ("Supreme Court Affirms Strong Presumption of Patent Validity") in support of the "clear and convincing evidence" standard? Or, will it blow ambiguously in the opposite direction? Time will tell.

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Footnotes:

[1] U.S. v. Lange, 312 F.3d 263 (2002) at 266 (secrecy can rely upon deeds (splitting of tasks) just as effectively as NDA promises). The Leader v. Facebook trial record shows no Facebook assessment of Leader's deeds, but the evidence shows substantial Leader attention to secrecy precautions, especially in their choice of directors who are recognized leaders in the fields of trade secrets, security and intellectual property protection, including Professor James P. Chandler and Major Gen. James E. Freeze, US Army (ret.). See WPAFB white paper evidence. See also footnote 2 below.

Most of the following evidence are citations to the Congressional Record which may be judicially noticed during appeal. See Fed. R.Evid. Rule 201 (judicial notice may be taken at any time of adjudicative facts and facts not subject to reasonable dispute).

Fig. 6 - Page 6 of Leader's Wright-Patterson White Paper that identifies Professor James P. Chandler, President of the National Intellectual Property Law Institute, Major General James Freeze, US Army (ret), and William "Bill" DeGenaro as security and intellectual property advisers to Leader. This evidence was actually  submitted by Facebook, but far from supporting Facebook, it shows that Leader engaged respected security advisers to protect its intellectual property. This evidence confirms Leader's "deeds" efforts pursuant to Lange to protect its inventions. Facebook did not perform a Lange deeds test regarding Leader's security practices.

Facebook attempted to use this white paper as evidence for on sale bar, even though: (a) WPAFB made a "no-reliance" agreement blocking offers; (b) WPAFB's research rules also blocked "buyer/seller" relationships; (c) Facebook and the district court misconstrued "fully developed" as a development instead of a financing statement; (d) numerous Leader products were being discussed with WPAFB that were not differentiated by Facebook, (e) no expert testimony was proffered by Facebook, (f) no WPAFB deposition testimony was proffered by Facebook, (g) no engineering or source code evidence was proffered by Facebook, and (h) the proposal was wholly experimental. All this evidence is fatal to Facebook. Doc. No. 627-13, DTX-179, p. 6.

Fig. 7 - Items of a Leader Report, pp. 1, 6 discussing the involvement of Leader directors Major General James E. Freeze and Professor James P. Chandler. This evidence was also submitted by Facebook, but like the white paper in Fig. 6, this evidence supports Michael McKibben's testimony that Leader engaged in substantial secrecy protection policies and procedures based on the advice of respected security professionals. This evidence also shows the "Proprietary & Confidential" trade secrets protection markings that appear on all of Leader documents. Such advisers and practices validate Leader's "deeds" in compliance with Lange, and are fatal to Facebook. Doc. No. 627-12, DTX-178, pp. 1, 6. Graphic: composite.

Fig. 8 - Professor James P. Chandler, former Leader Technologies Director, IP Counsel (See Archive.org "leader.com" 2001); President, National Intellectual Property Law Institute; Partner, Chandler Law Firm Chartered; Professor Emeritus George Washington University; adviser to Congress on intellectual property matters including trade secrets, patents, economic espionage.

Fig. 9 - James E. Freeze, former Leader Technologies Director (See Archive. org "leader.com" 2001); Chairman of Pinkerton Government Services; former head of the U.S. Army Security Agency; former Asst. Deputy Dir. of the National Security Agency (NSA); author of "The Freeze Report" on national laboratory security.

[2] Congressional testimony of Professor James P. Chandler, President of the National Intellectual Property Law Institute, and Major General James E. Freeze, U.S. Army (ret.), former head of the U.S. Army Security Agency and former Asst. Deputy Director of the National Security Agency. Both individuals were directors of Leader Technologies. See Figs. 8, 9.

Leader's secrecy deeds pursuant to Lange included reliance on the advice of former director Professor James P. Chandler whose congressional testimony and advice to the White House has included:

(a) S.Hrg. 104-499 - Economic espionage: Hearings before the Select Committee on Intelligence, United States Senate, and the Subcommittee on Terrorism, Technology, and Government Information of the Committee on the Judiciary, United States Senate, 104th Congress, Second Session, Feb. 28  (1996), Y 4.IN 8/19:S.Hrg. 104-499, Serial No. J-104-75 (Testimony of Louis Freeh acknowledging Professor James P. Chandler, p. 10). Last accessed Jan. 9, 2012 from Archive.org USA Gov. Doc. Call No. 39999059839439, ABSTRACT, PDF Version (5.3 MB), TXT Version (291KB), Online Version (134KB), MARCXML Catalog.

