Legal Case Summary

Thank you, Your Honor. May it please the Court. My name is Chris Hollen

. I represent Silicon Knights, the plaintiff in the underlying action and the appellant here before the court. As we have set forth in our papers, this case really involves a disparate application of the rules across a number of different fronts throughout the lower court trial

. Specifically, each and every attempt by plaintiff to prove its case was met with very exacting scrutiny and any perceived real or imagined flaws in the case were found to be fatal. Conversely, at every turn, any problems with epic counterclaims were overlooked, ignored, or ultimately ruled not to be problematic as they were with our case

. I think a couple of examples that we've put forth in the briefing highlight that. Silicon Knights was not allowed to introduce evidence of the voluminous third party complaints regarding the Unreal 3 engine

. That included even complaints that were put on a blog listing that all third party licensees had access to and on which epic acknowledge those complaints responded to them and in many cases admitted that there were flaws with the engine. We were not permitted to put those forth simply because they were alleged to have been made after the 2005 signing of the contract despite the fact that the contract encompassed a number of games and therefore required that Silicon Knights continue to, if the court will, re-up with its agreement with epic at each and every turn

. On the converse, epic was permitted to put in whatever third party praise it wanted about the engine at any point in time including praise well after the signing of the contract, including third party praise that if the rationale regarding hearsay and regarding 403 rulings were to be applied evenly, those issues should have been excluded as well. Certainly at a minimum we should have been allowed to introduce the third party complaints to challenge the position their witnesses took on the stand that there were no problems with the engine that in other words the way they were able to cast as we phrased it in the briefing, Silicon Knights has this lone complainant in the wilderness among the 178 licensees which was really what the jury was ultimately presented with

. The second piece of rulings that I think are emblematic of what we're discussing here are the exclusion of all evidence of epic's own fraudulent conduct after the signing of the contract and it appears as we've briefed and as we discussed in the reply that the court perceived all possible fraud to ceased as of the date of the signing of the contract where rather than viewing it as an independent and alternative grounds for relief and again where the contract specifically contemplated a series of engine usages that Silicon Knights would engage in certainly the ongoing misrepresentations that occurred throughout the period of usage would be relevant and again if we look at the opposite side epic was allowed to introduce all of that Silicon Knights ongoing usage was allowed to make comment on what Silicon Knights was supposedly doing with the code whether it was gutting the engine fast enough or not and make all the arguments that made all of which post dated the signing of the contract and yet we were not able to put those even in context on cross examination by showing that some of the action some of the continued usage that Silicon Knights was making was a direct result of the ongoing misrepresentations by epic and again I think those two those two issue or those two examples really amplify what we're talking about here the third that I would point out would be the exclusion of what came to be referred to as the black list subsequent to filing of the complaint Silicon Knights was put on a list for every single one of the several dozen licensees including several major publishers that if that publisher when it signed up as a licensee with epic would do business with Silicon Knights it would never be a due to business with epic that is very dramatic evidence of the UDPTA the unfair and deceptive Praid Practices Act claimed that we had the grounds on which that was excluded was that it came after again the filing of the the the signing of the contract and the filing of the complaint but again under simple notice pleading in federal court I'm alleging the same tort the fact that I discover additional evidence of that tort throughout the discovery process should not be something that is fatal to me pursuing that or utilizing the evidence that I've discovered through discovery process and yet when we attempted to introduce that evidence at trial it was summarily halted well I mean case law was a claim for fraud in utero yes there is your honor and I believe we've cited that in the briefing the the the concept that fraud is something that is an ongoing tort and and can be because there's there's two distinct claims fraud in the inducement you you defrauded me in signing up for the contract and then especially in a situation like this when you're saying you're improperly utilizing my my engine in an ongoing fashion that certainly believe that's the perfect example and again I apologize I don't have the case citation for you that certainly there's nothing from this circuit that we'd be binding on you but the the precedent is certainly therefore fraud as an ongoing tort and that's why fraud as an ongoing tort exists separate and independent as an alternative grounds that we've pled I would also submit that again even if even if the court were to agree with the exclusion from my prime of fascia case of that ongoing fraud and the ongoing third party complaints after the signing of the contract I still should have been in a allowed to I should have still should have been able to allow use those in cross examination when their witnesses get up and take the stand and deny knowledge claim that the the engine works claim that none of these problems that silicon nights has proffered even existed and I think certainly when we look at the exclusion of or the granting of the rule 50 motion that that effectively throughout all of the fraud base tort claims there's a relevance there as well when the standard is is there any sufficient legal basis for any reasonable juror to believe the evidence supports my clients claims and taking all of that in the light most favorable to silicon nights with that as a standard certainly looking at complaints contemporaneously by Disney by through its point of vista games division by electronic arts by ubi soft by midway by all of the major publishers around the world of video games they're all complaining Disney's complaint the reason we highlighted in the briefing here is it is almost a verbatim recitation of the complaints that silicon nights had and it was sent to epic literally contemporaneously with filing of this lawsuit Disney complaint and the epic paid them their money back that if that is not at least evidence even if I'm not allowed to use it in my case in chief even if the court agrees on that it certainly is informative for the court on a denovo review of whether or not reasonable people could view silicon nights claims as having merit since multitudes of other publishers in this industry who had this exact same set of problems lodge those same complaints with epic and in many cases dependent basically what it came down to was the bigger you are the more attention you get from epic a small company like my client is not allowed to even be cared about in its complaints and ultimately as we go through the trial all of those other complaints are excluded and we're left as I said appearing to be to the jury a lone wolf sort of crying in the wilderness for relief which was not factually the case and I think certainly on the denial of the rule of 50 motion I think in terms of reasonable this could reasonable people agree with us that's informative on the other side looking at the counter claims and what was allowed to occur in terms of judgment against my client certainly the the same standards were not put forth lack of a deposit of the of the code in front of the copyright office was simply overlooked the minimus absolutely diminuous copying admitted admitted by their experts by their own witnesses simply overlooked even though into the court's point there's not a single case anywhere in any jurisdiction district court or a peasant level that finds 0.5% to 2% copying sufficient to find copyright infringement they can't cite one there it doesn't exist yet the court allowed that to proceed whereas that was in my view if I'm getting held these other standards and all my cases getting thrown out I couldn't imagine that that's not going to go forward on the other side or the same standards I can apply similarly with respect to the trade secrets they're found or admitted repeatedly that all of those major companies that I just mentioned electronic arts Ubisoft all of them had access to these same supposed trade secrets they all they were under licensing agreements they they they were you're on that's how they got access to the code and that's their own the why is that probative of of your issue of trade secrets because it's probative because when you give your absolute that the bear license is all they have they said well I signed up a license agreement with them therefore it took to rephrase what they're saying whatever they do with the code I guess is okay and that's not the standard when you know that you're licensing it not simply third parties not simply unknown people that are smaller developers like my client but large major competitors like Ubisoft Microsoft electronic arts midway all these huge companies that have reams and reams of developers working and you give them your code and you know they are making not only games with your code but directly competitive games that are based on bait game engines being made simultaneously by the same developing parties and in fact again if we go back to the third party complaints in those complaints it's reflected that many of those people are saying well your stuff doesn't work so I'm going to put my team from my own game over here on this code to make sure it works to get it fixed and go forward that is the evidence that we're talking about that they are on notice then your honor that they have to simply not say well I got a license agreement with them so I'm just going to assume that they aren't going to breach it they have to take action to be reasonable that's again the standard what reasonable steps that they take to ensure that they kept their secret out of the hands of people that weren't allowed to have it and the way their contracts are structured it's only supposed to be the people working on their games that are supposed to look at they're not supposed to just be able to cross pollinate between all of their other game developers especially when they're putting out an engine as was the case with all of those that I listed they all had engines that were being put out in competition with the the UE3 game engine the engines that were the basis of their other games and as a result they they were on notice in honor if you will to take more reasonable steps and not simply say I'm going to willfully turn up the die and and ignore what is right in front of me certainly the the cases again that we've cited in the brief bear that out that when when you're given notice like that you need to take those reasonable steps the same thing is true with respect to the the double recovery issue and and again when in the briefs epic pointed out you know that one of their positions was that they thought for example with the with respect to the code deposit if the proper code wasn't deposited and there was no proof of that given to the jury while there's no harm well there is harm first of all the jury is in left with a false impression that not only is something that epic supposedly created but also that somehow the federal government via the copyright office has blessed it as being something very important and registrable when in fact the evidence was never put forth to show what in fact was ever registered and that was very important in this type of situation where you've got multiple iterations 27 or 28 iterations of the game engine that supposedly were given to my client and at no point are they ever saying well this is the one this is the part of this one that was actually registered I am because I apologize I actually switch or I'm talking about the attorneys fees claim because when they got when they got the I did and I apologize you're on right I switch over the copyright on that because the reason the copyright dam or issue was important was because they were allowed to then bootstrap that up and claim attorneys fees and I did I did slip up with respect to double recovery the their entire position is that somehow there was additional harm that was being compensated by the copyright infringement or by the trade secret infringement and separate it apart even if the court allows those claims before to go forward which I do not think they should separate apart from that they should not be able to then be made whole by virtue of a $2

.7 million recovery for the license fees because once the license fees are paid de facto no other use was improper again the third party usage evidently you can do whatever you want with the code once you've paid the license fee and their only argument as well somehow there was this additional benefit that was given to Siliconites the only reason they were able to present that as a benefit was because their expert on damages literally just counter-eating dollar for revenue Siliconites ever got and said that was always beneficial to SK without and our damages expert wasn't allowed to rebut that and take into account costs insurance facilities and other things that one typically would to determine whether there was indeed a profit which there was not in this case I short of time here I don't know if the court has any for the questions if not all you got for a bottle yes thank you right I'm probably not going to get this right mr. Shabelsky exactly right all right good to hear from you thank you if you please the court on Mike Shabelsky here on behalf of Epic Games I think it's important that the court not lose sight of the big picture here Siliconites had the benefit of a five-year discovery period to Marshall whatever evidence it could in support of its claims we then had a nearly three-week jury trial the jury heard their evidence and came back against them across the board the jury rejected Siliconites breach of contract claim finding that Epic did nothing wrong another contract we delivered an engine that worked as promised and it felt instead that it was Silicon Knights that had breached the license agreement that it had used our code in an authorized manner to work on several video game projects without paying a license fee and in addition in doing so they massively stole our trade secrets some three hundred and thirty three trade secrets were proven that they had stolen and they massively infringed the copyright and they did so in order to earn tens of millions of dollars now all the arguments they have raised on appeal do not challenge those fundamental facts that the jury found that Epic did not breach the contract but it was Silicon Knights that did and it was Silicon Knights that stole from us now the plethora little arguments that we've heard today don't change any of that turning first to the third party complaint issue first the court does not need to consider this issue at all if it affirms the dismissal of the fraud counts that is because below the only profit relevance for this evidence related to the fraud claims only it was not profit to have any relevance on Silicon Knights breach of contract claim or our counter claims secondly the court must make clear the very limited nature of the court's ruling the trial court did not exclude all evidence of third party complaints it excluded all it allowed evidence of complaints that predated the party's license agreement what this court excluded and the only thing it excluded was hearsay evidence of post license app agreement complaints the reason the court drew that distinction was because all the complaints were hearsay something counsel still has never addressed in their briefs or argument today the evidence they wanted to put in were letters from third parties without any corroborating testimony from a witness who could sponsor it and overcome the hearsay objection and so the only profit non hearsay reason for that evidence was the fact that it could constitute notice to epic before the party's license agreement informed epic state of mind and that was the distinction the court drew it was completely proper completely in keeping with the not with the hearsay nature of the evidence in addition the court excluded the evidence on post LA complaints on the additional basis under rule 403 factors finding that the need for a trial within a trial regarding each of these alleged post license application complaints would unduly retract the trial be unduly presidential in confusion confusing siliconites has never addressed that issue in their briefs are here today and that's an independent adequate grounds for the exclusion of this of this evidence and so there was nothing improper about the trial court's rulings on that issue in addition the second excluded allegedly excluded evidence talked here today concerned what counsel refers to as a blacklist but there was no black list at all nor was there any exclusion or proper made on that the issue concerned license agreements that epic entered into with other parties after siliconites had sued those agreements did not contain a blacklist do not work with siliconites it quite properly included a provision that told other licensees do not share epic code with siliconites no it's that perfectly proper to do so i think so in the circumstances where we had learned that siliconites had been massively ripping off our code for years that we ask our instructor all the licensees not to continue to give code to to a thief but be that as it may the agreements are irrelevant to the claims that were presented there is no contention that those contracts that said don't share our code are relevant to siliconites breach of contract claim are too any of our counter claims nor they relevant to a siliconites fraud claims those agreements do not tend to show one way or the other whether epic made any representations to siliconites to induce the license agreement and if so whether any such representations were false were made with the intent to deceive where were reasonably relied upon what siliconites is trying to do now on appeal is recast its unfair deceptive trade practice claim to try to make them after the these agreements after the fact relevant to those that claim but the complaint the unfair deceptive trade practice claim in the complaint focused on the alleged representations made before the license agreement that induced the license agreement the complaint makes no reference to these do not share clauses in third party contracts and furthermore siliconites did not preserve this issue below it never sought to introduce into evidence these contracts and all that ever happened below in their trial is that siliconites asked one witness whether he was aware of such an agreement there was an objection it was sustained and siliconites never offered what the answer to the witness would have been whether the witness even had knowledge of these agreements and thereafter siliconites never even moved to introduce the exhibits so there was no error made with exclusion of these exhibits because they were never introduced turning to the counter claims then first on the copyright there is the repeated argument made today that somehow siliconites either didn't prove that the code was copyrighted or didn't prove what was deposited with the copyright office first of all let me make clear if it's not already from our breeze epic proved that all the unreal engine three code that siliconites copied was registered here are the facts from the record siliconites first got access to the ue3 code at august 2004 that's when the nine-month evaluation period started siliconites witnesses testified that they had stopped downloading and merging epics code into the siliconites engine by august of 2006 that testimony came from for example siliconites director of technology mr

. O'Reilly whose testimony on that topic appears on pages 904 and 908 of the joint appendix so all the code ue3 code that siliconites copied came from that two year period from august 2004 to august 2006 and even though siliconites continue to include epic code in the engine after that period it all dates from that two year period epic introduced into evidence registrations that covered the ue3 code from august 2004 all the way to october of 2006 they appear in the appendix on pages 20 65 through 76 the initial registration from august 2004 on its face covered the entire ue3 code as it existed as of august 2004 and the subsequent registrations that were introduced into evidence without objection applied to the original code plus all quote revisions and updates to the code so epic did show in the record and the evidence was undisputed that all the code that siliconites says it downloaded and copied were in fact subject to registrations and those registrations were in proper form as cited in our brief under regulations entitled 37 of the code of federal regulations a party is not required to deposit the entirety of the code as part of its registration just the first 25 and last 25 pages and the undisputed testimony from mr. Wilbur at trial appearing on pages 2001 to 2006 of the joint appendix is that in fact our registrations include at the first 25 and last 25 pages there was no objection to the introduction of the registrations on any other basis and i could go on and say that point out as well your honors that this issue is moot about need to prove registration cacylchonites never asked for an instruction saying that epic had to prove registration its instructions on the elements of copyright infringement instruction 49 appearing at page 74 of the joint appendix stated that epic only had to prove two things for verdict in its favor that epic is the owner of a valid copyright and that siliconites copied original elements there was no mention made of registration as a requirement and indeed the trial court then gave the instructions as siliconites requested citing only those two elements siliconites proposed to additional instructions that address registration but those instructions stated only that an owner may but not must register a copyright and those proposed instructions appear at pages 578 to 579 siliconites proposed instructions said the consequences of not registering were only that the recovery would be limited to actual damages and profits and not stat but you couldn't recover statutory damages the trial court adopted siliconites proposed language instructed that registration may be done but never said registration must be done so it is law of the case that siliconites own request that registration is not an element of ethics copyright claim so both as a matter of fact and now as a law of the case they have identified no basis for setting aside the verdict against them on the copyright claim regarding the diminimous issue i want to make sure the record is clear on this as well because siliconites keeps arguing that only two percent of ethics code was copied that is flat out wrong epics copying a silicae's copying of ethics code was intentional it was systematic they copied starting off the entirety of our engine and did it not once but hundreds if not thousands of times on an almost daily basis as their employees worked on unauthorized video games over four-year period their argument proceeds from an incorrect factual premise they argue as if the only evidence that on copying came from dr

. Felton's comparative analysis what they say said was two percent i'll address that in a moment explain why that's wrong the evidence of siliconites unauthorized copying came from multiple sources in addition to dr. Felton sources that proved substantial copying there were direct admissions by silicon nights that they had copied substantial portions of the engine it started in 2005 as their witness mr

. barns explained when they copied one hundred percent of the engine to start work on their first unauthorized game called the box it continued in time when we got to all august of 2006 when they said they had stopped downloading additional code evidence was presented of power points and memorandum from the company's president at the time indicating that they would still be using up to fifty percent of epics code in their engine and even continuing forward in time in the following year there was the memorandum from their director of technology mr. O'Reilly saying that even at that point into o eight or they were using twenty one point five percent of our code in their engine there was an addition to the directed missions i witnessed testimony from an independent third party who had inspected the engine in two thousand and eight and found that it included modified and unmodified ue three code including quote lot of the core stuff in quote that was mr. pin warden's testimony silicon nights focus on the tail end of its use in the summer of two thousand and nine after silicon nights and its lawyers and its experts tried to quote clean up the engine by making cosmetic changes to it the foil dr. Felton's comparative analysis well silicon nights doesn't get a pass because in two thousand and nine the amount of code it used or was able to disguise had been decreased or even if they had stopped using our code all together they are and remain liable for their substantial infringement from the time period at least by two thousand and five continuing into two thousand and nine and even when dr

