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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE HONEYWELL INTERNATIONAL, INC., and ) HONEYWELL INTELLECTUAL PROPERTIES, ) INC., ) ) Plaintiffs, ) ) v. ) ) AUDIOVOX COMMUNICATIONS CORP., ) AUDIOVOX ELECTRONICS CORPORATION, ) NIKON CORPORATION; NIKON, INC., ) NOKIA CORPORATION; NOKIA, INC., ) SANYO ELECTRIC CO., LTD., and ) SANYO NORTH AMERICA CORPORATION, ) ) Defendants. ) ----------------------------------HONEYWELL INTERNATIONAL, INC., and ) HONEYWELL INTELLECTUAL PROPERTIES, ) INC., ) ) Plaintiffs, ) ) v. ) ) APPLE COMPUTER, INC.; ARGUS A/K/A ) HARTFORD COMPUTER GROUP, INC.; ) CASIO COMPUTER CO., LTD; CASIO, ) INC.; CONCORD CAMERAS; DELL INC.; ) EASTMAN KODAK COMPANY; FUJI PHOTO ) FILM CO., LTD.; FUJI PHOTO FILM ) U.S.A., INC.; FUJITSU LIMITED; ) FUJITSU AMERICA, INC.; FUJITSU ) COMPUTER PRODUCTS OF AMERICA, INC.;)

Civil Action No. 04-1337-KAJ

Civil Action No. 04-1338-KAJ

CORBETT & WILCOX Registered Professional Reporters 230 North Market Street Wilmington, DE 19899 (302) 571-0510 Corbett & Wilcox is not affiliated with Wilcox & Fetzer, Court Reporters

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OPTREX AMERICA, INC., KYOCERA WIRELESS CORP.; MATSUSHITA ) ELECTRICAL INDUSTRIAL CO.; ) MATSUSHITA ELECTRICAL CORPORATION ) OF AMERICA; NAVMAN NZ LIMITED; ) NAVMAN U.S.A. INC.; OLYMPUS ) CORPORATION; OLYMPUS AMERICA, INC.;) PENTAX CORPORATION; PENTAX U.S.A., ) INC.; SONY CORPORATION; SONY ) CORPORATION OF AMERICA; SONY ) ERICCSON MOBILE COMMUNICATIONS AB; ) SONY ERICCSON MOBILE COMMUNICATIONS) (USA) INC.; TOSHIBA CORPORATION; ) and TOSHIBA AMERICA, INC., ) ) Defendants. ) ----------------------------------) ) Plaintiff, ) ) v. ) ) HONEYWELL INTERNATIONAL, INC., and ) HONEYWELL INTELLECTUAL PROPERTIES, ) INC., ) ) Defendant. )

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Civil Action No. 04-1536-KAJ

Teleconference in the above matter taken pursuant to notice before Renee A. Meyers, Certified Realtime Reporter and Notary Public, in the law offices of Blank Rome, LLP, 1201 North Market Street, Wilmington, Delaware, on Tuesday, August 19, 2008, beginning at approximately 9:30 a.m., there being present: BEFORE: THE HONORABLE VINCENT J. POPPITI, SPECIAL MASTER

APPEARANCES: THOMAS C. GRIMM, ESQ. MORRIS NICHOLS ARSHT & TUNNELL LLP 1201 North Market Street Wilmington, Delaware 19801 for Honeywell

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RICHARD L. HORWITZ, ESQ. POTTER ANDERSON & CORROON 1313 North Market Street Wilmington, Delaware 19801 for Dell and Nikon CHAD M. SHANDLER, ESQ. RICHARDS, LAYTON & FINGER One Rodney Square Wilmington, Delaware 19801 for Eastman Kodak AIMEE CZACHOROWSKI, ESQ. DUANE MORRIS, LLP 1100 North Market Street, Suite 1200 Wilmington, DE 19801 for Audiovox Communications DONALD McPHAIL, ESQ. DUANE MORRIS, LLP 505 9th Street, Suite 1000 Washington, D.C. 20006 for Audiovox Communications FRANCIS DI GIOVANNI, ESQ. CONNOLLY BOVE LODGE & HUTZ LLP 1007 North Orange Street Wilmington, Delaware 19801 for Sony Ericcson Mobile Communications AB and Sony Ericcson Mobile Communications USA, Inc., and Navman AMY EVANS, ESQ. CROSS & SIMON, LLC 913 North Market Street, 11th Floor Wilmington, Delaware 19801 for Hartford Computer Group THOMAS L. HALKOWSKI, ESQ. FISH & RICHARDSON, P.C. 919 N. Market Street, Suite 1100 Wilmington, Delaware 19801 for Apple Computer, Inc. APPEARANCES (Continued):

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DAVID J. MARGULES, ESQ. BOUCHARD MARGULES & FRIEDLANDER, P.A. 222 Delaware Avenue, Suite 1400 Wilmington, Delaware 19801 for Citizen ADAM POFF, ESQ. YOUNG CONAWAY STARGATT & TAYLOR 1000 West Street, 17th Floor Wilmington, Delaware 19801 for Pentax KAREN L. PASCALE, ESQ. YOUNG CONAWAY STARGATT & TAYLOR 1000 West Street, 17th Floor Wilmington, Delaware 19801 for Optrex America MONTE T. SQUIRE, ESQ. YOUNG CONAWAY STARGATT & TAYLOR 1000 West Street, 17th Floor Wilmington, Delaware 19801

for Sony and Olympus Corp. and Olympus America, Inc.

