Interactive Products v. A2Z Mobile Office ( 2003 )

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21 3XUVXDQW WR 6L[WK &LUFXLW 5XOH   ,QWHUDFWLYH3URGXFWVY 1R (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU D]0RELOH2IILFHHWDO )LOH 1DPH DS BBBBBBBBBBBBBBBBB 81,7('67$7(6&28572)$33($/6 &2816(/ )257+(6,;7+&,5&8,7 $5*8('(ULF:*XWWDJ60,7+*877$* %2/,1 BBBBBBBBBBBBBBBBB 0DVRQ 2KLR IRU $SSHOODQW  7KRPDV 3 /LQLDN /,1,$. %(5(1$72/21*$&5( :+,7(%HWKHVGD0DU\ODQG sDPHV'/LOHV',16025( 6+2+/&LQFLQQDWL2KLR ,17(5$&7,9( 352'8&76 ; IRU $SSHOOHHV  21 %5,()  (ULF : *XWWDJ 60,7+ &25325$7,21  *877$*  %2/,1 0DVRQ 2KLR sRKQ s +HOEOLQJ 3ODLQWLII$SSHOODQW  &LQFLQQDWL2KLRIRU$SSHOODQW7KRPDV3/LQLDN/,1,$.  1R %(5(1$72/21*$&5( :+,7(%HWKHVGD0DU\ODQG  sDPHV'/LOHV',16025( 6+2+/&LQFLQQDWL2KLR Y ! IRU$SSHOOHHV   $= 02%,/( 2)),&(  BBBBBBBBBBBBBBBBB 62/87,216 ,1& %5,$1 /((  23,1,21 02%,/( 2)),&( (17(535,6(  BBBBBBBBBBBBBBBBB DQG'28*/$6 0$ IRUWUDGHPDUNLQIULQJHPHQW@LV 0RUHVSHFLILFDOO\FRXQW,DVVHUWVDFODLPIRULQIULQJHPHQW ZKHWKHUWKHGHIHQGDQW VXVHRIWKHGLVSXWHGPDUNLVOLNHO\WR XQGHU WKH 7UDGHPDUN $FW  86& †   &RXQW ,, FDXVHFRQIXVLRQDPRQJFRQVXPHUVUHJDUGLQJWKHRULJLQRIWKH DVVHUWVDFODLPXQGHUWKH/DQKDP$FW86&†IRU JRRGVRIIHUHGE\WKHSDUWLHVl'DGG\ VsXQN\0XVLF6WRUHV IDOVH GHVLJQDWLRQ RI RULJLQ DQG IRU IDOVH RU PLVOHDGLQJ ,QFY%LJ'DGG\ V)DPLO\0XVLF&HQWHU)G DGYHUWLVLQJ&RXQW,,,DVVHUWVDFODLPIRUWUDGHPDUNGLOXWLRQ WK&LU6LPLODUO\WRVXFFHHGRQDIDOVHGHVLJQDWLRQ XQGHUWKH/DQKDP$FW86&†F&RXQWV,9DQG RI RULJLQ FODLP D SODLQWLII PXVW VKRZ WKDW WKH IDOVH 9DVVHUWSDUDOOHOVWDWHODZFODLPVIRUWUDGHPDUNLQIULQJHPHQW GHVLJQDWLRQFUHDWHVDmOLNHOLKRRGRIFRQIXVLRQlsRKQVRQY DQG IDOVH GHVLJQDWLRQ RI RULJLQ XQGHU WKH 2KLR 'HFHSWLYH sRQHV  )G   WK &LU   )XUWKHUPRUH 7UDGH3UDFWLFHV$FW2KLR5HYLVHG&RGH†DQGWKH FODLPVIRUWUDGHPDUNLQIULQJHPHQWDQGIDOVHGHVLJQDWLRQRI FRPPRQODZRI2KLR&RXQW9,DSSHDUVWRDOOHJHWKDW0D\HU RULJLQ XQGHU WKH 2KLR 'HFHSWLYH 7UDGH 3UDFWLFHV $FW DQG EUHDFKHGWKHVHWWOHPHQWDJUHHPHQWE\DOORZLQJD]WRXVHWKH 2KLR FRPPRQ ODZ DUH VXEMHFW WR WKH VDPH mOLNHOLKRRG RI /DS7UDYHOHUWUDGHPDUNRQLWVZHEVLWH&RXQW9,,DOOHJHVWKDW FRQIXVLRQl VWDQGDUGV DV WKHLU IHGHUDO FRXQWHUSDUWV  6HH /HH D] DQG 02( LQGXFHG 0D\HU LQWR EUHDFKLQJ WKH 'DGG\ VsXQN\0XVLF)GDW7KHUHIRUHWRVXFFHHG VHWWOHPHQW DJUHHPHQW  &RXQW 9,,, DOOHJHV WKDW GHIHQGDQWV RQDQ\RILWVWUDGHPDUNFODLPVDWLVVXHLQWKLV DSSHDO,3& DOOHJHGLPSURSHUXVHRIWKH/DS7UDYHOHUWUDGHPDUNWRUWLRXVO\ PXVW VKRZ WKDW WKH SUHVHQFH RI LWV WUDGHPDUN LQ WKH SRVW LQWHUIHUHG ZLWK ,3& V H[LVWLQJ DQG SURVSHFWLYH EXVLQHVV GRPDLQSDWKRID]j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jV WKHGLVWULFWFRXUWLVVXHGDQRUGHUJUDQWLQJERWKPRWLRQV WUDGHPDUN LQ WKH SRVWGRPDLQ SDWK RI D]jV SRUWDEOH LQSDUWGLVPLVVLQJZLWKSUHMXGLFH,3&jVIHGHUDOFODLPVDQG FRPSXWHUVWDQG ZHE SDJH  7KHUHIRUH WKH GLVWULFW FRXUW SDUDOOHOVWDWHFODLPVDQGGHFOLQLQJWRH[HUFLVHVXSSOHPHQWDO JUDQWHGVXPPDU\MXGJPHQWLQIDYRURIGHIHQGDQWVRQ,3&jV MXULVGLFWLRQ RYHU ,3&jV UHPDLQLQJ VWDWH ODZ FODLPV  ,3& WUDGHPDUN FODLPV  :H UHYLHZ WKH GLVWULFW FRXUWjV JUDQW RI DSSHDOVRQO\WKHJUDQWRIVXPPDU\MXGJPHQWRQFHUWDLQRILWV VXPPDU\MXGJPHQWGHQRYR6HHLGDW IHGHUDO FODLPV DQG SDUDOOHO VWDWH FODLPV  6SHFLILFDOO\ ,3& DSSHDOVWKHJUDQWRIVXPPDU\MXGJPHQWRQFRXQWV,,,,9DQG 9RILWVFRPSODLQW  ,Q DGGLWLRQ WR WUDGHPDUN LQIULQJHPHQW FRXQW , DQG SDUWV RI FRXQWV ,9 DQG 9 DQG IDOVH GHVLJQDWLRQ RI RULJLQ SDUWV RI FRXQWV ,, ,9 DQG 