. pin warden's testimony silicon nights focus on the tail end of its use in the summer of two thousand and nine after silicon nights and its lawyers and its experts tried to quote clean up the engine by making cosmetic changes to it the foil dr. Felton's comparative analysis well silicon nights doesn't get a pass because in two thousand and nine the amount of code it used or was able to disguise had been decreased or even if they had stopped using our code all together they are and remain liable for their substantial infringement from the time period at least by two thousand and five continuing into two thousand and nine and even when dr. Felton identified in his analysis constituted tens of thousands of lines of code that he explained were both qualitatively important to the operation of an engine gave it a lot of value and why was copied as well as took lots of time and money and creativity to create and at the end of the day then whether silicon nights copying was substantial to the minimus and there could hardly be any doubt that it was substantial is a fact question there was more than sufficient basis to go to the jury on that question silicon nights was able to argue make all these arguments to the jury they did make those arguments to the jury the jury rejected it regarding the trade secrets counterclaim your honor the evidence is undisputed here on appeal that silicon nights misappropriated hundreds of ethics trade secrets that is misappropriation was intentional approved at the highest levels of the company it lasted several years and they used them to make tens of millions of dollars and then when they were called out that they engaged in what the trial court called a cover-up of a cover-up to try to mask that they had tried to conceal their massive theft none of these issues are challenged on appeal but silicon nights none of the less once a pass for its massive theft it claims that epic didn't protect its trade secrets but epic did and showed it at trial epic uses extensive protections to protect its trade secrets including state-of-the-art electronic protections state-of-the-art physical security protections and of course legal restrictions that bind as employees and licensees and others with access to its trade secrets importantly there was no evidence presented by silicon nights or anyone else that software developers commonly use other protections that epic does not and also very importantly epic measures have worked they have worked at maintaining the secrecy of their their trade secrets two witnesses very knowledgeable with the computer industry mr. Tim Sweeney and Wolfgang Engel testified that epic trade secrets the ones that issued that were stolen are not commonly known in the industry proving that epic trade secrets have in fact protections have in fact been successful in maintaining the secrecy so silicon night says that all those protections however and their proven track record of success mean nothing because epic didn't audit other licensees to see if they had stolen trade secrets just like silicon nights did well that does not entitle silicon nights to judgment as a matter of law on our counter claim and putting aside the jury's considered verdict the trade secret act requires f only that efforts be undertaken that are reasonable under under the circumstances to maintain their secrecy the act does not mandate licensee audits in fact the act doesn't mention licensee audits at all no case has ever held that licensee audits are required silicon nights is certainly never cited in any in the six years we've been litigating this case and indeed in many other cases courts have upheld this efficiency of a software developers trade secret protections without even mentioning whether or not licensee audits are occurred and certainly that is the case here because there is no evidence that other licensees had in fact misappropriated epic trade secrets and there was no evidence that other software companies that license software do sort of random spot audits certainly a rational jury could and did conclude in these circumstances that epic took reasonable precautions to protect their trade secrets the law does not require epic to harass innocent licensees silicon nights was instead free to argue to the jury our protections weren't reasonable it did in fact make all those arguments to the jury and again the jury rejected them finally your honor on the double recovery issue there is no double recovery and so again I want to make sure the record is clear on this as well the award on the breach of our breach of contract was for the unpaid license fees for the five or so games that silicon nights worked on without paying a license fee that award was different than the award on the copyright and trade secrets counterclaims the award on the copyright and trade secret counterclaims discouraged silicon nights unlawful profits that's what we asked for before the jury that's with the instructions to the jury were so they were different claims with different elements seeking different relief there is no double recovery we weren't claiming a double benefit the law clearly allows us under copyright and trade secrets to discouragement of the wrong doers unjust profits that's what we got under those claims the breach of contract damages were separate so all the counterclaims survived silicon nights is not entitled to judgment as a matter of law to sit aside the jury verdict of any of those and let's hear any other questions I thank the court for its attention and ask for a furnace Mr

. Felton identified in his analysis constituted tens of thousands of lines of code that he explained were both qualitatively important to the operation of an engine gave it a lot of value and why was copied as well as took lots of time and money and creativity to create and at the end of the day then whether silicon nights copying was substantial to the minimus and there could hardly be any doubt that it was substantial is a fact question there was more than sufficient basis to go to the jury on that question silicon nights was able to argue make all these arguments to the jury they did make those arguments to the jury the jury rejected it regarding the trade secrets counterclaim your honor the evidence is undisputed here on appeal that silicon nights misappropriated hundreds of ethics trade secrets that is misappropriation was intentional approved at the highest levels of the company it lasted several years and they used them to make tens of millions of dollars and then when they were called out that they engaged in what the trial court called a cover-up of a cover-up to try to mask that they had tried to conceal their massive theft none of these issues are challenged on appeal but silicon nights none of the less once a pass for its massive theft it claims that epic didn't protect its trade secrets but epic did and showed it at trial epic uses extensive protections to protect its trade secrets including state-of-the-art electronic protections state-of-the-art physical security protections and of course legal restrictions that bind as employees and licensees and others with access to its trade secrets importantly there was no evidence presented by silicon nights or anyone else that software developers commonly use other protections that epic does not and also very importantly epic measures have worked they have worked at maintaining the secrecy of their their trade secrets two witnesses very knowledgeable with the computer industry mr. Tim Sweeney and Wolfgang Engel testified that epic trade secrets the ones that issued that were stolen are not commonly known in the industry proving that epic trade secrets have in fact protections have in fact been successful in maintaining the secrecy so silicon night says that all those protections however and their proven track record of success mean nothing because epic didn't audit other licensees to see if they had stolen trade secrets just like silicon nights did well that does not entitle silicon nights to judgment as a matter of law on our counter claim and putting aside the jury's considered verdict the trade secret act requires f only that efforts be undertaken that are reasonable under under the circumstances to maintain their secrecy the act does not mandate licensee audits in fact the act doesn't mention licensee audits at all no case has ever held that licensee audits are required silicon nights is certainly never cited in any in the six years we've been litigating this case and indeed in many other cases courts have upheld this efficiency of a software developers trade secret protections without even mentioning whether or not licensee audits are occurred and certainly that is the case here because there is no evidence that other licensees had in fact misappropriated epic trade secrets and there was no evidence that other software companies that license software do sort of random spot audits certainly a rational jury could and did conclude in these circumstances that epic took reasonable precautions to protect their trade secrets the law does not require epic to harass innocent licensees silicon nights was instead free to argue to the jury our protections weren't reasonable it did in fact make all those arguments to the jury and again the jury rejected them finally your honor on the double recovery issue there is no double recovery and so again I want to make sure the record is clear on this as well the award on the breach of our breach of contract was for the unpaid license fees for the five or so games that silicon nights worked on without paying a license fee that award was different than the award on the copyright and trade secrets counterclaims the award on the copyright and trade secret counterclaims discouraged silicon nights unlawful profits that's what we asked for before the jury that's with the instructions to the jury were so they were different claims with different elements seeking different relief there is no double recovery we weren't claiming a double benefit the law clearly allows us under copyright and trade secrets to discouragement of the wrong doers unjust profits that's what we got under those claims the breach of contract damages were separate so all the counterclaims survived silicon nights is not entitled to judgment as a matter of law to sit aside the jury verdict of any of those and let's hear any other questions I thank the court for its attention and ask for a furnace Mr. Holland you have some rebuttal time yes your honor let me just quickly take a few of Mr. Shabelsky's points in order first of all he led off with the idea that all the evidence was heard I just think it's manifestly clear but that's part of my point all the evidence was not heard in addition with respect the trade secrets I like to raise a couple of points Mr

. Holland you have some rebuttal time yes your honor let me just quickly take a few of Mr. Shabelsky's points in order first of all he led off with the idea that all the evidence was heard I just think it's manifestly clear but that's part of my point all the evidence was not heard in addition with respect the trade secrets I like to raise a couple of points Mr. Shabelsky makes much of the 333 trade secrets what he ignores is the fact that nearly 1200 trade secrets were asserted and at a minimum when evaluating the attorney's fees award one should not be able to come in and overstate its alleged claim to that effect nearly 80% of the alleged trade secrets were asserted were withdrawn and then come in and say I'm entitled to get all my money back for having to try this case on that trade secret ground secondly it's not that he goes and sort of creates issues where there aren't on there's no case that says a licensee has to be audited well all the case law says that you have to take reasonable steps when you're put on notice that this is potentially occurring and doing nothing cannot be alleged to be reasonable I disagree strongly with my colleagues assertion that testimony came in about all these steps that were taken the only step that was ever discussed at trial was the contract itself and that's it in terms of the hearsay issue I again disagree I think we've abundantly had that in the record for quite some time a few times he made this statement that you know this is not challenged on appeal this was waived etc as we cited as particularly with respect to the blacklist issue on page 22 and 23 of our reply brief we cited the court to respond to their waiver argument exactly to where the court had both severely not just it wasn't just that the blacklist was attempted to be introduced and was objected it was attempted twice and on the second attempt the court made it clear that we were to and the courts were to move on from that I then repeatedly throughout the remainder of the trial asked and was assured that all such objections to jury instructions those types of objections that were made to Evan and their instructions were in fact preserved and that's again at pages 22 and 23 the reply brief so I did that we waived that and didn't preserve it to be able to talk about here it's not not correct in terms of the undo the undo prejudice and and undo confusion issue that that was attributed to the third party complaint I believe very clearly or very honestly you're honest that the opposite is true what was unduly confusing was for the the jury to be able to sit there and think that as he just attempted to say that silica knight says some sort of thief that it stole all this stuff that rather than the opposite of what it's true when the one looks at those third party complaints silica knight was in the same position everybody else in the industry was it couldn't make the code work and the reason why the de minimis infringement argument exists still today is because as pled in the complaint before the complaint before the case even started the code was being removed and and it continued to be removed because it didn't work not for any other reason not because there were some sort of titious use being put to not because some benefit was being gained to it because it did not work and that's why disney midway EA and all those of the people complained about it and that's why silica knight took it out of the engine the idea that they're out penalized for having what is called the core or the the the the core component that's another misnomer as the testimony client at trial made clear and as we've put in the briefs that is actually a shorthand version for what's called the math core the mathematical algorithms that any game engine must be based upon or what the core is and so while mr. chibalsky very adeptly says it's the core of the engine it's only called that because it's something that no engine can be made without and no one can actually own because it's so they're so ubiquitous and the testimony came in about that therefore the fact that it's supposed the core does not show some sort of monetary attribution to it with respect to the copyright very briefly the point is that yes you can you may submit your copyright to be registered you don't have to but you have to show that you've registered you have to show what you've registered if you get an litigation you want to sue someone for copyright infringement you can't simply say I registered something never demonstrate what it is and then have a jury verdict in the millions of dollars that's based on that and then further say I'm going to rely on my statutory registration which I didn't improve existed to bootstrap up attorney's fees claim on top of that and really that's the main point of the case here you are the whole theme that he has even today as we're sitting here that silica knight somehow stole everything and wanted to act nefariously this instance has one major logical flaw if that's what they wanted to do they never would have brought this case they could have set up in canada and simply taking the code and I wouldn't be standing here before you they came down here to have a right to have an injustice righted and this court has the last chance to have it happen I hope the court will do the right thing thank you honor

. Shabelsky makes much of the 333 trade secrets what he ignores is the fact that nearly 1200 trade secrets were asserted and at a minimum when evaluating the attorney's fees award one should not be able to come in and overstate its alleged claim to that effect nearly 80% of the alleged trade secrets were asserted were withdrawn and then come in and say I'm entitled to get all my money back for having to try this case on that trade secret ground secondly it's not that he goes and sort of creates issues where there aren't on there's no case that says a licensee has to be audited well all the case law says that you have to take reasonable steps when you're put on notice that this is potentially occurring and doing nothing cannot be alleged to be reasonable I disagree strongly with my colleagues assertion that testimony came in about all these steps that were taken the only step that was ever discussed at trial was the contract itself and that's it in terms of the hearsay issue I again disagree I think we've abundantly had that in the record for quite some time a few times he made this statement that you know this is not challenged on appeal this was waived etc as we cited as particularly with respect to the blacklist issue on page 22 and 23 of our reply brief we cited the court to respond to their waiver argument exactly to where the court had both severely not just it wasn't just that the blacklist was attempted to be introduced and was objected it was attempted twice and on the second attempt the court made it clear that we were to and the courts were to move on from that I then repeatedly throughout the remainder of the trial asked and was assured that all such objections to jury instructions those types of objections that were made to Evan and their instructions were in fact preserved and that's again at pages 22 and 23 the reply brief so I did that we waived that and didn't preserve it to be able to talk about here it's not not correct in terms of the undo the undo prejudice and and undo confusion issue that that was attributed to the third party complaint I believe very clearly or very honestly you're honest that the opposite is true what was unduly confusing was for the the jury to be able to sit there and think that as he just attempted to say that silica knight says some sort of thief that it stole all this stuff that rather than the opposite of what it's true when the one looks at those third party complaints silica knight was in the same position everybody else in the industry was it couldn't make the code work and the reason why the de minimis infringement argument exists still today is because as pled in the complaint before the complaint before the case even started the code was being removed and and it continued to be removed because it didn't work not for any other reason not because there were some sort of titious use being put to not because some benefit was being gained to it because it did not work and that's why disney midway EA and all those of the people complained about it and that's why silica knight took it out of the engine the idea that they're out penalized for having what is called the core or the the the the core component that's another misnomer as the testimony client at trial made clear and as we've put in the briefs that is actually a shorthand version for what's called the math core the mathematical algorithms that any game engine must be based upon or what the core is and so while mr. chibalsky very adeptly says it's the core of the engine it's only called that because it's something that no engine can be made without and no one can actually own because it's so they're so ubiquitous and the testimony came in about that therefore the fact that it's supposed the core does not show some sort of monetary attribution to it with respect to the copyright very briefly the point is that yes you can you may submit your copyright to be registered you don't have to but you have to show that you've registered you have to show what you've registered if you get an litigation you want to sue someone for copyright infringement you can't simply say I registered something never demonstrate what it is and then have a jury verdict in the millions of dollars that's based on that and then further say I'm going to rely on my statutory registration which I didn't improve existed to bootstrap up attorney's fees claim on top of that and really that's the main point of the case here you are the whole theme that he has even today as we're sitting here that silica knight somehow stole everything and wanted to act nefariously this instance has one major logical flaw if that's what they wanted to do they never would have brought this case they could have set up in canada and simply taking the code and I wouldn't be standing here before you they came down here to have a right to have an injustice righted and this court has the last chance to have it happen I hope the court will do the right thing thank you honor