(b) H.Rept. 104-784 -  MOORHEAD-SCHROEDER PATENT REFORM ACT: Hearings on H.R. 3460 before the Subcommittee on Courts and Intellectual Property of the Judiciary, June 8, 1995 and November 1, 1995, 104th Congress, Y 1.1/8 (1996) (citing Testimony of Mr. James Chandler, President of the National Intellectual Property Law Institute, Washington D.C., p. 39), GPO ABSTRACT, PDF Version (6 MB), TXT Version (174KB). GPO Authenticity Certificate.

(c) H.Rept. 104-788 - ECONOMIC ESPIONAGE ACT OF 1996: Hearings on H.R. 3723 before the Subcommittee on Crime of the Committee on the Judiciary, May 9, 104th Cong., Y 1.1/8 (1996) (citing Testimony of Dr. James P. Chandler, p. 8), GPO ABSTRACT, PDF Version (6 MB), TXT Version (174KB). GPO Authenticity Certificate; See also H.Rept. 104-879.

(d) H.Rept. 104-879 - Trade Secret Law and Economic Espionage: Hearings on H.R. 1732 and H.R.1733 Before the Subcommittee On Crime of the House Committee on the Judiciary, H.R. 359, 104th Congress, Y 1.1/8 (1996) (Testimony of Professor James P. Chandler, President of the National Intellectual Property Law Institute, p. 163, 167, 201), GPO ABSTRACT, PDF Version (740K), TXT Version (684KB). GPO Authenticity Certificate; See also H.Rept. 104-879.

(e) H.Rept. 104-879 - Patent Term: Hearings on H.R. 359 during Hearings on H.R. 1732 and H.R.1733 Before the Subcommittee On Crime of the House Committee. on the Judiciary, 104th Cong., Y 1.1/8 (1996) (Testimony of Professor James P. Chandler, President of the National Intellectual Property Law Institute, pp. 167-168), GPO ABSTRACT, PDF Version (740K), TXT Version (684KB). GPO Authenticity Certificate.

(f) H.Rept. 104-879 - Protection of Commercial Trade Secrets in US National Laboratories: Hearings on H.R. 359 Before the Subcommittee On Energy and the Environment of the House Comm. on the Judiciary, 104th Cong. (1996) (Testimony of Professor James P. Chandler, President, National Intellectual Property Law Institute, pp. 167-168), GPO ABSTRACT, PDF Version (740K), TXT Version (684KB). GPO Authenticity Certificate; See also H.Rept. 104-879.

(g) H.Rept. 104-887 - SUMMARY OF ACTIVITIES OF THE COMMITTEE ON SCIENCE U.S. HOUSE OF REPRESENTATIVES FOR THE ONE HUNDRED FOURTH CONGRESS: Hearings Changes in U.S. Patent Law and Their Implications for Energy and Environment Research and Development Before the Subcommittee on Energy and Environment of the Committee on Science, 104th Congress, May 2, 1996. Washington: U.S. G.P.O. (1997), Y 1.1/8 (Testimony of Dr. James P. Chandler, President, [N]ational Intellectual Property Law Institute, Washington D.C., pp. 176-177), GPO ABSTRACT, PDF Version (740K), TXT Version (684KB). GPO Authenticity Certificate.

(h) H.Rept 104-879 - REPORT ON THE ACTIVITIES OF THE COMMITTEE ON THE JUDICIARY of the HOUSE OF REPRESENTATIVES during the ONE HUNDRED FOURTH CONGRESS pursuant to Clause 1(d) Rule XI of the Rules of the House of Representatives, Trade Secret Protection for Inventors Should Not Be Abolished While Reforming Patent Law, Patent and Trademark Office Corporation Act of 1995, United States Intellectual Property Organization Act of 1995: Hearings on H.R. 1659 and H..R. 2533 Before the Subcommittee On Courts and Intellectual Property of the House Comm. On the Judiciary, 104th Congress. Washington: U.S. G.P.O. (1996) (Testimony of Professor James P. Chandler, President, National Intellectual Property Law Institute, pp. 159-161.), GPO ABSTRACT, PDF Version (740K), TXT Version (684KB). GPO Authenticity Certificate.

