MARSHALL, TEXAS

The shot across the bow, the splash in the water that signalled an adversary had appeared on the horizon and was spoiling for a fight, came in February, 2016.

“All of a sudden my phone started ringing,” recalls Dave Caputo, the former CEO of network optimization company Sandvine.

“And it was a bunch of law firms, many of them based in Dallas [saying] that, ‘We would love to represent you in your patent lawsuit.’

“I had no idea what the calls were about and thought, well, something must have happened.”

What had happened was Civil Docket No. 2:16-CV-147, filed in the United States District Court for the Eastern District of Texas, Marshall Division, by a three-person company called Packet Intelligence LLC.

Sandvine had been targeted in lawsuit by a patent troll. And those phone calls, which began on Feb. 17, 2016, would herald the beginning of a 21-month legal odyssey for Caputo and his senior executives as they worked to stake a claim to their company’s innocence and avoid paying a US$13.8-million demand for damages, plus ongoing royalties on future sales.

It was an odyssey that would eventually swallow up to US$2 million of Sandvine money in legal fees and additionally emerge as a cautionary tale for otherwise unsuspecting technology companies in Waterloo Region.

“It was,” said Caputo, “your worst nightmare come true if you’re a technology company.”

A patent troll – or, to use the common legal euphemism, “a non-practising entity” – is a company that buys patents and then searches for companies that might be in violation of those patents. When they believe they’ve found one, they sue.

Lawyers’ fees and legal costs are their overhead. Court awards, or negotiated out-of-court settlements, are their revenue.

They produce nothing. They sell nothing.

“They exist to extract some rents off other people’s success,” says Caputo.

And this one had Waterloo-based Sandvine in its crosshairs.

Packet Intelligence, headquartered in Marshall, Texas, was alleging that Sandvine’s products infringed upon three U.S. patents – No. 6,665,725, No. 6,839,751, No. 6,954,789 – which Packet now owned, and because Sandvine had not purchased a licence to make use of the property defined by those patents, Packet was demanding that Sandvine now do so for nearly US$14 million plus future royalties.

The first thing Caputo did when the phone calls slowed was huddle with his Chief Technology Officer, Don Bowman, and attempt to determine whether it was true or not – whether the company which he co-founded, or its products, or the technology underlying those products, had infringed on the patents at question.

And if they had?

“Then let’s have a big-boy conversation,” Caputo said.

Their determination, however, was that they had not. The determination was they would fight.

 

“Last year, one out of four patent cases [in the U.S.] was filed in the Marshall division alone.”

 

Marshall, a former oil and gas hub, is a small town of 24,000 in east Texas, a nearly three-hour drive east from Dallas along Interstate 20. It’s a drive that is mostly unremarkable save for pine forests that line sections of the four-lane highway and plenty of rolling, open prairie. If you were to keep driving for another 20 minutes you’d reach the Louisiana border, and 20 minutes beyond that, Shreveport.

A statue of a Confederate soldier stands sentry outside the Harrison County Historical Courthouse in Marshall, Texas. (Communitech photo: Craig Daniels)

A statue of a Confederate soldier stands sentry outside the Harrison County Historical Courthouse in Marshall, Texas. (Communitech photo: Craig Daniels)

Exit north off the interstate at the junction of Highway 59, and gas stations and restaurants give way to small homes and modest residential streets which lead, like spokes in a wagon wheel, to the town’s geographical centre and its defining feature – the postcard-perfect Harrison County Historical Courthouse, circa 1900, which sits inside the town’s Whetstone Square. A statue of a Confederate soldier guards the stately building’s eastern approach, adjacent to a parking lot and an outdoor ice rink donated by Samsung, a frequent defendant in Marshall’s courts. The downtown has a quiet, orderly, Andy of Mayberry feel.

Incongruously, tiny, otherwise sleepy Marshall, is also the home of the “rocket docket,” the jurisdiction of preference for patent trolls, and widely regarded as the unofficial “patent litigation capital of America.”

“Last year, one out of four patent cases [in the U.S.] was filed in the Marshall division alone,” says Eric Buresh, one of the founding partners at Erise IP, a law firm based in Kansas City that specializes in intellectual property cases. Buresh was part of Sandvine’s legal team in its case against Packet Intelligence.