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for Pentax. MR. MARGULES: David Margules, Bouchard for Honeywell. SPECIAL MASTER POPPITI: MR. HALKOWSKI: Richardson on behalf of Apple. MR. SQUIRE: Monte Squire from Young, Thank you. SPECIAL MASTER POPPITI: Counsel, I am

sorry, we are going to have to go back through just to make sure that we have the appropriate record on who is attending. Let's start with Honeywell. MR. GRIMM: Tom Grimm at Morris, Nichols

Tom Halkowski at Fish &

Conaway on behalf of Sony and Olympus. MS. PASCALE: Karen Pascale, also from

Young, Conaway, on behalf of Optrex America. MS. ZACHAROWSKI: Amy Zacharowski and

Don McVail of Duane Morris for Audiovox Communications Corporation. MR. HORWITZ: Anderson for Dell and Nikon. MR. SHANDLER: Chad Shandler from Rich Horwitz from Potter

Richards, Layton & Finger for Eastman Kodak. MR. POFF: Adam Poff from Young, Conaway

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Margules & Friedlander, for Citizen. MR. DI GIOVANNI: Frank Di Giovanni from

Connolly Bove for the Sony Ericcson defendants and also today for Navman. MS. EVANS: This is Amy Evans from Cross

& Simon for Hartford Computer Group. SPECIAL MASTER POPPITI: that rounds out everyone. Let me just make an observation or several observations for the record. This request to get And I think

everyone on the line was precipitated by Mr. Grimm's correspondence of yesterday requesting something that I am not sure is provided for by the Rules, but, in any event, requesting that I reconsider the finding and recommendation that I issued on August the 15th in several respects. And it's not important, I think for They

purposes of this call, to outline what they are.

are found in Mr. Grimm's letter of August the 18th. The reason why I thought it was important to get everyone on the line right away was because, as I suggested to you in my e-mail asking you all to do me the courtesy of participating, was to obviate the practice that is required by the Rule and required by Judge Farnan's order of August the 15th where

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he entered the proposed order, or signed the proposed order that I entered on August the 13th shortening the time frame within which to file Rule 53(g)(2) applications. And I thought that even though the Rule doesn't contemplate applications to reconsider, that it makes, from my perspective, and I would anticipate from Judge Farnan's perspective, and I hope from your perspective, it makes some sense to revisit the process, if you will, consider tolling the time within which an application under Rule 53(g)(2) has to be filed even with Judge Farnan's signature on the order. If I could get everyone to focus on a couple things that Mr. Grimm raised, one, of course, being the determination that I made that the burden of persuasion where there is an identification of a license and if the motion to dismiss is grounded on that license where the customers are claiming that they are either covered directly by the license, but I believe are covered, I think the claim is they are covered by virtue of third-party beneficiary under those licenses, that it becomes their responsibility to identify the license and the fact that they are an entity that is covered, and I determined that it was the responsibility of Honeywell to

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carry the burden forward to say, No, you are outside the scope. Honeywell, on the other hand, has suggested that the theory that the customer defendants should be focused on is the theory of patent exhaustion, and without getting into a discussion as to what patent exhaustion may be in the context of this case or these cases or these entities, it seems to me that the record that presently exists on either the claim of the customer defendants, that they are covered by the license, or if they were to be claiming patent exhaustion, I am not confident the record is full for purposes of joining, briefing, arguing, and having me make a determination on filings, namely, motions to dismiss. From Honeywell's perspective, Mr. Grimm, I know you will correct me if I am not capturing this correctly, from Honeywell's perspective, Honeywell is saying, We need discovery, we haven't had discovery on issues that bear either on licensure or that bear on patent exhaustion up to this point because, quite frankly, everything was stayed with respect to the customer defendant, and in order for us to meet any application that gets filed, we are going to need that discovery.

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well, Your Honor. I don't know what the customer defendants' view of that assertion is, and I just want to make sure that I create a very brief process within which we can focus on Honeywell's position as stated in the August 18th correspondence to me and get this thing moving forward. If it includes, or if it should include some opportunity to discover, more discovery either of the customer defendants with respect to the licensing issue or the patent exhaustion issue, or if it should include third-party discovery as I had permitted, but certainly the time frame is one that Honeywell rightly questioned, what should these time frames look like? That's kind of the backdrop as I approach today's conversations, knowing that everyone has not had an opportunity to respond to Honeywell's August 18th correspondence. Mr. Grimm, did I capture what I think you were saying in your correspondence? have said too much. MR. GRIMM: No. I think you did very And perhaps I

The burden of proof is obviously a

fundamental issue, but rather than avail ourselves of our right to appeal to Judge Farnan, which we know would hold

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up the process, we thought it made sense to come back and say, Why not leave that issue open, reserve the parties' ability to further brief it in connection with the motion to dismiss, which is, frankly, the typical situation litigants find themselves in. They don't typically have the opportunity of getting a judge to tell them in advance who has the burden of proof and then go out and take the discovery. Usually they take the discovery, they make

their motion, and then they are arguing about who has the burden of proof. So we thought, in this instance, it made a lot of sense to do that rather than for us to go to Judge Farnan now, knowing that if we did not go to Judge Farnan now, we could very well be met with an argument that your ruling has become law of the case and we have waived any right to appeal it later after the motion to dismiss is heard. So we just felt that it was a prudent and efficient way to go, even though, as Your Honor has said, there isn't anything clearly stated in the Rules that permits a reconsideration. SPECIAL MASTER POPPITI: Right. Let's

focus on that piece for a moment, and I certainly want to

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hear from any, hopefully not all of you, from the customer defendants' side. I am inclined to see that that is the best approach rather than leaving everything as is, that is, status quo, and expecting that one or all of you will launch whatever you think is appropriate to put something on Judge Farnan's desk. I am not sure that that is the most efficient way to move the defendants and Honeywell forward on the customer defendants' view that they should be out of this case or they should have been out of this case some time ago. Focus, then, for me first on the concept of kind of putting this thing on ice for a bit and focus on the burden of proof issue. Who is going to speak?

