Patriot Scientific

I hope that Ron doesn't mind ... Here's his post in the yahoo group

--- In patriot_scientific@yahoogroups.com, "Ron" wrote:

I consider most of the following to be academic at this point, but I continue to get a considerable number of calls about "how we got where we are". Having spoken with several of our members here by phone over the last week or so, I have tried to use an analogy with which I think most people have at least some familiarity, or with which they can become somewhat familiar with minimal effort — based upon that, there have been requests for me to make this post, which I am happy to do now that my schedule has cleared a bit. The more I have practiced law over nearly 27 years, the more I have become convinced that litigation is very much akin to a poker game reduced to essential terms, both are largely based on principles of risk management. If you're not a poker player, do a Google until you find a good basic text that outlines the game and the ranking of the winning hands, then find one of those "poker shows" on one of the cable TV networks and watch them play "Texas Hold'em" or "Omaha" for awhile.

At the outset, I will tell you that, regardless of what some folks on Agora apparently continue to talk about, there is no more settlement money or any other kind of funds coming from the J3 — not in any way, shape, or form whatsoever, nor at any time in the future. I have confirmed this with my sources close to PTSC, and
I have no reason to disbelieve them. With apologies and all due respect to my good friends, Virt and Fut, who are both very intelligent and always well-reasoned, there is no "continuing accounting" or "ongoing infringement analysis" being done so that any further J3 funds will be reported in August or at any other time. If others in the Agora crowd wish to continue to tell each other what they want to hear, that is their business — however, you can come up with any other "explanation" that the human mind can imagine, and the result will be the same, which is that "there ain't no more". There is nothing other than what has already been reported in the April 10Q, i.e., no "contingencies" of any kind whatsoever, and nothing even close to a "contingency" — nothing that semantic fantasies can create to make it otherwise. The J3 settlements as based on the MMP patents have been fully and finally concluded, without any kind of qualification whatsoever.

Sorry for the long paragraph above, but I wanted to be absolutely clear about that subject. With all of that said, it is time to move on.

So, how did we get to this juncture, and why? Before explaining further, I also want to say that I have seen some very good explanations among the more level-headed posters on Agora (Ease, Lambertslunatics, and several others) on this subject, and there has also been some element of accuracy at times even in posts of those who tend to enjoy spewing FUD (such as "MIKE"). Therefore, if some of this sounds familiar, that may be why. You will also find a great deal of it, either directly or indirectly, in my posting history on Agora beginning after the Markman hearing in May 2007.

First, you must realize that, contrary to what I see posted on Agora every now and then to my utter amazement, both infringement AND validity WOULD have been decided by the jury had the case against
the J3 gone to trial. If you do not believe this, try Googling something like, "eastern district of Texas Forgent case", and read the jury verdict, or a summary of it, in the "Forgent" matter. That case, which was decided just last year, was one in which the defendant made a "judicial admission" of infringement (same effect as a confession in a criminal case) due to the strength of the Markman ruling, then went to trial solely on the issue of validity — AND WON. Yep, even with a FAVORABLE Markman ruling and a LEGAL ADMISSION
of infringement, the patent holder LOST the case and was awarded ZERO by the jury.

I am not trying to scare anyone with this, and indeed, I believe I posted about it back on Agora — rather, I am merely pointing out that having a Markman ruling in one's favor is only, at most, half of the story. If you cannot understand or accept this, you will not be able to move forward — find a litigation attorney who has at least some experience in patent cases, pay his fee for a conference rather than listening to the free legal advice that you get here, and then give me the name and phone number of any lawyer who disagrees with that I have said above.

Now that perhaps you understand a bit more, let's get closer to discussing the effect of a trial setting. But first, let's play poker — it's not a perfect analogy, but it suffices for our purpose here.

Imagine you have drawn "hole cards" that, if completed as you wish, would lead to a very favorable hand, perhaps even a Royal Flush. Nevertheless, each card of the common group left on the table that is subsequently "turned up" has one of several possible effects — it either helps you, hurts you, or has no significant determinative effect except to shorten the game and thus introduces its own "time delay" for that hand. Of course, the same is true for your opponent(s). And, just as importantly, the value of your bet, as well as your decision to stay in the hand at all, must be based on the change in the situation each time a table" card is shown. If a card that is favorable to you is turned up, your hand becomes more valuable and you increase your bet accordingly. Conversely, if the card is not favorable to your hand, you "call" (merely match someone else's bet), or you fold and get out until the next hand. At some point, however, you are own to the last card to be "turned up", and you must evaluate the odds of whether that card will make you the winner, or whether it will make your opponent the winner — your hand has a value of "x" before the last card is turned, and "y" after it becomes known. This is simply a matter of uncertainty being transformed into reality — when there is no more uncertainty, the "actual" value of your hand becomes known and fixed.