Patent suits are hardly a new phenomena, nor are they unknown to the Waterloo tech ecosystem. Recall Blackberry paid US$612.5 million to NTP to settle a patent case in 2006.

But the preponderance of them appears to be growing. Michael Meehan, director of IP at Uber, wrote recently on TechCrunch.com that, in the U.S., “more than 10,000 companies have been sued at least once by a patent troll, and patent trolls file 84 per cent of high-tech patent lawsuits a year. Over the past decade, there has been a 500 per cent growth in patent troll lawsuits, and research from the Boston University School of Law found that PAE litigation results in $80 billion in lost wealth annually.”

Marshall, specifically, got its start as the rocket docket in the 1990s, when financially troubled Texas Instruments, looking for new revenue streams, grew frustrated with the three-plus years it was taking to bring patent cases to court in Dallas, its headquarters, due to courts clogged by criminal cases.

“There weren’t many criminal cases in Marshall at the time so [Texas Instruments] found that they could get their cases through more quickly,” Buresh says. Texas Instruments, writes Loren Steffy in a 2014 article in Texas Monthly entitled “Patently Unfair,” “saved itself by turning its patent portfolio into a profit machine.”

The judge in Marshall at the time, T. John Ward, “adopted rules and timetables for patent cases that were originally designed to make them more manageable,” Buresh explained, “but had the equal effect of making them move more quickly.

“That was the inception of the rocket docket.”

Among the rules? A clock, limiting the amount of time legal teams have to question their witnesses. Total time available to each team for direct examination and cross examination ranges from 10 to 13 hours. The time limits mean that most patent cases in Marshall last a neat-and-tidy five business days, from Monday to Friday. Jury deliberation rarely exceeds two or three hours (in Canada, by comparison, a patent trial normally lasts a minimum of two to three weeks and can stretch into months).

Speed, Buresh said, happened to additionally benefit the patent plaintiffs because time constraints put more pressure on defendants and reduced the chances of the court ruling in their favour.

“As a result, patent owners started filing more and more cases in Marshall, and [by] the mid-2000’s, it had taken on a life of its own.”

Marshall had become, in effect, a patent trial factory.

“In 2003 I tried my first intellectual property case, a trade secrets case, in Marshall,” says Harry ‘Gil’ Gillam, one of the principals in the Marshall-based law firm Gillam & Smith, also a firm hired by Sandvine and, like Erise IP, one that would play a major role in Sandvine’s defence.

“My law partner, Melissa Smith, and I started our own firm shortly after that in 2004. We were sitting on boxes in our new office when a referral on a patent case came in. Then another and then another. Over the years between us, we have been counsel in well over 1,000 cases and actually tried several dozen to verdict.”

Today, it’s impossible to spend time in Marshall and not feel the impact of the legal system. Legal offices flank the Marshall federal courthouse to the east and west and others are liberally dotted around the town’s main square. A few hundred metres west of the federal courthouse is the Harrison County Courthouse, and directly across the street to the north is the historical courthouse, which houses the Harrison County Museum and gift shop but is still used on occasion as a functioning court.

The preponderance of legal venues and offices means that legal matters play a significant role in Marshall’s economic health. Hotels cater to the whims of legal teams, not only providing sleeping accommodations, but war rooms equipped photocopiers and white boards. Restaurants and caterers are available on a 24/7 basis.

The multitude of patent trials in Marshall provides a steady income stream to local entrepreneurs such as Juli Jameson, owner of Sweet Sabine, a restaurant near the federal court building. (Communitech photo: Craig Daniels)

The multitude of patent trials in Marshall provides a steady income stream to local entrepreneurs such as Juli Jameson, owner of Sweet Sabine, a restaurant near the federal court building. (Communitech photo: Craig Daniels)

“I’d have to be deaf, dumb and blind not to recognize what’s going on,” says Juli Jameson, owner of a restaurant called Sweet Sabine, situated on the north side of Whetstone Square, directly across from the federal court building. “I think anyone in the hospitality business is acutely aware.”

Jameson and her restaurant – which features a burger called “The Rocket Docket” – regularly provide a catered lunch for jurors sitting in Marshall’s federal court, and she says a significant percentage of her business is connected to court activity. Lawyers drop in for lunch. Legal teams ask for catered meals in their war rooms.