9 ,3& DVVHUWHG D FODLP IRU WUDGHPDUN GLOXWLRQ FRXQW ,,, D FODLP ZKLFK GRHV QRW UHTXLUH D VKRZLQJ RI OLNHOLKRRG RI FRQIXVLRQ ,3& KRZHYHU KDV QRW DSSHDOHG WKH GLVWULFW FRXUWjV GLVPLVVDO RI LWV WUDGHPDUN GLOXWLRQ FODLP 1R ,QWHUDFWLYH3URGXFWVY   ,QWHUDFWLYH3URGXFWVY 1R D]0RELOH2IILFHHWDO D]0RELOH2IILFHHWDO ,Q W\SLFDO WUDGHPDUN FDVHV D FRXUW VKRXOG GHWHUPLQH ,IIRULQVWDQFHWKHSUHVHQWFDVHLQYROYHGDVLWXDWLRQZKHUH ZKHWKHUDOLNHOLKRRGRIFRQIXVLRQH[LVWVE\H[DPLQLQJDQG D]DQG02(ZHUHVHOOLQJDSRUWDEOHFRPSXWHUVWDQGFDOOHG ZHLJKLQJWKHIROORZLQJIDFWRUVWKHVWUHQJWKRIWKHVHQLRU m7KH /DS 7UDYHO 6WDQGl WKHQ WKLV ZRXOG EH D W\SLFDO PDUN  UHODWHGQHVV RI WKH JRRGV DQG VHUYLFHV  WKH WUDGHPDUNFDVHZKHUHWKHHLJKWIDFWRUVZRXOGEHKHOSIXOLQ VLPLODULW\RIWKHPDUNVHYLGHQFHRIDFWXDOFRQIXVLRQWKH GHWHUPLQLQJ ZKHWKHU GHIHQGDQWVj XVH RI WKLV PDUN ZRXOG PDUNHWLQJFKDQQHOVXVHGOLNHO\GHJUHHRISXUFKDVHUFDUH OLNHO\FDXVHFRQIXVLRQZLWK,3&jVm/DS7UDYHOHUlWUDGHPDUN WKHLQWHQWRIWKHGHIHQGDQWLQVHOHFWLQJWKHPDUNDQGWKH ,QWKLVFDVHKRZHYHUWKHSURGXFWGHIHQGDQWVDUHVHOOLQJLV OLNHOLKRRGRIH[SDQVLRQRIWKHSURGXFWOLQHV,GDW7KH FDOOHGm7KH0RELOH'HVNlDWUDGHPDUNQRWDWDOOVLPLODUWR GLVWULFWFRXUWH[DPLQHGWKHVHHLJKWIDFWRUVLQWKHSUHVHQWFDVH ,3&jV m/DS 7UDYHOHUl WUDGHPDUN  ,3& RI FRXUVH LV QRW $V WKLV FRXUW KDV FDXWLRQHG EHIRUH KRZHYHU m>H@DFK FDVH FKDOOHQJLQJGHIHQGDQWVjXVHRIWKHPDUNm7KH0RELOH'HVNl SUHVHQWVLWVRZQFRPSOH[VHWRIFLUFXPVWDQFHVDQGQRWDOORI WR LGHQWLI\ WKHLU FRPSHWLQJ SURGXFW LQVWHDG ,3& LV WKHVHIDFWRUVPD\EHSDUWLFXODUO\KHOSIXOLQDQ\JLYHQFDVHl FKDOOHQJLQJWKHSUHVHQFHRILWVWUDGHPDUNmODSWUDYHOHUlLQWKH +RPHRZQHUV*URXS,QFY+RPH0DUNHWLQJ6SHFLDOLVWV,QF 85/ SRVWGRPDLQ SDWK RI WKH ZHE SDJH IURP ZKLFK )GWK&LU7KHIDFWRUVDUHRQO\ GHIHQGDQWVDUHVHOOLQJWKH0RELOH'HVNSURGXFW XVHIXO WR WKH H[WHQW WKH\ DVVLVW LQ GHWHUPLQLQJ ZKHWKHU D OLNHOLKRRG RI FRQIXVLRQ H[LVWV  m7KH XOWLPDWH TXHVWLRQ 7KHUHIRUHLQWKLVFDVHWKHUHLVDSUHOLPLQDU\TXHVWLRQDERXW UHPDLQVZKHWKHUUHOHYDQWFRQVXPHUVDUHOLNHO\WREHOLHYHWKDW ZKHWKHUGHIHQGDQWVDUHXVLQJWKHFKDOOHQJHGPDUNLQDZD\ WKHSURGXFWVRUVHUYLFHVRIIHUHGE\WKHSDUWLHVDUHDIILOLDWHGLQ WKDW LGHQWLILHV WKH VRXUFH RI WKHLU JRRGV  ,I GHIHQGDQWV DUH VRPHZD\l,G RQO\XVLQJ,3&jVWUDGHPDUNLQDmQRQWUDGHPDUNlZD\oWKDW LVLQDZD\WKDWGRHVQRWLGHQWLI\WKHVRXUFHRIDSURGXFWo ,QWKHXVXDOWUDGHPDUNFDVHWKHGHIHQGDQWLVXVLQJDPDUN WKHQWUDGHPDUNLQIULQJHPHQWDQGIDOVHGHVLJQDWLRQRIRULJLQ WRLGHQWLI\LWVJRRGVWKDWLVVLPLODUWRWKHSODLQWLIIjVWUDGHPDUN ODZV GR QRW DSSO\  &I 1HZ .LGV RQ WKH %ORFN Y 1HZV )RULQVWDQFHLQ'DGG\jVsXQN\0XVLFWKLVFRXUWFRQVLGHUHG $PHULFD3XEOLVKLQJ,QF)GWK&LU DFDVHZKHUHWKHSODLQWLIIVROGPXVLFDOLQVWUXPHQWVXQGHUWKH KROGLQJWKDWLQIULQJHPHQWODZVmVLPSO\GRQRWDSSO\lWRD WUDGHPDUN m'DGG\jV sXQN\ 0XVLF 6WRUHVl ZKLOH WKH mQRQWUDGHPDUNXVHRIDPDUNl GHIHQGDQWVROGPXVLFDOLQVWUXPHQWVIURPLWVUHWDLOVWRUHm%LJ 'DGG\jV )DPLO\ 0XVLF &HQWHUl  7KH GLVWULFW FRXUW KDG 7KH HYLGHQFH VKRZV WKDW D] GLG QRW LQVHUW WKH PDUN GHWHUPLQHGWKDWWKHUHZDVQROLNHOLKRRGRIFRQIXVLRQEHWZHHQ mODSWUDYHOHUlLQWRWKH85/RILWVSRUWDEOHFRPSXWHUVWDQGZHE WKHPDUNVRIWKHSDUWLHVEXWWKLVFRXUWUHYHUVHGDIWHUZHLJKLQJ SDJHZKLOHVHOOLQJWKH0RELOH'HVN:KHQD]VXEVWLWXWHG HDFK RI WKH HLJKW IDFWRUV DQG GHWHUPLQLQJ WKDW WKHUH ZDV D WKH 0RELOH 'HVN SURGXFW IRU WKH /DS 7UDYHOHU SURGXFW LW OLNHOLKRRGRIFRQVXPHUFRQIXVLRQ$SSO\LQJWKHHLJKWIDFWRUV VLPSO\QHYHUFKDQJHGWKHSRVWGRPDLQSDWKQDPHRILWVZHE LVXVHIXOWRGHWHUPLQHOLNHOLKRRGRIFRQIXVLRQLQW\SLFDOFDVHV