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United States District Court, S.D. New York

May 26, 2004.


The opinion of the court was delivered by: THOMAS GRIESA, Senior District Judge


THE COURT: In the recess I went over the specifications and the figures, and that seems to me quite important. Now, I just want to summarize this, because I do think it's quite important.

  The abstract says that the combined information is displayed to a customer by security. I'm not reading whole sentences, and I may be paraphrasing, so these are not intended to be exact or complete quotes, but the substance is what I believe I'm indicating.

  Now, figure 2 is discussed in column 7. And column 7 at line 6, starting at line 6, says: The customized order book is displayed on the customer's terminal, normally organized by security and price.

  Now, I want to jump to figure 5, And figure 5 is described in column 9. Now, the discussion of figure 5 starts at line 9 of column 9, and it says: Figure 5 shows pricing data that would be available to a customer of the present invention.

  And going on, it says that the screen shows something about NASDAQ. And then it goes on to say the screen also shows the full order book for the following three ECNs: Instinet, Island and Strike. And then it describes the fact that for these ECNs there is the information about multiple bids and offers on the particular stock about which this screen is created, and it talks about the fact that for the particular stock, Dell, there is a certain amount of information. And it describes that.

  Then it says at line 21: Thus, the entire order books of all ECN members and the market makers, bids and offers, are consolidated into a single informative screen for any particular security. And of course figure 5 shows a screen for the security Dell or the company Dell, and it shows what we have looked at many times.

  Now, let's go to the discussion of figure 3. Figure 3 is described in column 7. The discussion of figure 3 is quite lengthy, going from column 7, line 14, all the way over to column 8, line 46. It's all of interest, but the high points are, I believe, what I'm pointing out now.

  Starting at line 35 of column 7 it says: The data from the first ECN, after conversion by the protocol converter, is combined with the converted data from the second ECN in a data distribution server — which is item 203 of figure 3.

  Then it goes on. Column 7 goes on to say: This information is organized by the distribution server — that is, item 203 in figure 3 — first by security, then by price and then by information such as volume, time or other parameters as desired.

  Oh, let me start again and backtrack a little bit.

  The data from the first ECN, after conversion by the protocol converter, is combined with the converted data from the second ECN in a data distribution server. The data distribution server generates a consolidated order book containing all orders from all ECN members connected to the CCS. And then it goes on to speak about how the information is organized by security, etc.

  But the consolidated order book which is generated contains all orders from all ECN members connected to the CCS.

  Now, the rest of column 7 deals with certain things that I think are not germane to our problem. It talks about market metrics perhaps being displayed, that is, historical liquidity and price volatility. It talks about a certain customer may not be entitled to get information from a particular ECN so there has to be ECN filtering.

  And then at line 57 it talks about the subscriber server, item 205 of figure 3, supplying the resulting consolidated order book to an analytical engine, which is item 206 of figure 3. And the analytical engine performs certain functions that are not relevant here, as far as I can see it.

  Now, going to column 8, line 6, it says that the subscriber server, item 205 of figure 3, forwards the customized consolidated ECN order book and customer analytics to trader terminal 101 — that's simply the desktop computer of the trader — if the customer is not a NASDAQ market maker or user. If, however, the customer is a NASDAQ market maker or user, the customer's NASDAQ information feed may also be operatively connected to the desktop computer through a NASDAQ protocol converter and integrator, which is item 207 of figure 3. The converter integrator converts NASDAQ information protocol to systems protocol and integrates the data into the ECN order book information and supplies it to terminal 101.

  Now, there is some crucial language: Supplies it to terminal 101. That's the desktop computer of the trader. And then there is this language which I quote exactly, "resulting in a consolidated display as seen in figure 5 on trading terminal 101.'I

  Now, what you have in this description of figure 3, you have what is clearly the integrating step resulting in what is spoken of as a consolidated order book containing all orders from all ECN members. Then you have a way to work in NASDAQ information. And I think it's quite clearly implied that it's all NASDAQ information.

  And then, with no explanation at all of how it's done, you suddenly go from this consolidated order book to the display in figure 5 of a single security, but there is no description whatever of the steps or process by which that is done. It simply says all this consolidation is carried out, and finally you've got everything cranked in from NASDAQ, all on a consolidated basis, then resulting in a consolidated display as in figure 5. But the consolidated display is for one stock.

  Now, this is described in a way that does not literally tie in to any particular limitation of any particular claim. It's describing the invention more generally, what I might call generic terms, which leaves us with what to do with Claim 9

  The plaintiff Lava is certainly correct that the specification indicates that the goal of the invention is to display information about particular securities. Of course it is. And it's the goal of the invention, not the goal of something that is supposed to occur after the invention is carried out. But what in the claims achieves that is left, in my view, unexplained. And what I have just said refers obviously to the reading of the analysis of figure 3.

  Now, what is very clear from the specification is that where it says in Claim 9 that the process includes "integrating the order book information from each alternative trading system into a single order book," the phrase "single order book" means the order book for all the ECNs and all the stocks.

  Now, the next question — and certainly a crucial question — is what is meant by the next limitation, which is as follows, "distributing the combined order book to the traders in the common system order book protocol."

  Despite what I have said and really struggled with in much of the discussion today, after reading the specification I do not believe that it would be proper for the court to do anything but construe that limitation according to its words.