Tom Halkowski, do you want to speak for everyone? MR. HALKOWSKI: I certainly don't I do certainly

pretend to speak on behalf of others. have a view on this. way or the other.

Really, it's not a strong view one

We do have some abbreviated

guidelines -- not guidelines, instructions in terms of how one is to raise things to Judge Farnan, but I don't think there would be much of a delay for this small legal issue to bounce up to him and have him confirm or modify

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it. I don't see it as being a very big deal. On the other hand, the suggestion made by Honeywell of just rolling this issue into the briefing that's going to be coming up soon is fine as well. I

don't have, like I said, a big problem with that either way. What I do have a much bigger problem with is the motion of extending things out yet again for several months. And I am sure we will get to those

issues in a moment, but on this one, I think, either way, it's going to be dealt with relatively quickly either, you know, a matter of days of getting some submissions into Judge Farnan and having him confirm or modify, or we just, you know, put that off and make it clear that Honeywell continues to have an opportunity to raise that issue in the upcoming briefing that we will be submitting in a couple weeks. Either way, it's going to get wrapped up, in my view, within a few weeks. SPECIAL MASTER POPPITI: The only

observation I would make about calling the finding and recommendation, if you will, final for purposes of having the time frame ultimately run for all of you to determine whether you want to file applications taking exception to

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the findings and recommendation, you all know, as members of the local Bar, that, from my desk, I can do something that I at least try to do in most instances, and, that is, say, Okay, I have got a matter before me, this is going to be an argument date, and I intend to commit to a certain date, or thereabouts, and you are going to have a document bringing the matter to closure from my desk. That's something that I just think is important as part of my responsibility to the Court and to all of you. The Court usually doesn't take that approach to work that the Court has for a host of different reasons, not the least of which is, of course, the Court's Docket is jam packed, as you all know. So even if you put something on Judge Farnan's desk that is clear and brief and to the point, and I will even go so far as to say, the matter that is simply joined, that doesn't mean that it's going to go to the top of the pile for purposes of getting a quick turnaround. So, I guess that's a gentle way of saying that, in my communications with, particularly with Judge Farnan over the years, I have never had a conversation with him to say, You know, Judge Farnan,

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everyone would really like to see a decision from your desk within a week or ten days. I don't know if you want me to have that conversation with him. I know I wouldn't want to. No, I appreciate that.

MR. HALKOWSKI:

Nonetheless, I do feel as if this issue, in my view, at least, would likely be addressed relatively soon and it's a relatively narrow issue, but, as I say, I don't have a strong feeling on it. I am just as happy to go with the

approach of having that issue remain open for further briefing, you know, consistent with the schedule that we have laid out. Like I said, I have much stronger

concerns that relate to the, that we actually stick on that schedule. SPECIAL MASTER POPPITI: Let's do this:

Does anyone disagree with the approach recommended by Mr. Grimm with respect to the burden of proof issue and wrapping it into the briefing schedule on anticipated motions to dismiss? Does anyone disagree? Your Honor, this is Monte I don't necessarily

MR. SQUIRE:

Squire for Sony as well as Olympus.

disagree, but I would like, at least, the opportunity to confer with my co-counsel on that point and make sure that they don't have any -- I anticipate that they won't

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disagree either, but I should have the -- I would like to have the opportunity to review it with them and somehow let the Court know after at least having a discussion with them about it. SPECIAL MASTER POPPITI: I certainly

understand the responsibility that you have to confer with your co-counsel, and expecting others may be in the same circumstance, what I'd like to have happen, if you can, is I'd like that conversation or communication to occur shortly after we conclude business today, and I'd like everyone's view that has to do that not later than, I'd like to even say before close of business today so I can make sure that things are moving in the appropriate direction. So, if you can do that before 3:00 p.m. this afternoon, that would be great. Do any others of you expect that you are going to be needing that time to say definitely we agree with Mr. Grimm's approach? MR. HORWITZ: Your Honor, this is Rich

Horwitz on behalf of Dell and Nikon. Mr. Grimm's approach and your articulation of it are fine for those two defendants. SPECIAL MASTER POPPITI: Okay. Any

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one first. MR. GRIMM: Okay. This was just an Mr. Di Giovanni. Let's, then, turn to the other issue that is raised by Mr. Grimm. MR. GRIMM: The issue regarding Di Giovanni. you, Ms. Evans. MS. EVANS: Thank you. Your Honor, it's Frank others, please? I will take everyone else's silence to

mean that no one takes exception to Mr. Grimm's approach and understand that there may be one coming in not later than 3:00 today. MS. EVANS: Your Honor, this is Amy

Evans from Cross & Simon, and I would get with co-counsel and get with Your Honor before 3:00 today. SPECIAL MASTER POPPITI: Okay. Thank

MR. DI GIOVANNI:

I would also like to confer with my clients

and return by 3:00. SPECIAL MASTER POPPITI: Thank you,

third-party discovery, Your Honor? SPECIAL MASTER POPPITI: Let's do that

issue of practicality that, just from experience, we know that conducting third-party discovery, even within the

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United States, in two weeks' time is very difficult, but to do it with these foreign entities is, as Your Honor, I am sure, appreciates, next to impossible, even if they were to cooperate, which they have not to date. As a side note, I would mention, with respect to the cooperation of the manufacturers, if they believe that, for example, we certainly believe Mr. Halkowski's representation that he believes that his products of Apple are covered by a license; at the same time, it strikes us as odd that none of these manufacturer defendants have come forward and said, Leave my customer alone. They are licensed.