(i) Y 4.J 89/1:104/30 - Patents Legislation : Hearings Before the Subcommittee On Courts and Intellectual Property of the Committee On the Judiciary, House of Representatives, 104th Congress, First Session, On H.R. 359, H.R. 632, H.R. 1732, and H.R. 1733, June 8 and November 1, 1995. Washington: U.S. G.P.O. (1996). Y 4.J 89/1:104/30, ISBN 0-16-052342-7, OCLC 34470448, 104 PL 308, 110 STAT 3814 (Testimony of Professor James P. Chandler, President, National Intellectual Property Law Institute, pp. III, IV, 349-354, PDF Version), FULL TXT Version of the Hearings; See also H.Rept. 104-879, GPO ABSTRACT, PDF Version (740K), TXT Version (684KB). GPO Authenticity Certificate.

(j) The White House, Office of the Press Secretary. (Jan. 18, 2001). President Clinton Names Eighteen Members to the National Infrastructure Assurance Council [Press release] (citing "Mr. James Phillip Chandler" [Professor James P. Chandler] head of "the National Intellectual Property Law Institute" and "Emeritus Professor of Law at the George Washington University" and "President of Chandler Law Firm Chartered," ¶14). Retrieved from National Archives and Records Administration <http://clinton6.nara.gov/2001/01/2001-01-18-members-named-to-national-infrastructure-assurance-council.html>.

"The National Infrastructure Assurance Council (NIAC) was established by Executive Order 13010 on July 14, 1999 . . . to propose and develop ways to encourage private industry to perform periodic risk assessments on critical processes, including information and telecommunications systems." Id.

Common sense says that Professor Chandler would have been encouraging his then-current client, Leader Technologies, to practice these principles as the company developed its innovations. However, Leader was not given an opportunity to gather testimony from Professor Chandler and Major General Freeze because the trial court allowed Facebook to add its on sale/public disclosure bar claim after the close of discovery. While prejudicial amended claims are technically not permitted by the Rules, such trial court decisions are rarely, if ever, overturned on appeal. That's ashamed in this case. Facebook evidently learned something in their jury focus group that convinced them that they could use fabricated evidence to hoodwink the jury. See Jury transforms disbelief into evidence; No evidence? No problem. Fabricate it.; Facebook’s' trial conduct; Facebook's "court room theater"; Facebook's "I'm tired" tactic; Missing Facebook Documents; Expert witness practices "dark arts"; Patent Office records disprove Facebook; Facebook's jury binder innuendo.

(k) Theodore R. Sarbin. "Computer Crime: A Peopleware Problem." Proceedings of a Conference held on October 25-26, 1993." Defense Personnel Security Research Center (1993). Doc. Nos. DTIC-94-7-18-001, AD-A281-541. (citing Professor James P. Chandler, National Intellectual Property Law Institute, pp. i, 2, 3, 5, 13, 14, 33-72). Accessed Jan. 12, 2012 . <http://www.dtic.mil/cgi-bin/GetTRDoc?AD=ADA281541>.

(l) James P. Chandler. "Patent Protection of Computer Programs." National Intellectual Property Law Institute (2000). Accessed Jan. 13, 2012 <http://www.nipli.org/docs/computer.pdf>.

Congressional testimony of Major General James E. Freeze, U.S. Army (ret.) includes the following; further reinforcing the evident fact that Leader took extraordinary "deeds" steps to protect the secrecy of its inventions pursuant to the Lange. See Fig. 9.

(a) H.Hrg. 106-148 - Hearing on the WEAKNESSES IN CLASSIFIED INFORMATION SECURITY CONTROLS AT DOE'S NUCLEAR WEAPON LABORATORIES, 106th Congress, Y 4.C 73/8 (2000) (citing "The 1990 Freeze Report" and Major General James E. Freeze, USA (ret.)," pp. 171, 172), GPO ABSTRACT, PDF version (6 MB), TXT version (174KB). GPO Authenticity Certificate.

"The [1990] Freeze Report" is actually mentioned in Leader evidence. The Leader evidence in Fig. 6 verifies Michael McKibben testimony and the Wright Patterson evidence that Leader exercised reasonable measures pursuant to the Lange deeds test to preserve secrecy. See Fig. 6 above.