For the duration of the Packet Intelligence/Sandvine trial, it was Sweet Sabine’s that fed the jurors at lunch time and even as Jameson spoke to Communitech News, jurors were noshing on hot Black Forest ham-and- swiss on a kaiser, homemade potato soup and brownies, from her kitchen.

“I would say [the court system] is definitely a positive,” says Jameson, [but] this is not a new situation for this county at all. Look at the historical courthouse. It has been very important in this town for well over a century. So this is nothing brand spanking new.”

Last spring, the U.S. Supreme Court ruled unanimously that patent holders could no longer hunt for friendly jurisdictions to sue companies. The decision initially sent a shiver down the spine of Marshall and its businesses. Since then, fears of a reduction in cases appear to have faded, but residents are nevertheless wary. Asked about that decision and impact, Peggy McCreary, administrative assistant at the historical courthouse, stood on the building’s wrap-around verandah, paused, looked up at a reporter, and made it clear what was at stake:

“If they take away the court cases, it’s gonna hurt this town.”

 

At the Sandvine trial, only one of the eight jurors would hold a university or college degree.

 

“All rise!”

With those words Judge J. Rodney Gilstrap, medium-set with glasses and groomed dark hair, enters “his” courtroom, the one that bears a plaque affixed to the wall next to the doors with his name emblazoned in gold letters. It is Nov. 6, 2017. Outside, it’s cool and cloudy, and the forecast is for clouds and intermittent rain for much of the week.

Everyone entering Judge Gilstrap’s courtroom is required to pass through a metal detector. Pockets are emptied. Belts are removed. Males must a wear a tie; Caputo, caught unaware the first time he entered, was forced to borrow one. Electronic devices are forbidden – unless one is a member of one of the legal teams.

“Be seated, please,” says Gilstrap. “Is there anything the Court needs to be aware of or take up from either party before we proceed to bring in the jury?”

Juries are selected from Harrison and four nearby counties that together form the Marshall Division of the Eastern District of Texas. The area is the definition of rural, small-town America – the kind of place that generally likes the idea of making America great again. The makeup of the area is both a problem and an opportunity to be exploited by plaintiffs and defence teams alike during complex technology trials.

“I think the thing that makes this area somewhat unique – one of the things that makes my job challenging – is that there are cultural limitations and by cultural, I mean there is a limitation in the jurors’ experience when it comes to technology, world travel, different cultures, and things like that,” says Mary Noffsinger, Senior Litigation Consultant with Courtroom Sciences Inc.

Courtroom Sciences, based out of Irving, Texas, helps legal teams with jury selection and overall strategy. Her firm, which was co-founded by Dr. Phil – yes, that Dr. Phil – was hired by Sandvine for its patent case with Packet Intelligence.

“Let’s use this [case] as an example,” says Noffsinger: “During jury selection, one of our prospective jurors, who almost ended up on the jury, said that he had never used a computer and does not have a computer or cell phone. Period. In their house. So they do not own a computer or a cell phone.”

“So, when you’re talking about a tiny piece of technology inside a computer network – [one] that maybe a juror who uses computers and the Internet frequently might understand – you’re going to face challenges with the ones who have never used a computer and doesn’t use the Internet. We actually run into that quite a bit.”

At the Sandvine trial, only one of the eight jurors – three men, five women, all of them middle-aged – would hold a university or college degree.

As a result, the legal technique for both sides is to frame the case and their arguments in the simplest terms possible. Extraordinarily complex ideas that in some cases have taken engineers years to build are reduced in court to common, everyday concepts.

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The U.S. federal courthouse in Marshall, Texas, home to the infamous “rocket docket.” (Communitech photo: Craig Daniels)

In this case, there were two everyday concepts that would be chosen by Sandvine’s lawyers as proxies for the technology at issue in the trial: Rice – as in, individual grains of rice thrown at a wedding – and a mesh bag to hold the rice.

The rice would stand as a metaphor for a technology protocol called a connection flow. The mesh bag would stand for something called a conversation flow. The entire trial would hinge on their distinction: Sandvine would argue its technology amounted to the former – a connection flow; Packet would argue Sandvine’s technology amounted to the latter – conversation flow – and was the basis of Packet’s assertion that Sandvine had infringed on its patents and was liable for damages.