Thank you, Your Honor. May it please the Court. My name is Chris Hollen. I represent Silicon Knights, the plaintiff in the underlying action and the appellant here before the court. As we have set forth in our papers, this case really involves a disparate application of the rules across a number of different fronts throughout the lower court trial. Specifically, each and every attempt by plaintiff to prove its case was met with very exacting scrutiny and any perceived real or imagined flaws in the case were found to be fatal. Conversely, at every turn, any problems with epic counterclaims were overlooked, ignored, or ultimately ruled not to be problematic as they were with our case. I think a couple of examples that we've put forth in the briefing highlight that. Silicon Knights was not allowed to introduce evidence of the voluminous third party complaints regarding the Unreal 3 engine. That included even complaints that were put on a blog listing that all third party licensees had access to and on which epic acknowledge those complaints responded to them and in many cases admitted that there were flaws with the engine. We were not permitted to put those forth simply because they were alleged to have been made after the 2005 signing of the contract despite the fact that the contract encompassed a number of games and therefore required that Silicon Knights continue to, if the court will, re-up with its agreement with epic at each and every turn. On the converse, epic was permitted to put in whatever third party praise it wanted about the engine at any point in time including praise well after the signing of the contract, including third party praise that if the rationale regarding hearsay and regarding 403 rulings were to be applied evenly, those issues should have been excluded as well. Certainly at a minimum we should have been allowed to introduce the third party complaints to challenge the position their witnesses took on the stand that there were no problems with the engine that in other words the way they were able to cast as we phrased it in the briefing, Silicon Knights has this lone complainant in the wilderness among the 178 licensees which was really what the jury was ultimately presented with. The second piece of rulings that I think are emblematic of what we're discussing here are the exclusion of all evidence of epic's own fraudulent conduct after the signing of the contract and it appears as we've briefed and as we discussed in the reply that the court perceived all possible fraud to ceased as of the date of the signing of the contract where rather than viewing it as an independent and alternative grounds for relief and again where the contract specifically contemplated a series of engine usages that Silicon Knights would engage in certainly the ongoing misrepresentations that occurred throughout the period of usage would be relevant and again if we look at the opposite side epic was allowed to introduce all of that Silicon Knights ongoing usage was allowed to make comment on what Silicon Knights was supposedly doing with the code whether it was gutting the engine fast enough or not and make all the arguments that made all of which post dated the signing of the contract and yet we were not able to put those even in context on cross examination by showing that some of the action some of the continued usage that Silicon Knights was making was a direct result of the ongoing misrepresentations by epic and again I think those two those two issue or those two examples really amplify what we're talking about here the third that I would point out would be the exclusion of what came to be referred to as the black list subsequent to filing of the complaint Silicon Knights was put on a list for every single one of the several dozen licensees including several major publishers that if that publisher when it signed up as a licensee with epic would do business with Silicon Knights it would never be a due to business with epic that is very dramatic evidence of the UDPTA the unfair and deceptive Praid Practices Act claimed that we had the grounds on which that was excluded was that it came after again the filing of the the the signing of the contract and the filing of the complaint but again under simple notice pleading in federal court I'm alleging the same tort the fact that I discover additional evidence of that tort throughout the discovery process should not be something that is fatal to me pursuing that or utilizing the evidence that I've discovered through discovery process and yet when we attempted to introduce that evidence at trial it was summarily halted well I mean case law was a claim for fraud in utero yes there is your honor and I believe we've cited that in the briefing the the the concept that fraud is something that is an ongoing tort and and can be because there's there's two distinct claims fraud in the inducement you you defrauded me in signing up for the contract and then especially in a situation like this when you're saying you're improperly utilizing my my engine in an ongoing fashion that certainly believe that's the perfect example and again I apologize I don't have the case citation for you that certainly there's nothing from this circuit that we'd be binding on you but the the precedent is certainly therefore fraud as an ongoing tort and that's why fraud as an ongoing tort exists separate and independent as an alternative grounds that we've pled I would also submit that again even if even if the court were to agree with the exclusion from my prime of fascia case of that ongoing fraud and the ongoing third party complaints after the signing of the contract I still should have been in a allowed to I should have still should have been able to allow use those in cross examination when their witnesses get up and take the stand and deny knowledge claim that the the engine works claim that none of these problems that silicon nights has proffered even existed and I think certainly when we look at the exclusion of or the granting of the rule 50 motion that that effectively throughout all of the fraud base tort claims there's a relevance there as well when the standard is is there any sufficient legal basis for any reasonable juror to believe the evidence supports my clients claims and taking all of that in the light most favorable to silicon nights with that as a standard certainly looking at complaints contemporaneously by Disney by through its point of vista games division by electronic arts by ubi soft by midway by all of the major publishers around the world of video games they're all complaining Disney's complaint the reason we highlighted in the briefing here is it is almost a verbatim recitation of the complaints that silicon nights had and it was sent to epic literally contemporaneously with filing of this lawsuit Disney complaint and the epic paid them their money back that if that is not at least evidence even if I'm not allowed to use it in my case in chief even if the court agrees on that it certainly is informative for the court on a denovo review of whether or not reasonable people could view silicon nights claims as having merit since multitudes of other publishers in this industry who had this exact same set of problems lodge those same complaints with epic and in many cases dependent basically what it came down to was the bigger you are the more attention you get from epic a small company like my client is not allowed to even be cared about in its complaints and ultimately as we go through the trial all of those other complaints are excluded and we're left as I said appearing to be to the jury a lone wolf sort of crying in the wilderness for relief which was not factually the case and I think certainly on the denial of the rule of 50 motion I think in terms of reasonable this could reasonable people agree with us that's informative on the other side looking at the counter claims and what was allowed to occur in terms of judgment against my client certainly the the same standards were not put forth lack of a deposit of the of the code in front of the copyright office was simply overlooked the minimus absolutely diminuous copying admitted admitted by their experts by their own witnesses simply overlooked even though into the court's point there's not a single case anywhere in any jurisdiction district court or a peasant level that finds 0.5% to 2% copying sufficient to find copyright infringement they can't cite one there it doesn't exist yet the court allowed that to proceed whereas that was in my view if I'm getting held these other standards and all my cases getting thrown out I couldn't imagine that that's not going to go forward on the other side or the same standards I can apply similarly with respect to the trade secrets they're found or admitted repeatedly that all of those major companies that I just mentioned electronic arts Ubisoft all of them had access to these same supposed trade secrets they all they were under licensing agreements they they they were you're on that's how they got access to the code and that's their own the why is that probative of of your issue of trade secrets because it's probative because when you give your absolute that the bear license is all they have they said well I signed up a license agreement with them therefore it took to rephrase what they're saying whatever they do with the code I guess is okay and that's not the standard when you know that you're licensing it not simply third parties not simply unknown people that are smaller developers like my client but large major competitors like Ubisoft Microsoft electronic arts midway all these huge companies that have reams and reams of developers working and you give them your code and you know they are making not only games with your code but directly competitive games that are based on bait game engines being made simultaneously by the same developing parties and in fact again if we go back to the third party complaints in those complaints it's reflected that many of those people are saying well your stuff doesn't work so I'm going to put my team from my own game over here on this code to make sure it works to get it fixed and go forward that is the evidence that we're talking about that they are on notice then your honor that they have to simply not say well I got a license agreement with them so I'm just going to assume that they aren't going to breach it they have to take action to be reasonable that's again the standard what reasonable steps that they take to ensure that they kept their secret out of the hands of people that weren't allowed to have it and the way their contracts are structured it's only supposed to be the people working on their games that are supposed to look at they're not supposed to just be able to cross pollinate between all of their other game developers especially when they're putting out an engine as was the case with all of those that I listed they all had engines that were being put out in competition with the the UE3 game engine the engines that were the basis of their other games and as a result they they were on notice in honor if you will to take more reasonable steps and not simply say I'm going to willfully turn up the die and and ignore what is right in front of me certainly the the cases again that we've cited in the brief bear that out that when when you're given notice like that you need to take those reasonable steps the same thing is true with respect to the the double recovery issue and and again when in the briefs epic pointed out you know that one of their positions was that they thought for example with the with respect to the code deposit if the proper code wasn't deposited and there was no proof of that given to the jury while there's no harm well there is harm first of all the jury is in left with a false impression that not only is something that epic supposedly created but also that somehow the federal government via the copyright office has blessed it as being something very important and registrable when in fact the evidence was never put forth to show what in fact was ever registered and that was very important in this type of situation where you've got multiple iterations 27 or 28 iterations of the game engine that supposedly were given to my client and at no point are they ever saying well this is the one this is the part of this one that was actually registered I am because I apologize I actually switch or I'm talking about the attorneys fees claim because when they got when they got the I did and I apologize you're on right I switch over the copyright on that because the reason the copyright dam or issue was important was because they were allowed to then bootstrap that up and claim attorneys fees and I did I did slip up with respect to double recovery the their entire position is that somehow there was additional harm that was being compensated by the copyright infringement or by the trade secret infringement and separate it apart even if the court allows those claims before to go forward which I do not think they should separate apart from that they should not be able to then be made whole by virtue of a $2.7 million recovery for the license fees because once the license fees are paid de facto no other use was improper again the third party usage evidently you can do whatever you want with the code once you've paid the license fee and their only argument as well somehow there was this additional benefit that was given to Siliconites the only reason they were able to present that as a benefit was because their expert on damages literally just counter-eating dollar for revenue Siliconites ever got and said that was always beneficial to SK without and our damages expert wasn't allowed to rebut that and take into account costs insurance facilities and other things that one typically would to determine whether there was indeed a profit which there was not in this case I short of time here I don't know if the court has any for the questions if not all you got for a bottle yes thank you right I'm probably not going to get this right mr. Shabelsky exactly right all right good to hear from you thank you if you please the court on Mike Shabelsky here on behalf of Epic Games I think it's important that the court not lose sight of the big picture here Siliconites had the benefit of a five-year discovery period to Marshall whatever evidence it could in support of its claims we then had a nearly three-week jury trial the jury heard their evidence and came back against them across the board the jury rejected Siliconites breach of contract claim finding that Epic did nothing wrong another contract we delivered an engine that worked as promised and it felt instead that it was Silicon Knights that had breached the license agreement that it had used our code in an authorized manner to work on several video game projects without paying a license fee and in addition in doing so they massively stole our trade secrets some three hundred and thirty three trade secrets were proven that they had stolen and they massively infringed the copyright and they did so in order to earn tens of millions of dollars now all the arguments they have raised on appeal do not challenge those fundamental facts that the jury found that Epic did not breach the contract but it was Silicon Knights that did and it was Silicon Knights that stole from us now the plethora little arguments that we've heard today don't change any of that turning first to the third party complaint issue first the court does not need to consider this issue at all if it affirms the dismissal of the fraud counts that is because below the only profit relevance for this evidence related to the fraud claims only it was not profit to have any relevance on Silicon Knights breach of contract claim or our counter claims secondly the court must make clear the very limited nature of the court's ruling the trial court did not exclude all evidence of third party complaints it excluded all it allowed evidence of complaints that predated the party's license agreement what this court excluded and the only thing it excluded was hearsay evidence of post license app agreement complaints the reason the court drew that distinction was because all the complaints were hearsay something counsel still has never addressed in their briefs or argument today the evidence they wanted to put in were letters from third parties without any corroborating testimony from a witness who could sponsor it and overcome the hearsay objection and so the only profit non hearsay reason for that evidence was the fact that it could constitute notice to epic before the party's license agreement informed epic state of mind and that was the distinction the court drew it was completely proper completely in keeping with the not with the hearsay nature of the evidence in addition the court excluded the evidence on post LA complaints on the additional basis under rule 403 factors finding that the need for a trial within a trial regarding each of these alleged post license application complaints would unduly retract the trial be unduly presidential in confusion confusing siliconites has never addressed that issue in their briefs are here today and that's an independent adequate grounds for the exclusion of this of this evidence and so there was nothing improper about the trial court's rulings on that issue in addition the second excluded allegedly excluded evidence talked here today concerned what counsel refers to as a blacklist but there was no black list at all nor was there any exclusion or proper made on that the issue concerned license agreements that epic entered into with other parties after siliconites had sued those agreements did not contain a blacklist do not work with siliconites it quite properly included a provision that told other licensees do not share epic code with siliconites no it's that perfectly proper to do so i think so in the circumstances where we had learned that siliconites had been massively ripping off our code for years that we ask our instructor all the licensees not to continue to give code to to a thief but