(b) GAO/RCED-93-10 - Nuclear Security - Improving Correction of Security Deficiencies at DOE's Weapons Facilities, Report to the Chairman, Subcommittee on Oversight and Investigations, Committee on Energy and Commerce House of Representatives, Nov. 1992. U.S. General Accounting Office. GAO/RCED-93-10 Nov. 1992 (citing Major General James E. Freeze, p. 18). Accessed Jan. 11, 2012 from the U.S. Government Accounting Office <http://www.gao.gov/assets/220/217384.pdf>.

(c) Statement of John C. Tuck, Undersecretary of Energy, U.S. Department of Energy before the Committee on Energy and Commerce, Oversight and Investigations Subcommittee (Serial T91BB192), 100th Congress (1991) ("[Admiral Watkins] commissioned a study conducted by retired Army Major General James E. Freeze to review the broad area of safeguards and security"). Accessed Jan. 11, 2012 from the Federation of American Scientists <http://www.fas.org/irp/congress/1991_hr/h910424.htm>.

(d) Matthew L. Wald. "SECURITY GAP SEEN AT NUCLEAR SITES." The New York Times, Dec. 21, 1990 ("James E. Freeze, a retired Army major general who is a former deputy chief of the National Security Agency, called for major management changes"). Accessed Jan 11, 2012 <http://www.nytimes.com/1990/12/21/us/security-gap-seen-at-nuclear-sites.html>.

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Leader's lawyers dismantle Facebook’s "schizophrenic” response brief

OPINION: One blogger's perspective

Oral arguments will now be scheduled in front of a 3-judge panel at the Federal Circuit Court of Appeals

In a recondite rebuff of Facebook's legal arguments, Leader lawyers take Facebook to the proverbial woodshed. The stage is now set for a showdown on legal matters that will affect American innovation and jurisprudence for many years, if not decades. If Leader prevails it will support the American inventor and entrepreneurial spirit. If Facebook prevails it will encourage big infringers/counterfeiters to steal inventions and use their ill-gotten gain from the inventions to fend off their day of reckoning.

November 28, 2011 — Leader Technologies today filed its reply brief (Fig. 3, below) following Facebook's response brief (Fig. 2, below) to Leader's opening appeal brief (Fig. 1, below) in Leader Technologies, Inc. v. Facebook, Inc., 08-CV-862-JJF-LPS (D.Del. 2008). Fed. Cir. Case No. 2011-1366. This was the final brief before oral arguments. The U.S. District Court trial resulted in a split verdict. Leader won the meat of the trial: Leader won on "literal infringement" of 11 of 11 patent claims and no published prior art regarding Leader's U.S. Patent No. 7,139,761. In other words, the engine running Facebook is Leader's invention. Facebook won on an esoteric law called "on sale bar and public disclosure." On appeal to the Federal Circuit Court of Appeals in Washington D.C., Leader argues that Facebook had no evidence of sale/public disclosure and confused the jury with court room theatrics. Facebook says their evidence was "substantial." The evidence appears to be fatal to Facebook.

Fig. 1 - Leader OPENING White Brief, Jul. 25, 2011, Fed. Cir. Case No. 2011-1366.	Fig. 2 - Facebook RESPONSE Red Brief, Oct. 24, 2011. Fed. Cir. Case No. 2011-1366.	Fig. 3 - Leader REPLY Gray Brief, Nov. 28, 2011. Fed. Cir. Case No. 2011-1366.

Leader shows that Facebook's response is riddled with inconsistencies, misrepresentations, misdirection, weak or non-existent legal argument and pointless invectives. Among the highlights are these:

1. "Sole question for the jury" sidelined: After making inventor Michael McKibben's credibility the "sole question for the jury" at trial, Facebook now sidelines this argument in favor of new arguments that were not presented to the jury or in post-trial motions, sort of. (Perhaps because Facebook knows that appeals judges, unlike a jury, are not misled by trial theater.)
   
   
2. "Muckracking:" While sidelining McKibben's credibility as their main argument, Facebook schizophrenically trash-talks McKibben on no fewer than 17 pages of its brief (e.g., "McKibben lied," "McKibben's lies," "McKibben's guilty knowledge," "McKibben's falsehoods"). See Fig. 2.1.
   