However, as in all trials, particularly trials argued before juries, there are two parallel dramas in play. One is about facts, chronology, decisions. The other is about the perception of the facts, chronology and decisions filtered through the people delivering them, and filtered again by the jurors themselves as they weigh the simple credibility and likeability of the lawyers, the plaintiffs, the defence and the witnesses. A case and its outcome, no matter how complex, is often influenced by people.

 

“The right answer at Sandvine is always to do the right thing.”

 

Dave Caputo is a 50-year-old serial entrepreneur who lives in St. Agatha, Ont., a small community 15 minutes west of Kitchener-Waterloo. He has a computer science degree from York University and an MBA from University of Toronto. He met his wife, a French and special education teacher, in university. They have two grown kids, both in university.

In the autumn of 2000, at the height of the Internet bubble, Caputo and 250 others lost their jobs when their division – previously a startup called PixStream, which had been acquired by Cisco Systems for CDN$554 million four months earlier – was shut down.

When he received the news, Caputo, dazed, went home and then went for a walk with his two then-young boys. His cell phone rang. It was Sir Terry Matthews, an Ottawa-based tech magnate and early investor in PixStream, urging Caputo to round up key members of his former team and start a new venture.

Twelve hours later, Sandvine was born.

“We decided that night that we would start another company,” Caputo told the court on Day 1 of the trial.

The company would eventually go on to become a world leader in network management, producing hardware and embedded software that helped big online providers – Bell, Comcast, Time-Warner, and the like – manage and optimize the flow of their broadband traffic.

As Caputo, from the witness box, described Sandvine’s early history, his lawyer, Gil Gillam, instructed the court clerks to display on video monitors a photo of the Sandvine founders sitting in and atop an old Volkswagen minibus adorned with the company logo. The photo was taken on the first day of the company’s existence. It’s a light-hearted, carefree portrayal, one meant to convey the kind of company Caputo and the other founders wanted Sandvine to be.

sandvine---vw---van

Sandvine’s founding executive team on the company’s official launch day, Aug. 31, 2001. Clockwise from top left: Don Bowman, Tom Donnelly, Dave Caputo, Marc Morin and Brad Siim. (Photo courtesy of Don Bowman)

It was not the first time the trial would see the slide and it would not be the last.

“… we came up with this concept called the Sandvine Way,” Caputo told the court, as the image appeared on the monitors. “And I won’t bore you with all of it, but there are eight tenets of it with things like: customer first; we won’t ever be successful unless our customers are successful; there was work hard, play hard. We were young. We wanted to work hard, but we wanted to have a lot of fun while we were working together.

“And then – and then most importantly, I think – was, do the right thing and everything else will take care of itself. The right answer at Sandvine is always to do the right thing.”

Last summer Sandvine was sold to a private equity firm called Francisco Partners for $562 million. On Sept. 21, as part of the sale, Caputo’s role shifted from CEO to “non-executive chairman of the board.” In effect, the company was no longer his to run – and yet here he was in Marshall representing Sandvine and defending the company while a member of Sandvine’s new executive team, Richard Deggs, Vice-President and CFO, sat in the back of the courtroom, merely observing.

Caputo: “Certainly when Francisco Partners acquired us, we passionately said: ‘Please don’t settle this. Let us fight it.’”

As the trial’s first day drew to a close, Caputo, from the witness box and tears welling, explained why fighting mattered.

“I — I — I believe we’ve been falsely accused,” said Caputo. “And I believe that I owe it to the engineers who built this product to follow the Sandvine Way and do the right thing. And the right thing is not to pay for something that you’re not using.”

 

In 2012, Intellectual Ventures was described as not only being a patent troll, but “the most hated company in tech.”

 

In 1975 Phil Vachon joined the U.S. Air Force after high school. Vachon, from a small town called Woonsocket, R.I., eventually became a jet engine mechanic.

In his spare time he took computer courses and, upon an honourable discharge from the military four years later, landed a programming job, eventually joining Oracle in 1998. He stayed at Oracle for nine years, moving on to an Oracle spinoff company called Liberate Technology, and after that company was sold to Comcast in 2005, he became a consultant for an intellectual property holding company called Intellectual Ventures. In 2012, Intellectual Ventures was described as not only being a patent troll, but “the most hated company in tech.”