SDJH$QVZHULQJDTXHVWLRQDERXWZK\mODSWUDYHOHUlDSSHDUV VXFKDV'DGG\jVsXQN\0XVLFZKHUHWKHUHLVQRWDQ\TXHVWLRQ LQ WKH 85/ /HH WHVWLILHG m%HFDXVH WKDWjV WKH ZD\ P\ WKDWWKHGHIHQGDQWLVXVLQJWKHFKDOOHQJHGPDUNWRLGHQWLI\LWV GLUHFWRU\SDWKZDVVHWXSl7KHUHFRUGGRHVQRWLQGLFDWHZK\ JRRGV,QVXFKDFDVHLWPDNHVVHQVHWRFRQVLGHUVXFKWKLQJV DVWKHVLPLODULW\RIWKHPDUNVDQGWKHUHODWHGQHVVRIWKHJRRGV DQGVHUYLFHVLGHQWLILHGE\WKRVHPDUNV  ,Q WKH FRQWH[W RI WKLV FDVH WKHUH LV QR PHDQLQJIXO GLVWLQFWLRQ EHWZHHQ m/DS 7UDYHOHUl DQG mODSWUDYHOHUl 6HH HJ 3XEOLF 6HUY &R Y 1H[XV (QHUJ\ 6RIWZDUH ,QF  )6XSSG  ' 0DVV  ILQGLQJ m(QHUJ\ 3ODFHl DQG mHQHUJ\SODFHFRPl WR EH YLUWXDOO\ LGHQWLFDO 1R ,QWHUDFWLYH3URGXFWVY   ,QWHUDFWLYH3URGXFWVY 1R D]0RELOH2IILFHHWDO D]0RELOH2IILFHHWDO D]GLGQRWFKDQJHWKHSRVWGRPDLQSDWKQDPHRILWVZHESDJH DQRWKHUjV WUDGHPDUN LQ WKH SRVWGRPDLQ SDWK RI D 85/ RQFHLWVWRSSHGVHOOLQJWKH/DS7UDYHOHUEXW/HHGLGWHVWLI\ YLRODWHVWUDGHPDUNODZ6HYHUDOFRXUWVKDYHFRQVLGHUHGWKH WKDWPDNLQJVXFKDFKDQJHZRXOGEHmQRWWHUULEO\lGLIILFXOW LVVXH RI ZKHWKHU WKH XVH RI DQRWKHUjV WUDGHPDUN LQ RQHjV 1HYHUWKHOHVVWKHUHLVQRWDQ\HYLGHQFHLQWKHUHFRUGWKDWD] ZHEVLWHGRPDLQQDPHYLRODWHVWUDGHPDUNODZDQGWKHDQVZHU OHIW mODSWUDYHOHUl LQ LWV 85/ SDWK LQWHQGLQJ WR FRQIXVH RU LVXVXDOO\WKDWVXFKXVHLVDYLRODWLRQ6HHHJ3$&&$5 PLVOHDGDQ\RQH7KHZHESDJHLWVHOIFOHDUO\DQGSURPLQHQWO\ ,QF Y 7HOH6FDQ 7HFK //&  )G  WK &LU  PDUNVWKHSURGXFWEHLQJVROGDVm7KH0RELOH'HVNl KROGLQJ WKDW GHIHQGDQWjV XVH RI GRPDLQ QDPHV VXFK DV mSHWHUELOWWUXFNVFRPlDQGmNHQZRUWKQHZWUXFNVFRPlYLRODWHG 7KHXOWLPDWHLVVXHLQWKLVFDVHKRZHYHULVQRWGHIHQGDQWVj SODLQWLIIjV WUDGHPDUN ULJKWV LQ WKH PDUNV m3HWHUELOWl DQG LQWHQWEXWZKHWKHUWKHSUHVHQFHRImODSWUDYHOHUlLQWKH85/ m.HQZRUWKl%URRNILHOG&RPPXQLFDWLRQV,QFY:HVW&RDVW SRVWGRPDLQSDWKIRUD]jVSRUWDEOHFRPSXWHUVWDQGZHESDJH (QWHUWDLQPHQW&RUS)GWK&LUKROGLQJ LVOLNHO\WRFDXVHFRQIXVLRQDPRQJFRQVXPHUVUHJDUGLQJWKH WKDWWKHGHIHQGDQWjVXVHRIWKHGRPDLQQDPHmPRYLHEXIIFRPl RULJLQRIWKH0RELOH'HVNSURGXFW6WDWHGDQRWKHUZD\WKH YLRODWHG SODLQWLIIjV WUDGHPDUN ULJKWV LQ WKH PDUN LVVXHLVZKHWKHUDFRQVXPHULVOLNHO\WRQRWLFHmODSWUDYHOHUlLQ m0RYLH%XIIl%XWWKHVHFRXUWVKDYHDOOUHOLHGRQWKHIDFWWKDW WKH SRVWGRPDLQ SDWK DQG WKHQ WKLQN WKDW WKH 0RELOH 'HVN GRPDLQQDPHVXVXDOO\VLJQLI\VRXUFH$VZHUHFHQWO\VWDWHG PD\ EH SURGXFHG E\ WKH VDPH FRPSDQ\ RU D FRPSDQ\ m>Z@RUGVLQPDQ\GRPDLQQDPHVFDQDQGGRFRPPXQLFDWH DIILOLDWHGZLWKWKHFRPSDQ\WKDWPDNHVWKH/DS7UDYHOHU LQIRUPDWLRQ DV WR WKH VRXUFH RU VSRQVRU RI WKH ZHE VLWHl 3$&&$5)GDWFI'DWD&RQFHSWV,QFY'LJLWDO 7RDQVZHUWKLVTXHVWLRQLWLVKHOSIXOWRUHYLHZmWKHEDVLF &RQVXOWLQJ ,QF  )G   WK &LU  REMHFWLYHV RI WUDGHPDUN ODZl ZKLFK WKH 8QLWHG 6WDWHV 0HUULWW FRQFXUULQJ QRWLQJ WKDW D GRPDLQ QDPH GRHV QRW 6XSUHPH&RXUWKDVGHVFULEHGDVIROORZV DOZD\VDFWDVDWUDGHPDUNDQGVWDWLQJm:KHQDGRPDLQQDPH LVXVHGRQO\WRLQGLFDWHDQDGGUHVVRQWKH,QWHUQHWDQGQRWWR ,QSULQFLSOHWUDGHPDUNODZE\SUHYHQWLQJRWKHUVIURP LGHQWLI\WKHVRXUFHRIVSHFLILFJRRGVDQGVHUYLFHVWKHQDPHLV FRS\LQJ D VRXUFHLGHQWLI\LQJ PDUN mUHGXFH>V@ WKH QRWIXQFWLRQLQJDVDWUDGHPDUNl FXVWRPHU V FRVWV RI VKRSSLQJ DQG PDNLQJ SXUFKDVLQJ GHFLVLRQVlIRULWTXLFNO\DQGHDVLO\DVVXUHVDSRWHQWLDO 7KH SRVWGRPDLQ SDWK RI D 85/ KRZHYHU GRHV QRW FXVWRPHU WKDWWKLV LWHP o WKH LWHP ZLWK WKLV PDUN o LV W\SLFDOO\VLJQLI\VRXUFH7KHSRVWGRPDLQSDWKPHUHO\VKRZV PDGH E\ WKH VDPH SURGXFHU DV RWKHU VLPLODUO\ PDUNHG KRZ WKH ZHEVLWHjV GDWD LV RUJDQL]HG ZLWKLQ WKH KRVW LWHPVWKDWKHRUVKHOLNHGRUGLVOLNHGLQWKHSDVW$WWKH