be that as it may the agreements are irrelevant to the claims that were presented there is no contention that those contracts that said don't share our code are relevant to siliconites breach of contract claim are too any of our counter claims nor they relevant to a siliconites fraud claims those agreements do not tend to show one way or the other whether epic made any representations to siliconites to induce the license agreement and if so whether any such representations were false were made with the intent to deceive where were reasonably relied upon what siliconites is trying to do now on appeal is recast its unfair deceptive trade practice claim to try to make them after the these agreements after the fact relevant to those that claim but the complaint the unfair deceptive trade practice claim in the complaint focused on the alleged representations made before the license agreement that induced the license agreement the complaint makes no reference to these do not share clauses in third party contracts and furthermore siliconites did not preserve this issue below it never sought to introduce into evidence these contracts and all that ever happened below in their trial is that siliconites asked one witness whether he was aware of such an agreement there was an objection it was sustained and siliconites never offered what the answer to the witness would have been whether the witness even had knowledge of these agreements and thereafter siliconites never even moved to introduce the exhibits so there was no error made with exclusion of these exhibits because they were never introduced turning to the counter claims then first on the copyright there is the repeated argument made today that somehow siliconites either didn't prove that the code was copyrighted or didn't prove what was deposited with the copyright office first of all let me make clear if it's not already from our breeze epic proved that all the unreal engine three code that siliconites copied was registered here are the facts from the record siliconites first got access to the ue3 code at august 2004 that's when the nine-month evaluation period started siliconites witnesses testified that they had stopped downloading and merging epics code into the siliconites engine by august of 2006 that testimony came from for example siliconites director of technology mr. O'Reilly whose testimony on that topic appears on pages 904 and 908 of the joint appendix so all the code ue3 code that siliconites copied came from that two year period from august 2004 to august 2006 and even though siliconites continue to include epic code in the engine after that period it all dates from that two year period epic introduced into evidence registrations that covered the ue3 code from august 2004 all the way to october of 2006 they appear in the appendix on pages 20 65 through 76 the initial registration from august 2004 on its face covered the entire ue3 code as it existed as of august 2004 and the subsequent registrations that were introduced into evidence without objection applied to the original code plus all quote revisions and updates to the code so epic did show in the record and the evidence was undisputed that all the code that siliconites says it downloaded and copied were in fact subject to registrations and those registrations were in proper form as cited in our brief under regulations entitled 37 of the code of federal regulations a party is not required to deposit the entirety of the code as part of its registration just the first 25 and last 25 pages and the undisputed testimony from mr. Wilbur at trial appearing on pages 2001 to 2006 of the joint appendix is that in fact our registrations include at the first 25 and last 25 pages there was no objection to the introduction of the registrations on any other basis and i could go on and say that point out as well your honors that this issue is moot about need to prove registration cacylchonites never asked for an instruction saying that epic had to prove registration its instructions on the elements of copyright infringement instruction 49 appearing at page 74 of the joint appendix stated that epic only had to prove two things for verdict in its favor that epic is the owner of a valid copyright and that siliconites copied original elements there was no mention made of registration as a requirement and indeed the trial court then gave the instructions as siliconites requested citing only those two elements siliconites proposed to additional instructions that address registration but those instructions stated only that an owner may but not must register a copyright and those proposed instructions appear at pages 578 to 579 siliconites proposed instructions said the consequences of not registering were only that the recovery would be limited to actual damages and profits and not stat but you couldn't recover statutory damages the trial court adopted siliconites proposed language instructed that registration may be done but never said registration must be done so it is law of the case that siliconites own request that registration is not an element of ethics copyright claim so both as a matter of fact and now as a law of the case they have identified no basis for setting aside the verdict against them on the copyright claim regarding the diminimous issue i want to make sure the record is clear on this as well because siliconites keeps arguing that only two percent of ethics code was copied that is flat out wrong epics copying a silicae's copying of ethics code was intentional it was systematic they copied starting off the entirety of our engine and did it not once but hundreds if not thousands of times on an almost daily basis as their employees worked on unauthorized video games over four-year period their argument proceeds from an incorrect factual premise they argue as if the only evidence that on copying came from dr. Felton's comparative analysis what they say said was two percent i'll address that in a moment explain why that's wrong the evidence of siliconites unauthorized copying came from multiple sources in addition to dr. Felton sources that proved substantial copying there were direct admissions by silicon nights that they had copied substantial portions of the engine it started in 2005 as their witness mr. barns explained when they copied one hundred percent of the engine to start work on their first unauthorized game called the box it continued in time when we got to all august of 2006 when they said they had stopped downloading additional code evidence was presented of power points and memorandum from the company's president at the time indicating that they would still be using up to fifty percent of epics code in their engine and even continuing forward in time in the following year there was the memorandum from their director of technology mr. O'Reilly saying that even at that point into o eight or they were using twenty one point five percent of our code in their engine there was an addition to the directed missions i witnessed testimony from an independent third party who had inspected the engine in two thousand and eight and found that it included modified and unmodified ue three code including quote lot of the core stuff in quote that was mr. pin warden's testimony silicon nights focus on the tail end of its use in the summer of two thousand and nine after silicon nights and its lawyers and its experts tried to quote clean up the engine by making cosmetic changes to it the foil dr. Felton's comparative analysis well silicon nights doesn't get a pass because in two thousand and nine the amount of code it used or was able to disguise had been decreased or even if they had stopped using our code all together they are and remain liable for their substantial infringement from the time period at least by two thousand and five continuing into two thousand and nine and even when dr. Felton identified in his analysis constituted tens of thousands of lines of code that he explained were both qualitatively important to the operation of an engine gave it a lot of value and why was copied as well as took lots of time and money and creativity to create and at the end of the day then whether silicon nights copying was substantial to the minimus and there could hardly be any doubt that it was substantial is a fact question there was more than sufficient basis to go to the jury on that question silicon nights was able to argue make all these arguments to the jury they did make those arguments to the jury the jury rejected it regarding the trade secrets counterclaim your honor the evidence is undisputed here on appeal that silicon nights misappropriated hundreds of ethics trade secrets that is misappropriation was intentional approved at the highest levels of the company it lasted several years and they used them to make tens of millions of dollars and then when they were called out that they engaged in what the trial court called a cover-up of a cover-up to try to mask that they had tried to conceal their massive theft none of these issues are challenged on appeal but silicon nights none of the less once a pass for its massive theft it claims that epic didn't protect its trade secrets but epic did and showed it at trial epic uses extensive protections to protect its trade secrets including state-of-the-art electronic protections state-of-the-art physical security protections and of course legal restrictions that bind as employees and licensees and others with access to its trade secrets importantly there was no evidence presented by silicon nights or anyone else that software developers commonly use other protections that epic does not and also very importantly epic measures have worked they have worked at maintaining the secrecy of their their trade secrets two witnesses very knowledgeable with the computer industry mr. Tim Sweeney and Wolfgang Engel testified that epic trade secrets the ones that issued that were stolen are not commonly known in the industry proving that epic trade secrets have in fact protections have in fact been successful in maintaining the secrecy so silicon night says that all those protections however and their proven track record of success mean nothing because epic didn't audit other licensees to see if they had stolen trade secrets just like silicon nights did well that does not entitle silicon nights to judgment as a matter of law on our counter claim and putting aside the jury's considered verdict the trade secret act requires f only that efforts be undertaken that are reasonable under under the circumstances to maintain their secrecy the act does not mandate licensee audits in fact the act doesn't mention licensee audits at all no case has ever held that licensee audits are required silicon nights is certainly never cited in any in the six years we've been litigating this case and indeed in many other cases courts have upheld this efficiency of a software developers trade secret protections without even mentioning whether or not licensee audits are occurred and certainly that is the case here because there is no evidence that other licensees had in fact misappropriated epic trade secrets and there was no evidence that other software companies that license software do sort of random spot audits certainly a rational jury could and did conclude in these circumstances that epic took reasonable precautions to protect their trade secrets the law does not require epic to harass innocent licensees silicon nights was instead free to argue to the jury our protections weren't reasonable it did in fact make all those arguments to the jury and again the jury rejected them finally your honor on the double recovery issue there is no double recovery and so again I want to make sure the record is clear on this as well the award on the breach of our breach of contract was for the unpaid license fees for the five or so games that silicon nights worked on without paying a license fee that award was different than the award on the copyright and trade secrets counterclaims the award on the copyright and trade secret counterclaims discouraged silicon nights unlawful profits that's what we asked for before the jury that's with the instructions to the jury were so they were different claims with different elements seeking different relief there is no double recovery we weren't claiming a double benefit the law clearly allows us under copyright and trade secrets to discouragement of the wrong doers unjust profits that's what we got under those claims the breach of contract damages were separate so all the counterclaims survived silicon nights is not entitled to judgment as a matter of law to sit aside the jury verdict of any of those and let's hear any other questions I thank the court for its attention and ask for a furnace Mr. Holland you have some rebuttal time yes your honor let me just quickly take a few of Mr. Shabelsky's points in order first of all he led off with the idea that all the evidence was heard I just think it's manifestly clear but that's part of my point all the evidence was not heard in addition with respect the trade secrets I like to raise a couple of points Mr. Shabelsky makes much of the 333 trade secrets what he ignores is the fact that nearly 1200 trade secrets were asserted and at a minimum when evaluating the attorney's fees award one should not be able to come in and overstate its alleged claim to that effect nearly 80% of the alleged trade secrets were asserted were withdrawn and then come in and say I'm entitled to get all my money back for having to try this case on that trade secret ground secondly it's not that he goes and sort of creates issues where there aren't on there's no case that says a licensee has to be audited well all the case law says that you have to take reasonable steps when you're put on notice that this is potentially occurring and doing nothing cannot be alleged to be reasonable I disagree strongly with my colleagues assertion that testimony came in about all these steps that were taken the only step that was ever discussed at trial was the contract itself and that's it in terms of the hearsay issue I again disagree I think we've abundantly had that in the record for quite some time a few times he made this statement that you know this is not challenged on appeal this was waived etc as we cited as particularly with respect to the blacklist issue on page 22 and 23 of our reply brief we cited the court to respond to their waiver argument exactly to where the court had both severely not just it wasn't just that the blacklist was attempted to be introduced and was objected it was attempted twice and on the second attempt the court made it clear that we were to and the courts were to move on from that I then repeatedly throughout the remainder of the trial asked and was assured that all such objections to jury instructions those types of objections that were made to Evan and their instructions were in fact preserved and that's again at pages 22 and 23 the reply brief so I did that we waived that and didn't preserve it to be able to talk about here it's not not correct in terms of the undo the undo prejudice and and undo confusion issue that that was attributed to the third party complaint I believe very clearly or very honestly you're honest that the opposite is true what was unduly confusing was for the the jury to be able to sit there and think that as he just attempted to say that silica knight says some sort of thief that it stole all this stuff that rather than the opposite of what it's true when the one looks at those third party complaints silica knight was in the same position everybody else in the industry was it couldn't make the code work and the reason why the de minimis infringement argument exists still today is because as pled in the complaint before the complaint before the case even started the code was being removed and and it continued to be removed because it didn't work not for any other reason not because there were some sort of titious use being put to not because some benefit was being gained to it because it did not work and that's why disney midway EA and all those of the people complained about it and that's why silica knight took it out of the engine the idea that they're out penalized for having what is called the core or the the the the core component that's another misnomer as the testimony client at trial made clear and as we've put in the briefs that is actually a shorthand version for what's called the math core the mathematical algorithms that any game engine must be based upon or what the core is and so while mr. chibalsky very adeptly says it's the core of the engine it's only called that because it's something that no engine can be made without and no one can actually own because it's so they're so ubiquitous and the testimony came in about that therefore the fact that it's supposed the core does not show some sort of monetary attribution to it with respect to the copyright very briefly the point is that yes you can you may submit your copyright to be registered you don't have to but you have to show that you've registered you have to show what you've registered if you get an litigation you want to sue someone for copyright infringement you can't simply say I registered something never demonstrate what it is and then have a jury verdict in the millions of dollars that's based on that and then further say I'm going to rely on my statutory registration which I didn't improve existed to bootstrap up attorney's fees claim on top of that and really that's the main point of the case here you are the whole theme that he has even today as we're sitting here that silica knight somehow stole everything and wanted to act nefariously this instance has one major logical flaw if that's what they wanted to do they never would have brought this case they could have set up in canada and simply taking the code and I wouldn't be standing here before you they came down here to have a right to have an injustice righted and this court has the last chance to have it happen I hope the court will do the right thing thank you honor

