United States District Court, S.D. New York
May 26, 2004.
LAVA TRADING, INC., Plaintiff, -against- SONIC TRADING MANAGEMENT, LLC, JOE CAMMARATA, AND LOUIS LIU, Defendants; LAVA TRADING, INC., Plaintiff, -against- ROYALBLUE GROUP PLC, ROYALBLUE FINANCIAL CORP. and ROYALBLUE FINANCIAL PLC, Defendants; LAVA TRADING, INC., Plaintiff, V. SONIC TRADING MANAGEMENT, LLC Defendant; LAVA TRADING, INC., Plaintiff, V. ROYALBLUE GROUP, PLC, Defendant
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
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
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
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
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
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
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
THE COURT: Well, have you told him?
MR. CARLINSKY: No.
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
MR. STERN: We appreciate that, your Honor.
MR. CARLINSKY: Okay.
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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