  If there were guidance in the specification to indicate that somehow the distribution meant that there was a distribution of less than the whole order book, I would have some guidance. I have none. Consequently, I must hold as a matter of interpretation that the distribution limitation simply means distributing the combined order book — that means in terms of the specification the consolidated order book — pertaining to all orders from all ECN members.

  When we come to the display limitation, I have no choice, it seems to me, but to read that limitation from the same point of view. It is very clear that the specification and figure 3 and figure 5 say that ultimately this invention ends up with a screen about a single security, but it does not explain how this comes about through Claim 9, despite the fact that this lengthy description of figure 3 is a quite full description of the whole process. But it isn't full enough, at least if one is supposed to apply it to Claim 9. If it is meant to apply to Claim 8 or some other claim, perhaps that may be what is intended, but there is no explanation of how it applies to Claim 9

  Consequently, I am compelled, I believe, to interpret the limitation "displaying said combined order book to the traders" as simply meaning the display of the combined or consolidated order book to the traders. And it's the only interpretation which I feel is justified by this language, even after going over the specification.

  So that's the ruling after the Markman hearing, and now we have to figure out when we have the trial. When are you all available for that? I will be gone until the 1st of August, but I can try it in August or thereafter.

  MR. STERN: Your Honor, if I may, I appreciate your ruling today. We appreciate your ruling today, and I know during the argument this morning you mentioned that you were inclined to hold with respect to the understanding of the phrase "received order book information from the at least two ATSs and the integration and conversion steps".

  THE COURT: I think we have covered that so many times.

  MR. STERN: That's fine, your Honor.

  THE COURT: It means all information from all ECNs, and that's agreed to by witnesses, parties, everybody.

  MR. STERN: That's fine, your Honor. Thank you.

  MR. WALDBAUM: Your Honor asked for a date. Is September/October okay?

  THE COURT: I take it your summer is summer, and you are not available in August.

  MR. WALDBAUM: Not available in August.

  THE COURT: That's right. I certainly wouldn't demand that.

  MR. STERN: Your Honor, I have back-to-back trials September, October through November. More importantly, my calendar is being held hostage by the U.S. Marshals downstairs, because they do not allow Blackberrys up here, so I don't have any calendar here with me.

  THE COURT: I think this ought to get tried quickly.

  MR. STERN: Your Honor, actually in light of your Honor's ruling, the truth is that there is going to be almost immediately a motion for summary judgment filed, at least of noninfringement and perhaps invalidity as well. So if that is the case, the question is really — although if your Honor wants to set a trial date, that's fine. We would like to make sure —

  THE COURT: Look, I think the Markman ruling was crucial —

  MR. STERN: Yes, I agree.

  THE COURT: — one way or the other. And it seems to me what you would do well to do — and you are all very, very fine lawyers. This was a wonderful presentation by all sides and all. But you ought to get together and figure out how to simplify the rest of the proceeding.

  I am sure, unless there is a settlement, it will go up to the federal circuit, and the best thing you could do for the business of your clients and all is to get this over with now. And I am sure nobody wants to stipulate, but you might figure out a way to get some quite abbreviated summary judgment motions in, and they could be decided quickly, and there could be a judgment, and then you would be on your way.

  MR. STERN: If I may, your Honor, in light of your Honor's ruling, as I said, we think there would be a relatively quick summary judgment motion. But the question is this — and counsel and I have not discussed this at all — there are more than just patent claims that have been asserted. There are a variety of other state law claims that are pending as well. And the question is whether or not the court — and I haven't spoken with counsel — but whether the court would be agreeable, if the parties were agreed to stipulate to a judgment one way or another on the patent claim, to hold in abeyance the state law claims.

  THE COURT: Oh, absolutely. Absolutely. Why don't you — you know, this has been a long day and a long two days. Why don't you figure out, so that we don't have to figure out until October or November or something to get this resolved. That doesn't help anybody.

  MR. STERN: Thank you, your Honor.

  MR. CARLINSKY: Two other housekeeping items, your Honor. Your Honor, a few weeks ago we had the issue of some inadvertently produced privilege documents. Your Honor instructed Lava at the time to return those. We have since had to write two letters. We still don't have those documents. I hate to raise that with the court, but it seems like again I have no choice. Hopefully I will get those if your Honor will instruct Mr. Bennett to return those, as you had previously done.

  MR. BENNETT: They are destroyed. He gave us the choice of returning them or destroying them, so we destroyed them.

  THE COURT: Well, have you told him?


  MR. BENNETT: He hasn't asked this question recently.

  THE COURT: Oh, well. I tell you —

  MR. WALDBAUM: Your Honor, let's keep to the main point. Let's try to get a trial as soon as possible.

  THE COURT: Every point is a main point.

  MR. WALDBAUM: We want to get to the Second Circuit as soon as possible. That's the main point.

  THE COURT: Sure.

  MR. CARLINSKY: While we were preparing for the Markman hearing Lava had filed a summary judgment motion on inequitable conduct, and we have asked for additional time to brief it.

  THE COURT: Look, there are other motions. You ought to figure out a way to trim those out. This is the main scene of the action. All that other stuff —

  MR. STERN: We appreciate that, your Honor.


  THE COURT: — it's really just a waste of time. You don't want to sit around. I can't decide anymore motions before I leave the 1st of June, and you don't want to sit waiting for that for two months and then start in on motion practice, I mean on the subsidiary things. It's just a waste of time.

  MR. CARLINSKY: You're right.

  MR. STERN: Your Honor, we wish you the best of vacations. Thank' you, your Honor, and to your law clerks as well.


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