Thank you, Your Honor. May it please the Court. My name is Chris Hollen. I represent Silicon Knights, the plaintiff in the underlying action and the appellant here before the court. As we have set forth in our papers, this case really involves a disparate application of the rules across a number of different fronts throughout the lower court trial. Specifically, each and every attempt by plaintiff to prove its case was met with very exacting scrutiny and any perceived real or imagined flaws in the case were found to be fatal. Conversely, at every turn, any problems with epic counterclaims were overlooked, ignored, or ultimately ruled not to be problematic as they were with our case. I think a couple of examples that we've put forth in the briefing highlight that. Silicon Knights was not allowed to introduce evidence of the voluminous third party complaints regarding the Unreal 3 engine. That included even complaints that were put on a blog listing that all third party licensees had access to and on which epic acknowledge those complaints responded to them and in many cases admitted that there were flaws with the engine. We were not permitted to put those forth simply because they were alleged to have been made after the 2005 signing of the contract despite the fact that the contract encompassed a number of games and therefore required that Silicon Knights continue to, if the court will, re-up with its agreement with epic at each and every turn. On the converse, epic was permitted to put in whatever third party praise it wanted about the engine at any point in time including praise well after the signing of the contract, including third party praise that if the rationale regarding hearsay and regarding 403 rulings were to be applied evenly, those issues should have been excluded as well. Certainly at a minimum we should have been allowed to introduce the third party complaints to challenge the position their witnesses took on the stand that there were no problems with the engine that in other words the way they were able to cast as we phrased it in the briefing, Silicon Knights has this lone complainant in the wilderness among the 178 licensees which was really what the jury was ultimately presented with. The second piece of rulings that I think are emblematic of what we're discussing here are the exclusion of all evidence of epic's own fraudulent conduct after the signing of the contract and it appears as we've briefed and as we discussed in the reply that the court perceived all possible fraud to ceased as of the date of the signing of the contract where rather than viewing it as an independent and alternative grounds for relief and again where the contract specifically contemplated a series of engine usages that Silicon Knights would engage in certainly the ongoing misrepresentations that occurred throughout the period of usage would be relevant and again if we look at the opposite side epic was allowed to introduce all of that Silicon Knights ongoing usage was allowed to make comment on what Silicon Knights was supposedly doing with the code whether it was gutting the engine fast enough or not and make all the arguments that made all of which post dated the signing of the contract and yet we were not able to put those even in context on cross examination by showing that some of the action some of the continued usage that Silicon Knights was making was a direct result of the ongoing misrepresentations by epic and again I think those two those two issue or those two examples really amplify what we're talking about here the third that I would point out would be the exclusion of what came to be referred to as the black list subsequent to filing of the complaint Silicon Knights was put on a list for every single one of the several dozen licensees including several major publishers that if that publisher when it signed up as a licensee with epic would do business with Silicon Knights it would never be a due to business with epic that is very dramatic evidence of the UDPTA the unfair and deceptive Praid Practices Act claimed that we had the grounds on which that was excluded was that it came after again the filing of the the the signing of the contract and the filing of the complaint but again under simple notice pleading in federal court I'm alleging the same tort the fact that I discover additional evidence of that tort throughout the discovery process should not be something that is fatal to me pursuing that or utilizing the evidence that I've discovered through discovery process and yet when we attempted to introduce that evidence at trial it was summarily halted well I mean case law was a claim for fraud in utero yes there is your honor and I believe we've cited that in the briefing the the the concept that fraud is something that is an ongoing tort and and can be because there's there's two distinct claims fraud in the inducement you you defrauded me in signing up for the contract and then especially in a situation like this when you're saying you're improperly utilizing my my engine in an ongoing fashion that certainly believe that's the perfect example and again I apologize I don't have the case citation for you that certainly there's nothing from this circuit that we'd be binding on you but the the precedent is certainly therefore fraud as an ongoing tort and that's why fraud as an ongoing tort exists separate and independent as an alternative grounds that we've pled I would also submit that again even if even if the court were to agree with the exclusion from my prime of fascia case of that ongoing fraud and the ongoing third party complaints after the signing of the contract I still should have been in a allowed to I should have still should have been able to allow use those in cross examination when their witnesses get up and take the stand and deny knowledge claim that the the engine works claim that none of these problems that silicon nights has proffered even existed and I think certainly when we look at the exclusion of or the granting of the rule 50 motion that that effectively throughout all of the fraud base tort claims there's a relevance there as well when the standard is is there any sufficient legal basis for any reasonable juror to believe the evidence supports my clients claims and taking all of that in the light most favorable to silicon nights with that as a standard certainly looking at complaints contemporaneously by Disney by through its point of vista games division by electronic arts by ubi soft by midway by all of the major publishers around the world of video games they're all complaining Disney's complaint the reason we highlighted in the briefing here is it is almost a verbatim recitation of the complaints that silicon nights had and it was sent to epic literally contemporaneously with filing of this lawsuit Disney complaint and the epic paid them their money back that if that is not at least evidence even if I'm not allowed to use it in my case in chief even if the court agrees on that it certainly is informative for the court on a denovo review of whether or not reasonable people could view silicon nights claims as having merit since multitudes of other publishers in this industry who had this exact same set of problems lodge those same complaints with epic and in many cases dependent basically what it came down to was the bigger you are the more attention you get from epic a small company like my client is not allowed to even be cared about in its complaints and ultimately as we go through the trial all of those other complaints are excluded and we're left as I said appearing to be to the jury a lone wolf sort of crying in the wilderness for relief which was not factually the case and I think certainly on the denial of the rule of 50 motion I think in terms of reasonable this could reasonable people agree with us that's informative on the other side looking at the counter claims and what was allowed to occur in terms of judgment against my client certainly the the same standards were not put forth lack of a deposit of the of the code in front of the copyright office was simply overlooked the minimus absolutely diminuous copying admitted admitted by their experts by their own witnesses simply overlooked even though into the court's point there's not a single case anywhere in any jurisdiction district court or a peasant level that finds 0.5% to 2% copying sufficient to find copyright infringement they can't cite one there it doesn't exist yet the court allowed that to proceed whereas that was in my view if I'm getting held these other standards and all my cases getting thrown out I couldn't imagine that that's not going to go forward on the other side or the same standards I can apply similarly with respect to the trade secrets they're found or admitted repeatedly that all of those major companies that I just mentioned electronic arts Ubisoft all of them had access to these same supposed trade secrets they all they were under licensing agreements they they they were you're on that's how they got access to the code and that's their own the why is that probative of of your issue of trade secrets because it's probative because when you give your absolute that the bear license is all they have they said well I signed up a license agreement with them therefore it took to rephrase what they're saying whatever they do with the code I guess is okay and that's not the standard when you know that you're licensing it not simply third parties not simply unknown people that are smaller developers like my client but large major competitors like Ubisoft Microsoft electronic arts midway all these huge companies that have reams and reams of developers working and you give them your code and you know they are making not only games with your code but directly competitive games that are based on bait game engines being made simultaneously by the same developing parties and in fact again if we go back to the third party complaints in those complaints it's reflected that many of those people are saying well your stuff doesn't work so I'm going to put my team from my own game over here on this code to make sure it works to get it fixed and go forward that is the evidence that we're talking about that they are on notice then your honor that they have to simply not say well I got a license agreement with them so I'm just going to assume that they aren't going to breach it they have to take action to be reasonable that's again the standard what reasonable steps that they take to ensure that they kept their secret out of the hands of people that weren't allowed to have it and the way their contracts are structured it's only supposed to be the people working on their games that are supposed to look at they're not supposed to just be able to cross pollinate between all of their other game developers especially when they're putting out an engine as was the case with all of those that I listed they all had engines that were being put out in competition with the the UE3 game engine the engines that were the basis of their other games and as a result they they were on notice in honor if you will to take more reasonable steps and not simply say I'm going to willfully turn up the die and and ignore what is right in front of me certainly the the cases again that we've cited in the brief bear that out that when when you're given notice like that you need to take those reasonable steps the same thing is true with respect to the the double recovery issue and and again when in the briefs epic pointed out you know that one of their positions was that they thought for example with the with respect to the code deposit if the proper code wasn't deposited and there was no proof of that given to the jury while there's no harm well there is harm first of all the jury is in left with a false impression that not only is something that epic supposedly created but also that somehow the federal government via the copyright office has blessed it as being something very important and registrable when in fact the evidence was never put forth to show what in fact was ever registered and that was very important in this type of situation where you've got multiple iterations 27 or 28 iterations of the game engine that supposedly were given to my client and at no point are they ever saying well this is the one this is the part of this one that was actually registered I am because I apologize I actually switch or I'm talking about the attorneys fees claim because when they got when they got the I did and I apologize you're on right I switch over the copyright on that because the reason the copyright dam or issue was important was because they were allowed to then bootstrap that up and claim attorneys fees and I did I did slip up with respect to double recovery the their entire position is that somehow there was additional harm that was being compensated by the copyright infringement or by the trade secret infringement and separate it apart even if the court allows those claims before to go forward which I do not think they should separate apart from that they should not be able to then be made whole by virtue of a $2.7 million recovery for the license fees because once the license fees are paid de facto no other use was improper again the third party usage evidently you can do whatever you want with the code once you've paid the license fee and their only argument as well somehow there was this additional benefit that was given to Siliconites the only reason they were able to present that as a benefit was because their expert on damages literally just counter-eating dollar for revenue Siliconites ever got and said that was always beneficial to SK without and our damages expert wasn't allowed to rebut that and take into account costs insurance facilities and other things that one typically would to determine whether there was indeed a profit which there was not in this case I short of time here I don't know if the court has any for the questions if not all you got for a bottle yes thank you right I'm probably not going to get this right mr. Shabelsky exactly right all right good to hear from you thank you if you please the court on Mike Shabelsky here on behalf of Epic Games I think it's important that the court not lose sight of the big picture here Siliconites had the benefit of a five-year discovery period to Marshall whatever evidence it could in support of its claims we then had a nearly three-week jury trial the jury heard their evidence and came back against them across the board the jury rejected Siliconites breach of contract claim finding that Epic did nothing wrong another contract we delivered an engine that worked as promised and it felt instead that it was Silicon Knights that had breached the license agreement that it had used our code in an authorized manner to work on several video game projects without paying a license fee and in addition in doing so they massively stole our trade secrets some three hundred and thirty three trade secrets were proven that they had stolen and they massively infringed the copyright and they did so in order to earn tens of millions of dollars now all the arguments they have raised on appeal do not challenge those fundamental facts that the jury found that Epic did not breach the contract but it was Silicon Knights that did and it was Silicon Knights that stole from us now the plethora little arguments that we've heard today don't change any of that turning first to the third party complaint issue first the court does not need to consider this issue at all if it affirms the dismissal of the fraud counts that is because below the only profit relevance for this evidence related to the fraud claims only it was not profit to have any relevance on Silicon Knights breach of contract claim or our counter claims secondly the court must make clear the very limited nature of the court's ruling the trial court did not exclude all evidence of third party complaints it excluded all it allowed evidence of complaints that predated the party's license agreement what this court excluded and the only thing it excluded was hearsay evidence of post license app agreement complaints the reason the court drew that distinction was because all the complaints were hearsay something counsel still has never addressed in their briefs or argument today the evidence they wanted to put in were letters from third parties without any corroborating testimony from a witness who could sponsor it and overcome the hearsay objection and so the only profit non hearsay reason for that evidence was the fact that it could constitute notice to epic before the party's license agreement informed epic state of mind and that was the distinction the court drew it was completely proper completely in keeping with the not with the hearsay nature of the evidence in addition the court excluded the evidence on post LA complaints on the additional basis under rule 403 factors finding that the need for a trial within a trial regarding each of these alleged post license application complaints would unduly retract the trial be unduly presidential in confusion confusing siliconites has never addressed that issue in their briefs are here today and that's an independent adequate grounds for the exclusion of this of this evidence and so there was nothing improper about the trial court's rulings on that issue in addition the second excluded allegedly excluded evidence talked here today concerned what counsel refers to as a blacklist but there was no black list at all nor was there any exclusion or proper made on that the issue concerned license agreements that epic entered into with other parties after siliconites had sued those agreements did not contain a blacklist do not work with siliconites it quite properly included a provision that told other licensees do not share epic code with siliconites no it's that perfectly proper to do so i think so in the circumstances where we had learned that siliconites had been massively ripping off our code for years that we ask our instructor all the licensees not to continue to give code to to a thief but be that as it may the agreements are irrelevant to the claims that were presented there is no contention that those contracts that said don't share our code are relevant to siliconites breach of contract claim are too any of our counter claims nor they relevant to a siliconites fraud claims those agreements do not tend to show one way or the other whether epic made any representations to siliconites to induce the license agreement and if so whether any such representations were false were made with the intent to deceive where were reasonably relied upon what siliconites is trying to do now on appeal is recast its unfair deceptive trade practice claim to try to make them after the these agreements after the fact relevant to those that claim but the complaint the unfair deceptive trade practice claim in the complaint focused on the alleged representations made before the license agreement that induced the license agreement the complaint makes no reference to these do not share clauses in third party contracts and furthermore siliconites did not preserve this issue below it never sought to introduce into evidence these contracts and all that ever happened below in their trial is that siliconites asked one witness whether he was aware of such an agreement there was an objection it was sustained and siliconites never offered what the answer to the witness would have been whether the witness even had knowledge of these agreements and thereafter siliconites never even moved to introduce the exhibits so there was no error made with exclusion of these exhibits because they were never introduced turning to the counter claims then first on the copyright there is the repeated argument made today that somehow siliconites either didn't prove that the code was copyrighted or didn't prove what was deposited with the copyright office first of all let me make clear if it's not already from our breeze epic proved that all the unreal engine three code that siliconites copied was registered here are the facts from the record siliconites first got access to the ue3 code at august 2004 that's when the nine-month evaluation period started siliconites witnesses testified that they had stopped downloading and merging epics code into the siliconites engine by august of 2006 that testimony came from for example siliconites director of technology mr. O'Reilly whose testimony on that topic appears on pages 904 and 908 of the joint appendix so all the code ue3 code that siliconites copied came from that two year period from august 2004 to august 2006 and even though siliconites continue to include epic code in the engine after that period it all dates from that two year period epic introduced into evidence registrations that covered the ue3 code from august 2004 all the way to october of 2006 they appear in the appendix on pages 20 65 through 76 the initial registration from august 2004 on its face covered the entire ue3 code as it existed as of august 2004 and the subsequent registrations that were introduced into evidence without objection applied to the original code plus all quote revisions and updates to the code so epic did show in the record and the evidence was undisputed that all the code that siliconites says it downloaded and copied were in fact subject to registrations and those registrations were in proper form as cited in our brief under regulations entitled 37 of the code of federal regulations a party is not required to deposit the entirety of the code as part of its registration just the first 25 and last 25 pages and the undisputed testimony from mr. Wilbur at trial appearing on pages 2001 to 2006 of the joint appendix is that in fact our registrations include at the first 25 and last 25 pages there was no objection to the introduction of the registrations on any other basis and i could go on and say that point out as well your honors that this issue is moot about need to prove registration cacylchonites never asked for an instruction saying that epic had to prove registration its instructions on the elements of copyright infringement instruction 49 appearing at page 74 of the joint appendix stated that epic only had to prove two things for verdict in its favor that epic is the owner of a valid copyright and that siliconites copied original elements there was no mention made of registration as a requirement and indeed the trial court then gave the instructions as siliconites requested citing only those two elements siliconites proposed to additional instructions that address registration but those instructions stated only that an owner may but not must register a copyright and those proposed instructions appear at pages 578 to 579 siliconites proposed instructions said the consequences of not registering were only that the recovery would be limited to actual damages and profits and not stat but you couldn't recover statutory damages the trial court adopted siliconites proposed language instructed that registration may be done but never said registration must be done so it is law of the case that siliconites own request that registration is not an element of ethics copyright claim so both as a matter of fact and now as a law of the case they have identified no basis for setting aside the verdict against them on the copyright claim regarding the diminimous issue i want to make sure the record is clear on this as well because siliconites keeps arguing that only two percent of ethics code was copied that is flat out wrong epics copying a silicae's copying of ethics code was intentional it was systematic they copied starting off the entirety of our engine and did it not once but hundreds if not thousands of times on an almost daily basis as their employees worked on unauthorized video games over four-year period their argument proceeds from an incorrect factual premise they argue as if the only evidence that on copying came from dr. Felton's comparative analysis what they say said was two percent i'll address that in a moment explain why that's wrong the evidence of siliconites unauthorized copying came from multiple sources in addition to dr. Felton sources that proved substantial copying there were direct admissions by silicon nights that they had copied substantial portions of the engine it started in 2005 as their witness mr. barns explained when they copied one hundred percent of the engine to start work on their first unauthorized game called the box it continued in time when we got to all august of 2006 when they said they had stopped downloading additional code evidence was presented of power points and memorandum from the company's president at the time indicating that they would still be using up to fifty percent of epics code in their engine and even continuing forward in time in the following year there was the memorandum from their director of technology mr. O'Reilly saying that even at that point into o eight or they were using twenty one point five percent of our code in their engine there was an addition to the directed missions i witnessed testimony from an independent third party who had inspected the engine in two thousand and eight and found that it included modified and unmodified ue three code including quote lot of the core stuff in quote that was mr. pin warden's testimony silicon nights focus on the tail end of its use in the summer of two thousand and nine after silicon nights and its lawyers and its experts tried to quote clean up the engine by making cosmetic changes to it the foil dr. Felton's comparative analysis well silicon nights doesn't get a pass because in two thousand and nine the amount of code it used or was able to disguise had been decreased or even if they had stopped using our code all together they are and remain liable for their substantial infringement from the time period at least by two thousand and five continuing into two thousand and nine and even when dr. Felton identified in his analysis constituted tens of thousands of lines of code that he explained were both qualitatively important to the operation of an engine gave it a lot of value and why was copied as well as took lots of time and money and creativity to create and at the end of the day then whether silicon nights copying was substantial to the minimus and there could hardly be any doubt that it was substantial is a fact question there was more than sufficient basis to go to the jury on that question silicon nights was able to argue make all these arguments to the jury they did make those arguments to the jury the jury rejected it regarding the trade secrets counterclaim your honor the evidence is undisputed here on appeal that silicon nights misappropriated hundreds of ethics trade secrets that is misappropriation was intentional approved at the highest levels of the company it lasted several years and they used them to make tens of millions of dollars and then when they were called out that they engaged in what the trial court called a cover-up of a cover-up to try to mask that they had tried to conceal their massive theft none of these issues are challenged on appeal but silicon nights none of the less once a pass for its massive theft it claims that epic didn't protect its trade secrets but epic did and showed it at trial epic uses extensive protections to protect its trade secrets including state-of-the-art electronic protections state-of-the-art physical security protections and of course legal restrictions that bind as employees and licensees and others with access to its trade secrets importantly there was no evidence presented by silicon nights or anyone else that software developers commonly use other protections that epic does not and also very importantly epic measures have worked they have worked at maintaining the secrecy of their their trade secrets two witnesses very knowledgeable with the computer industry mr. Tim Sweeney and Wolfgang Engel testified that epic trade secrets the ones that issued that were stolen are not commonly known in the industry proving that epic trade secrets have in fact protections have in fact been successful in maintaining the secrecy so silicon night says that all those protections however and their proven track record of success mean nothing because epic didn't audit other licensees to see if they had stolen trade secrets just like silicon nights did well that does not entitle silicon nights to judgment as a matter of law on our counter claim and putting aside the jury's considered verdict the trade secret act requires f only that efforts be undertaken that are reasonable under under the circumstances to maintain their secrecy the act does not mandate licensee audits in fact the act doesn't mention licensee audits at all no case has ever held that licensee audits are required silicon nights is certainly never cited in any in the six years we've been litigating this case and indeed in many other cases courts have upheld this efficiency of a software developers trade secret protections without even mentioning whether or not licensee audits are occurred and certainly that is the case here because there is no evidence that other licensees had in fact misappropriated epic trade secrets and there was no evidence that other software companies that license software do sort of random spot audits certainly a rational jury could and did conclude in these circumstances that epic took reasonable precautions to protect their trade secrets the law does not require epic to harass innocent licensees silicon nights was instead free to argue to the jury our protections weren't reasonable it did in fact make all those arguments to the jury and again the jury rejected them finally your honor on the double recovery issue there is no double recovery and so again I want to make sure the record is clear on this as well the award on the breach of our breach of contract was for the unpaid license fees for the five or so games that silicon nights worked on without paying a license fee that award was different than the award on the copyright and trade secrets counterclaims the award on the copyright and trade secret counterclaims discouraged silicon nights unlawful profits that's what we asked for before the jury that's with the instructions to the jury were so they were different claims with different elements seeking different relief there is no double recovery we weren't claiming a double benefit the law clearly allows us under copyright and trade secrets to discouragement of the wrong doers unjust profits that's what we got under those claims the breach of contract damages were separate so all the counterclaims survived silicon nights is not entitled to judgment as a matter of law to sit aside the jury verdict of any of those and let's hear any other questions I thank the court for its attention and ask for a furnace Mr. Holland you have some rebuttal time yes your honor let me just quickly take a few of Mr. Shabelsky's points in order first of all he led off with the idea that all the evidence was heard I just think it's manifestly clear but that's part of my point all the evidence was not heard in addition with respect the trade secrets I like to raise a couple of points Mr. Shabelsky makes much of the 333 trade secrets what he ignores is the fact that nearly 1200 trade secrets were asserted and at a minimum when evaluating the attorney's fees award one should not be able to come in and overstate its alleged claim to that effect nearly 80% of the alleged trade secrets were asserted were withdrawn and then come in and say I'm entitled to get all my money back for having to try this case on that trade secret ground secondly it's not that he goes and sort of creates issues where there aren't on there's no case that says a licensee has to be audited well all the case law says that you have to take reasonable steps when you're put on notice that this is potentially occurring and doing nothing cannot be alleged to be reasonable I disagree strongly with my colleagues assertion that testimony came in about all these steps that were taken the only step that was ever discussed at trial was the contract itself and that's it in terms of the hearsay issue I again disagree I think we've abundantly had that in the record for quite some time a few times he made this statement that you know this is not challenged on appeal this was waived etc as we cited as particularly with respect to the blacklist issue on page 22 and 23 of our reply brief we cited the court to respond to their waiver argument exactly to where the court had both severely not just it wasn't just that the blacklist was attempted to be introduced and was objected it was attempted twice and on the second attempt the court made it clear that we were to and the courts were to move on from that I then repeatedly throughout the remainder of the trial asked and was assured that all such objections to jury instructions those types of objections that were made to Evan and their instructions were in fact preserved and that's again at pages 22 and 23 the reply brief so I did that we waived that and didn't preserve it to be able to talk about here it's not not correct in terms of the undo the undo prejudice and and undo confusion issue that that was attributed to the third party complaint I believe very clearly or very honestly you're honest that the opposite is true what was unduly confusing was for the the jury to be able to sit there and think that as he just attempted to say that silica knight says some sort of thief that it stole all this stuff that rather than the opposite of what it's true when the one looks at those third party complaints silica knight was in the same position everybody else in the industry was it couldn't make the code work and the reason why the de minimis infringement argument exists still today is because as pled in the complaint before the complaint before the case even started the code was being removed and and it continued to be removed because it didn't work not for any other reason not because there were some sort of titious use being put to not because some benefit was being gained to it because it did not work and that's why disney midway EA and all those of the people complained about it and that's why silica knight took it out of the engine the idea that they're out penalized for having what is called the core or the the the the core component that's another misnomer as the testimony client at trial made clear and as we've put in the briefs that is actually a shorthand version for what's called the math core the mathematical algorithms that any game engine must be based upon or what the core is and so while mr. chibalsky very adeptly says it's the core of the engine it's only called that because it's something that no engine can be made without and no one can actually own because it's so they're so ubiquitous and the testimony came in about that therefore the fact that it's supposed the core does not show some sort of monetary attribution to it with respect to the copyright very briefly the point is that yes you can you may submit your copyright to be registered you don't have to but you have to show that you've registered you have to show what you've registered if you get an litigation you want to sue someone for copyright infringement you can't simply say I registered something never demonstrate what it is and then have a jury verdict in the millions of dollars that's based on that and then further say I'm going to rely on my statutory registration which I didn't improve existed to bootstrap up attorney's fees claim on top of that and really that's the main point of the case here you are the whole theme that he has even today as we're sitting here that silica knight somehow stole everything and wanted to act nefariously this instance has one major logical flaw if that's what they wanted to do they never would have brought this case they could have set up in canada and simply taking the code and I wouldn't be standing here before you they came down here to have a right to have an injustice righted and this court has the last chance to have it happen I hope the court will do the right thing thank you honor