Moving further along, apply the above to the patent litigation scenario. You have a favorable Markman ruling, but no judicial determination of validity (and before anyone says it, lots of prior licensing deals, reviewed by scores of other attorneys, don't count for squat — regardless of such things, none of it constitutes a JUDICIAL determination). Thus, you have "turned up" one key favorable card (the Markman), but not the last one (validity) — and to win, you must have both. If you go to trial and lose on validity (a la Forgent), it is "game over" not only for that hand, but also in an end-game context (unless you can win on appeal, which is very difficult and takes perhaps a couple of years). Now move forward a bit in time with respect to the litigation. The trial is getting closer, legal fees (part of your "bet") are mounting, and the PTO doesn't appear to be close to ruling — do you risk a Forgent-type result, or do you "retreat and live to fight another day"? As I always said back on Agora, a trial setting is "the great equalizer", and whichever party has the most to lose and/or is being the most unreasonable tends to get very reasonable in short order when faced with the reality that the end is near — in our case, the J3 had virtually limitless funds, as compared to TPL, which has a horrendously large burn rate and no significant known revenue source other than litigation and licensing deals. In other words, the J3 would have survived even a fairly massive verdict, whereas TPL would have been severely hit (and PTSC would have ceased to exist as we know it) in the event of a "zero"
or relatively small verdict, either of which would have been favorable to the J3. Of course, if certain Agora members read the above, they will likely assert their current mantra about "preserving the patents" as being the goal of the J3 settlement. Frankly, I don't disagree with that point in and of itself, but unfortunately, it took those Agora folks many months to morph into that position from their prior spin-doctoring of "the numbers must be huge" — and, combined with the "I can wait until April" crowd (who now seem to be proclaiming that they are waiting until August, when they will again be disappointed if they are still waiting on something else from the J3), and the "We'll be rich very soon" crowd, lots of folks got sucked in by all of that complete and utter nonsense. I am not speaking of everyone on Agora in making that reference, because
there are some really good and sincere people there — the ones I am talking about in this post were those who formed the most vocal and assertive minority. Obviously, it most assuredly was NOT the original goal of TPL in the J3 litigation to merely "preserve the patents" — instead, the original goal was to use the patents as weapons, not "patent preservers", and to kick some "J-butt" and take names by raking in big dollars. TPL filed the J3 litigation in the hope of getting those "huge" bucks that the vocal minority on Agora loved to talk about so often, and it was not until later that "preservation" BECAME the goal when things turned out the way they did — there is surely a "night and day" difference between settling for "huge numbers" versus settling merely to "preserve the patents". Alas, one cannot win an argument with someone who is ignorant — because one who vigorously argues (as contrasted with inquiring) from a position of ignorance has a vast universe of irrelevant information from which to speak, while at the same time enjoying the advantage of staying disconnected from any obligation to be accurate. It is one thing to ask a question about something that is not in one's field of knowledge or experience, which is always appropriate if sincere because it generates honest discussion — but it is quite another thing when someone continuously "holds forth" in a field in which he or she has no education or experience, all the while hiding behind the ever-present "all IMO" and/or "show me where I'm wrong". The latter is especially irresponsible, and doesn't
warrant an intelligent response since doing so would tend to dignify what was inane from the git-go — ridiculous arguments don't "challenge" those who are knowledgeable, but are instead merely a source of "noise" and gibberish that deserves no ongoing attention. Unfortunately, when that attention is not given,
the opponent usually then exhibits the infantile, tantrum- like, "hissy fit" reaction of engaging in escalating personal attacks. What I previously posted on Agora was based on a law degree and more than two decades of litigation experience, while those who argued incessantly to the contrary had neither — it is up to you to decide who and what is more credible, if you are still interested in doing so at this point. In that event, you need only read my posting history and compare it to that of those who have now begun (or continue) to engage in the vile, vitriolic personal attacks mentioned above, which for some reason the attackers feel is a substitute for factual data and experienced-based analysis.

Having said all of this about the J3 settlement, I will also say that I do not disagree at all with TPL on the decision to settle, even for the relatively small amount. As in poker, that's just the hand we were dealt within a given time frame, and sometimes, one's hand simply cannot be improved upon before the allotted time and/or the cards run out. As Ease and others have said, this will hopefully allow us to get those "big(ger) numbers" from other alleged infringers after re-validation occurs from the PTO. I am waiting with great anticipation for that day, and in the interim, it appears we do have some licenses that have not yet been reported in SEC filings which will provide at least some revenue for the current quarter. Also, there are the ongoing efforts of Mr. Goerner, who IMO continues on the right track. The bottom line is that all we need now is a favorable PTO ruling, and our position will be significantly strengthened — while it is possible that Judge Ward could come to the same Markman conclusion regarding the `584 even based on the revised claims submitted to the PTO (see a post from Wolf in this regard on Agora some time back, where Judge Ward did just such a thing), that remains to be seen at this juncture. Please recall my post back on Agora in
which I indicated that, with a re-validation by the PTO, we would then have TWO legally authoritative pieces of paper (one for infringement, the other for validity — both sides of the coin) that we can then send to targeted infringers. This is considerably different IMO from having a strong Markman ruling complemented only by a patent or patents that are under challenge at the PTO — yes, the patents remain valid until they are legally invalidated, but then again, the PTO proceedings act as a "cloud" on things due to
the element of uncertainty.

In closing, someone on the Agora board recently asked why we would attempt to return to Texas and Judge Ward if we hadn't "won" with the J3. This is a very easy question, and Billwilke hit the nail on the head with a post in response — why would we NOT return to Judge Ward when he has previously rendered such a favorable Markman ruling to us, in a venue where jurors, despite the Forgent exception, are largely favorable to patent holders? It is unlikely that Judge Ward, absent new evidence, would rule differently in subsequent Markman hearings on the same patents (except for perhaps the `584, with its "improved" claims), and as a result, we have our "foot in the door" there in the Eastern District of Texas. Nevertheless, the attempted return to Marshall does not in any way prove that the J3 settlements were "huge", or that there is anything coming from them in the future — any attempt to make such a connection is flawed, as it is based on a non-sequitur.

I hope the above has helped you in forming a better understanding of the litigation process and our current status. As it has turned out, our old friend, Larscot, was the most perceptive of all of us when he posted, quite some time ago back on Agora, that there would be no change in status until the PTO rules. Kudos to you, Larry, and I hope you and yours are well. If you have other questions, I will try to find time to answer them, but I am not in a position to make promises even though I now have a bit more "breathing room" due to a trial having
been moved from mid-June to later this year. Best wishes to all.,_._,___

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Cheers, DW