At age 50, Vachon left Intellectual Ventures, partnered with a man named Brad Brunell – who had worked for 16 years at Microsoft, including several years as its head of Microsoft’s intellectual property licensing – and they decided in 2012, as Vachon told the court, “to go into the intellectual property licensing business together.” They formed Packet Intelligence.

Packet Intelligence is based in Marshall, Tex., close to the courts where it is a frequent plaintiff in patent infringement cases. (Communitech photo: Craig Daniels)

Packet Intelligence is based in Marshall, Texas, close to the courts where it is a frequent plaintiff in patent infringement cases. (Communitech photo: Craig Daniels)

Packet, that same year, bought a portfolio of 22 patents, 10 of them registered in the U.S., from a company called Exar, for US$500,000. Packet agreed to pay an additional US$375,000 to Exar in the event they were successful in getting other companies to pay a licensing fee on the patents. The typical way that companies are convinced to take a licence is through a lawsuit, which generates a settlement or a court case.

They were successful. Very.

Last October, in the very same Marshall courtroom, on the very same patents at issue with Sandvine, Packet sued a Westford, Mass., company called NetScout Systems and won a judgment of US$5.7 million.

Cisco, Sandvine’s competitor, was sued by Packet in March of 2014, and eventually settled out of court for US$19.5 million.

Packet earned what is believed to be US$180,000 in an uncontested suit brought against Huawei Device USA.

In court, Sandvine’s lawyers went to lengths to lay bare, in pejorative terms, the nature of Packet’s business – to make it clear to the jury that Packet neither makes nor sells a product. That it is, in effect, a patent troll.

“In addition to manufacturing products and building things with this technology back in 2012, you would have had the right as the patent owner to sell products using this technology that you’ve talked about today, correct?” Gillam asked Vachon, seated in the witness box on the trial’s first day.

“Yes,” Vachon replied.

“And you did not do that either?”

“I think you asked me that question already, but the answer is we did not.”

Gillam then pressed the point, asking if any attempt had been made to contact Sandvine and discuss the patents before launching a lawsuit, or perhaps write a cease-and-desist letter.

“No, we did not,” said Vachon.

And then Gillam pointed out that Vachon and Brunell had both bought shares in Sandvine. He asked Vachon when that took place, whether it was before the lawsuit was launched, or after. At that point, one of Packet’s lawyers, William E. Davis III, objected.

“Relevance?” Davis asked the court.

“Do you have a response, Mr. Gillam?” Judge Gilstrap asked.

“Absolutely, Your Honour. What the evidence is going to show is not only did they go out and purchase stock in Sandvine, but then they began a campaign of contacting analysts and contacting Sandvine’s in-house counsel in an effort to pressure this company into negotiating a licence with them through the vehicle of being stockholders in Sandvine.”

In other words, Gillam wanted to know – and wanted the jury to know – whether Packet, after suing Sandvine, bought stock in the company and then began to use their position as shareholders as a platform from which to pressure the company into settling the lawsuit – which would have generated a payday for Packet.

After a back-and-forth, Gilstrap called the lawyers to the bench for discussion, which the jury did not hear. There was a tension at work: Gilstrap wanted the case to be heard only on the merits of the technical issues, not on the character of the plaintiffs or the nature of their company. Gillam wanted the opposite. The conversation, according to a court transcript, went like this:

Judge Gilstrap: There’s a willfulness claim here, does this go to willfulness? I’m trying to figure out what this is relevant to other than to make [Vachon] look bad.

Gillam: The actions – the – well, the actions of this company –

Gilstrap: I know that’s what you’re trying to do.

Gillam: The actions of this company – or the actions of these men and going out after the fact or before the fact, we don’t know which one it is, and I don’t know which one it is, going out and buying stock in a – in a company that you’ve actually got a lawsuit against and then going out and trying to muscle them into negotiating some settlement with you by going – by calling up their in-house – by calling up their in-house counsel, the actions of a company, the actions of this man, and this other fellow out here doing that is not relevant, I think it’s absolutely relevant. Not to the issues of –

Gilstrap: To what issue?