And, so, we have not gotten that kind of cooperation from them to date. And if we were to have to

go through formal discovery procedures through the Hague, as Your Honor knows, that's a hopelessly long process, so we hope that it doesn't come to that. SPECIAL MASTER POPPITI: It is, and I

don't want anyone to expect, although I may have left a number of you, and, more likely, all of you scratching your heads, saying, What's he thinking? And, quite

frankly, what I was thinking was putting, whether it was a two-week deadline, three-week deadline, or a four-week deadline on something like that was really intended to

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helpful. sense. prime the pump to see, No. 1, whether the gates for cooperation could be completely open, or to simply get some turnaround back from you saying, This is really the time frame in which we think we can accomplish this. So, it has a desired effect in one And what I am looking for is if a third-party

discovery is going to be conducted, and I don't think I should be saying it is clearly not necessary because it seems to me it may be critically important, if there are no voluntary dismissals or if any individual customer defendant remains standing, it's going to have to occur, and I just need some sense as to when I should say it is over. Mr. Grimm. MR. GRIMM: Your Honor, that's very

And when we put in our suggestion in our letter

to allow for 60 to 90 days, it was with the thought that within some time period like that, and it can certainly be shorter than 60 to 90 days, longer, I think, than two weeks, we were thinking we would know whether or not we were going to get the cooperation of the discovery we needed, or whether we, in fact, came back to Your Honor, because, obviously, 60 to 90 days wasn't going to be enough if we had to go through the Hague Convention.

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years. MR. HALKOWSKI: And we have pointed out, So, I think if we put in a period of time to do just what Your Honor said, to prime the pump, so to speak, I do think that even just corresponding with these people will take a little longer than two weeks, so if we could have something in the order of 30 to 45 days, I think would probably be, you know, more realistic. SPECIAL MASTER POPPITI: Does anyone,

and maybe the best way to approach this again, does anyone disagree with Mr. Grimm's characterization and the amount of time in which he thinks -MR. HALKOWSKI: Your Honor, as I

indicated, I take strong exception to any further extensive delays, and I think it's important, when you think about this, to take a step back and realize exactly where we are. We have raised this issue, you know, for

some time, I think over 18 months. SPECIAL MASTER POPPITI: It's almost two

from whatever time, that we are licensed, our suppliers are licensed, and fully expecting to hear back from Honeywell a reasonable response along the lines of, Oh, gee, didn't realize that, we are happy to stipulate to a dismissal, even without prejudice, so if something turned

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up down the road that turned up as something is not covered, you know, we can deal with it. We didn't get that. And Honeywell didn't deem it important and certainly didn't, apparently, believe that there was any concern that any of these licences had been exceeded in scope or that there is anything else breached of the license, so they haven't, apparently, done the discovery, which now, all of a sudden, they want to do. So, from our view, Honeywell has had almost two years to do this and they had, for whatever reason, they chose not to. And, secondly, as I mentioned, another easy solution here is for Honeywell to say, Well, gee, we have licensed all these people, and some of them, we have, a lot of them have been part of this lawsuit and we dismissed them, some of them we never even bothered to bring into the lawsuit because, apparently, they believed the licenses are in effect and they are strolling along and none of the tasks have been exceeded, etcetera, and, so, there is no apparent reason on Honeywell's side to believe that the licenses are, as I say, have been breached or the limitations have been exceeded. And, so, if that's the case, then it's

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just, it's difficult to imagine that this is now an issue that all of a sudden requires attention, whereas, you know, it didn't before, No. 1, and, No. 2, like I said, a simple solution if they are concerned about, you know, getting a final resolution to this, is to just cooperatively agree to dismiss the customer defendants without prejudice, and if, down the road, it turns out that scopes have been exceeded for the licenses or whatever and they need to bring people back in, you know, whatever, happy day, have at it. But I think, at this point, you know, we have got, the record is what it is, Honeywell has had plenty of opportunity to deal with this issue in some more cooperative way or in some other approach if they wanted to get discovery and figure out whether they needed to bring some of these module suppliers, who are supposedly licensed, if they really truly believed that they needed to bring some of them back into the suit because the licenses have been exceeded, they have had that opportunity. And to now say, Hey, wait a minute, wait a minute, we have done all this stuff that we didn't know, we need to kind of basically tie this thing up, we start talking about the Hague convention and going into

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that kind of discovery, we could be here forever. MR. GRIMM: Can I respond to that? I understand My

SPECIAL MASTER POPPITI:

that and certainly Mr. Grimm has identified that. question is this with respect to your comments that

Honeywell could have done certain things, and I will certainly want Honeywell to speak to this, but the observation that I have, and I am not telling you that, although I believe I have a fairly good handle, and I have been able to get my arms around, I believe, the process of this case up through when Judge Farnan was assigned the responsibility to try the case, it seems to me that the customer defendants asked for a complete stay of proceedings as it related to them, and it seems to me, and I know that I articulated some of this history in my findings and recommendations, that as of a certain date, once there were some conditions met, that, in fact, there was a complete stay of all proceeding as it related to the customer defendants. And I expect that that means that if Honeywell had an inclination, I am not sure why they would have had it, but if they had an inclination to want to conduct third-party discovery, for example, with respect to licenses that the customer defendants have,

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that there would have to have been a lift of the stay. MR. GRIMM: Your Honor, there is one

thing that maybe I didn't explain as well as I could have. What I meant to say was we are talking about

third-party discovery. SPECIAL MASTER POPPITI: MR. HALKOWSKI: Correct.

And then the third-party

discovery we are talking about is discovery from the Honeywell's licensees. SPECIAL MASTER POPPITI: MR. HALKOWSKI: Correct.

