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Nothing on Pacer but looks like something is going on
REH
THERE'S LESS THAN 100M SHARES OUTSTANDING SO $100M SETTLEMENT OR VERDICT WOULD MEAN $1 PER SHARE. A CONSERVATIVE P/E WOULD BE BETWEEN 5-10 WHICH WOULD EQUATE TO A STOCK PRICE OF $5-10
AT THIS POINT ACTIVISION IS WILLFULLY INFRINGING WHICH IS SUBJECT TO TREBLE DAMAGES SO AN AWARD OF $100M FOR EXAMPLE COULD TRIPLE TO $300M
PR FROM WORLDS THIS MORNING REF DISMISSAL OF CA CASE:
Activision Publishing Lawsuit Against Worlds Inc., Worlds Online Dismissed With Prejudice
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Activision Publishing Lawsuit Against Worlds Inc., Worlds Online Dismissed With Prejudice
BOSTON, MA--(Marketwired - Jun 2, 2014) - A lawsuit (CV 13-07380 CBM (PLAx)) by Activision Publishing, Inc., a subsidiary of Activision Blizzard, Inc. (ATVI), against Worlds Inc. (OTCBB: WDDD) and Worlds Online, Inc. (OTCBB: WORX) has been dismissed with prejudice.
After Worlds Inc. filed a patent infringement suit against Activision Blizzard, Inc., Blizzard Entertainment, Inc. and Activision Publishing, Inc. (Activision), in early October 2013, Activision Publishing, Inc. filed a lawsuit claiming patent infringement against Worlds Inc. and Worlds Online Inc., in the U.S. District Court for the Central District of California. Activision alleged that Worlds violates U.S. Patent No. 6,014,145 entitled "Navigation with optimum viewpoints in three-dimensional workspace interactive displays having three-dimensional objects with collision barriers" and U.S. Patent No. 5,883,628 entitled "Climability: property for objects in 3-D virtual environments."
"We are happy with the court outcome. We and our legal counsel, Susman Godfrey LLP, believed the case had no merit, but instead was simply a tactical legal maneuver to tax Worlds' financial resources and distract legal counsel from the primary litigation against Activision in Massachusetts," stated Thom Kidrin, CEO for Worlds Inc. and Worlds Online. "With that matter disposed permanently, we are now focusing on the scheduling of the Markman Hearing date in our patent infringement suit against Activision et al."
More information on the lawsuit and Worlds' patents can be found on the Worlds Inc. website at http://www.worlds.com.
About Worlds Inc.:
Worlds Inc. (OTCBB: WDDD) developed software and related technology for the creation of interactive three-dimensional (3D) Internet environments encompassing massively multiplayer online role-playing games (MMORPG). The company's technologies are designed for large-scale communities of simultaneous online users, who interact within online interactive 3D virtual worlds. Worlds intends to monetize its patent portfolio through enforcement, licensing and royalties of its patented technologies. For more information, visit www.worlds.com.
Forward Looking Statements
This release contains certain forward-looking statements and information relating to Worlds Inc. that are based on the beliefs of Worlds' management, as well as assumptions made based upon information currently available to the Company. Such statements reflect the current views of the Company with respect to future events including estimates and projections about its business based on certain assumptions of its management, including those described in this Release. These statements are not guarantees of future performance and involve risk and uncertainties that are difficult to predict, including, among other factors, changes in demand for the Company's services and products, changes in the economic environment and changes in technology. Additional risk factors are included in the Company's public filings with the SEC. Should one or more of these underlying assumptions prove incorrect, actual results may vary materially from those described herein as "hoped," "anticipated," "believed," "estimated," "should," "preparing," "expected," "intends" or words of a similar nature. The Company does not intend to update these forward-looking statements.
Disclaimer with respect to website:
You are advised that the contents of the Company's website are not incorporated by reference into this press release.
Contacts:
Thom Kidrin
CEO
Worlds Inc.
Email Contact
Julie Shepherd
Media relations
Accentuate PR for Worlds Inc.
847 275 3643
In the formal legal world a court case that is dismissed with prejudice means that it is dismissed permanently. A case dismissed with prejudice is over and done with, once and for all, and can't be brought back to court. A case dismissed without prejudice means the opposite. It's not dismissed forever.
Both parties agreed to this so I say the chances of settlement now is at 75% or higher. This could of course be a move by Activision to counter the consolidation but then why would Worlds agree if they thought CA was a better venue?