   

   

   Fig. 2.1 - Vitriolic references to Leader inventor Michael McKibben in Facebook's Oct. 24, 2011 Red Brief in Leader's appeal to the Federal Circuit Court of Appeals of Leader Technologies, Inc. v. Facebook, Inc., 08-862-JJF-LPS (D.Del. 2008); Fed. Cir. Case No. 2011-1366.

3. Attacking inventors to create opposite-evidence: After relying on the idea that disbelief of an inventor's testimony is affirmative evidence of the opposite, Facebook feebly defended this "general principle;" as if they don't really believe it themselves. Leader's lawyers pointed out (and Facebook ignored) that the federal circuit is split on this issue. The "general principle" may apply in cases where the scales of evidence are otherwise weighted more or less evenly. However, in this case, there is no other evidence on either scale. Getting the jury to disbelieve McKibben's testimony was Facebook's entire on sale/public disclosure case. No source code. No engineering drawings. No third party testimony. No expert testimony. No technical information at all. The implications of this argument, if it prevails, are profound on all law since it will open the door for the guilty to encourage their victims to testify truthfully, then use "dark arts" tactics to encourage the jury to disbelieve that testimony. This was Facebook's evident tactic at this trial.
   
   
4. Ignored Legal Argument: Facebook ignored (failed to "differentiate") most of the legal arguments Leader made in its opening White Brief. Such conduct signals a lack of belief in one’s key lower court arguments. More damaging to Facebook, by not arguing the law, they waive their defenses under those laws.
   
   Some examples: (a) Facebook failed to argue why they are permitted to ignore the jury's instructions to perform an element-by-element comparison of the claims against the alleged sale/public disclosures. (b) Instead, they just repeat the mantra that McKibben lied and that the jury's disbelief cannot be questioned. However, such circumstances are why the appeals process exists—to correct misapplications of the law. (c) Facebook then failed to argue why they are permitted to ignore the district court's opinion focusing the question of law on Interrogatory No. 9 as the "sole question" for the jury. (d) Following that, Facebook ignored Leader's argument that a 2009 present tense answer to an interrogatory about the components of Leader2Leader® in 2009, by the plain English, cannot apply to the components in 2002. (e) Then, Facebook argued that the courts are not permitted to take judicial notice of registered trademark dates at the U.S. Patent Office for the combined marks Leader2Leader® and Digital Leaderboard®—the prima facie combination of which puts Interrogatory No. 9 outside the critical date. (f) Facebook's argument focused instead on the Leader2Leader® mark and ignored completely the Digital Leaderboard® mark award date of Dec. 16, 2003—another elephant in the room that is fatal to Facebook.
   
   Without bogging down this article with too many legal citations, the following relate to the subject matter of the previous paragraph: Scaltech Inc. v. Retec/Tetra, L.L.C. (Fed. Cir. 1999) ("first determination" in any on sale bar "analysis must be whether the subject of the barring activity met each and every limitation of the claim, and thus was an embodiment of the claimed invention"); Carr v. United States (U.S. 2010) (use of present tense in statute does not include past actions); Helifix Ltd. v. Blok-Lok, Ltd. (Fed. Cir. 2000) (mere mention of the "DryFix" brand name in a trade show brochure and other letters failed to show a tool that met all the limitations; "there were many tools that had been called 'DryFix tools'"); Federal Rules of Evidence 201 (b)(2) ("The court may judicially notice a fact that is not subject to reasonable dispute because it: . . . (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned).
   
   
5. New "Phantom NDA" Debunked: In a myopic interlude, Facebook consumes an entire page of its Red Brief accusing McKibben of lying about an April 2, 2001 NDA—calling it a "phantom NDA" (non-disclosure agreement). Facebook's new argument (not made to the jury) is that the first Wright-Patterson Air Force Base ("WPAFB") NDA did not occur until Apr. 10, 2001. Ostensibly, Facebook claims that this proves: (1) McKibben is a liar with "guilty knowledge" and the jury was right to disbelieve him, and (2) the invention was publicly disclosed. Facebook repeated the phrase "guilty knowledge" seven times.
   
   Facebook's "McKibben lies" epithets turn on an internal Apr. 3, 2001 email from Leader engineer Steve Hanna to Leader's developers in which he mentions a presentation on Apr. 2, 2001 attended by an unnamed person who was "the number one ranking civilian at WPAFB - Executive Director of Aeronautical Systems Center." See Fig. 5.1.
   