FRPSXWHUjVILOHV6HH3DWPRQW0RWRU:HUNV,QFY*DWHZD\ VDPHWLPHWKHODZKHOSVDVVXUHDSURGXFHUWKDWLWDQG 0DULQH ,QF 1R &  :/  DW  Q QRW DQ LPLWDWLQJ FRPSHWLWRU ZLOO UHDS WKH ILQDQFLDO 1'&DO'HF7\SLFDOO\ZHESDJHVFRQWDLQLQJ UHSXWDWLRQUHODWHG UHZDUGV DVVRFLDWHG ZLWK D GHVLUDEOH SRVWGRPDLQSDWKVDUHQRWUHDFKHGE\HQWHULQJWKHIXOO85/ SURGXFW  ,W LV WKH VRXUFHGLVWLQJXLVKLQJ DELOLW\ RI D LQWR  D  EURZVHU  LQVWHDG  WKHVH  VHFRQGDU\  SDJHV  DUH PDUNWKDWSHUPLWVLWWRVHUYHWKHVHEDVLFSXUSRVHV XVXDOO\ UHDFKHG   YLD   D   OLQN   IURP   WKH   ZHEVLWHjV KRPHSDJHZKLFKGRHVQRWFRQWDLQDSRVWGRPDLQ 4XDOLWH[&RYsDFREVRQ3URGXFWV&R,QF86 SDWK)RUH[DPSOHDFRQVXPHUZDQWLQJWRSXUFKDVH FLWDWLRQVRPLWWHG D  /DS  7UDYHOHU  SURGXFW ZRXOG SUREDEO\ QRW HQWHU mD]VROXWLRQVFRPGHVNVIORRUODSWUDYHOHUGNIOOWKWPlLQWRD $SSDUHQWO\WKHSUHVHQWFDVHPDUNVWKHILUVWWLPHDFLUFXLW EURZVHU  7KH FRQVXPHU ZRXOG PRUH OLNHO\ HQWHU FRXUW KDV FRQVLGHUHG WKH LVVXH RI ZKHWKHU WKH SUHVHQFH RI 1R ,QWHUDFWLYH3URGXFWVY   ,QWHUDFWLYH3URGXFWVY 1R D]0RELOH2IILFHHWDO D]0RELOH2IILFHHWDO m/DS7UDYHOHUFRPlZKLFKZRXOGEULQJWKHFRQVXPHUWR,3&jV m.HQZRUWKl LQ GHIHQGDQWjV ZHEVLWHVj GRPDLQ QDPHV WKH ZHEVLWHZKLFKVHOOVWKH/DS7UDYHOHU,IDFRQVXPHUZHUH FRXUW FLWHG 3DWPRQW 0RWRU :HUNV DQG VXJJHVWHG WKDW WKH JHQHUDOO\ORRNLQJIRUSRUWDEOHFRPSXWHUVWDQGSURGXFWVWKH GHIHQGDQWFRXOGLQVWHDGXVHWKHSODLQWLIIjVWUDGHPDUNVLQSRVW FRQVXPHUPLJKWORRNDWDJHQHUDOUHWDLOHUjVZHEVLWHVXFKDV GRPDLQSDWKV)6XSSGDWFLWLQJ3DWPRQW0RWRU D]VROXWLRQVFRP  ,I WKH FRQVXPHU ZHUH WR JR WR :HUNVDQGVWDWLQJm0RUHRYHUVRPHDXWKRULW\VXJJHVWVWKDW D]VROXWLRQVFRP WKH FRQVXPHU ZRXOG ILQG D OLQN HQWLWOHG WKHXVHRIWUDGHPDUNVLQWKHSRVWGRPDLQSDWKRID85/LV m7KH 0RELOH 'HVNŒ &RPSXWHU 6WDQGl ZKLFK LI GRXEOH DFFHSWDEOHl FOLFNHGZRXOGEULQJWKHFRQVXPHUWRD]jVSRUWDEOHFRPSXWHU VWDQGZHESDJHVHOOLQJ7KH0RELOH'HVN ,3& DWWHPSWV WR GLVWLQJXLVK 3DWPRQW 0RWRU :HUNV DQG 3$&&$5E\QRWLQJWKDWHDFKRIWKHVHWZRFDVHVLQYROYHGD 7KHRQO\WZRFDVHVWKDWDGGUHVVWKHLVVXHSUHVHQWHGKHUHDUH GHIHQGDQW ZKR ZDV UHVHOOLQJ WKH SODLQWLIIjV SURGXFW RQ LWV 3DWPRQW0RWRU:HUNVDQG3$&&$5,QFY7HOHVFDQ7HFK ZHEVLWH7KHUHIRUH,3&DUJXHVWKHGHIHQGDQWVLQWKRVHFDVHV //&)6XSSG('0LFKDIILUPHGLQSDUW ZHUHVLPSO\PDNLQJUHIHUHQFHVWRWUDGHPDUNHGJRRGVRIIHUHG DQGYDFDWHGLQSDUWRQDGLIIHUHQWJURXQGE\)G IRUVDOHE\WKHDOOHJHGLQIULQJHU1HLWKHURIWKHVHWZRFDVHV WK&LU,Q3DWPRQW0RWRU:HUNVWKH'LVWULFW&RXUW KRZHYHU UHOLHG RQ WKLV IDFW LQ GHWHUPLQLQJ WKDW WKH XVH RI IRU WKH 1RUWKHUQ 'LVWULFW RI &DOLIRUQLD KHOG WKDW WKH DQRWKHUjVWUDGHPDUNLQDSRVWGRPDLQSDWKLVQRWDYLRODWLRQ GHIHQGDQWjV XVH RI WKH SODLQWLIIjV WUDGHPDUN LQ WKH SRVW RIWUDGHPDUNODZ7KHGLVWULFWFRXUWLQ3DWPRQW0RWRU:HUNV GRPDLQ SDWK RI RQH RI WKH GHIHQGDQWjV ZHE SDJHV GLG QRW EDVHGLWVILQGLQJLQWKLVUHJDUGVROHO\RQWKHIDFWWKDWDSRVW YLRODWHWUDGHPDUNODZ:/DW Q7KH GRPDLQSDWKGRHVQRWVLJQLI\VRXUFHDQGWKHUHIRUHFDQQRWDFW SODLQWLIIZDVDPDNHURIVPDOOPRWRUL]HGVFRRWHUVZKLFKLW WRFRQIXVHUHJDUGLQJVRXUFH:/DW Q VROGXQGHUWKHWUDGHPDUNm*R3HGl7KHGHIHQGDQWRZQHG $QG WKH GLVWULFW FRXUW LQ 3$&&$5 VLPSO\ FLWHG 3DWPRQW DQGRSHUDWHGDZHEVLWHZZZLGLRV\QFFRPZKLFKUHVROGWKH 0RWRU:HUNVZLWKRXWIXUWKHUDQDO\VLV)6XSSGDW *R3HG SURGXFW IURP RQH RI LWV VHFRQGDU\ ZHE SDJHV )XUWKHUPRUHWKHUHLVQREDVLVWRFRQFOXGHWKDWDGHIHQGDQWjV ZZZLGLRV\QFFRPJRSHG7KHSODLQWLIIDVVHUWHGWKDWWKH UHVHOOLQJ RI WKH SODLQWLIIjV SURGXFW RQ LWV ZHE SDJH ZRXOG SUHVHQFHRILWVWUDGHPDUNLQWKHSRVWGRPDLQSDWKRIRQHRI GHFUHDVHWKHSUREDELOLW\WKDWWKHGHIHQGDQWjVSRVWGRPDLQSDWK