Thank you, Your Honor. May it please the Court. My name is Chris Hollen. I represent Silicon Knights, the plaintiff in the underlying action and the appellant here before the court. As we have set forth in our papers, this case really involves a disparate application of the rules across a number of different fronts throughout the lower court trial. Specifically, each and every attempt by plaintiff to prove its case was met with very exacting scrutiny and any perceived real or imagined flaws in the case were found to be fatal. Conversely, at every turn, any problems with epic counterclaims were overlooked, ignored, or ultimately ruled not to be problematic as they were with our case. I think a couple of examples that we've put forth in the briefing highlight that. Silicon Knights was not allowed to introduce evidence of the voluminous third party complaints regarding the Unreal 3 engine. That included even complaints that were put on a blog listing that all third party licensees had access to and on which epic acknowledge those complaints responded to them and in many cases admitted that there were flaws with the engine. We were not permitted to put those forth simply because they were alleged to have been made after the 2005 signing of the contract despite the fact that the contract encompassed a number of games and therefore required that Silicon Knights continue to, if the court will, re-up with its agreement with epic at each and every turn. On the converse, epic was permitted to put in whatever third party praise it wanted about the engine at any point in time including praise well after the signing of the contract, including third party praise that if the rationale regarding hearsay and regarding 403 rulings were to be applied evenly, those issues should have been excluded as well. Certainly at a minimum we should have been allowed to introduce the third party complaints to challenge the position their witnesses took on the stand that there were no problems with the engine that in other words the way they were able to cast as we phrased it in the briefing, Silicon Knights has this lone complainant in the wilderness among the 178 licensees which was really what the jury was ultimately presented with. The second piece of rulings that I think are emblematic of what we're discussing here are the exclusion of all evidence of epic's own fraudulent conduct after the signing of the contract and it appears as we've briefed and as we discussed in the reply that the court perceived all possible fraud to ceased as of the date of the signing of the contract where rather than viewing it as an independent and alternative grounds for relief and again where the contract specifically contemplated a series of engine usages that Silicon Knights would engage in certainly the ongoing misrepresentations that occurred throughout the period of usage would be relevant and again if we look at the opposite side epic was allowed to introduce all of that Silicon Knights ongoing usage was allowed to make comment on what Silicon Knights was supposedly doing with the code whether it was gutting the engine fast enough or not and make all the arguments that made all of which post dated the signing of the contract and yet we were not able to put those even in context on cross examination by showing that some of the action some of the continued usage that Silicon Knights was making was a direct result of the ongoing misrepresentations by epic and again I think those two those two issue or those two examples really amplify what we're talking about here the third that I would point out would be the exclusion of what came to be referred to as the black list subsequent to filing of the complaint Silicon Knights was put on a list for every single one of the several dozen licensees including several major publishers that if that publisher when it signed up as a licensee with epic would do business with Silicon Knights it would never be a due to business with epic that is very dramatic evidence of the UDPTA the unfair and deceptive Praid Practices Act claimed that we had the grounds on which that was excluded was that it came after again the filing of the the the signing of the contract and the filing of the complaint but again under simple notice pleading in federal court I'm alleging the same tort the fact that I discover additional evidence of that tort throughout the discovery process should not be something that is fatal to me pursuing that or utilizing the evidence that I've discovered through discovery process and yet when we attempted to introduce that evidence at trial it was summarily halted well I mean case law was a claim for fraud in utero yes there is your honor and I believe we've cited that in the briefing the the the concept that fraud is something that is an ongoing tort and and can be because there's there's two distinct claims fraud in the inducement you you defrauded me in signing up for the contract and then especially in a situation like this when you're saying you're improperly utilizing my my engine in an ongoing fashion that certainly believe that's the perfect example and again I apologize I don't have the case citation for you that certainly there's nothing from this circuit that we'd be binding on you but the the precedent is certainly therefore fraud as an ongoing tort and that's why fraud as an ongoing tort exists separate and independent as an alternative grounds that we've pled I would also submit that again even if even if the court were to agree with the exclusion from my prime of fascia case of that ongoing fraud and the ongoing third party complaints after the signing of the contract I still should have been in a allowed to I should have still should have been able to allow use those in cross examination when their witnesses get up and take the stand and deny knowledge claim that the the engine works claim that none of these problems that silicon nights has proffered even existed and I think certainly when we look at the exclusion of or the granting of the rule 50 motion that that effectively throughout all of the fraud base tort claims there's a relevance there as well when the standard is is there any sufficient legal basis for any reasonable juror to believe the evidence supports my clients claims and taking all of that in the light most favorable to silicon nights with that as a standard certainly looking at complaints contemporaneously by Disney by through its point of vista games division by electronic arts by ubi soft by midway by all of the major publishers around the world of video games they're all complaining Disney's complaint the reason we highlighted in the briefing here is it is almost a verbatim recitation of the complaints that silicon nights had and it was sent to epic literally contemporaneously with filing of this lawsuit Disney complaint and the epic paid them their money back that if that is not at least evidence even if I'm not allowed to use it in my case in chief even if the court agrees on that it certainly is informative for the court on a denovo review of whether or not reasonable people could view silicon nights claims as having merit since multitudes of other publishers in this industry who had this exact same set of problems lodge those same complaints with epic and in many cases dependent basically what it came down to was the bigger you are the more attention you get from epic a small company like my client is not allowed to even be cared about in its complaints and ultimately as we go through the trial all of those other complaints are excluded and we're left as I said appearing to be to the jury a lone wolf sort of crying in the wilderness for relief which was not factually the case and I think certainly on the denial of the rule of 50 motion I think in terms of reasonable this could reasonable people agree with us that's informative on the other side looking at the counter claims and what was allowed to occur in terms of judgment against my client certainly the the same standards were not put forth lack of a deposit of the of the code in front of the copyright office was simply overlooked the minimus absolutely diminuous copying admitted admitted by their experts by their own witnesses simply overlooked even though into the court's point there's not a single case anywhere in any jurisdiction district court or a peasant level that finds 0.5% to 2% copying sufficient to find copyright infringement they can't cite one there it doesn't exist yet the court allowed that to proceed whereas that was in my view if I'm getting held these other standards and all my cases getting thrown out I couldn't imagine that that's not going to go forward on the other side or the same standards I can apply similarly with respect to the trade secrets they're found or admitted repeatedly that all of those major companies that I just mentioned electronic arts Ubisoft all of them had access to these same supposed trade secrets they all they were under licensing agreements they they they were you're on that's how they got access to the code and that's their own the why is that probative of of your issue of trade secrets because it's probative because when you give your absolute that the bear license is all they have they said well I signed up a license agreement with them therefore it took to rephrase what they're saying whatever they do with the code I guess is okay and that's not the standard when you know that you're licensing it not simply third parties not simply unknown people that are smaller developers like my client but large major competitors like Ubisoft Microsoft electronic arts midway all these huge companies that have reams and reams of developers working and you give them your code and you know they are making not only games with your code but directly competitive games that are based on bait game engines being made simultaneously by the same developing parties and in fact again if we go back to the third party complaints in those complaints it's reflected that many of those people are saying well your stuff doesn't work so I'm going to put my team from my own game over here on this code to make sure it works to get it fixed and go forward that is the evidence that we're talking about that they are on notice then your honor that they have to simply not say well I got a license agreement with them so I'm just going to assume that they aren't going to breach it they have to take action to be reasonable that's again the standard what reasonable steps that they take to ensure that they kept their secret out of the hands of people that weren't allowed to have it and the way their contracts are structured it's only supposed to be the people working on their games that are supposed to look at they're not supposed to just be able to cross pollinate between all of their other game developers especially when they're putting out an engine as was the case with all of those that I listed they all had engines that were being put out in competition with the the UE3 game engine the engines that were the basis of their other games and as a result they they were on notice in honor if you will to take more reasonable steps and not simply say I'm going to willfully turn up the die and and ignore what is right in front of me certainly the the cases again that we've cited in the brief bear that out that when when you're given notice like that you need to take those reasonable steps the same thing is true with respect to the the double recovery issue and and again when in the briefs epic pointed out you know that one of their positions was that they thought for example with the with respect to the code deposit if the proper code wasn't deposited and there was no proof of that given to the jury while there's no harm well there is harm first of all the jury is in left with a false impression that not only is something that epic supposedly created but also that somehow the federal government via the copyright office has blessed it as being something very important and registrable when in fact the evidence was never put forth to show what in fact was ever registered and that was very important in this type of situation where you've got multiple iterations 27 or 28 iterations of the game engine that supposedly were given to my client and at no point are they ever saying well this is the one this is the part of this one that was actually registered I am because I apologize I actually switch or I'm talking about the attorneys fees claim because when they got when they got the I did and I apologize you're on right I switch over the copyright on that because the reason the copyright dam or issue was important was because they were allowed to then bootstrap that up and claim attorneys fees and I did I did slip up with respect to double recovery the their entire position is that somehow there was additional harm that was being compensated by the copyright infringement or by the trade secret infringement and separate it apart even if the court allows those claims before to go forward which I do not think they should separate apart from that they should not be able to then be made whole by virtue of a $2.7 million recovery for the license fees because once the license fees are paid de facto no other use was improper again the third party usage evidently you can do whatever you want with the code once you've paid the license fee and their only argument as well somehow there was this additional benefit that was given to Siliconites the only reason they were able to present that as a benefit was because their expert on damages literally just counter-eating dollar for revenue Siliconites ever got and said that was always beneficial to SK without and our damages expert wasn't allowed to rebut that and take into account costs insurance facilities and other things that one typically would to determine whether there was indeed a profit which there was not in this case I short of time here I don't know if the court has any for the questions if not all you got for a bottle yes thank you right I'm probably not going to get this right mr. Shabelsky exactly right all right good to hear from you thank you if you please the court on Mike Shabelsky here on behalf of Epic Games I think it's important that the court not lose sight of the big picture here Siliconites had the benefit of a five-year discovery period to Marshall whatever evidence it could in support of its claims we then had a nearly three-week jury trial the jury heard their evidence and came back against them across the board the jury rejected Siliconites breach of contract claim finding that Epic did nothing wrong another contract we delivered an engine that worked as promised and it felt instead that it was Silicon Knights that had breached the license agreement that it had used our code in an authorized manner to work on several video game projects without paying a license fee and in addition in doing so they massively stole our trade secrets some three hundred and thirty three trade secrets were proven that they had stolen and they massively infringed the copyright and they did so in order to earn tens of millions of dollars now all the arguments they have raised on appeal do not challenge those fundamental facts that the jury found that Epic did not breach the contract but it was Silicon Knights that did and it was Silicon Knights that stole from us now the plethora little arguments that we've heard today don't change any of that turning first to the third party complaint issue first the court does not need to consider this issue at all if it affirms the dismissal of the fraud counts that is because below the only profit relevance for this evidence related to the fraud claims only it was not profit to have any relevance on Silicon Knights breach of contract claim or our counter claims secondly the court must make clear the very limited nature of the court's ruling the trial court did not exclude all evidence of third party complaints it excluded all it allowed evidence of complaints that predated the party's license agreement what this court excluded and the only thing it excluded was hearsay evidence of post license app agreement complaints the reason the court drew that distinction was because all the complaints were hearsay something counsel still has never addressed in their briefs or argument today the evidence they wanted to put in were letters from third parties without any corroborating testimony from a witness who could sponsor it and overcome the hearsay objection and so the only profit non hearsay reason for that evidence was the fact that it could constitute notice to epic before the party's license agreement informed epic state of mind and that was the distinction the court drew it was completely proper completely in keeping with the not with the hearsay nature of the evidence in addition the court excluded the evidence on post LA complaints on the additional basis under rule 403 factors finding that the need for a trial within a trial regarding each of these alleged post license application complaints would unduly retract the trial be unduly presidential in confusion confusing siliconites has never addressed that issue in their briefs are here today and that's an independent adequate grounds for the exclusion of this of this evidence and so there was nothing improper about the trial court's rulings on that issue in addition the second excluded allegedly excluded evidence talked here today concerned what counsel refers to as a blacklist but there was no black list at all nor was there any exclusion or proper made on that the issue concerned license agreements that epic entered into with other parties after siliconites had sued those agreements did not contain a blacklist do not work with siliconites it quite properly included a provision that told other licensees do not share epic code with siliconites no it's that perfectly proper to do so i think so in the circumstances where we had learned that siliconites had been massively ripping off our code for years that we ask our instructor all the licensees not to continue to give code to to a thief but be that as it may the agreements are irrelevant to the claims that were presented there is no contention that those contracts that said don't share our code are relevant to siliconites breach of contract claim are too any of our counter claims nor they relevant to a siliconites fraud claims those agreements do not tend to show one way or the other whether epic made any representations to siliconites to induce the license agreement and if so whether any such representations were false were made with the intent to deceive where were reasonably relied upon what siliconites is trying to do now on appeal is recast its unfair deceptive trade practice claim to try to make them after the these agreements after the fact relevant to those that claim but the complaint the unfair deceptive trade practice claim in the complaint focused on the alleged representations made before the license agreement that induced the license agreement the complaint makes no reference to these do not share clauses in third party contracts and furthermore siliconites did not preserve this issue below it never sought to introduce into evidence these contracts and all that ever happened below in their trial is that siliconites asked one witness whether he was aware of such an agreement there was an objection it was sustained and siliconites never offered what the answer to the witness would have been whether the witness even had knowledge of these agreements and thereafter siliconites never even moved to introduce the exhibits so there was no error made with exclusion of these exhibits because they were never introduced turning to the counter claims then first on the copyright there is the repeated argument made today that somehow siliconites either didn't prove that the code was copyrighted or didn't prove what was deposited with the copyright office first of all let me make clear if it's not already from our breeze epic proved that all the unreal engine three code that siliconites copied was registered here are the facts from the record siliconites first got access to the ue3 code at august 2004 that's when the nine-month evaluation period started siliconites witnesses testified that they had stopped downloading and merging epics code into the siliconites engine by august of 2006 that testimony came from for example siliconites director of technology mr. O'Reilly whose testimony on that topic appears on pages 904 and 908 of the joint appendix so all the code ue3 code that siliconites copied came from that two year period from august 2004 to august 2006 and even though siliconites continue to include epic code in the engine after that period it all dates from that two year period epic introduced into evidence registrations that covered the ue3 code from august 2004 all the way to october of 2006 they appear in the appendix on pages 20 65 through 76 the initial registration from august 2004 on its face covered the entire ue3 code as it existed as of august 2004 and the subsequent registrations that were introduced into evidence without objection applied to the original code plus all quote revisions and updates to the code so epic did show in the record and the evidence was undisputed that all the code that siliconites says it downloaded and copied were in fact subject to registrations and those registrations were in proper form as cited in our brief under regulations entitled 37 of the code of federal regulations a party is not required to deposit the entirety of the code as part of its registration just the first 25 and last 25 pages and the undisputed testimony from mr. Wilbur at trial appearing on pages 2001 to 2006 of the joint appendix is that in fact our registrations include at the first 25 and last 25 pages there was no objection to the introduction of the registrations on any other basis and i could go on and say that point out as well your honors that this issue is moot about need to prove registration cacylchonites never asked for an instruction saying that epic had to prove registration its instructions on the elements of copyright infringement instruction 49 appearing at page 74 of the joint appendix stated that epic only had to prove two things for verdict in its favor that epic is the owner of a valid copyright and that siliconites copied original elements there was no mention made of registration as a requirement and indeed the trial court then gave the instructions as siliconites requested citing only those two elements siliconites proposed to additional instructions that address registration but those instructions stated only that an owner may but not must register a copyright and those proposed instructions appear at pages 578 to 579 siliconites proposed instructions said the consequences of not registering were only that the recovery would be limited to actual damages and profits and not stat but you couldn't recover statutory damages the trial court adopted siliconites proposed language instructed that registration may be done but never said registration must be done so it is law of the case that siliconites own request that registration is not an element of ethics copyright claim so both as a matter of fact and now as a law of the case they have identified no basis for setting aside the verdict against them on the copyright claim regarding the diminimous issue i want to make sure the record is clear on this as well because siliconites keeps arguing that only two percent of ethics code was copied that is flat out wrong epics copying a silicae's copying of ethics code was intentional it was systematic they copied starting off the entirety of our engine and did it not once but hundreds if not thousands of times on an almost daily basis as their employees worked on unauthorized video games over four-year period their argument proceeds from an incorrect factual premise they argue as if the only evidence that on copying came from dr. Felton's comparative analysis what they say said was two percent i'll address that in a moment explain why that's wrong the evidence of siliconites unauthorized copying came from multiple sources in addition to dr. Felton sources that proved substantial copying there were direct admissions by silicon nights that they had copied substantial portions of the engine it started in 2005 as their witness mr. barns explained when they copied one hundred percent of the engine to start work on their first unauthorized game called the box it continued in time when we got to all august of 2006 when they said they had stopped downloading additional code evidence was presented of power points and memorandum from the company's president at the time indicating that they would still be using up to fifty percent of epics code in their engine and even continuing forward in time in the following year there was the memorandum from their director of technology mr. O'Reilly saying that even at that point into o eight or they were using twenty one point five percent of our code in their engine there was an addition to the directed missions i witnessed testimony from an independent third party who had inspected the engine in two thousand and eight and found that it included modified and unmodified ue three code including quote lot of the core stuff in quote that was mr. pin warden's testimony silicon nights focus on the tail end of its use in the summer of two thousand and nine after silicon nights and its lawyers and its experts tried to quote clean up the engine by making cosmetic changes to it the foil dr. Felton's comparative analysis well silicon nights doesn't get a pass because in two thousand and nine the amount of code it used or was able to disguise had been decreased or even if they had stopped using our code all together they are and remain liable for their substantial infringement from the time period at least by two thousand and five continuing into two thousand and nine and even when dr. Felton identified in his analysis constituted tens of thousands of lines of code that he explained were both qualitatively important to the operation of an engine gave it a lot of value and why was copied as well as took lots of time and money and creativity to create and at the end of the day then whether silicon nights copying was substantial to the minimus and there could hardly be any doubt that it was substantial is a fact question there was more than sufficient basis to go to the jury on that question silicon nights was able to argue make all these arguments to the jury they did make those arguments to the jury the jury rejected it regarding the trade secrets counterclaim your honor the evidence is undisputed here on appeal that silicon nights misappropriated hundreds of ethics trade secrets that is misappropriation was intentional approved at the highest levels of the company it lasted several years and they used them to make tens of millions of dollars and then when they were called out that they engaged in what the trial court called a cover-up of a cover-up to try to mask that they had tried to conceal their massive theft none of these issues are challenged on appeal but silicon nights none of the less once a pass for its massive theft it claims that epic didn't protect its trade secrets but epic did and showed it at trial epic uses extensive protections to protect its trade secrets including state-of-the-art electronic protections state-of-the-art physical security protections and of course legal restrictions that bind as employees and licensees and others with access to its trade secrets importantly there was no evidence presented by silicon nights or anyone else that software developers commonly use other protections that epic does not and also very importantly epic measures have worked they have worked at maintaining the secrecy of their their trade secrets two witnesses very knowledgeable with the computer industry mr. Tim Sweeney and Wolfgang Engel testified that epic trade secrets the ones that issued that were stolen are not commonly known in the industry proving that epic trade secrets have in fact protections have in fact been successful in maintaining the secrecy so silicon night says that all those protections however and their proven track record of success mean nothing because epic didn't audit other licensees to see if they had stolen trade secrets just like silicon nights did well that does not entitle silicon nights to judgment as a matter of law on our counter claim and putting aside the jury's considered verdict the trade secret act requires f only that efforts be undertaken that are reasonable under under the circumstances to maintain their secrecy the act does not mandate licensee audits in fact the act doesn't mention licensee audits at all no case has ever held that licensee audits are required silicon nights is certainly never cited in any in the six years we've been litigating this case and indeed in many other cases courts have upheld this efficiency of a software developers trade secret protections without even mentioning whether or not licensee audits are occurred and certainly that is the case here because there is no evidence that other licensees had in fact misappropriated epic trade secrets and there was no evidence that other software companies that license software do sort of random spot audits certainly a rational jury could and did conclude in these circumstances that epic took reasonable precautions to protect their trade secrets the law does not require epic to harass innocent licensees silicon nights was instead free to argue to the jury our protections weren't reasonable it did in fact make all those arguments to the jury and again the jury rejected them finally your honor on the double recovery issue there is no double recovery and so again I want to make sure the record is clear on this as well the award on the breach of our breach of contract was for the unpaid license fees for the five or so games that silicon nights worked on without paying a license fee that award was different than the award on the copyright and trade secrets counterclaims the award on the copyright and trade secret counterclaims discouraged silicon nights unlawful profits that's what we asked for before the jury that's with the instructions to the jury were so they were different claims with different elements seeking different relief there is no double recovery we weren't claiming a double benefit the law clearly allows us under copyright and trade secrets to discouragement of the wrong doers unjust profits that's what we got under those claims the breach of contract damages were separate so all the counterclaims survived silicon nights is not entitled to judgment as a matter of law to sit aside the jury verdict of any of those and let's hear any other questions I thank the court for its attention and ask for a furnace Mr. Holland you have some rebuttal time yes your honor let me just quickly take a few of Mr. Shabelsky's points in order first of all he led off with the idea that all the evidence was heard I just think it's manifestly clear but that's part of my point all the evidence was not heard in addition with respect the trade secrets I like to raise a couple of points Mr. Shabelsky makes much of the 333 trade secrets what he ignores is the fact that nearly 1200 trade secrets were asserted and at a minimum when evaluating the attorney's fees award one should not be able to come in and overstate its alleged claim to that effect nearly 80% of the alleged trade secrets were asserted were withdrawn and then come in and say I'm entitled to get all my money back for having to try this case on that trade secret ground secondly it's not that he goes and sort of creates issues where there aren't on there's no case that says a licensee has to be audited well all the case law says that you have to take reasonable steps when you're put on notice that this is potentially occurring and doing nothing cannot be alleged to be reasonable I disagree strongly with my colleagues assertion that testimony came in about all these steps that were taken the only step that was ever discussed at trial was the contract itself and that's it in terms of the hearsay issue I again disagree I think we've abundantly had that in the record for quite some time a few times he made this statement that you know this is not challenged on appeal this was waived etc as we cited as particularly with respect to the blacklist issue on page 22 and 23 of our reply brief we cited the court to respond to their waiver argument exactly to where the court had both severely not just it wasn't just that the blacklist was attempted to be introduced and was objected it was attempted twice and on the second attempt the court made it clear that we were to and the courts were to move on from that I then repeatedly throughout the remainder of the trial asked and was assured that all such objections to jury instructions those types of objections that were made to Evan and their instructions were in fact preserved and that's again at pages 22 and 23 the reply brief so I did that we waived that and didn't preserve it to be able to talk about here it's not not correct in terms of the undo the undo prejudice and and undo confusion issue that that was attributed to the third party complaint I believe very clearly or very honestly you're honest that the opposite is true what was unduly confusing was for the the jury to be able to sit there and think that as he just attempted to say that silica knight says some sort of thief that it stole all this stuff that rather than the opposite of what it's true when the one looks at those third party complaints silica knight was in the same position everybody else in the industry was it couldn't make the code work and the reason why the de minimis infringement argument exists still today is because as pled in the complaint before the complaint before the case even started the code was being removed and and it continued to be removed because it didn't work not for any other reason not because there were some sort of titious use being put to not because some benefit was being gained to it because it did not work and that's why disney midway EA and all those of the people complained about it and that's why silica knight took it out of the engine the idea that they're out penalized for having what is called the core or the the the the core component that's another misnomer as the testimony client at trial made clear and as we've put in the briefs that is actually a shorthand version for what's called the math core the mathematical algorithms that any game engine must be based upon or what the core is and so while mr. chibalsky very adeptly says it's the core of the engine it's only called that because it's something that no engine can be made without and no one can actually own because it's so they're so ubiquitous and the testimony came in about that therefore the fact that it's supposed the core does not show some sort of monetary attribution to it with respect to the copyright very briefly the point is that yes you can you may submit your copyright to be registered you don't have to but you have to show that you've registered you have to show what you've registered if you get an litigation you want to sue someone for copyright infringement you can't simply say I registered something never demonstrate what it is and then have a jury verdict in the millions of dollars that's based on that and then further say I'm going to rely on my statutory registration which I didn't improve existed to bootstrap up attorney's fees claim on top of that and really that's the main point of the case here you are the whole theme that he has even today as we're sitting here that silica knight somehow stole everything and wanted to act nefariously this instance has one major logical flaw if that's what they wanted to do they never would have brought this case they could have set up in canada and simply taking the code and I wouldn't be standing here before you they came down here to have a right to have an injustice righted and this court has the last chance to have it happen I hope the court will do the right thing thank you honor