Gillam: To the issues of the character of these men doing what they’re doing. What we have – what we have here, Your Honor, is we’ve got a company that has brought a lawsuit that doesn’t do – that they don’t make any – we know it’s a non-practising entity. I – I haven’t been calling it that, but the actions or the character of them going down the road of contacting people – …

Gilstrap then stopped him, and said he would sustain the objection. The jury, therefore, didn’t hear the answer as to whether or not an attempt was made to use shares as a lever to pressure Sandvine into settling – a settlement that would have resulted in revenue for Packet – but the seed had been planted, a seed tied to, as Gillam told Judge Gilstrap, “character.”

 

Both sides scored points that made it appear their case was the one the jurors should believe.

 

Conversation flow. Connection flow. For four days the jury would hear lawyers and various experts from both sides explain the relevance, or not, of both terms to the patents.

To win the case, Packet had to prove Sandvine’s products, operating between an Internet provider and its customers, monitored conversation flows, or a group of connection flows bundled together. Sandvine had to prove its products monitored only connection flows – grains of rice versus all the grains held together in a mesh bag.

Both sides would call their own technology expert – Sandvine’s expert was earning US$490 per hour; Packet’s, US$600 – and cross-examine their adversary’s expert. Both sides scored points that made it appear their case was the one the jurors should believe.

A key moment, however, appeared to come on Day 2, Tuesday, late in the morning. Don Bowman, Sandvine’s former chief technology officer, was on the stand, explaining the decision-making as he and his team designed Sandvine’s products.

Bowman said his team deliberately did not want to deal with conversation flows, deliberately didn’t want a mesh bag around the rice, and the reason was speed. Doing so would have slowed the performance of their products:

“Why would you not want to put a net around the rice?,” asked Sandvine lawyer Eric Buresh. “Why would you not want to group [the] connection flows together?

Bowman replied: “That would have taken time on every single new connection flow. That would have been the tradeoff we didn’t want to make. We would have slowed down the common case to speed up the uncommon case. I don’t see why we would want to do that. It didn’t make sense.”

What appeared to be another key moment occurred later that same day. On the stand was Dr. Scott Nettles, a technology expert called by Sandvine.

Nettles, under questioning from Buresh, explained that the history of the patents at issue – history being the back-and-forth that the original inventor had with the patent office as it applied for a patent – specifically describes technology that relates to a conversation flow, and not connection flow. In other words, it described technology that Bowman said Sandvine didn’t make. Therefore, there could be no infringement.

Nettles: “It’s a crucial distinction. It’s – I think it’s fair to say, it’s the heart of the distinction, the difference – the heart of the invention.”

Buresh: “What, in your opinion, is the key concept of the asserted patents in this case?

Nettles: “Conversational flows.”

 

“I am very grateful for this experience and I had a lot of fun fighting the good fight.”

 

Closing arguments, and the judge’s instructions to the jury, concluded at mid-morning on Thursday, Nov. 9, Day 4 of the trail. Lawyers dispersed throughout Marshall’s tiny downtown to wait for the jury to reach a verdict.

Caputo, Don Bowman (Sandvine’s former CTO, who had remained in Marshall even after his testimony had concluded), and Scott Hamilton, (Sandvine’s former CFO), headed outside. The day was sunny and relatively warm, the first pleasant weather of the week. The three men walked laps of the public square in front of the courthouse, “trying to convince ourselves,” Caputo said later, “that we should win.”

Shortly after lunch, news, tangential but important to trial participants on both sides, emerged out of Germany: Sandvine had obtained an ruling in Munich, Germany, that declared the equivalent European patents invalid, successfully blunting an attempt by Packet Intelligence to additionally sue it in Europe.

“It’s fantastic news,” said Scott Hamilton, Sandvine’s former CFO, as the trial participants filtered back into the courtroom after lunch.

Moments later, word came that the jury had reached a verdict. Urgent emails and text messages flowed, summoning both full teams back inside.

Caputo had been warned by his lawyers not to show any emotion when the verdict was read, lest he draw the ire of the judge. But once inside, Caputo’s competitive nature, and the pent-up anxiety generated since the lawsuit was launched nearly two years previous, got the better of him. He walked up to Vachon and an exchange began.

Caputo later described what happened:

“I felt I needed to say something to Phil Vachon, so that if we lost, it would be clear that he didn’t beat me personally.

“As I paced, we made eye contact and I decided to say out loud, ‘Just another day at the office, Phil?’

“His team of lawyers rolled their eyes as if to say, ‘What a douchebag.’