WKHGHIHQGDQWjVZHEVLWHjVZHESDJHVYLRODWHGWUDGHPDUNODZ XVH RI SODLQWLIIjV WUDGHPDUN ZRXOG FRQIXVH D FRQVXPHU 7KHFRXUWKRZHYHUIRXQGmDVDPDWWHURIODZWKDWVXFKXVH UHJDUGLQJ WKH VRXUFH RI WKH ZHEVLWH  ,I DQ\WKLQJ LW ZRXOG GRHVQRWVXJJHVW>WKHSODLQWLIIjV@VSRQVRUVKLSRUHQGRUVHPHQW EHFDXVH WKH *R3HG PDUN GLG QRW DSSHDU LQ WKH ZHEVLWHjV µGRPDLQ QDPHjl  ,G 7KH FRXUW ZHQW RQ WR H[SODLQ WKDW D  ,Q GHWHUPLQLQJ WKDW WKH GHIHQGDQWjV XVH RI WKH SODLQWLIIjV WUDGHPDUN mZHEVLWHjVGRPDLQQDPHVLJQLILHVLWVVRXUFHRIRULJLQlEXW 3DWPRQW 0RWRU :HUNV LQ WKH WH[W RI LWV ZHEVLWH ZDV QRW D YLRODWLRQ RI WUDGHPDUN ODZ WKH FRXUW WKDWWKHSRVWGRPDLQSDWKmVHUYHVDGLIIHUHQWIXQFWLRQlDQG LQ GLG UHO\ RQ WKH IDFW WKDW WKH GHIHQGDQW ZDV GRHVQRWVLJQLI\VRXUFHRIRULJLQ,G VLPSO\ PDNLQJ QHFHVVDU\ XVH RI WKH PDUN WR UHIHU WR WKH SODLQWLIIjV SURGXFW  :/  DW  UHO\LQJ RQ WKH mQRPLQDWLYH IDLU XVHl ,Q3$&&$5,QFWKH'LVWULFW&RXUWIRUWKH(DVWHUQ'LVWULFW GRFWULQH DV RXWOLQHG LQ 1HZ .LGV ZKLFK SURWHFWV D GHIHQGDQWjV mUHDVRQDEO\ QHFHVVDU\l XVH RI D SODLQWLIIjV WUDGHPDUN ZKHQ WKH GHIHQGDQW RI 0LFKLJDQ VHHPLQJO\ HQGRUVHG WKH SUDFWLFH RI XVLQJ LV UHIHUHQFLQJ WKH SODLQWLIIjV SURGXFW 7KH FRXUW KRZHYHU GLG QRW UHO\ DQRWKHUjVWUDGHPDUNLQDZHESDJHjVSRVWGRPDLQSDWK,Q RQ WKLV UHDVRQLQJ LQ PDNLQJ LWV GHFLVLRQ UHJDUGLQJ WKH XVH RI WKH PDUN LQ GLVFRXQWLQJWKHSRWHQWLDOKDUPWRWKHGHIHQGDQWRIHQMRLQLQJ WKH SRVWGRPDLQ SDWK DQG LW ZRXOG KDYH EHHQ GLIILFXOW IRU WKH FRXUW WR ILQG GHIHQGDQWjVXVHRIWKHSODLQWLIIjVWUDGHPDUNVm3HWHUELOWlDQG WKDW WKH GHIHQGDQWjV XVH RI WKH SODLQWLIIjV WUDGHPDUN LQ LWV SRVWGRPDLQ SDWK ZDV D mUHDVRQDEO\ QHFHVVDU\l XVH 1R ,QWHUDFWLYH3URGXFWVY   ,QWHUDFWLYH3URGXFWVY 1R D]0RELOH2IILFHHWDO D]0RELOH2IILFHHWDO VHHPWKDWWKHGHIHQGDQWjVPDUNHWLQJRIWKHSODLQWLIIjVSURGXFW WKH/DQKDP$FW86&†DSDUWRIFRXQW,,DV RQLWVZHESDJHZRXOGLQFUHDVHWKHOLNHOLKRRGWKDWDFRQVXPHU ZHOODV2KLRjVHTXLYDOHQWVWDWXWH25&†$SDUW PD\WKLQNWKDWWKHGHIHQGDQWLVDVVRFLDWHGZLWKWKHSODLQWLII RIFRXQW,9:LWKUHJDUGWRDFODLPIRUIDOVHDGYHUWLVLQJWKLV FRXUWKDVVWDWHGDVIROORZV %HFDXVHSRVWGRPDLQSDWKVGRQRWW\SLFDOO\VLJQLI\VRXUFH LW LV XQOLNHO\ WKDW WKH SUHVHQFH RI DQRWKHUjV WUDGHPDUN LQ D :KHQDSODLQWLIIVHHNVDQDZDUGRIPRQHWDU\GDPDJHVIRU SRVWGRPDLQSDWKRID85/ZRXOGHYHUYLRODWHWUDGHPDUNODZ IDOVHRUPLVOHDGLQJDGYHUWLVHPHQWXQGHUWKH/DQKDP$FW )RUSXUSRVHVRIWKHSUHVHQWFDVHKRZHYHULWLVHQRXJKWRILQG KHPD\VKRZHLWKHUWKDWWKHGHIHQGDQW VDGYHUWLVHPHQWLV WKDW,3&KDVQRWSUHVHQWHGDQ\HYLGHQFHWKDWWKHSUHVHQFHRI OLWHUDOO\ IDOVH RU WKDW LW LV WUXH \HW PLVOHDGLQJ RU mODSWUDYHOHUl LQ WKH SRVWGRPDLQ SDWK RI D]j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jVWUDGHPDUN OLWHUDOIDOVLW\DYLRODWLRQFDQRQO\EHHVWDEOLVKHGE\SURRI FODLPV0RUHRYHUEHFDXVHWKHUHLVQRWDQ\HYLGHQFHWKDWWKH RI DFWXDO GHFHSWLRQ LH HYLGHQFH WKDW LQGLYLGXDO SRVWGRPDLQSDWKRID]jVSRUWDEOHFRPSXWHUVWDQGZHESDJH FRQVXPHUV SHUFHLYHG WKH DGYHUWLVHPHQW LQ D ZD\ WKDW VLJQLILHVVRXUFHLWZDVXQQHFHVVDU\IRUWKHGLVWULFWFRXUWWR PLVOHGWKHPDERXWWKHSODLQWLII VSURGXFW$SODLQWLII H[DPLQH WKH HLJKW IDFWRUV WUDGLWLRQDOO\ XVHG WR GHWHUPLQH UHO\LQJ XSRQ VWDWHPHQWV WKDW DUH OLWHUDOO\ WUXH \HW OLNHOLKRRGRIFRQIXVLRQEHWZHHQWZRVRXUFHVLJQLI\LQJPDUNV PLVOHDGLQJ µFDQQRW REWDLQ UHOLHI E\ DUJXLQJ KRZ FRQVXPHUV FRXOG UHDFW LW PXVW VKRZ KRZ FRQVXPHUV % )DOVHDGYHUWLVLQJ DFWXDOO\GRUHDFWj,QDGGLWLRQD/DQKDP$FWFODLPPXVW EHEDVHGXSRQDVWDWHPHQWRIIDFWQRWRIRSLQLRQ ,3&FODLPVWKDWWKH$QQRXQFHPHQWDQGWKHVOLJKWYDULDWLRQV RI WKH $QQRXQFHPHQW WKDW DSSHDUHG