Thank you, Your Honor. May it please the Court. My name is Chris Hollen. I represent Silicon Knights, the plaintiff in the underlying action and the appellant here before the court. As we have set forth in our papers, this case really involves a disparate application of the rules across a number of different fronts throughout the lower court trial. Specifically, each and every attempt by plaintiff to prove its case was met with very exacting scrutiny and any perceived real or imagined flaws in the case were found to be fatal. Conversely, at every turn, any problems with epic counterclaims were overlooked, ignored, or ultimately ruled not to be problematic as they were with our case. I think a couple of examples that we've put forth in the briefing highlight that. Silicon Knights was not allowed to introduce evidence of the voluminous third party complaints regarding the Unreal 3 engine. That included even complaints that were put on a blog listing that all third party licensees had access to and on which epic acknowledge those complaints responded to them and in many cases admitted that there were flaws with the engine. We were not permitted to put those forth simply because they were alleged to have been made after the 2005 signing of the contract despite the fact that the contract encompassed a number of games and therefore required that Silicon Knights continue to, if the court will, re-up with its agreement with epic at each and every turn. On the converse, epic was permitted to put in whatever third party praise it wanted about the engine at any point in time including praise well after the signing of the contract, including third party praise that if the rationale regarding hearsay and regarding 403 rulings were to be applied evenly, those issues should have been excluded as well. Certainly at a minimum we should have been allowed to introduce the third party complaints to challenge the position their witnesses took on the stand that there were no problems with the engine that in other words the way they were able to cast as we phrased it in the briefing, Silicon Knights has this lone complainant in the wilderness among the 178 licensees which was really what the jury was ultimately presented with. The second piece of rulings that I think are emblematic of what we're discussing here are the exclusion of all evidence of epic's own fraudulent conduct after the signing of the contract and it appears as we've briefed and as we discussed in the reply that the court perceived all possible fraud to ceased as of the date of the signing of the contract where rather than viewing it as an independent and alternative grounds for relief and again where the contract specifically contemplated a series of engine usages that Silicon Knights would engage in certainly the ongoing misrepresentations that occurred throughout the period of usage would be relevant and again if we look at the opposite side epic was allowed to introduce all of that Silicon Knights ongoing usage was allowed to make comment on what Silicon Knights was supposedly doing with the code whether it was gutting the engine fast enough or not and make all the arguments that made all of which post dated the signing of the contract and yet we were not able to put those even in context on cross examination by showing that some of the action some of the continued usage that Silicon Knights was making was a direct result of the ongoing misrepresentations by epic and again I think those two those two issue or those two examples really amplify what we're talking about here the third that I would point out would be the exclusion of what came to be referred to as the black list subsequent to filing of the complaint Silicon Knights was put on a list for every single one of the several dozen licensees including several major publishers that if that publisher when it signed up as a licensee with epic would do business with Silicon Knights it would never be a due to business with epic that is very dramatic evidence of the UDPTA the unfair and deceptive Praid Practices Act claimed that we had the grounds on which that was excluded was that it came after again the filing of the the the signing of the contract and the filing of the complaint but again under simple notice pleading in federal court I'm alleging the same tort the fact that I discover additional evidence of that tort throughout the discovery process should not be something that is fatal to me pursuing that or utilizing the evidence that I've discovered through discovery process and yet when we attempted to introduce that evidence at trial it was summarily halted well I mean case law was a claim for fraud in utero yes there is your honor and I believe we've cited that in the briefing the the the concept that fraud is something that is an ongoing tort and and can be because there's there's two distinct claims fraud in the inducement you you defrauded me in signing up for the contract and then especially in a situation like this when you're saying you're improperly utilizing my my engine in an ongoing fashion that certainly believe that's the perfect example and again I apologize I don't have the case citation for you that certainly there's nothing from this circuit that we'd be binding on you but the the precedent is certainly therefore fraud as an ongoing tort and that's why fraud as an ongoing tort exists separate and independent as an alternative grounds that we've pled I would also submit that again even if even if the court were to agree with the exclusion from my prime of fascia case of that ongoing fraud and the ongoing third party complaints after the signing of the contract I still should have been in a allowed to I should have still should have been able to allow use those in cross examination when their witnesses get up and take the stand and deny knowledge claim that the the engine works claim that none of these problems that silicon nights has proffered even existed and I think certainly when we look at the exclusion of or the granting of the rule 50 motion that that effectively throughout all of the fraud base tort claims there's a relevance there as well when the standard is is there any sufficient legal basis for any reasonable juror to believe the evidence supports my clients claims and taking all of that in the light most favorable to silicon nights with that as a standard certainly looking at complaints contemporaneously by Disney by through its point of vista games division by electronic arts by ubi soft by midway by all of the major publishers around the world of video games they're all complaining Disney's complaint the reason we highlighted in the briefing here is it is almost a verbatim recitation of the complaints that silicon nights had and it was sent to epic literally contemporaneously with filing of this lawsuit Disney complaint and the epic paid them their money back that if that is not at least evidence even if I'm not allowed to use it in my case in chief even if the court agrees on that it certainly is informative for the court on a denovo review of whether or not reasonable people could view silicon nights claims as having merit since multitudes of other publishers in this industry who had this exact same set of problems lodge those same complaints with epic and in many cases dependent basically what it came down to was the bigger you are the more attention you get from epic a small company like my client is not allowed to even be cared about in its complaints and ultimately as we go through the trial all of those other complaints are excluded and we're left as I said appearing to be to the jury a lone wolf sort of crying in the wilderness for relief which was not factually the case and I think certainly on the denial of the rule of 50 motion I think in terms of reasonable this could reasonable people agree with us that's informative on the other side looking at the counter claims and what was allowed to occur in terms of judgment against my client certainly the the same standards were not put forth lack of a deposit of the of the code in front of the copyright office was simply overlooked the minimus absolutely diminuous copying admitted admitted by their experts by their own witnesses simply overlooked even though into the court's point there's not a single case anywhere in any jurisdiction district court or a peasant level that finds 0.5% to 2% copying sufficient to find copyright infringement they can't cite one there it doesn't exist yet the court allowed that to proceed whereas that was in my view if I'm getting held these other standards and all my cases getting thrown out I couldn't imagine that that's not going to go forward on the other side or the same standards I can apply similarly with respect to the trade secrets they're found or admitted repeatedly that all of those major companies that I just mentioned electronic arts Ubisoft all of them had access to these same supposed trade secrets they all they were under licensing agreements they they they were you're on that's how they got access to the code and that's their own the why is that probative of of your issue of trade secrets because it's probative because when you give your absolute that the bear license is all they have they said well I signed up a license agreement with them therefore it took to rephrase what they're saying whatever they do with the code I guess is okay and that's not the standard when you know that you're licensing it not simply third parties not simply unknown people that are smaller developers like my client but large major competitors like Ubisoft Microsoft electronic arts midway all these huge companies that have reams and reams of developers working and you give them your code and you know they are making not only games with your code but directly competitive games that are based on bait game engines being made simultaneously by the same developing parties and in fact again if we go back to the third party complaints in those complaints it's reflected that many of those people are saying well your stuff doesn't work so I'm going to put my team from my own game over here on this code to make sure it works to get it fixed and go forward that is the evidence that we're talking about that they are on notice then your honor that they have to simply not say well I got a license agreement with them so I'm just going to assume that they aren't going to breach it they have to take action to be reasonable that's again the standard what reasonable steps that they take to ensure that they kept their secret out of the hands of people that weren't allowed to have it and the way their contracts are structured it's only supposed to be the people working on their games that are supposed to look at they're not supposed to just be able to cross pollinate between all of their other game developers especially when they're putting out an engine as was the case with all of those that I listed they all had engines that were being put out in competition with the the UE3 game engine the engines that were the basis of their other games and as a result they they were on notice in honor if you will to take more reasonable steps and not simply say I'm going to willfully turn up the die and and ignore what is right in front of me certainly the the cases again that we've cited in the brief bear that out that when when you're given notice like that you need to take those reasonable steps the same thing is true with respect to the the double recovery issue and and again when in the briefs epic pointed out you know that one of their positions was that they thought for example with the with respect to the code deposit if the proper code wasn't deposited and there was no proof of that given to the jury while there's no harm well there is harm first of all the jury is in left with a false impression that not only is something that epic supposedly created but also that somehow the federal government via the copyright office has blessed it as being something very important and registrable when in fact the evidence was never put forth to show what in fact was ever registered and that was very important in this type of situation where you've got multiple iterations 27 or 28 iterations of the game engine that supposedly were given to my client and at no point are they ever saying well this is the one this is the part of this one that was actually registered I am because I apologize I actually switch or I'm talking about the attorneys fees claim because when they got when they got the I did and I apologize you're on right I switch over the copyright on that because the reason the copyright dam or issue was important was because they were allowed to then bootstrap that up and claim attorneys fees and I did I did slip up with respect to double recovery the their entire position is that somehow there was additional harm that was being compensated by the copyright infringement or by the trade secret infringement and separate it apart even if the court allows those claims before to go forward which I do not think they should separate apart from that they should not be able to then be made whole by virtue of a $2.7 million recovery for the license fees because once the license fees are paid de facto no other use was improper again the third party usage evidently you can do whatever you want with the code once you've paid the license fee and their only argument as well somehow there was this additional benefit that was given to Siliconites the only reason they were able to present that as a benefit was because their expert on damages literally just counter-eating dollar for revenue Siliconites ever got and said that was always beneficial to SK without and our damages expert wasn't allowed to rebut that and take into account costs insurance facilities and other things that one typically would to determine whether there was indeed a profit which there was not in this case I short of time here I don't know if the court has any for the questions if not all you got for a bottle yes thank you right I'm probably not going to get this right mr. Shabelsky exactly right all right good to hear from you thank you if you please the court on Mike Shabelsky here on behalf of Epic Games I think it's important that the court not lose sight of the big picture here Siliconites had the benefit of a five-year discovery period to Marshall whatever evidence it could in support of its claims we then had a nearly three-week jury trial the jury heard their evidence and came back against them across the board the jury rejected Siliconites breach of contract claim finding that Epic did nothing wrong another contract we delivered an engine that worked as promised and it felt instead that it was Silicon Knights that had breached the license agreement that it had used our code in an authorized manner to work on several video game projects without paying a license fee and in addition in doing so they massively stole our trade secrets some three hundred and thirty three trade secrets were proven that they had stolen and they massively infringed the copyright and they did so in order to earn tens of millions of dollars now all the arguments they have raised on appeal do not challenge those fundamental facts that the jury found that Epic did not breach the contract but it was Silicon Knights that did and it was Silicon Knights that stole from us now the plethora little arguments that we've heard today don't change any of that turning first to the third party complaint issue first the court does not need to consider this issue at all if it affirms the dismissal of the fraud counts that is because below the only profit relevance for this evidence related to the fraud claims only it was not profit to have any relevance on Silicon Knights breach of contract claim or our counter claims secondly the court must make clear the very limited nature of the court's ruling the trial court did not exclude all evidence of third party complaints it excluded all it allowed evidence of complaints that predated the party's license agreement what this court excluded and the only thing it excluded was hearsay evidence of post license app agreement complaints the reason the court drew that distinction was because all the complaints were hearsay something counsel still has never addressed in their briefs or argument today the evidence they wanted to put in were letters from third parties without any corroborating testimony from a witness who could sponsor it and overcome the hearsay objection and so the only profit non hearsay reason for that evidence was the fact that it could constitute notice to epic before the party's license agreement informed epic state of mind and that was the distinction the court drew it was completely proper completely in keeping with the not with the hearsay nature of the evidence in addition the court excluded the evidence on post LA complaints on the additional basis under rule 403 factors finding that the need for a trial within a trial regarding each of these alleged post license application complaints would unduly retract the trial be unduly presidential in confusion confusing siliconites has never addressed that issue in their briefs are here today and that's an independent adequate grounds for the exclusion of this of this evidence and so there was nothing improper about the trial court's rulings on that issue in addition the second excluded allegedly excluded evidence talked here today concerned what counsel refers to as a blacklist but there was no black list at all nor was there any exclusion or proper made on that the issue concerned license agreements that epic entered into with other parties after siliconites had sued those agreements did not contain a blacklist do not work with siliconites it quite properly included a provision that told other licensees do not share epic code with siliconites no it's that perfectly proper to do so i think so in the circumstances where we had learned that siliconites had been massively ripping off our code for years that we ask our instructor all the licensees not to continue to give code to to a thief but be that as it may the agreements are irrelevant to the claims that were presented there is no contention that those contracts that said don't share our code are relevant to siliconites breach of contract claim are too any of our counter claims nor they relevant to a siliconites fraud claims those agreements do not tend to show one way or the other whether epic made any representations to siliconites to induce the license agreement and if so whether any such representations were false were made with the intent to deceive where were reasonably relied upon what siliconites is trying to do now on appeal is recast its unfair deceptive trade practice claim to try to make them after the these agreements after the fact relevant to those that claim but the complaint the unfair deceptive trade practice claim in the complaint focused on the alleged representations made before the license agreement that induced the license agreement the complaint makes no reference to these do not share clauses in third party contracts and furthermore siliconites did not preserve this issue below it never sought to introduce into evidence these contracts and all that ever happened below in their trial is that siliconites asked one witness whether he was aware of such an agreement there was an objection it was sustained and siliconites never offered what the answer to the witness would have been whether the witness even had knowledge of these agreements and thereafter siliconites never even moved to introduce the exhibits so there was no error made with exclusion of these exhibits because they were never introduced turning to the counter claims then first on the copyright there is the repeated argument made today that somehow siliconites either didn't prove that the code was copyrighted or didn't prove what was deposited with the copyright office first of all let me make clear if it's not already from our breeze epic proved that all the unreal engine three code that siliconites copied was registered here are the facts from the record siliconites first got access to the ue3 code at august 2004 that's when the nine-month evaluation period started siliconites witnesses testified that they had stopped downloading and merging epics code into the siliconites engine by august of 2006 that testimony came from for example siliconites director of technology mr. O'Reilly whose testimony on that topic appears on pages 904 and 908 of the joint appendix so all the code ue3 code that siliconites copied came from that two year period from august 2004 to august 2006 and even though siliconites continue to include epic code in the engine after that period it all dates from that two year period epic introduced into evidence registrations that covered the ue3 code from august 2004 all the way to october of 2006 they appear in the appendix on pages 20 65 through 76 the initial registration from august 2004 on its face covered the entire ue3 code as it existed as of august 2004 and the subsequent registrations that were introduced into evidence without objection applied to the original code plus all quote revisions and updates to the code so epic did show in the record and the evidence was undisputed that all the code that siliconites says it downloaded and copied were in fact subject to registrations and those registrations were in proper form as cited in our brief under regulations entitled 37 of the code of federal regulations a party is not required to deposit the entirety of the code as part of its registration just the first 25 and last 25 pages and the undisputed testimony from mr. Wilbur at trial appearing on pages 2001 to 2006 of the joint appendix is that in fact our registrations include at the first 25 and last 25 pages there was no objection to the introduction of the registrations on any other basis and i could go on and say that point out as well your honors that this issue is moot about need to prove registration cacylchonites never asked for an instruction saying that epic had to prove registration its instructions on the elements of copyright infringement instruction 49 appearing at page 74 of the joint appendix stated that epic only had to prove two things for verdict in its favor that epic is the owner of a valid copyright and that siliconites copied original elements there was no mention made of registration as a requirement and indeed the trial court then gave the instructions as siliconites requested citing only those two elements siliconites proposed to additional instructions that address registration but those instructions stated only that an owner may but not must register a copyright and those proposed instructions appear at pages 578 to 579 siliconites proposed instructions said the consequences of not registering were only that the recovery would be limited to actual damages and profits and not stat but you couldn't recover statutory damages the trial court adopted siliconites proposed language instructed that registration may be done but never said registration must be done so it is law of the case that siliconites own request that registration is not an element of ethics copyright claim so both as a matter of fact and now as a law of the case they have identified no basis for setting aside the verdict against them on the copyright claim regarding the diminimous issue i want to make sure the record is clear on this as well because siliconites keeps arguing that only two percent of ethics code was copied that is flat out wrong epics copying a silicae's copying of ethics code was intentional it was systematic they copied starting off the entirety of our engine and did it not once but hundreds if not thousands of times on an almost daily basis as their employees worked on unauthorized video games over four-year period their argument proceeds from an incorrect factual premise they argue as if the only evidence that on copying came from dr. Felton's comparative analysis what they say said was two percent i'll address that in a moment explain why that's wrong the evidence of siliconites unauthorized copying came from multiple sources in addition to dr. Felton sources that proved substantial copying there were direct admissions by silicon nights that they had copied substantial portions of the engine it started in 2005 as their witness mr. barns explained when they copied one hundred percent of the engine to start work on their first unauthorized game called the box it continued in time when we got to all august of 2006 when they said they had stopped downloading additional code evidence was presented of power points and memorandum from the company's president at the time indicating that they would still be using up to fifty percent of epics code in their engine and even continuing forward in time in the following year there was the memorandum from their director of technology mr. O'Reilly saying that even at that point into o eight or they were using twenty one point five percent of our code in their engine there was an addition to the directed missions i witnessed testimony from an independent third party who had inspected the engine in two thousand and eight and found that it included modified and unmodified ue three code including quote lot of the core stuff in quote that was mr. pin warden's testimony silicon nights focus on the tail end of its use in the summer of two thousand and nine after silicon nights and its lawyers and its experts tried to quote clean up the engine by making cosmetic changes to it the foil dr. Felton's comparative analysis well silicon nights doesn't get a pass because in two thousand and nine the amount of code it used or was able to disguise had been decreased or even if they had stopped using our code all together they are and remain liable for their substantial infringement from the time period at least by two thousand and five continuing into two thousand and nine and even when dr. Felton identified in his analysis constituted tens of thousands of lines of code that he explained were both qualitatively important to the operation of an engine gave it a lot of value and why was copied as well as took lots of time and money and creativity to create and at the end of the day then whether silicon nights copying was substantial to the minimus and there could hardly be any doubt that it was substantial is a fact question there was more than sufficient basis to go to the jury on that question silicon nights was able to argue make all these arguments to the jury they did make those arguments to the jury the jury rejected it regarding the trade secrets counterclaim your honor the evidence is undisputed here on appeal that silicon nights misappropriated hundreds of ethics trade secrets that is misappropriation was intentional approved at the highest levels of the company it lasted several years and they used them to make tens of millions of dollars and then when they were called out that they engaged in what the trial court called a cover-up of a cover-up to try to mask that they had tried to conceal their massive theft none of these issues are challenged on appeal but silicon nights none of the less once a pass for its massive theft it claims that epic didn't protect its trade secrets but epic did and showed it at trial epic uses extensive protections to protect its trade secrets including state-of-the-art electronic protections state-of-the-art physical security protections and of course legal restrictions that bind as employees and licensees and others with access to its trade secrets importantly there was no evidence presented by silicon nights or anyone else that software developers commonly use other protections that epic does not and also very importantly epic measures have worked they have worked at maintaining the secrecy of their their trade secrets two witnesses very knowledgeable with the computer industry mr. Tim Sweeney and Wolfgang Engel testified that epic trade secrets the ones that issued that were stolen are not commonly known in the industry proving that epic trade secrets have in fact protections have in fact been successful in maintaining the secrecy so silicon night says that all those protections however and their proven track record of success mean nothing because epic didn't audit other licensees to see if they had stolen trade secrets just like silicon nights did well that does not entitle silicon nights to judgment as a matter of law on our counter claim and putting aside the jury's considered verdict the trade secret act requires f only that efforts be undertaken that are reasonable under under the circumstances to maintain their secrecy the act does not mandate licensee audits in fact the act doesn't mention licensee audits at all no case has ever held that licensee audits are required silicon nights is certainly never cited in any in the six years we've been litigating this case and indeed in many other cases courts have upheld this efficiency of a software developers trade secret protections without even mentioning whether or not licensee audits are occurred and certainly that is the case here because there is no evidence that other licensees had in fact misappropriated epic trade secrets and there was no evidence that other software companies that license software do sort of random spot audits certainly a rational jury could and did conclude in these circumstances that epic took reasonable precautions to protect their trade secrets the law does not require epic to harass innocent licensees silicon nights was instead free to argue to the jury our protections weren't reasonable it did in fact make all those arguments to the jury and again the jury rejected them finally your honor on the double recovery issue there is no double recovery and so again I want to make sure the record is clear on this as well the award on the breach of our breach of contract was for the unpaid license fees for the five or so games that silicon nights worked on without paying a license fee that award was different than the award on the copyright and trade secrets counterclaims the award on the copyright and trade secret counterclaims discouraged silicon nights unlawful profits that's what we asked for before the jury that's with the instructions to the jury were so they were different claims with different elements seeking different relief there is no double recovery we weren't claiming a double benefit the law clearly allows us under copyright and trade secrets to discouragement of the wrong doers unjust profits that's what we got under those claims the breach of contract damages were separate so all the counterclaims survived silicon nights is not entitled to judgment as a matter of law to sit aside the jury verdict of any of those and let's hear any other questions I thank the court for its attention and ask for a furnace Mr. Holland you have some rebuttal time yes your honor let me just quickly take a few of Mr. Shabelsky's points in order first of all he led off with the idea that all the evidence was heard I just think it's manifestly clear but that's part of my point all the evidence was not heard in addition with respect the trade secrets I like to raise a couple of points Mr. Shabelsky makes much of the 333 trade secrets what he ignores is the fact that nearly 1200 trade secrets were asserted and at a minimum when evaluating the attorney's fees award one should not be able to come in and overstate its alleged claim to that effect nearly 80% of the alleged trade secrets were asserted were withdrawn and then come in and say I'm entitled to get all my money back for having to try this case on that trade secret ground secondly it's not that he goes and sort of creates issues where there aren't on there's no case that says a licensee has to be audited well all the case law says that you have to take reasonable steps when you're put on notice that this is potentially occurring and doing nothing cannot be alleged to be reasonable I disagree strongly with my colleagues assertion that testimony came in about all these steps that were taken the only step that was ever discussed at trial was the contract itself and that's it in terms of the hearsay issue I again disagree I think we've abundantly had that in the record for quite some time a few times he made this statement that you know this is not challenged on appeal this was waived etc as we cited as particularly with respect to the blacklist issue on page 22 and 23 of our reply brief we cited the court to respond to their waiver argument exactly to where the court had both severely not just it wasn't just that the blacklist was attempted to be introduced and was objected it was attempted twice and on the second attempt the court made it clear that we were to and the courts were to move on from that I then repeatedly throughout the remainder of the trial asked and was assured that all such objections to jury instructions those types of objections that were made to Evan and their instructions were in fact preserved and that's again at pages 22 and 23 the reply brief so I did that we waived that and didn't preserve it to be able to talk about here it's not not correct in terms of the undo the undo prejudice and and undo confusion issue that that was attributed to the third party complaint I believe very clearly or very honestly you're honest that the opposite is true what was unduly confusing was for the the jury to be able to sit there and think that as he just attempted to say that silica knight says some sort of thief that it stole all this stuff that rather than the opposite of what it's true when the one looks at those third party complaints silica knight was in the same position everybody else in the industry was it couldn't make the code work and the reason why the de minimis infringement argument exists still today is because as pled in the complaint before the complaint before the case even started the code was being removed and and it continued to be removed because it didn't work not for any other reason not because there were some sort of titious use being put to not because some benefit was being gained to it because it did not work and that's why disney midway EA and all those of the people complained about it and that's why silica knight took it out of the engine the idea that they're out penalized for having what is called the core or the the the the core component that's another misnomer as the testimony client at trial made clear and as we've put in the briefs that is actually a shorthand version for what's called the math core the mathematical algorithms that any game engine must be based upon or what the core is and so while mr. chibalsky very adeptly says it's the core of the engine it's only called that because it's something that no engine can be made without and no one can actually own because it's so they're so ubiquitous and the testimony came in about that therefore the fact that it's supposed the core does not show some sort of monetary attribution to it with respect to the copyright very briefly the point is that yes you can you may submit your copyright to be registered you don't have to but you have to show that you've registered you have to show what you've registered if you get an litigation you want to sue someone for copyright infringement you can't simply say I registered something never demonstrate what it is and then have a jury verdict in the millions of dollars that's based on that and then further say I'm going to rely on my statutory registration which I didn't improve existed to bootstrap up attorney's fees claim on top of that and really that's the main point of the case here you are the whole theme that he has even today as we're sitting here that silica knight somehow stole everything and wanted to act nefariously this instance has one major logical flaw if that's what they wanted to do they never would have brought this case they could have set up in canada and simply taking the code and I wouldn't be standing here before you they came down here to have a right to have an injustice righted and this court has the last chance to have it happen I hope the court will do the right thing thank you honor