And these -- so if

Honeywell -- this has nothing to do with whether or not there was a stay with regard to the customers. We are

talking about whether or not Honeywell could have gotten discovery from Honeywell's licensees, the majority of whom were previously defendants in this case. So the point is if Honeywell had an inkling that, Well, gee, we are not so sure that the licensees that we have made deals with are abiding by those terms and that there hasn't been some exceeding of the scope of some of those licensees and we might want to bring some of them back into this suit, that's why I am saying they have had that opportunity for some time. And in addition to that, for over two

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years, they have been, or nearly two years, I think it's only, whatever, between a year-and-a-half and two, but for all that time, they have additionally known of our concerns that we think we are all completely licensed up. So, taken in combination, there certainly was no reason for them not to have pursued this if they had a legitimate concern or belief that there was some, you know, real possibility that these licenses have been exceeded in some way. And, as I say, so they could

have done that with, just with regard to finding out whether or not the manufacturer, the suppliers, were exceeding their licenses and whether or not those manufacturers and suppliers should be brought back into this suit. MR. GRIMM: Your Honor, this is

completely irrelevant to the question we are talking about here, which is whether or not their licenses are covered. You put your finger right on it. We had no

reason to address this issue because there was a complete stay of the case. the stay. And although Apple raised this issue two years ago, Judge Thynge said she was not going to address it at that time. She was not going to lift the stay. It would have required a lifting of

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She was not going to address the issue. So to suggest that Honeywell should have then started taking discovery on the issue, I think, is slightly unfounded, unfair, and probably would have been met by objections from the customer defendants. Even since April, when the issue, as was put on the table, we received no cooperation from anybody in getting any discovery, and it's only Your Honor's order that made it clear again that we are entitled to some limited discovery that we hope we will break that wall down. But to suggest that we should have done it

earlier, I think, is just not right at all. MR. HALKOWSKI: the stay is truly a red herring. Your Honor, the issue on This is actually

nothing to do with the stay on discovery from customer defendants. I mean, that's one thing. But it's

certainly, you know, third-party discovery, there is certainly no particular obstacle to pursuing that with regard to Honeywell's own licensees if they actually had a legitimate concern that, Gee, we had these licenses with these guys and we think maybe there is an issue that you guys have exceeded the scope of them somehow. And,

you know, we have got this other issue with the customers that they say, They are all licensed up.

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SPECIAL MASTER POPPITI: understand something. Help me

What you are saying is that some

of them, not all of them, were in the case at various points in time because a number of them have been let out of the case over the course of time, those that were in the case at any particular time, Honeywell could have initiated discovery against them on this issue, you would not have to have been noticed, and you would not have been able to participate in any, for example, any depositions that would occur? MR. HALKOWSKI: As far as I understand,

you know, the Federal Rules of Procedure, there may have been, you know, whatever the notice is that go into the Court to the depositions being taken and then these, you know, anybody that's a party to the suit would certainly be aware of that, but in terms of Honeywell pursuing third-party discovery, which is, again, the issue we are talking about, I don't know of any, like I said, any obstacle or anything that we, as customers, would have been able to say, Hey, wait a minute, discovery is stayed with regard to the customers, so you can't have discovery with regard to your licensee manufacturers. That's, like I said, it's a red herring. It's besides the point.

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And, again, this is all just a point to be made that it's just interesting, if nothing else, that now, you know, Honeywell says, Well, wait a minute, before we let anybody go, we need to see whether some of these licenses have been exceeded in some way. But, you know, they have had that opportunity and it's, you know, the issue has been out there, and if, like I said, as I said before, they had a legitimate concern about that, they certainly had an opportunity to pursue it before. And at this point, I think, you know, we have got a record that it is what it is in terms of discovery, and, you know, we ought to move forward and get our briefing in and see where it leads. SPECIAL MASTER POPPITI: shift focus for a moment. Let me just

You said the record is what it

is with respect to discovery. Tell me what that record is in terms of what it is with respect to discovery from the customer defendant. MR. HALKOWSKI: From the customer

defendants, I believe it's fairly limited, and, again, I don't think there is, from our perspective, certainly, anything that we have that's of significant interest

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other than the issue that we have been around a couple of times on it, and I think Your Honor has now addressed, and, that is, our identification of which manufacturers have supplied which modules with regard to the accused products. And, so, you know, that issue is something that we have provided information on, and, you know, there is certain obligations that we have got in terms of having some sworn declarations, and I know there is some other issues with regards to some other discovery, so in terms of the customer defendants, that's, you know, that's really, you know, the key issues with regard to this licensing issue, and that's, you know, all that I am aware of with regard to discovery. Now, this, again, that's, at least in my view, it appears to be a separate issue from the concern about information that might be within the hands of Honeywell's licensees LCD manufacturers and whether or not they have got information in their possession that shows that, you know, Gee, it turns out that we entered this license with you and we have now exceeded, you know, certain bounds of it, and, so, we ought to be back in the suit. Now, whether that's out there or not, I

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don't think. don't know, but, again, I don't think that has anything to do with customer discovery. SPECIAL MASTER POPPITI: What I'd like

to do, and Mr. Grimm, you can outline the discovery that you propose for the customer defendants, you first mentioned it in the first full paragraph of page 2 of your August 18th letter. MR. GRIMM: Yes, Your Honor. It seems

like, you know, simple enough to us and it should be discoverable, it seems to us, that they provide us with any correspondence that they have had with their manufacturers on this issue. I think that could quickly

dispose of it if the manufacturers make it clear that, yes, we believe that you are covered by this license, we intended to cover you by this license, and here is why, to the contrary, there could be, you know, correspondence that indicates just the opposite. That's, you know, it's not privileged, I It seems like it should be equally

discoverable and we think would facilitate and expedite any third-party discovery that we would need to get from the manufacturers. The second component is whether or not they purchased, these customers, whether or not they

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component. purchased a completed module from the manufacturing defendants because it's only completed modules that are licensed. And in this industry, it won't surprise Your

Honor, that a lot of times one entity, a manufacturing defendant, will create the LCD screen. SPECIAL MASTER POPPITI: MR. GRIMM: Right.