   

   

   Fig. 5.1 – Internal Apr. 3, 2001 Leader email (composite graphic) written by engineer Steve Hanna confirming attendance by a WPAFB participant at a University of Dayton presentation on Apr. 2, 2001. This evidence was actually submitted by Facebook as DTX-1348, Trial Doc. No. 675-25.

   
   Facebook's new argument is that McKibben lied when he testified at trial that "Vincent Russo" was the WPAFB person at that meeting. Facebook Red Br. 40, 44; Trial Tr. 10805:24-10806:3. Facebook now floats the story that the first WPAFB NDA did not occur until the Douglas W. Fleser NDA on Apr. 10, 2001. This new argument was never presented to the jury or in post-trial motions. McKibben's testimony is the only evidence on point. See Fig. 5.2.
   
   Facebook appears to be attempting to expand its "opposite of testimony" theory to new facts never before contested. In other words, McKibben testified that the WPAFB person on Apr. 2, 2011 was Vincent Russo. But, if Facebook can convince the court that the jury did not believe him (and absent any other proof of Russo's association with WPAFB), then maybe they could prevail on the "opposites" theory that Russo was not associated with WPAFB, and therefore, an unidentified third party from WPAFB was the recipient of the allegedly invalidating public disclosure; notwithstanding an entire body of patent and trade secret law in Leader's favor as well.
   
   

   

   Fig. 5.2 – WPAFB fax cover page header, and Leader NDA signature block (composite graphic) signed by Douglas W. Fleser on Apr. 10, 2001. PTX-1058, Trial Doc. 628-9.

   
   The Russo NDA (signature block shown below) did not explicitly identify his association with WPAFB. So, Facebook evidently decided to disbelieve McKibben's testimony about the association (with no proof to the contrary). See Fig. 5.3; Leader Reply 13.
   
   

   

   Fig. 5.3 – Signature block from the Leader NDA signed by (Dr.) Vincent J. Russo on Apr. 2, 2001. This document was submitted into evidence by Facebook. Excerpt of DTX-725, Trial Doc. No. 627-19.

   
   However, a quick Google search of the Congressional Record proves fatal to Facebook. It confirms that "Dr. Vincent J. Russo" was, indeed, the top civilian at Wright-Patterson Air Force Base between at least 1999 and 2003, which would include Apr. 2, 2001, just like both Hanna and McKibben said.  See Fig. 5.4. 
   
   

   

   Fig. 5.4 – S. Hrg. 108-100 - AN OVERLOOKED ASSET: THE DEFENSE CIVILIAN WORKFORCE, 108th Cong. III, SuDoc. Cl. No. Y 4.G 74/9, p. 11 (2003) (testimony of Dr. Vincent J. Russo), GPO ABSTRACT,  PDF version (6 MB), TXT version (174KB). GPO Authenticity Certificate. Dr. Russo's testimony places him at WPAFB on Apr. 2, 2001. Graphic: composite.

   
   McKibben testified at trial (See Trial Tr. 10805:24-10806:3):

   Q. The meeting you had on April 2nd, 2001, was it with Mr. Fleser?
   A. No. I had not met him yet.
   Q. Okay. Who was at that meeting?
   A. The person at that meeting was invited by the senior people from the University of Dayton to attend. And was the top civilian at Wright Patterson Air Force Base. His name was Vincent Russo.
   Q. Did you obtain an NDA from Mr. Russo?
   A. I did.

   

   Fig. 5.5 – Correlation of evidence which proves incontestably that Michael McKibben's testimony about the Apr. 2, 2001 presentation at the University of Dayton was truthful.

   
   Therefore, (a) the Congressional Record provides irrefutable proof that Dr. Vincent J. Russo was associated with WPAFB on Apr. 2, 2001, (b) McKibben's testimony was accurate, (c) any jury disbelief of McKibben in this matter was legal error, and (d) Facebook’s new "phantom NDA" accusation is wrong—and knowingly so. Model Rules of Professional Conduct 3.3, Candor Toward The Tribunal ("(a) A lawyer shall not knowingly: (1) make a false statement of fact or law to a tribunal").
   
   
6. Both cannot be true: Facebook used Leader's provisional patent source code to successfully invalidate Leader’s earlier provisional patent priority date—based on the testimony of Facebook's expert witness Dr. Saul Greenberg. Dr. Greenberg testified that the invention was not present in the source code.
   