“But Phil bit, and got out of his chair and said with a smile, ‘Yes, just another day at the office, Dave.’

“And I said, ‘I want to thank you, Phil.’

“‘For what?’

“‘I want to thank you for taking this all the way and not settling. I am very grateful for this experience and I had a lot of fun fighting the good fight.’”

Before the exchange could progress further, the court security officer said, “All rise,” and Judge Gilstrap entered the courtroom.

Moments later, so did the jury, bearing its verdict.

Months’ worth of depositions, legal briefs and millions of dollars of legal and witness fees on both sides, now boiled down to a one-word answer to the trial’s central question, both of which Gilstrap read aloud after he was handed the verdict: “Did Packet Intelligence prove by a preponderance of the evidence that Sandvine has infringed any of the asserted claims of the ‘725 patent, the ‘751 patent, or the ‘789 patent?”

There was a brief pause, and then:

“No,” said Gilstrap.

Sandvine had won.

Caputo looked down at the table in front of him for one, perhaps, two, seconds (he revealed afterward he was quietly pumping his forearms under the table) and then looked up, but otherwise outwardly contained whatever he was feeling. Once outside the courtroom, however, it was a different matter. On the courtroom steps, Caputo, Hamilton and Bowman joined hands and, smiling, lifted their arms in victory.

In the moments immediately after the trial, Packet Intelligence principal Brad Brunell walked quickly down the street away from the courthouse, brushing off a reporter’s request for comment. The Sandvine team lingered on the courthouse steps glad-handing and taking celebratory photographs.

 

“I think there was a moral game at play in the courtroom.”

 

sandvine---courthouse-steps

From left to right, former Sandvine CEO Dave Caputo, former CFO Scott Hamilton and former CTO Don Bowman celebrate their victory on the courthouse steps. (Communitech photo: Craig Daniels)

“The jury decision of non-infringement was a surprise,” Brunell said a few days later via email. “The evidence presented by both parties was clear and convincing that Sandvine infringed, well beyond the standard of a preponderance of the evidence. It was a perplexing outcome but apparently the jury was convinced by the Sandvine team with their overall messages and positioning.”

Messaging and positioning. Did it play a role? Less than a month earlier, NetScout had lost an infringement case to Packet Intelligence in the same courtroom and on the same patents, and yet this time, an opposite outcome.

It’s worth noting that it was Buresh who chose to use the metaphor of rice thrown at a wedding and the mesh bag. The choice, he said, was deliberate.

“Once we had the jury set after jury selection, I knew their demographics and backgrounds,” said Buresh. “Given their age and backgrounds, I was confident that particular wedding tradition would be a positive nostalgic for all of them.

“If we had been trying the case to a group of millennials on the West Coast, we would have needed a different analogy. It’s all about what connects with a particular group of people.”

The comment drives to the heart of the enormous risk assumed by a company like Packet, particularly at a jury trial, where far-from-dispassionate human beings are charged with making decisions: A court case, as Brunell himself admits, leads to “a binary outcome,” a stark win or loss, and fear of those stakes on both sides generates out-of-court settlements “in 97 per cent of cases.”

Packet was forced to escape the appearance of being, as Gillam told the court in his closing arguments, “a non-practising entity,” a company that makes nothing and sells nothing – a patent troll versus the carefree boys on the Sandvine bus.

Asked about the term, about being characterized as a “patent troll,” Brunell replied:

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Brad Brunell, co-founder of Packet Intelligence, is a former Microsoft executive. (Photo: Facebook)

“Calling people names is what someone does when they are trying to be divisive and when they don’t want the listener to think or consider deeply.”

One of the jurors, Robert Berg, who served as jury foreperson, said in the immediate aftermath of the trial that the nature of the two companies as they were portrayed in court played no role in the jury’s deliberation. Berg said the trial’s facts, the technology at play, were clear cut. At least in their minds.

“The majority [of the jury] was leaning toward Sandvine when we initially started talking,” said Berg. “And [a few jurors] were kinda on the fence and listening to what we were talking about, and when we went back over one of the documents that they showed in court, that kind of settled it for them.”

Buresh, however, believes more was at play.