And that's the critical

And then perhaps they then send it on to

another company who puts, assembles the back light, which is a less critical component, and then that package deal is then sent on to one of these customer defendants. If we could get information from the customer defendants on, you know, What state is the module in when you receive it?, Is it a fully complete module that's covered by these licenses or not?, that also would, obviously, facilitate and expedite whatever third-party discovery we had to get from the manufacturing defendants. MR. HALKOWSKI: speak to that issue. SPECIAL MASTER POPPITI: MR. HALKOWSKI: Please. Your Honor, if I could

It seems, from my

perspective, I am looking this over, and, again, I have only looked this over briefly, but with regard to the

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discovery that Honeywell is now seeking from the customers in this letter, it appears to be material that it's going to either come to light and be relied upon as a part of the upcoming motion, and if so, you know, it will be something that Honeywell might want to pursue or might want to get some further information on or have a file, you know, request for a deposition to maybe present some correspondence from X, Y, Z supplier, that may or may not happen. I don't see that happening certainly for Apple because, from our perspective, this is all besides the point. It's hand waving. It might be interesting,

but what's at issue is the licenses, the licenses and particular terms. they don't. They either cover what's going on or It's not X, Y, Z

It's the licenses.

corporation saying, You know what, I think you are covered by this license. That's certainly our view, and,

you know, the customer saying, Oh, great, I am glad to hear that, we think we are covered, too. It's really the licenses. So what? The licenses

have terms and they either cover what's going on or they don't. And, so, certainly -MR. GRIMM: Can I speak to that, Your

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think they have. Honor. SPECIAL MASTER POPPITI: It's your

position that it's Honeywell's burden to prove that the scope, the activity is beyond the scope of the license, and if I ultimately conclude that that is Honeywell's burden, shouldn't they have the opportunity to discover that information? MR. HALKOWSKI: They should. And I

I guess that was, you know, my point,

that, yes, they have had, you know, like I said, as much time as they could have possibly wanted to pursue any of this discovery from the licensee manufacturers. Now, again, it goes back on looking at the customers now, and with regard to the customers, I just, I can't imagine any of the customers having information in their possession that, you know, that's going to be particularly dispositive or helpful in terms of Honeywell being able to determine whether or not the terms of the licenses have been exceeded or not. Whatever information and whether that exists or not is going to be in the possession of licensee manufacturers. Frankly, it really comes down to one of the key issues is these sales caps, and some of the

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licenses have sales caps, and we are not going to have that information, that's for sure. If anyone is going to

have it, it's going to be the licensee manufacturers. And, again, if Honeywell had an inkling that there was an issue there, they have had eons of time to pursue that, and that's our concern about, at this point, trying to tie things up and not further to allow them, you know, yet another delay in these proceedings. Now, in terms of, like I said, specifically what it seems they are looking for from the customers, the correspondence, again, is, you know, I don't believe it's going to be relevant, I can't imagine that there is going to be anything there, but, and, again, I think it's besides the point, but, you know, frankly, the biggest concern that we have got is the additional delay that would be engendered by continuing to run down these various different rabbit holes, in our view. MR. GRIMM: Can I speak? Do you want me

to speak to any of that, Your Honor? SPECIAL MASTER POPPITI: MR. GRIMM: Yes, please.

No. 1, going in reverse, I We are just asking them

don't see any additional delay.

to search their files for this correspondence and to tell

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us what state they received the module in. All Mr. Halkowski says is, I don't think there will be anything there. Well, let's find out.

As Your Honor said, we are entitled to discovery either to carry our burden of proof or to rebut their burden. The notion that Honeywell has had the

opportunity is, I hate to use the word, you know, ludicrous or ridiculous, but that's where we are heading here. issues. We have had no opportunity to discover these These issues were never on the table. Judge

Thynge said they were not on the table. Why would Honeywell take discovery of people it's already licensed, who have already capitulated to this patent to see if they have exceeded their caps. We have audit rights to do that. The only reason to do it now is these customer defendants now want out of the case. looking to double dip. We are not

We have had a tremendously We were forced to go out The customer

successful licensing program.

to the manufacturing defendants first. chose that.

They got the stay that they wanted. We are happy to let them out once there

is a showing that they are entitled to be out, but as Your Honor knows, it's not crystal clear under these

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licenses. The supplier licenses don't say, We are

covering all the modules we sold to Apple. If Mr. Halkowski is so sure that he is covered, then he can come forward with evidence of that. But we should have the opportunity to take the discovery now, that we have never had any reason to take, that we would have been met with an argument that was stayed because, as Your Honor pointed out, the customers would have wanted to be involved in that discovery, and, frankly, we had no reason to take that discovery. We are

only taking it now to see whether or not these customers are licensed or not. And, so, you know, Honeywell has taken it upon itself to go forward and try to take this discovery. We put out 30(b)(6) deposition notices the We sent out letters

day after Your Honor's recent order.

asking for the declarations that Your Honor suggested. We are prepared to proceed on the schedule that Your Honor set, but for the request that we have a little bit more time to prime the pump, as you say, to conduct third-party discovery, and we make this one simple suggestion with respect to the customers because we think that would facilitate all of it. And, so, that's where we are. And, you

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know, I think those are relatively simple issues and we ought to get on with it. MR. HALKOWSKI: Your Honor, just to be

clear, it's not, I don't have a huge problem with narrow, you know, particular requests that don't result in additional delay. I mean, that's really our concern. I mean, we are happy to, you know, provide some limited, you know, kind of focused information as opposed to the, kind of the broadside that we initially got from Honeywell a few weeks ago. that's point one. Point two, again, I will just point out that Honeywell, it is really either the licensee manufacturers, you know, should be back in the suit and Apple should not be out because it's the scope of the license had been exceeded or the scope of the licenses have not been exceeded and there is no reason to bring back in the licensee manufacturers and there is no reason for Apple to be in this suit. either both in or both out. And what my point has been is that for, you know, a year-and-a-half or two years, Honeywell has not deemed it of any concern that these other -- that Apple's manufacturers exceeded their licenses, and, so, It's kind of you are So