   However, Facebook then argued the polar opposite when trying to prove on sale/public disclosure. For on sale/public disclosure bar, Facebook ignored Dr. Greenberg's testimony, and argued that days earlier the full invention was present, was disclosed and was offered for sale. Facebook's problem here is that while they were able to produce Leader source code to disprove the presence of the invention in the provisional patent, they did not produce Leader source code to prove on sale/public disclosure bar. Both claims cannot be true. The absence of Leader source code proof in their on sale/public disclosure bar argument is fatal. See Fig. 6.1; See also Expert witness practices "dark arts."
   
   

   

   Fig. 6.1 - Excerpts from the testimony of Facebook expert witness Dr. Saul Greenberg regarding the only Leader source code placed into evidence in the trial. This source code was contained in the provisional patent application. Dr. Greenberg testified that this source code did not disclosure the '761 invention. However, regarding the on sale/public disclosure claim, Facebook argued that the entire invention was ready for patenting (without showing any additional source code). Trial Doc. No. 623. Tr. 10903-10908.

   
   Note that Dr. Greenberg was not an expert witness for on sale/public disclosure bar, but rather for prior art and enablement of the provisional patent. Facebook did not proffer an expert for on sale/public disclosure bar. Therefore, the only Facebook expert testimony at trial on the subject of Leader's source code is Dr. Greenberg's which is fatal to Facebook.
   
   
7. Ignoring the "clear and convincing standard" legal argument; re-arguing trial evidence instead: Facebook spends 11 pages re-arguing its trial evidence. Leader's appeal argument is on the "clear and convincing evidence" legal standard. Facebook largely ignored that question of law and merely re-argued its trial case. This could prove fatal since hard evidence of the kind that only source code could provide was glaringly missing.
   
   
8. Smoking Gun: In fact, the trial record reveals a Facebook "smoking gun." Even Facebook's own attorney argued to the trial court that the only way they could tell if Leader2Leader practiced the invention was to study the source code.
   
   See Facebook Cooley Godward LLP attorney Mark Weinstein's letter to Judge Stark citing his Jan. 27, 2010 letter to Leader attorney James Hannah 6 months before trial: "in order to analyze whether or not it practices the '761 patent... Facebook would require... the source code for Leader2Leader." See Fig. 8.1.
   
   

   

   Fig. 8.1 – Facebook's attorney, Cooley Godward LLP Attorney Mark Weinstein's Feb. 27, 2010 statement to Judge Leonard Stark that Facebook needed access to the Leader2Leader source code in order to prove whether or not the back end components practiced the '761 invention (six months before trial). Trial Doc. No.283, Ex. 3, PDF p. 11..

   
   The judge was persuaded and gave Facebook access, but tellingly, none of the source code was produced at trial to prove sale/public disclosure. Since the source code is the only sure way for Facebook to have shown the inner workings of software patents, one can only presume they did not find evidence to prove on sale bar and public disclosure—so they did not use any of it at trial. This absence of source code proof should be fatal (although one can excuse a lay jury's lack of appreciation for this clearly intentional Facebook omission). Facebook's trial conduct here is reminiscent of the "Pay no attention to that man behind the curtain" scene from the Wizard of Oz.
   
   Facebook's argument that they provided "substantial" evidence to meet their "clear and convincing" burden of proof is disingenuous. It contradicts Mark Weinstein's earlier statements to the district court. Reason, common sense and the law all say this should be fatal.
   
   
9. New arguments: Facebook's brief argued "alternative grounds for affirmance." This means that Facebook made new arguments to the court on appeal that it did not make in the lower court. Such tactics signal lack of belief in the strength of one’s case, and appeals courts rarely give such "Hail Mary" arguments much weight, if any.
   
   
10. No expert testimony: Facebook makes brand new arguments about Leader’s patent claims that they did not argue to the jury, nor did they argue in post-trial motions. The arguments are too technical for discussion here since they address esoteric areas of patent law like "infringement theories," "limitations," "claim construction," "indefiniteness" and "presumption of validity." These new Facebook arguments are likely out-of-order since they are normally the subject of extensive pre-trial expert witness reports and testimony that are dictated by well-settled law called the Markman Hearing and Daubert Motions. The expert testimony from both sides would have been presented to the jury. None of this happened with these new arguments.
    