RQ D]jV ZHEVLWH $PHULFDQ &RXQFLO RI &HUWLILHG 3RGLDWULF 3K\VLFLDQV WKURXJKRXWFRQVWLWXWHDFWLRQDEOHIDOVHDGYHUWLVLQJXQGHU 6XUJHRQV Y $PHULFDQ %G RI 3RGLDWULF 6XUJHU\ ,QF  )GWK&LUFLWDWLRQVRPLWWHG  ,QWKHGLVWULFWFRXUW,3&DUJXHGWKDWWKH$QQRXQFHPHQWZDV ,3& DOVR FRPSODLQV WKDW D]jV SRUWDEOHFRPSXWHUVWDQG ZHE SDJH LV PLVOHDGLQJHYHQLILWZDVOLWHUDOO\WUXH$VWKHGLVWULFWFRXUW OLVWHG DV RQH RI WKH KLWV ZKHQ RQH GRHV DQ ,QWHUQHW VHDUFK IRU WKH WHUP mODSWUDYHOHUl ,3&jV RZQ H[SHUW KRZHYHU WHVWLILHG WKDW mWKH SDWK QDPH FRUUHFWO\IRXQGKRZHYHU,3&IDLOHGWRVXEPLWDQ\FRPSHWHQW GRHV QRW ELDV D VHDUFK HQJLQHl ,Q DGGLWLRQ ,3& KDV RIIHUHG QR SURRI WKDW HYLGHQFHRIDFWXDOGHFHSWLRQ5HFRJQL]LQJWKLVIDLOXUH,3& GHIHQGDQWV GLG DQ\WKLQJ QHIDULRXV WR FDXVH VHDUFK HQJLQHV WR KLW D]jV QRZ IRFXVHV LWV DUJXPHQW RQ WKH DVVHUWLRQ WKDW WKH ZHE SDJH ZKHQ VHDUFKLQJ IRU mODSWUDYHOHUl )RU LQVWDQFH ,3& GRHV QRW $QQRXQFHPHQWLVOLWHUDOO\IDOVH7KLVDUJXPHQWDOVRIDLOV SUHVHQW DQ\ HYLGHQFH WKDW GHIHQGDQWV UHIHUHQFHG mODSWUDYHOHUl LQ WKH PHWDWDJV RI D]jV SRUWDEOHFRPSXWHUVWDQG ZHE SDJH 6HH 3URPDWHN :HUHYLHZWKHGLVWULFWFRXUWjVJUDQWRIVXPPDU\MXGJPHQW ,QGXVWULHV /WG Y (TXLWUDF &RUS  )G   WK &LU  KROGLQJ WKDW WKH GHIHQGDQWjV UHIHUHQFH WR WKH SODLQWLIIjV WUDGHPDUN LQ WKH GH QRYR  7KH ILUVW FKDOOHQJHG VWDWHPHQW FRQWDLQHG LQ WKH PHWDWDJV RI WKH GHIHQGDQWjV ZHE SDJH ZDV D YLRODWLRQ RI WUDGHPDUN ODZ $QQRXQFHPHQW LV WKDW m>W@KH RULJLQDO /DS 7UDYHOHU ZDV 7KH UHFRUG GRHV QRW FRQWDLQ DQ\ HYLGHQFH WKDW H[SODLQV ZK\ D]jV ZHE FRGHYHORSHGE\'RXJ0D\HUDQGKLVH[SDUWQHUl,3&DUJXHV SDJH LV KLW ZKHQ SHUIRUPLQJ DQ ,QWHUQHW VHDUFK IRU mODSWUDYHOHUl 1R ,QWHUDFWLYH3URGXFWVY   ,QWHUDFWLYH3URGXFWVY 1R D]0RELOH2IILFHHWDO D]0RELOH2IILFHHWDO WKDW WKLV VWDWHPHQW LV IDOVH mEHFDXVH 0D\HU DQG &RPHDX[ PHUHRSLQLRQZKLFKLVQRWDFWLRQDEOHXQGHUWKH/DQKDP$FW ZHUH QRW SDUWQHUV EXW ZHUH LQVWHDG VKDUHKROGHUV LQ DQG 6HH$PHULFDQ&RXQFLORI&HUWLILHG3RGLDWULF3K\VLFLDQV RIILFHUV RI ,3& LH ,3& LV QRW D SDUWQHUVKLS EXW D 6XUJHRQV)GDW FRUSRUDWLRQl1RUHDVRQDEOHMXURUFRXOGFRQFOXGH WKDWWKH $QQRXQFHPHQWZDVXVLQJWKHWHUPmSDUWQHUlLQLWVOHJDOVHQVH & 'LVFRYHU\GLVSXWH WR GLVWLQJXLVK WKH UHODWLRQVKLS IURP D FRUSRUDWLRQ  7KH FRPPRQPHDQLQJRImSDUWQHUlZKHQXVHGLQWKLVFRQWH[WLV 'XULQJWKHFRXUVHRIGLVFRYHU\,3&PRYHGmIRUOHDYHlWR mEXVLQHVV DVVRFLDWHl DQG 0D\HU DQG &RPHDX[ ZHUH FORVH WDNHWKHGHSRVLWLRQVRIFRXQVHOIRUGHIHQGDQWV,3&EDVHGWKLV EXVLQHVVDVVRFLDWHV,QWHUHVWLQJO\LQRUDODUJXPHQWLQIURQWRI PRWLRQ RQ WKH DOOHJDWLRQV WKDW GXULQJ WKH EUHDNV LQ ,3&jV WKHPDJLVWUDWHMXGJHRQDPRWLRQWRFRPSHO,3&jVFRXQVHO GHSRVLWLRQ RI D]jV SUHVLGHQW GHIHQGDQWVj FRXQVHO KDG VXPPDUL]HG WKLV FDVH E\ VWDWLQJ m:HjUH GHDOLQJ ZLWK WZR LQDSSURSULDWHFRQYHUVDWLRQVZLWKWKHZLWQHVVDQGWKDWGXULQJ IRUPHU SDUWQHUV RQ DQ LQWHOOHFWXDO SURSHUW\ LVVXH ZKLFK LV WKHGHSRVLWLRQGHIHQGDQWVjFRXQVHOZHUHVLJQDOLQJDQVZHUVWR EDVLFDOO\DOPRVWDFDVHRIILUVWLPSUHVVLRQl'XULQJWKHVDPH WKH ZLWQHVV  7KH PDJLVWUDWH MXGJH GHQLHG ,3&jV PRWLRQ RUDODUJXPHQW,3&jVFRXQVHOLGHQWLILHV0D\HUDVmDIRUPHU ZKLFKWKHMXGJHDSSURSULDWHO\FKDUDFWHUL]HGDVDPRWLRQWR SDUWQHURIRXUFOLHQWl FRPSHORQWKUHHJURXQGVFRXQVHOIRU,3&IDLOHGWRDWWHPSW WRUHVROYHWKHGLVFRYHU\GLVSXWHH[WUDMXGLFLDOO\SULRUWRILOLQJ 7KHQH[WFKDOOHQJHGVWDWHPHQWLQWKH$QQRXQFHPHQWLVWKDW WKHPRWLRQDVUHTXLUHGE\ORFDOUXOHVWKHUHFRUGIDLOHGWR &RPHDX[ DQG 0D\HU mKDYH VSOLWl  ,3& DUJXHV WKDW WKLV VXSSRUWDFODLPRIPLVFRQGXFWDQGWKHLQIRUPDWLRQVRXJKW