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they haven't pursued discovery from them saying, you know, We think maybe we might need to bring you back in the suit because we think you exceeded the scope of this and that's why we can't let Apple out of this suit and that's why you need to come back in, they have had that opportunity and they just simply haven't pursued that. That's what our bigger concern is that they, you know, they now kind of throw a monkey wrench into this process that we finally thought we had started on the right track in terms of getting an opportunity to brief it to Your Honor. SPECIAL MASTER POPPITI: track, I can assure you that. We are on a

I do want to hear from any

other customer defendant if they want to speak. MR. DI GIOVANNI: Your Honor, my one

concern that hasn't been addressed is the scope of discovery, and some of the things I have heard today from Honeywell makes me a little bit concerned. For example,

they mentioned taking document discovery or other discovery of the communications between the manufacturers and customer defendants. I think that would go beyond

the scope of what I would have anticipated and what I would consider reasonable. And, I actually don't agree

with Honeywell that, in fact, such documents would not be

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privileged. I think there would be a privilege, in most

instances, a common legal interest privilege. So that just makes me a bit concerned that the discovery that we are talking about here, that at least Honeywell is going to seek, is going to be far beyond what is called for in this circumstance. SPECIAL MASTER POPPITI: The

limitations, as I understand it, and, Mr. Grimm, correct me if I am wrong, if you kind of draw a box, forget third-party for a moment, around the first full paragraph of page 2 and its last full sentence, that's what I am focused on, and that's what, Mr. Grimm, I expect you wanted me to focus on? MR. GRIMM: Correct, Your Honor. With respect

SPECIAL MASTER POPPITI: to, quote/unquote, limited discovery.

So, let me just make this observation. No. 1, I think it's important to toll the time within which to take exceptions to my findings and recommendations so that everyone can, in a sense, stand down from the need to focus on that activity. No. 2, I will be getting out today a letter, which I may now have to modify, although I don't think I do, with respect to the work we are doing today,

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that will focus all parties on what I think is going to be important for me to have before the hearing scheduled for September 4 and in anticipation of my recommendation to Judge Farnan as to how the case should be configured going forward to trial/trials, or going forward to disposition of pending motions for summary judgment, for example, of Citizen. With all of that in mind, what makes some sense to me is to say to you, between now and the 4th, I'd like you to take a step at trying to, not trying to, meeting and conferring and coming to some four-corner resolution on at least what the discovery should be from the customer defendants. I think that makes the most sense in terms of the time frames coming up. I realize that that may have some impact on the briefing schedule, and, quite frankly, I don't have a mirror image of it in my mind to see what that would do with it, but I think that if it does, I will take a look at it during the course of the day today and we will accommodate in terms of what it should look like after you all say to me, We are in agreement this is what should be occurring. If a shorter time frame makes some sense

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kind of position. to keep on track with the briefing schedule, I am happy to say, Meet and confer between now and the end of the week, come up with what is the limited discovery as proposed by Mr. Grimm in the August 18th letter to me, and then we just simply move forward on the same schedule. On the issue of third-party discovery, I have made it a practice of my professional life not to try to look over my shoulder to try and second guess what a Court of Appeals would or would not do with any order that I enter. And I am not intending to suggest that I

am doing that today. However, I would not want to, and I don't think the parties would want to be in the position of having to argue, not to Judge Farnan but to the Circuit, that because of the way this case was configured moving forward, that there would be some determination that the parties did not have a full and fair opportunity, within the framework of how this case was structured, to conduct discovery without having gone back and forth to the Court for applications to lift stay and applications for leave to do other things. I don't think anyone wants to be in that I think the customer defendants want

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Thank you. SPECIAL MASTER POPPITI: If the 4th that. out. My sense is that Honeywell would want the, needs

information to either agree to let them out or needs information to help permit them to respond to any motions to dismiss. I believe that there needs to be a time frame within which to secure third-party cooperation and/or third-party discovery. latter. I am hoping it is not the

If it's the latter, I am not sure where we are

in terms of time frame. So, I would like you, within the context of those meet and confers, to also reach agreement, and if you don't, I will make some determination with respect to the time frame within which to prime the pump with the third parties. I know you have already tried to do I know that some dialogue is occurring but I'd

like there to be one last shot at it and I'd like a time certain to see that accomplished within. MR. GRIMM: Very well, Your Honor.

makes sense, let's say the 4th, and I will write an appropriate document which tolls the time within which to file exceptions, if you think it can be done before the

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4th, then please someone suggest to me a different and earlier date. MR. GRIMM: Can you clarify what you

mean by what would be on the 4th? SPECIAL MASTER POPPITI: Well, on the

4th, there is either going to be, you are all going to be telling me that there is full resolution to the issues that have been raised with respect to discovery, or you are going to be telling me you haven't reached resolution and I am going to be telling you what the road signs are going to look like going forward. And if you can do it beforehand and you want to set a different date and have a brief teleconference so we keep everybody moving on the schedule that I have already set, then I am happy to do that as well. MR. GRIMM: I certainly think it would

be helpful to do it much earlier than that. MR. HALKOWSKI: MR. GRIMM: I agree.

So we would be prepared to

wrap up the meet and confer process by the end of this week, as you suggested earlier. SPECIAL MASTER POPPITI: Is there any

disagreement from any of the customer defendants?