“Patent cases, like any other, should present a real-life story to the jury,” he said. “The story that most connects with the jurors’ collective human experience is most likely to win. Sandvine was made up of some really good individuals who had a very interesting and compelling story to tell. The trial gave them an opportunity to share that story, and it connected with the jurors. It connected with me as well. I was struck by the very real emotions of the trial. And I was hugely impressed by the quality of people that made up Sandvine.”

The comments are echoed by Noffsinger, but in stronger terms:

“I think there was a moral game at play in the courtroom,” she said.

“I’ve seen this at play before and I thought to myself this time it was particularly strong – I haven’t seen it to this degree more than two or three times.

“These [jurors] are religious, moral people. I don’t think anybody on that jury was looking to give somebody a big payday. They weren’t particularly grievance-ridden people, chip-on-their-shoulder, or angry, or particularly cynical.

“I always stress to defence teams that jurors need to hear the defendant’s independent story of development. They need to hear the defendant’s blood, sweat and tears story. There isn’t always one, for various reasons.

“The amount of time we were able to spend on the startup of Sandvine and the innovation involved and the perspiration and inspiration on the part of  these guys, was pretty incredible. And they were there to talk about it, and that’s unusual, too. [It was] huge – hugely important, I think.”

 

“The reality is, there’s no law against being a patent troll.”

 

“It was the best feeling of my life.”

Four days after the trial concluded Caputo is sitting at a table in the Communitech Hub looking back at the ordeal he and the company he co-founded had just been through. He is asked what it was like, the moment Judge Gilstrap announced he had won, when he looked down at the courtroom table for moment or two.

“In this scenario, it’s sort of like scoring an overtime goal in the seventh game of the Stanley Cup, in that you’re waiting for a result, and it happens in a split second, and you really don’t know [which way it’s going to go],” he said.

“I remember thinking, ‘I’ve got to hang onto this. This is pure joy, pure adulation. I’ve got to remember this and lock it in.’”

But why risk so much? Why didn’t Sandvine settle the suit in the way, for instance, Cisco had settled?

“The reason we took it all the way was we were wrongfully accused,” Caputo said. “We were being accused of using someone else’s intellectual property. And once I understood that we weren’t infringing – this is the whole connection flows versus conversational flows – it didn’t make sense for me to pay for something we weren’t using.

“I thought it would be an affront to the engineers at Sandvine who had the idea and built and created this technology. I thought I owed it to them that the world should understand they invented this and created it themselves.

“And so, to bring it back to the Sandvine Way, do the right thing and everything else will take care of itself. This was an example of the Sandvine Way. Do the right thing and everything else will take care of itself.

“I thought it was the right thing to do. It is expensive. It is complicated to do. But it’s also a bit of an adventure.

“And I have a sense that once someone sees that you’re willing to fight this all the way, you’re less likely to attract patent troll lawsuits against you. So there’s a bit of an investment, as well.

“Ultimately, I don’t think [Packet Intelligence] would have settled for anything near what we spent to fight this lawsuit.”

Rules in Texas mean it is unlikely, even though Sandvine won, that the company will recover more than a small fraction of its legal costs. But the biggest loser, in terms of money? It may be the legal team hired by Packet Intelligence, who, Caputo believes, was working on a 50-50 contingency basis – typical, he says, in cases such as these. Under those terms, a Packet Intelligence victory would have meant a payout of nearly US$7 million; a loss, nothing.

The question, whether his legal team was working on contingency, was asked of Brunell, who declined to answer.

But even though Sandvine won, the company and its principals did not escape unscathed: Considerable treasure was expended in terms of money, time and anxiety. At the end of the day, an argument could be made that everyone lost.

“The reality is, there’s no law against being a patent troll,” says Caputo. “So, they’re not doing something that’s against the law.

“End of the day, it’s an experience no company wants to go through. But if you are going to go through it, you would much prefer to win.”

About The Author

Craig Daniels
Senior Journalist

Craig Daniels is a veteran reporter, columnist and editor who has joined Communitech’s editorial team as senior journalist. He worked most recently at Postmedia in Hamilton, where he led the team that produced the National Post, and before that at the Globe and Mail, the Toronto Sun, Financial Post, the Montreal Daily News and the Telegraph-Journal in Saint John, N.B. He has an abiding interest in the transformational power and promise of tech and startup ecosystems, is a commercially licensed pilot, and has a debilitating wrist-watch fetish.