This should get really interesting and if there's settlement we will find out very soon. If there's no settlement I guess we will find out why Worlds agreed to this and how they feel about their chances in front of Casper.
I would expect a PR from Worlds this week that either announces the settlement or their reasons for agreeing to dismiss the CA suit.
Every $10M of settlement is worth at least $50 cents on the stock price IMHO, using a low P/E of 5. Settlement could be worth substantially more as it would set a precedent for others and lead to significant licensing revenue stream.
REH
ps All my opinion so do your own due diligence. Disclolusre: Significant Long position in WDDD
I'd start with other multi-player game publishers, quite a few of them out there. Obviously need to first research the technology they use to see if it breaches any of World's patents. They cannot afford to sue everyone at once so they picked the biggest dog to set a precedent I believe.
REH
Activision posted revenues of $1.1b for the first quarter so an annual estimate of $4b is reasonably conservative. The patents and games in the MA suit covers at least half that revenue or $2b annually. A RAND rate of a very conservative 1% (normally 2%+) would then equal about $20M which over 5 years becomes $100M, never mind that infringement goes way beyond 5 years but taking into this the latest ruling due to mistake by USPTO and for the sake of a settlement negotiation. A settlement of $100M seems very reasonable on the part of Worlds. This would equate to a little over $1.00 per share. A conservative P/E of 5 puts the stock price at $5. Not taken into effect other infringers nor new business.
I can wait a year or two for this and believe Worlds will win or settle at or above my calculation. Today's market price seems like a great opportunity even though the stock is trading "by appointment" only and any buy side volume surely would drive the price up.
All above just my opinion, do your own due diligence.
REH
Well, we knew this was coming as both parties agreed to extend more time to Activision to file their opposition to Worlds move to transfer. I think their reply was pretty weak but who knows how the judge will rule. She hopefully realizes that the only reason there is a case in CA is due to Activision trying to bleed Worlds on two coasts. These cases should not only be in the same venue but be consolidated for judicial economy.
Settlement discussions might still be happening and if they are they have no effect on the attorney's pursuing the case in the meantime.
REH
ACTIVISION’S MEMORANDUM IN OPPOSITION TO WORLDS’ MOTION TO TRANSFER VENU
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THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
WORLDS, INC.,
Plaintiff,
v.
ACTIVISION BLIZZARD, INC., BLIZZARD ENTERTAINMENT, INC. and ACTIVISION PUBLISHING, INC.,
Defendants.
) ) ) ) ) ) ) ) ) ) ) ) )
Civil Action No. 1:12-CV-10576 (DJC)
ACTIVISION’S MEMORANDUM IN OPPOSITION TO WORLDS’ MOTION TO TRANSFER VENUE
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 1 of 17
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Activision Blizzard, Inc.; Blizzard Entertainment, Inc.; and Activision Publishing, Inc.,
(collectively “Activision”) submit this memorandum in opposition to plaintiff Worlds, Inc.’s,
Motion To Transfer Venue (D.I. 132).
I. INTRODUCTION Worlds’ request that this action be transferred to California more than two years after
Worlds chose to sue Activision in this Court is a transparent attempt at forum shopping.
Activision respectfully requests that Worlds’ motion be denied. It would be unfair to give
Worlds a chance to repudiate its original choice of venue, in order to advance its new interest in
securing what it considers a more advantageous forum.
Worlds’ motion is predicated substantially on two incorrect assertions: (1) there is
significant overlap between this action and a patent lawsuit that defendant Activision Publishing
filed against Worlds and its affiliate Worlds Online in the Central District of California, and
(2) if this Massachusetts action is transferred to California, the California Court will consolidate
the two actions.
But this action and the California lawsuit are unrelated. They involve different patents,
different accused products, and non-identical parties. In this Massachusetts action, the primary
issue is whether Activision’s accused Call of Duty and Worlds of Warcraft videogames infringe
Worlds’ asserted patents. In the California action, the primary issue is whether Worlds’ and
Worlds Online’s accused WorldsPlayer product infringes Activision Publishing’s unrelated
patents. Simply because the two lawsuits involve some of the same parties does not mean that
the cases should be litigated in the same Court. In fact, the lack of substantial overlap between
the cases shows that consolidation would not promote judicial economy and, therefore, the cases
are not likely to be consolidated.
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 2 of 17
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Activision has chosen to enforce its unrelated patents against Worlds’ unrelated products
in California. That choice plays no role in the venue transfer analysis here. Worlds has not
otherwise shown that convenience and judicial efficiency strongly favor litigating this action in
California, as required by the authorities in this Circuit. For these reasons, and to prevent
Worlds from engaging in forum shopping, Worlds motion should be denied.