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MR. HALKOWSKI: from our perspective as well. That is certainly better I do have a question that

is contemplated for the in-person hearing on the 4th, primarily because I am going to be in trial on that day and I am uncertain as to whether that hearing is more focused on the case in general or is it more focused on what we have been talking about with Your Honor, the various licensing issues? SPECIAL MASTER POPPITI: It is more

focused on the case in general because I certainly anticipated that the licensing/exhaustion issues were, if you will, covered by the findings and recommendations. Clearly, there needs to be some fine tuning to that. it will be focused on the case in general. MR. HALKOWSKI: Is it, I guess, But

necessary, from Your Honor's perspective, to have the full participation of the customer defendants, then, for the hearing on the 4th? SPECIAL MASTER POPPITI: I think that if

we establish a different date going forward, if you are going to finish meet and conferring by the 22nd, we may want to schedule a very brief teleconference on the 25th, for example. I am not sure that I would see the need for

customer defendants to be participating, but I am

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or 1:30? SPECIAL MASTER POPPITI: Let's do this, makes sense. MR. HALKOWSKI: Do you want to say 1:00 certainly not going to suggest that they can't or shouldn't. MR. HALKOWSKI: that clarification. Okay. Thank you for

I guess we will get to work on the

meet and confer and get a report to you by Friday. SPECIAL MASTER POPPITI: And what time

on Monday, the 25th, if you are going to be getting something to me on Friday? MR. GRIMM: I would suggest sometime

early afternoon just for anybody who may be in a different time zone. SPECIAL MASTER POPPITI: Yes. That

because if you are going to be sending something to me that is other than a resolution on the 22nd, I am actually going to be leaving the office on the 22nd around 3:00, so if it comes in after that, I am not going to get to look at it -- well, let's do 2:00 on the 25th. MR. HORWITZ: Your Honor, I hesitate to

throw a monkey wrench into what you have just discussed, but I don't know whether people who would like to

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great. MR. GRIMM: Okay. Your Honor, will we participate in these meet and confers are around, especially now, given the time of year that we are in, and I wonder whether it would be more prudent to have Monday as the deadline so that if some people are away, we will at least be able to have some communications and have people back in the office for one day to submit something to you and then have a follow-up call the next day. MR. HALKOWSKI: objection to that. MR. GRIMM: Honeywell does not either. All right. If Apple doesn't have any

SPECIAL MASTER POPPITI:

there is no disagreement with that, we can just move the 2:00 on the 25th to 2:00 on the 26th. MR. GRIMM: Your Honor, do you want to

set a deadline on the 25th at 3:00 p.m.? SPECIAL MASTER POPPITI: That would be

keep the September 4th hearing in place just in case we need it? SPECIAL MASTER POPPITI: Yes. The

September 4th hearing will be going forward in any event, and if it's important, once you see my letter, because

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the draft of the letter essentially says that the 24th will be focused on things other than those that were addressed in the report and recommendation that I have issued, if it's important to say, We need to also revisit some things with respect to that, then just simply advise. And I think, in light of what we have all said, and even Mr. Grimm, your suggestion that perhaps there may be some things left over for the 4th, I am going to suggest to you all, and just let me know if anyone disagrees, that the -- I am wondering whether I should suspend the time within which to take exceptions to the report and recommendation until the 5th. I realize that that may not make any darn sense because we are chugging along on the schedule. Does anyone have a view as to when you think it would be important to set that deadline? And I will accept

anything from you that makes sense. MR. GRIMM: I would think a deadline

that coincides with the date on which Your Honor decides the motions to dismiss. MR. HALKOWSKI: Your Honor, I wouldn't

have an issue with that if we were basically sticking with our original schedule on the briefing, but if we are

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not going to be sticking with that and if there is, indeed, going to be an extensive delay, for whatever reason, third-party or Hague Convention or whatever you want to talk about, but if there is going to be an extensive delay, then I see no reason why we shouldn't at least try to get this burden of proof issue through the hopper with Judge Farnan as soon as possible. If, on the other hand, we are going to be able to stick to a briefing schedule that is along the lines that we had previously set forth and with the hearing in October, I mean, that's a different story. So, from my perspective, it entirely depends upon how far out we are going to end up going for -SPECIAL MASTER POPPITI: Let's do this.

Let's review the date on the, we can talk about the date again on the 26th because that will give me and that will give everyone a sense as to where we are with respect to hopefully your agreement on most if not everything, and that would include any tweaking of the briefing schedule that I have already issued. So I will draft an

appropriate order which simply tolls the time within which to file something under the Rule without setting a new date yet. MR. GRIMM: That's fine, Your Honor.

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10:38 a.m.) MR. HALKOWSKI: Apple's perspective, Your Honor. SPECIAL MASTER POPPITI: All right. That makes sense from

Thank you everyone for participating, and I look forward to seeing an agreement; if not, look forward to working with you on the 26th at 2:00. MR. GRIMM: Thank you, Your Honor, for We very much

scheduling this on such short notice. appreciate it. MR. HALKOWSKI:

Thank you, Your Honor. Bye, now.

SPECIAL MASTER POPPITI:

(The hearing was concluded at

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________________________________ RENEE A. MEYERS REGISTERED PROFESSIONAL REPORTER CERTIFICATION NO. 106-RPR (Expires January 31, 2011) 2008. STATE OF DELAWARE: : NEW CASTLE COUNTY: I, Renee A. Meyers, a Registered Professional Reporter, within and for the County and State aforesaid, do hereby certify that the foregoing teleconference was taken before me, pursuant to notice, at the time and place indicated; that the teleconference was correctly recorded in machine shorthand by me and thereafter transcribed under my supervision with computer-aided transcription; that the foregoing teleconference is a true record; and that I am neither of counsel nor kin to any party in said action, nor interested in the outcome thereof. WITNESS my hand this 20th day of August A.D. C E R T I F I C A T E

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