VWDWHPHQWLVIDOVHmEHFDXVHLQDFWXDOLW\0D\HUUHVLJQHGIURP LQWKHPRWLRQFRXOGKDYHEHHQREWDLQHGE\RWKHUPHDQV7KH DQG OHIW ,3& LH WKHUH ZDV QR µVSOLWWLQJj RI SDUWQHUV RU D PDJLVWUDWH MXGJH WKHQ JUDQWHG GHIHQGDQWVj PRWLRQ IRU WKH SDUWQHUVKLS DQG ,3& LWVHOI GLG QRW µVSOLWjl  $JDLQ QR UHFRYHU\ RI UHDVRQDEOH H[SHQVHV RI GHIHQGLQJ WKH PRWLRQ UHDVRQDEOHMXURUFRXOGFRQFOXGHWKDWWKH$QQRXQFHPHQWZDV LQFOXGLQJDWWRUQH\VjIHHV XVLQJWKHWHUPmVSOLWlLQVRPHOHJDOVHQVHWRGLVWLQJXLVKWKH VLWXDWLRQIURPDQRIILFHUUHVLJQLQJIURPDFRUSRUDWLRQ7RVD\ ,3&REMHFWHGWRWKHPDJLVWUDWHMXGJHjVRUGHUEXWWKHGLVWULFW WKDW&RPHDX[DQG0D\HUmVSOLWlLVQRWIDOVH FRXUWRYHUUXOHG,3&jVREMHFWLRQDIWHULWmUHYLHZHGWKHHQWLUHW\ RI 0U /HHjV GHSRVLWLRQ WUDQVFULSWV DQG WKH FLUFXPVWDQFHV ,3&ODVWO\FKDOOHQJHVWKHVWDWHPHQWLQWKH$QQRXQFHPHQW VXUURXQGLQJWKHFRQYHUVDWLRQVZLWK0U/HHlDQGIRXQGmQR WKDWmD]FDUULHVWKHUHGHVLJQHGDQGLPSURYHGSURGXFWo7KH IDFWXDOVXSSRUWIRU3ODLQWLIIjVFODLPRIDWWRUQH\PLVFRQGXFWl 0RELOH'HVNŒl,3&DUJXHVWKDWWKLVVWDWHPHQWmQHFHVVDULO\ )XUWKHUPRUHWKHGLVWULFWFRXUWIRXQGWKDWmEHFDXVH3ODLQWLIIjV LPSOLHV WKDW µ7KH 0RELOH 'HVNj LV WKH µUHGHVLJQHG DQG PRWLRQZDVQRWVXEVWDQWLDOO\MXVWLILHGWKH&RXUWDJUHHVZLWK LPSURYHGj /DS 7UDYHOHU SURGXFW ZKLFK LW LV QRWl  $V WKH >0DJLVWUDWH@ sXGJH 6KHUPDQjV GHFLVLRQ WKDW DQ DZDUG RI GLVWULFW FRXUW FRUUHFWO\ KHOG FDOOLQJ WKH 0RELOH 'HVN DWWRUQH\jVIHHVDQGFRVWVLVDSSURSULDWH6HH)HG5&LY3 mUHGHVLJQHG DQG LPSURYHGl LV PHUH SXIIHU\ ZKLFK LV QRW D%l DFWLRQDEOHXQGHUWKH/DQKDP$FW6HH3L]]D+XW,QFY3DSD sRKQjV,QWjO,QF)GWK&LU,WLV ,3&QRZDSSHDOVWKHGLVWULFWFRXUWjVRUGHURYHUUXOLQJ,3&jV XQGLVSXWHGWKDW0D\HUZDVLQYROYHGLQWKHGHVLJQRIWKH/DS REMHFWLRQ WR WKH PDJLVWUDWH MXGJHjV DZDUG RI IHHV DQG 7UDYHOHUDQGWKDW0D\HUODWHUGHYHORSHGDFRPSHWLQJSURGXFW H[SHQVHV WR GHIHQGDQWV  ,3& DUJXHV WKDW WKH DZDUG ZDV ZLWK D GLIIHUHQW GHVLJQ FDOOHG 7KH 0RELOH 'HVN  7KH LQDSSURSULDWHEHFDXVHGHIHQGDQWVGLGQRWFRPSO\ZLWKWKHVDIH $QQRXQFHPHQWjVVXJJHVWLRQWKDWWKHUHGHVLJQLVLPSURYHGLV KDUERU SURYLVLRQ RI 5XOH  RI WKH )HGHUDO 5XOHV RI &LYLO 1R ,QWHUDFWLYH3URGXFWVY   ,QWHUDFWLYH3URGXFWVY 1R D]0RELOH2IILFHHWDO D]0RELOH2IILFHHWDO 3URFHGXUH  1RWKLQJ LQ WKH UHFRUG KRZHYHU VXJJHVWV WKDW ' 6DQFWLRQV GHIHQGDQWVjUHTXHVWIRUH[SHQVHVZDVSXUVXDQWWR5XOH  ,3&DGYDQFHVWKLVDUJXPHQWIRUWKHILUVWWLPHRQDSSHDODQG 5XOH  RI WKH )HGHUDO 5XOHV RI $SSHOODWH 3URFHGXUH GLGQRWPDNHDQ\UHODWHGDUJXPHQWWRWKHGLVWULFWFRXUW SURYLGHV 7KLVFRXUWUHYLHZVGHFLVLRQVRIDGLVWULFWFRXUWUHJDUGLQJ ,I D FRXUW RI DSSHDOV GHWHUPLQHV WKDW DQ DSSHDO LV GLVFRYHU\PDWWHUVLQFOXGLQJDZDUGLQJDWWRUQH\VjIHHVXQGHU IULYRORXVLWPD\DIWHUDVHSDUDWHO\ILOHGPRWLRQRUQRWLFH DQDEXVHRIGLVFUHWLRQVWDQGDUG%LOO&DOO)RUG,QFY)RUG IURP WKH FRXUW DQG UHDVRQDEOH RSSRUWXQLW\ WR UHVSRQG 0RWRU&RPSDQ\)GWK&LU$EXVHRI DZDUG MXVW GDPDJHV DQG VLQJOH RU GRXEOH FRVWV WR WKH GLVFUHWLRQ PHDQV WKDW WKH DSSHOODWH FRXUW LV OHIW ZLWK mD DSSHOOHH GHILQLWHDQGILUPFRQYLFWLRQWKDWWKHFRXUWEHORZFRPPLWWHG DFOHDUHUURURIMXGJPHQWl,G 02(DQG0D\HUDUJXHWKDWWKLVDSSHDOLVIULYRORXVDVWR WKHPEHFDXVH,3&KDVRIIHUHGQRHYLGHQFHWKDWHLWKHURIWKHP $VWKHGLVWULFWFRXUWPDNHVFOHDULQLWVRUGHUWKHDZDUGZDV LVUHVSRQVLEOHIRUWKHDOOHJHGWUDGHPDUNYLRODWLRQVZKLFKDOO JUDQWHGSXUVXDQWWR5XOHD%RIWKH)HGHUDO5XOHVRI DULVHRXWRID]jVZHEVLWHoDZHEVLWHRYHUZKLFK02(DQG &LYLO3URFHGXUHQRW5XOH5XOHD%SURYLGHVWKDW 0D\HUFODLPWRKDYHQRFRQWURO0RUHRYHU02(DQG0D\HU LIDPRWLRQWRFRPSHOGLVFRYHU\LVGHQLHGWKHFRXUWmVKDOO DUJXHWKDW,3&jVDSSHDORIWKHDZDUGRIH[SHQVHVUHODWLQJWR