    
11. Haughtiness in the face of "literal infringement:" Facebook's flippancy gets even more strange when—in the face of a "literal infringement" verdict against them on 11 of 11 Leader claims and no published prior art—they state in their first footnote on page 4 that they don't think that the technology that Leader invented is anything special (and by inference neither is their technology). Such haughty statements may come back to haunt them.

    Facebook does not believe that the '761 patent reflects a significant advance or solves any significant problem. The terms "inventor" and "invention" are used merely for convenience." Facebook Red Brief, fn. 1.

    

    Fig. 11.1 - Facebook's footnote 1 in its appeal reply brief. This comment belies the verdict against them of "literal infringement" of 11 of 11 claims in Leader Technologies, Inc. v. Facebook, Inc., 08-862-JJF-LPS (D.Del. 2008). In other words, the engine running the Facebook website is Leader's invention. See U.S. Patent No. 7,139,761; Fed. Cir. Case No. 2011-1366.

    This is surreal comment given the frenzy with which Mark Zuckerberg is being listed as inventor on inventions around the planet—54 at last count—using Leader's patent as the foundation. All this Facebook activity to protect its intellectual property contradicts their self-confessed hacker culture and their disrespect for the privacy and property rights of others—as exposed by the recent Federal Trade Commission sanction of Facebook for deceptive privacy practices and Mark Zuckerberg's vacuous mea culpa. See Achohido, Byron. "Facebook settles with FTC over deception charges," USA Today, Dec. 2, 2011. Last accessed Dec. 3, 2011.
    

    Mark Zuckerberg: "one good hacker can be as good as 10 or 20 engineers." Wired, Apr. 19, 2010; Hollywood Reporter, Jun. 28, 2011.

    Impressive patent activity for a hacker. Facebook sends an ambiguous message regarding intellectual property. On the one hand, they admit hacking ideas at a feverish pace, and on the other, they are filing patent applications with abandon. See U.S. Patent Nos. 7,669,123; 7,725,492; 7,788,260; 7,797,256; 7,809,805; 7,827,208; 7,827,265; 7,890,501; 7,933,810; 7,945,653; 7,970,657; 8,010,458; 8,027,943; 8,037,093; U.S. Patent App. Nos. US 2011/0264736 A1; US 2011/0231747 A1; US 2011/0225481 A1; US 2011/0202531 A1; US 2011/0202822 A1; US 2011/0087526 A1; US 2011/0029388 A1; US 2011/0004831 A1; US 2010/0199192 A1; US 2010/0146443 A1; US 2009/0182589 A1; US 2009/0119167 A1; US 2009/0037277 A1; US 2008/0091723 A1; US 2008/0046976 A1; US 2008/0040474 A1; US 2008/0040673 A1; US 2008/0033739 A1; US 2007/0214141 A1; US 2007/0192299 A1; US 2004/0230672 A1; PRC 101849229 A; PRC 101495991; PRC 101366029;  EP 2210185 A1; EP 1971911 A2; EP 1964003 A2; EP 1682089 A2; CA 2704680 A1; CA 2703851 A1; CA 2660539 A1; CA 2660459 A1; CA 2634961 A1; CA 2634928 A1; CA 2633512 A1; CN 101495991; CN 101366029; CN 101849229 A. See "Mark Zuckerberg's Patents," ip.com. Last accessed Dec. 3, 2011; See also Inequitable Conduct.

More review of this Federal Circuit appeal will be forthcoming now that all the legal arguments are in.

Reckless Modus Operandi

The elephant-in-the-room question for Facebook is their motivation for not settling this case. The engine running their site is Leader's invention. Facebook "literally infringes" Leader U.S. Patent No. 7,139,761—that is now proven and will most likely be affirmed on appeal.

Facebook and Lawfare

Given a pending damages-willfulness-injunction trial in this case, one cannot imagine Facebook going public with this risk disclosure embedded in a prospectus. Another theory endorsed by some pundits familiar with this case is that Facebook has adopted a "lawfare" posture against all those from whom they have stolen intellectual property. PhD candidate, Christi Scott Bartman, recently wrote on this subject. Facebook's convoluted arguments in this case consume enormous amounts of limited judicial resources, their privacy deceptions triggering FTC investigations consume limited regulatory resources, and Mr. Zuckerberg's flurry of patent applications worldwide consume even more limited regulatory resources.

Whatever the motivation for continuing to press convoluted arguments, American inventor-ship is on trial here. Will it back the innovation horses, or the leg-less horsemen? Time will tell.

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