Thank you, Your Honor. May it please the Court. My name is Chris Hollen. I represent Silicon Knights, the plaintiff in the underlying action and the appellant here before the court. As we have set forth in our papers, this case really involves a disparate application of the rules across a number of different fronts throughout the lower court trial. Specifically, each and every attempt by plaintiff to prove its case was met with very exacting scrutiny and any perceived real or imagined flaws in the case were found to be fatal. Conversely, at every turn, any problems with epic counterclaims were overlooked, ignored, or ultimately ruled not to be problematic as they were with our case. I think a couple of examples that we've put forth in the briefing highlight that. Silicon Knights was not allowed to introduce evidence of the voluminous third party complaints regarding the Unreal 3 engine. That included even complaints that were put on a blog listing that all third party licensees had access to and on which epic acknowledge those complaints responded to them and in many cases admitted that there were flaws with the engine. We were not permitted to put those forth simply because they were alleged to have been made after the 2005 signing of the contract despite the fact that the contract encompassed a number of games and therefore required that Silicon Knights continue to, if the court will, re-up with its agreement with epic at each and every turn. On the converse, epic was permitted to put in whatever third party praise it wanted about the engine at any point in time including praise well after the signing of the contract, including third party praise that if the rationale regarding hearsay and regarding 403 rulings were to be applied evenly, those issues should have been excluded as well. Certainly at a minimum we should have been allowed to introduce the third party complaints to challenge the position their witnesses took on the stand that there were no problems with the engine that in other words the way they were able to cast as we phrased it in the briefing, Silicon Knights has this lone complainant in the wilderness among the 178 licensees which was really what the jury was ultimately presented with. The second piece of rulings that I think are emblematic of what we're discussing here are the exclusion of all evidence of epic's own fraudulent conduct after the signing of the contract and it appears as we've briefed and as we discussed in the reply that the court perceived all possible fraud to ceased as of the date of the signing of the contract where rather than viewing it as an independent and alternative grounds for relief and again where the contract specifically contemplated a series of engine usages that Silicon Knights would engage in certainly the ongoing misrepresentations that occurred throughout the period of usage would be relevant and again if we look at the opposite side epic was allowed to introduce all of that Silicon Knights ongoing usage was allowed to make comment on what Silicon Knights was supposedly doing with the code whether it was gutting the engine fast enough or not and make all the arguments that made all of which post dated the signing of the contract and yet we were not able to put those even in context on cross examination by showing that some of the action some of the continued usage that Silicon Knights was making was a direct result of the ongoing misrepresentations by epic and again I think those two those two issue or those two examples really amplify what we're talking about here the third that I would point out would be the exclusion of what came to be referred to as the black list subsequent to filing of the complaint Silicon Knights was put on a list for every single one of the several dozen licensees including several major publishers that if that publisher when it signed up as a licensee with epic would do business with Silicon Knights it would never be a due to business with epic that is very dramatic evidence of the UDPTA the unfair and deceptive Praid Practices Act claimed that we had the grounds on which that was excluded was that it came after again the filing of the the the signing of the contract and the filing of the complaint but again under simple notice pleading in federal court I'm alleging the same tort the fact that I discover additional evidence of that tort throughout the discovery process should not be something that is fatal to me pursuing that or utilizing the evidence that I've discovered through discovery process and yet when we attempted to introduce that evidence at trial it was summarily halted well I mean case law was a claim for fraud in utero yes there is your honor and I believe we've cited that in the briefing the the the concept that fraud is something that is an ongoing tort and and can be because there's there's two distinct claims fraud in the inducement you you defrauded me in signing up for the contract and then especially in a situation like this when you're saying you're improperly utilizing my my engine in an ongoing fashion that certainly believe that's the perfect example and again I apologize I don't have the case citation for you that certainly there's nothing from this circuit that we'd be binding on you but the the precedent is certainly therefore fraud as an ongoing tort and that's why fraud as an ongoing tort exists separate and independent as an alternative grounds that we've pled I would also submit that again even if even if the court were to agree with the exclusion from my prime of fascia case of that ongoing fraud and the ongoing third party complaints after the signing of the contract I still should have been in a allowed to I should have still should have been able to allow use those in cross examination when their witnesses get up and take the stand and deny knowledge claim that the the engine works claim that none of these problems that silicon nights has proffered even existed and I think certainly when we look at the exclusion of or the granting of the rule 50 motion that that effectively throughout all of the fraud base tort claims there's a relevance there as well when the standard is is there any sufficient legal basis for any reasonable juror to believe the evidence supports my clients claims and taking all of that in the light most favorable to silicon nights with that as a standard certainly looking at complaints contemporaneously by Disney by through its point of vista games division by electronic arts by ubi soft by midway by all of the major publishers around the world of video games they're all complaining Disney's complaint the reason we highlighted in the briefing here is it is almost a verbatim recitation of the complaints that silicon nights had and it was sent to epic literally contemporaneously with filing of this lawsuit Disney complaint and the epic paid them their money back that if that is not at least evidence even if I'm not allowed to use it in my case in chief even if the court agrees on that it certainly is informative for the court on a denovo review of whether or not reasonable people could view silicon nights claims as having merit since multitudes of other publishers in this industry who had this exact same set of problems lodge those same complaints with epic and in many cases dependent basically what it came down to was the bigger you are the more attention you get from epic a small company like my client is not allowed to even be cared about in its complaints and ultimately as we go through the trial all of those other complaints are excluded and we're left as I said appearing to be to the jury a lone wolf sort of crying in the wilderness for relief which was not factually the case and I think certainly on the denial of the rule of 50 motion I think in terms of reasonable this could reasonable people agree with us that's informative on the other side looking at the counter claims and what was allowed to occur in terms of judgment against my client certainly the the same standards were not put forth lack of a deposit of the of the code in front of the copyright office was simply overlooked the minimus absolutely diminuous copying admitted admitted by their experts by their own witnesses simply overlooked even though into the court's point there's not a single case anywhere in any jurisdiction district court or a peasant level that finds 0.5% to 2% copying sufficient to find copyright infringement they can't cite one there it doesn't exist yet the court allowed that to proceed whereas that was in my view if I'm getting held these other standards and all my cases getting thrown out I couldn't imagine that that's not going to go forward on the other side or the same standards I can apply similarly with respect to the trade secrets they're found or admitted repeatedly that all of those major companies that I just mentioned electronic arts Ubisoft all of them had access to these same supposed trade secrets they all they were under licensing agreements they they they were you're on that's how they got access to the code and that's their own the why is that probative of of your issue of trade secrets because it's probative because when you give your absolute that the bear license is all they have they said well I signed up a license agreement with them therefore it took to rephrase what they're saying whatever they do with the code I guess is okay and that's not the standard when you know that you're licensing it not simply third parties not simply unknown people that are smaller developers like my client but large major competitors like Ubisoft Microsoft electronic arts midway all these huge companies that have reams and reams of developers working and you give them your code and you know they are making not only games with your code but directly competitive games that are based on bait game engines being made simultaneously by the same developing parties and in fact again if we go back to the third party complaints in those complaints it's reflected that many of those people are saying well your stuff doesn't work so I'm going to put my team from my own game over here on this code to make sure it works to get it fixed and go forward that is the evidence that we're talking about that they are on notice then your honor that they have to simply not say well I got a license agreement with them so I'm just going to assume that they aren't going to breach it they have to take action to be reasonable that's again the standard what reasonable steps that they take to ensure that they kept their secret out of the hands of people that weren't allowed to have it and the way their contracts are structured it's only supposed to be the people working on their games that are supposed to look at they're not supposed to just be able to cross pollinate between all of their other game developers especially when they're putting out an engine as was the case with all of those that I listed they all had engines that were being put out in competition with the the UE3 game engine the engines that were the basis of their other games and as a result they they were on notice in honor if you will to take more reasonable steps and not simply say I'm going to willfully turn up the die and and ignore what is right in front of me certainly the the cases again that we've cited in the brief bear that out that when when you're given notice like that you need to take those reasonable steps the same thing is true with respect to the the double recovery issue and and again when in the briefs epic pointed out you know that one of their positions was that they thought for example with the with respect to the code deposit if the proper code wasn't deposited and there was no proof of that given to the jury while there's no harm well there is harm first of all the jury is in left with a false impression that not only is something that epic supposedly created but also that somehow the federal government via the copyright office has blessed it as being something very important and registrable when in fact the evidence was never put forth to show what in fact was ever registered and that was very important in this type of situation where you've got multiple iterations 27 or 28 iterations of the game engine that supposedly were given to my client and at no point are they ever saying well this is the one this is the part of this one that was actually registered I am because I apologize I actually switch or I'm talking about the attorneys fees claim because when they got when they got the I did and I apologize you're on right I switch over the copyright on that because the reason the copyright dam or issue was important was because they were allowed to then bootstrap that up and claim attorneys fees and I did I did slip up with respect to double recovery the their entire position is that somehow there was additional harm that was being compensated by the copyright infringement or by the trade secret infringement and separate it apart even if the court allows those claims before to go forward which I do not think they should separate apart from that they should not be able to then be made whole by virtue of a $2.7 million recovery for the license fees because once the license fees are paid de facto no other use was improper again the third party usage evidently you can do whatever you want with the code once you've paid the license fee and their only argument as well somehow there was this additional benefit that was given to Siliconites the only reason they were able to present that as a benefit was because their expert on damages literally just counter-eating dollar for revenue Siliconites ever got and said that was always beneficial to SK without and our damages expert wasn't allowed to rebut that and take into account costs insurance facilities and other things that one typically would to determine whether there was indeed a profit which there was not in this case I short of time here I don't know if the court has any for the questions if not all you got for a bottle yes thank you right I'm probably not going to get this right mr. Shabelsky exactly right all right good to hear from you thank you if you please the court on Mike Shabelsky here on behalf of Epic Games I think it's important that the court not lose sight of the big picture here Siliconites had the benefit of a five-year discovery period to Marshall whatever evidence it could in support of its claims we then had a nearly three-week jury trial the jury heard their evidence and came back against them across the board the jury rejected Siliconites breach of contract claim finding that Epic did nothing wrong another contract we delivered an engine that worked as promised and it felt instead that it was Silicon Knights that had breached the license agreement that it had used our code in an authorized manner to work on several video game projects without paying a license fee and in addition in doing so they massively stole our trade secrets some three hundred and thirty three trade secrets were proven that they had stolen and they massively infringed the copyright and they did so in order to earn tens of millions of dollars now all the arguments they have raised on appeal do not challenge those fundamental facts that the jury found that Epic did not breach the contract but it was Silicon Knights that did and it was Silicon Knights that stole from us now the plethora little arguments that we've heard today don't change any of that turning first to the third party complaint issue first the court does not need to consider this issue at all if it affirms the dismissal of the fraud counts that is because below the only profit relevance for this evidence related to the fraud claims only it was not profit to have any relevance on Silicon Knights breach of contract claim or our counter claims secondly the court must make clear the very limited nature of the court's ruling the trial court did not exclude all evidence of third party complaints it excluded all it allowed evidence of complaints that predated the party's license agreement what this court excluded and the only thing it excluded was hearsay evidence of post license app agreement complaints the reason the court drew that distinction was because all the complaints were hearsay something counsel still has never addressed in their briefs or argument today the evidence they wanted to put in were letters from third parties without any corroborating testimony from a witness who could sponsor it and overcome the hearsay objection and so the only profit non hearsay reason for that evidence was the fact that it could constitute notice to epic before the party's license agreement informed epic state of mind and that was the distinction the court drew it was completely proper completely in keeping with the not with the hearsay nature of the evidence in addition the court excluded the evidence on post LA complaints on the additional basis under rule 403 factors finding that the need for a trial within a trial regarding each of these alleged post license application complaints would unduly retract the trial be unduly presidential in confusion confusing siliconites has never addressed that issue in their briefs are here today and that's an independent adequate grounds for the exclusion of this of this evidence and so there was nothing improper about the trial court's rulings on that issue in addition the second excluded allegedly excluded evidence talked here today concerned what counsel refers to as a blacklist but there was no black list at all nor was there any exclusion or proper made on that the issue concerned license agreements that epic entered into with other parties after siliconites had sued those agreements did not contain a blacklist do not work with siliconites it quite properly included a provision that told other licensees do not share epic code with siliconites no it's that perfectly proper to do so i think so in the circumstances where we had learned that siliconites had been massively ripping off our code for years that we ask our instructor all the licensees not to continue to give code to to a thief but be that as it may the agreements are irrelevant to the claims that were presented there is no contention that those contracts that said don't share our code are relevant to siliconites breach of contract claim are too any of our counter claims nor they relevant to a siliconites fraud claims those agreements do not tend to show one way or the other whether epic made any representations to siliconites to induce the license agreement and if so whether any such representations were false were made with the intent to deceive where were reasonably relied upon what siliconites is trying to do now on appeal is recast its unfair deceptive trade practice claim to try to make them after the these agreements after the fact relevant to those that claim but the complaint the unfair deceptive trade practice claim in the complaint focused on the alleged representations made before the license agreement that induced the license agreement the complaint makes no reference to these do not share clauses in third party contracts and furthermore siliconites did not preserve this issue below it never sought to introduce into evidence these contracts and all that ever happened below in their trial is that siliconites asked one witness whether he was aware of such an agreement there was an objection it was sustained and siliconites never offered what the answer to the witness would have been whether the witness even had knowledge of these agreements and thereafter siliconites never even moved to introduce the exhibits so there was no error made with exclusion of these exhibits because they were never introduced turning to the counter claims then first on the copyright there is the repeated argument made today that somehow siliconites either didn't prove that the code was copyrighted or didn't prove what was deposited with the copyright office first of all let me make clear if it's not already from our breeze epic proved that all the unreal engine three code that siliconites copied was registered here are the facts from the record siliconites first got access to the ue3 code at august 2004 that's when the nine-month evaluation period started siliconites witnesses testified that they had stopped downloading and merging epics code into the siliconites engine by august of 2006 that testimony came from for example siliconites director of technology mr. O'Reilly whose testimony on that topic appears on pages 904 and 908 of the joint appendix so all the code ue3 code that siliconites copied came from that two year period from august 2004 to august 2006 and even though siliconites continue to include epic code in the engine after that period it all dates from that two year period epic introduced into evidence registrations that covered the ue3 code from august 2004 all the way to october of 2006 they appear in the appendix on pages 20 65 through 76 the initial registration from august 2004 on its face covered the entire ue3 code as it existed as of august 2004 and the subsequent registrations that were introduced into evidence without objection applied to the original code plus all quote revisions and updates to the code so epic did show in the record and the evidence was undisputed that all the code that siliconites says it downloaded and copied were in fact subject to registrations and those registrations were in proper form as cited in our brief under regulations entitled 37 of the code of federal regulations a party is not required to deposit the entirety of the code as part of its registration just the first 25 and last 25 pages and the undisputed testimony from mr. Wilbur at trial appearing on pages 2001 to 2006 of the joint appendix is that in fact our registrations include at the first 25 and last 25 pages there was no objection to the introduction of the registrations on any other basis and i could go on and say that point out as well your honors that this issue is moot about need to prove registration cacylchonites never asked for an instruction saying that epic had to prove registration its instructions on the elements of copyright infringement instruction 49 appearing at page 74 of the joint appendix stated that epic only had to prove two things for verdict in its favor that epic is the owner of a valid copyright and that siliconites copied original elements there was no mention made of registration as a requirement and indeed the trial court then gave the instructions as siliconites requested citing only those two elements siliconites proposed to additional instructions that address registration but those instructions stated only that an owner may but not must register a copyright and those proposed instructions appear at pages 578 to 579 siliconites proposed instructions said the consequences of not registering were only that the recovery would be limited to actual damages and profits and not stat but you couldn't recover statutory damages the trial court adopted siliconites proposed language instructed that registration may be done but never said registration must be done so it is law of the case that siliconites own request that registration is not an element of ethics copyright claim so both as a matter of fact and now as a law of the case they have identified no basis for setting aside the verdict against them on the copyright claim regarding the diminimous issue i want to make sure the record is clear on this as well because siliconites keeps arguing that only two percent of ethics code was copied that is flat out wrong epics copying a silicae's copying of ethics code was intentional it was systematic they copied starting off the entirety of our engine and did it not once but hundreds if not thousands of times on an almost daily basis as their employees worked on unauthorized video games over four-year period their argument proceeds from an incorrect factual premise they argue as if the only evidence that on copying came from dr. Felton's comparative analysis what they say said was two percent i'll address that in a moment explain why that's wrong the evidence of siliconites unauthorized copying came from multiple sources in addition to dr. Felton sources that proved substantial copying there were direct admissions by silicon nights that they had copied substantial portions of the engine it started in 2005 as their witness mr. barns explained when they copied one hundred percent of the engine to start work on their first unauthorized game called the box it continued in time when we got to all august of 2006 when they said they had stopped downloading additional code evidence was presented of power points and memorandum from the company's president at the time indicating that they would still be using up to fifty percent of epics code in their engine and even continuing forward in time in the following year there was the memorandum from their director of technology mr. O'Reilly saying that even at that point into o eight or they were using twenty one point five percent of our code in their engine there was an addition to the directed missions i witnessed testimony from an independent third party who had inspected the engine in two thousand and eight and found that it included modified and unmodified ue three code including quote lot of the core stuff in quote that was mr. pin warden's testimony silicon nights focus on the tail end of its use in the summer of two thousand and nine after silicon nights and its lawyers and its experts tried to quote clean up the engine by making cosmetic changes to it the foil dr. Felton's comparative analysis well silicon nights doesn't get a pass because in two thousand and nine the amount of code it used or was able to disguise had been decreased or even if they had stopped using our code all together they are and remain liable for their substantial infringement from the time period at least by two thousand and five continuing into two thousand and nine and even when dr. Felton identified in his analysis constituted tens of thousands of lines of code that he explained were both qualitatively important to the operation of an engine gave it a lot of value and why was copied as well as took lots of time and money and creativity to create and at the end of the day then whether silicon nights copying was substantial to the minimus and there could hardly be any doubt that it was substantial is a fact question there was more than sufficient basis to go to the jury on that question silicon nights was able to argue make all these arguments to the jury they did make those arguments to the jury the jury rejected it regarding the trade secrets counterclaim your honor the evidence is undisputed here on appeal that silicon nights misappropriated hundreds of ethics trade secrets that is misappropriation was intentional approved at the highest levels of the company it lasted several years and they used them to make tens of millions of dollars and then when they were called out that they engaged in what the trial court called a cover-up of a cover-up to try to mask that they had tried to conceal their massive theft none of these issues are challenged on appeal but silicon nights none of the less once a pass for its massive theft it claims that epic didn't protect its trade secrets but epic did and showed it at trial epic uses extensive protections to protect its trade secrets including state-of-the-art electronic protections state-of-the-art physical security protections and of course legal restrictions that bind as employees and licensees and others with access to its trade secrets importantly there was no evidence presented by silicon nights or anyone else that software developers commonly use other protections that epic does not and also very importantly epic measures have worked they have worked at maintaining the secrecy of their their trade secrets two witnesses very knowledgeable with the computer industry mr. Tim Sweeney and Wolfgang Engel testified that epic trade secrets the ones that issued that were stolen are not commonly known in the industry proving that epic trade secrets have in fact protections have in fact been successful in maintaining the secrecy so silicon night says that all those protections however and their proven track record of success mean nothing because epic didn't audit other licensees to see if they had stolen trade secrets just like silicon nights did well that does not entitle silicon nights to judgment as a matter of law on our counter claim and putting aside the jury's considered verdict the trade secret act requires f only that efforts be undertaken that are reasonable under under the circumstances to maintain their secrecy the act does not mandate licensee audits in fact the act doesn't mention licensee audits at all no case has ever held that licensee audits are required silicon nights is certainly never cited in any in the six years we've been litigating this case and indeed in many other cases courts have upheld this efficiency of a software developers trade secret protections without even mentioning whether or not licensee audits are occurred and certainly that is the case here because there is no evidence that other licensees had in fact misappropriated epic trade secrets and there was no evidence that other software companies that license software do sort of random spot audits certainly a rational jury could and did conclude in these circumstances that epic took reasonable precautions to protect their trade secrets the law does not require epic to harass innocent licensees silicon nights was instead free to argue to the jury our protections weren't reasonable it did in fact make all those arguments to the jury and again the jury rejected them finally your honor on the double recovery issue there is no double recovery and so again I want to make sure the record is clear on this as well the award on the breach of our breach of contract was for the unpaid license fees for the five or so games that silicon nights worked on without paying a license fee that award was different than the award on the copyright and trade secrets counterclaims the award on the copyright and trade secret counterclaims discouraged silicon nights unlawful profits that's what we asked for before the jury that's with the instructions to the jury were so they were different claims with different elements seeking different relief there is no double recovery we weren't claiming a double benefit the law clearly allows us under copyright and trade secrets to discouragement of the wrong doers unjust profits that's what we got under those claims the breach of contract damages were separate so all the counterclaims survived silicon nights is not entitled to judgment as a matter of law to sit aside the jury verdict of any of those and let's hear any other questions I thank the court for its attention and ask for a furnace Mr. Holland you have some rebuttal time yes your honor let me just quickly take a few of Mr. Shabelsky's points in order first of all he led off with the idea that all the evidence was heard I just think it's manifestly clear but that's part of my point all the evidence was not heard in addition with respect the trade secrets I like to raise a couple of points Mr. Shabelsky makes much of the 333 trade secrets what he ignores is the fact that nearly 1200 trade secrets were asserted and at a minimum when evaluating the attorney's fees award one should not be able to come in and overstate its alleged claim to that effect nearly 80% of the alleged trade secrets were asserted were withdrawn and then come in and say I'm entitled to get all my money back for having to try this case on that trade secret ground secondly it's not that he goes and sort of creates issues where there aren't on there's no case that says a licensee has to be audited well all the case law says that you have to take reasonable steps when you're put on notice that this is potentially occurring and doing nothing cannot be alleged to be reasonable I disagree strongly with my colleagues assertion that testimony came in about all these steps that were taken the only step that was ever discussed at trial was the contract itself and that's it in terms of the hearsay issue I again disagree I think we've abundantly had that in the record for quite some time a few times he made this statement that you know this is not challenged on appeal this was waived etc as we cited as particularly with respect to the blacklist issue on page 22 and 23 of our reply brief we cited the court to respond to their waiver argument exactly to where the court had both severely not just it wasn't just that the blacklist was attempted to be introduced and was objected it was attempted twice and on the second attempt the court made it clear that we were to and the courts were to move on from that I then repeatedly throughout the remainder of the trial asked and was assured that all such objections to jury instructions those types of objections that were made to Evan and their instructions were in fact preserved and that's again at pages 22 and 23 the reply brief so I did that we waived that and didn't preserve it to be able to talk about here it's not not correct in terms of the undo the undo prejudice and and undo confusion issue that that was attributed to the third party complaint I believe very clearly or very honestly you're honest that the opposite is true what was unduly confusing was for the the jury to be able to sit there and think that as he just attempted to say that silica knight says some sort of thief that it stole all this stuff that rather than the opposite of what it's true when the one looks at those third party complaints silica knight was in the same position everybody else in the industry was it couldn't make the code work and the reason why the de minimis infringement argument exists still today is because as pled in the complaint before the complaint before the case even started the code was being removed and and it continued to be removed because it didn't work not for any other reason not because there were some sort of titious use being put to not because some benefit was being gained to it because it did not work and that's why disney midway EA and all those of the people complained about it and that's why silica knight took it out of the engine the idea that they're out penalized for having what is called the core or the the the the core component that's another misnomer as the testimony client at trial made clear and as we've put in the briefs that is actually a shorthand version for what's called the math core the mathematical algorithms that any game engine must be based upon or what the core is and so while mr. chibalsky very adeptly says it's the core of the engine it's only called that because it's something that no engine can be made without and no one can actually own because it's so they're so ubiquitous and the testimony came in about that therefore the fact that it's supposed the core does not show some sort of monetary attribution to it with respect to the copyright very briefly the point is that yes you can you may submit your copyright to be registered you don't have to but you have to show that you've registered you have to show what you've registered if you get an litigation you want to sue someone for copyright infringement you can't simply say I registered something never demonstrate what it is and then have a jury verdict in the millions of dollars that's based on that and then further say I'm going to rely on my statutory registration which I didn't improve existed to bootstrap up attorney's fees claim on top of that and really that's the main point of the case here you are the whole theme that he has even today as we're sitting here that silica knight somehow stole everything and wanted to act nefariously this instance has one major logical flaw if that's what they wanted to do they never would have brought this case they could have set up in canada and simply taking the code and I wouldn't be standing here before you they came down here to have a right to have an injustice righted and this court has the last chance to have it happen I hope the court will do the right thing thank you hono