DIWHUDIIRUGLQJDQRSSRUWXQLW\WREHKHDUGUHTXLUHWKHPRYLQJ WKHDWWHPSWHGGHSRVLWLRQRIGHIHQGDQWVj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l  ,Q LWV YLFDULRXVO\OLDEOHIRUWKHDFWVRID],3&FLWHVDGUDIWHPDLO UHSO\DSSHOODWHEULHI,3&DUJXHVWKDW5XOHGRHVQRWDSSO\ SUHSDUHGE\WKHSUHVLGHQWRID]ZKLFKLGHQWLILHVD]DVmDQ WRWKLVVLWXDWLRQEHFDXVHLWVPRWLRQZDVmIRUOHDYHlWRGHSRVH DXWKRUL]HG DJHQWl RI 0D\HU WKH SUHVLGHQW RI 02(  ,Q GHIHQGDQWVj FRXQVHO QRW D PRWLRQ mWR FRPSHOl WKH DGGLWLRQ ,3& FLWHV WKH 6XSUHPH &RXUW FDVH ,QZRRG GHSRVLWLRQV  ,3& FLWHV QR DXWKRULW\ IRU WKLV KDLUVSOLWWLQJ /DERUDWRULHV,QFY,YHV/DERUDWRULHV,QFZKLFKVWDWHV DUJXPHQW >/@LDELOLW\IRUWUDGHPDUNLQIULQJHPHQWFDQH[WHQGEH\RQG ,QDIILUPLQJWKHPDJLVWUDWHMXGJHWKHGLVWULFWFRXUWGLGQRW WKRVH ZKR DFWXDOO\ PLVODEHO JRRGV ZLWK WKH PDUN RI DEXVH LWV GLVFUHWLRQ LQ GHWHUPLQLQJ WKDW ,3&jV PRWLRQ ZDV DQRWKHU(YHQLIDPDQXIDFWXUHUGRHVQRWGLUHFWO\FRQWURO SURSHUO\FKDUDFWHUL]HGDVDPRWLRQWRFRPSHO,QDGGLWLRQWKH RWKHUV LQ WKH FKDLQ RI GLVWULEXWLRQ LW FDQ EH KHOG GLVWULFWFRXUWGLGQRWDEXVHLWVGLVFUHWLRQLQGHWHUPLQLQJWKDW UHVSRQVLEOHIRU WKHLULQIULQJLQJDFWLYLWLHVXQGHUFHUWDLQ ,3&jVPRWLRQZDVQRWmVXEVWDQWLDOO\MXVWLILHGlDQGWKHUHIRUH FLUFXPVWDQFHV 7KXV LI D PDQXIDFWXUHU RU GLVWULEXWRU WKHGLVWULFWFRXUWDSSURSULDWHO\DIILUPHGWKHPDJLVWUDWHMXGJHjV LQWHQWLRQDOO\LQGXFHVDQRWKHUWRLQIULQJHDWUDGHPDUNRU RUGHUGLUHFWLQJ,3&WRUHLPEXUVHGHIHQGDQWVIRUWKHLUIHHVDQG LILWFRQWLQXHVWRVXSSO\LWVSURGXFWWRRQHZKRPLWNQRZV H[SHQVHV LQ RSSRVLQJ WKH PRWLRQ SXUVXDQW WR 5XOH RU KDV UHDVRQ WR NQRZ LV HQJDJLQJ LQ WUDGHPDUN D% LQIULQJHPHQW WKH PDQXIDFWXUHU RU GLVWULEXWRU LV 1R ,QWHUDFWLYH3URGXFWVY   ,QWHUDFWLYH3URGXFWVY 1R D]0RELOH2IILFHHWDO D]0RELOH2IILFHHWDO FRQWULEXWRULDOO\UHVSRQVLEOHIRUDQ\KDUPGRQHDVDUHVXOW 9&21&/86,21 RIWKHGHFHLW )RUDOOWKHIRUHJRLQJUHDVRQVZHDIILUPWKHGLVWULFWFRXUWjV 86 GHFLVLRQ LQ LWV HQWLUHW\ DQG ZH GHQ\ 02( DQG 0D\HUjV PRWLRQIRUVDQFWLRQV ,Q :LOWRQ &RUS Y $VKODQG &DVWLQJV &RUS WKLV FRXUW WKRURXJKO\GLVFXVVHGWKHLVVXHRIZKHQLWLVDSSURSULDWHWR LPSRVH5XOHVDQFWLRQVRQDQDSSHOODQWDQGLQWKDWFDVHZH FRQFOXGHGWKDWVDQFWLRQVZHUHDSSURSULDWH >W@KRXJKZHILQGWKLVDSSHDOWRKDYHEHHQILOHGZLWKRXW GHOD\ RU EDG IDLWK ZH GR ILQG LW WR EH ZKROO\ ZLWKRXW PHULW :H FRQFOXGH WKDW WKLV DSSHDO LQYROYHG DQ LVVXH DOUHDG\ mFOHDUO\ UHVROYHGl WKDW LW ZDV mLQVXEVWDQWLDOl DQG WKH SODLQWLII V DUJXPHQWV HVVHQWLDOO\ KDG QR UHDVRQDEOH H[SHFWDWLRQ RI DOWHULQJ WKH GLVWULFW FRXUW V MXGJPHQWEDVHGRQODZRUIDFW )GWK&LUFLWDWLRQVRPLWWHG ,3&jV DSSHDO UDLVHV D QRYHO LVVXH UHJDUGLQJ ZKHWKHU WKH SUHVHQFHRIDQRWKHUjVWUDGHPDUNLQDZHESDJHjV85/SRVW GRPDLQSDWKYLRODWHVWUDGHPDUNODZ)XUWKHUPRUH,3&KDV DGYDQFHGDWOHDVWDFRORUDEOHHYHQLIXOWLPDWHO\XQSHUVXDVLYH DUJXPHQWEDVHGRQ6XSUHPH&RXUWSUHFHGHQWWKDW02(DQG 0D\HUZRXOGEHYLFDULRXVO\OLDEOHLIWKHFRXUWZHUHWRILQG D]jV ZHE SDJH WR EH LQ YLRODWLRQ RI WUDGHPDUN ODZ 7KHUHIRUH ,3&jV DSSHDO RI WKH GLVWULFW FRXUWjV VXPPDU\ MXGJPHQWLQIDYRURI02(DQG0D\HUZDVQRWIULYRORXV ,3&jVDSSHDORIWKHDZDUGRIGHIHQGDQWVjIHHVDQGH[SHQVHV LQRSSRVLQJ,3&jVPRWLRQWRFRPSHOKRZHYHUZDVIULYRORXV ,3&DGYDQFHVVHQVHOHVVDUJXPHQWVRQWKLVLVVXHWKDWKDGQR UHDVRQDEOH FKDQFH RI VXFFHVV  6LJQLILFDQWO\ KRZHYHU FRXQVHOIRU02(DQG0D\HUGHYRWHGRQO\WKUHHDQGDKDOI SDJHVRIWKHLUWKLUW\IRXUSDJHDSSHOODWHEULHIWRUHVSRQGWR ,3&jVIULYRORXVDUJXPHQWVLQIDYRURIUHYHUVLQJWKHDZDUGRI IHHVDQGH[SHQVHV:HGHFOLQHWRH[HUFLVHRXUGLVFUHWLRQWR VDQFWLRQ,3&EHFDXVHZHILQGWKDWRQWKHZKROH,3&jVDSSHDO ZDVQRWIULYRORXV