II. LAW “For the convenience of parties and witnesses, in the interest of justice, a district court
may transfer any civil action to any other district or division where it might have been brought.”
28 U.S.C. § 1404(a). The moving party “must bear the burden of proving both the availability of
an adequate alternative forum and that considerations of convenience and judicial efficiency
strongly favor litigating the claim in the alternative forum.” Champion Exposition Servs., Inc. v.
Hi-Tech Elec., LLC, 273 F. Supp. 2d 172, 180 (D. Mass. 2003) (citing Nowak v. Tak How
Investments, Ltd., 94 F.3d 708, 719 (1st Cir. 1996)) (emphasis added). The decision of whether
or not to transfer a case under Section 1404 lies solely within the discretion of the Court.
Holmes Grp Inc. v. Hamilton Beach Proctor Silex Inc., 249 F. Supp. 2d 12, 15 (D. Mass. 2002).
III. ARGUMENT Worlds incorrectly argues that the “legal standard [under Section 1404(a)] is the same
irrespective of which party is seeking transfer.” (D.I. 132 at 8.) In the case cited by Worlds for
this proposition, Schoendorf v. RTH Mech. Contractors, Inc., Civil No. 11–cv–566–JL, 2012 WL
1986508 (D.N.H. May 31, 2012), the Court assessed the Section 1404(a) convenience factors
only after determining that the movant-plaintiff (1) chose the original forum by “mistake,”
(2) was not engaged in “improper forum shopping,” and (3) did not delay in bringing the motion.
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 3 of 17
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Id at *3. Worlds, however, cannot meet any of these criteria. Therefore, Worlds’ motion should
be denied in the interest of justice alone.
Furthermore, Worlds has not shown that “the convenience of the parties, the convenience
of witnesses and location of documents, any connection between the forum and the issues, the
law to be applied, and the state or public interest at stake” together strongly favor transfer.
Kleinerman v. Luxtron Corp., 107 F. Supp. 2d 122, 125 (D. Mass. 2000).
A. Transfer Is Not In The Interest Of Justice 1. Worlds’ Motion Is An Attempt To Forum Shop “‘[A] motion to transfer venue is not ordinarily granted at the request of the party who
chose the forum in the first place.’” Wang v. Phoenix Satellite Television US, Inc., No. 13 Civ.
218, 2014 WL 116220 (S.D.N.Y. Jan. 13, 2014). Worlds chose to sue Activision in
Massachusetts, where Worlds resides, and Activision did not challenge Worlds’ choice of venue.
At the time that Worlds filed suit, it knew that Activision’s primary place of business was in
California and it knew the locations of the third-parties listed in its initial disclosures.
Nevertheless, Worlds chose Massachusetts because, among other things, it was convenient for
Worlds’ CEO, Thom Kidrin, who resides in Massachusetts. None of these circumstances, which
existed at the time Worlds filed its complaint, has changed.
The most significant change since the filing of this action is that the Court found Worlds’
patents to be invalid from the dates of their issuance to September 24, 2013, the date the Patent
Office issued Certificates of Correction for Worlds’ patents. D.I. 124. This Court made this
ruling on March 13, 2014, almost two years after Worlds filed its complaint and five months
after Activision sued Worlds for patent infringement in California. Yet Worlds waited until after
the Court’s Order issued to decide to request transfer to California.
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 4 of 17
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Worlds’ belated decision to seek transfer is nothing more than an effort to move this case
to what Worlds now perceives to be a more advantageous forum, and perhaps to reopen the
Summary Judgment determination. Where plaintiffs, rather than defendants, seek transfer,
prejudice from “forum shopping” is the “principal” concern. Al Shimari v. CACI Intern., Inc.,
933 F. Supp. 2d 793, 799 (E.D.V.A. 2013) (citing Ferens v. John Deere Co., 494 U.S. 516 (1990)); see Cohen v. Waxman, 421 Fed. Appx. 801, 803 (10th Cir. 2010) (affirming refusal to
grant plaintiff transfer for “two bites at the apple”); see, e.g., Wang, 2014 WL 116220, at *4
(“Because Ms. Wang waited for the Court to decide the motion, portions of which were decided
adversely to her, before requesting this venue transfer, the Court views the instant motion as a
belated attempt at securing a judge perceived to be more favorable to her claims-in essence,
judge shopping.”).
The First Circuit has warned that a court asked to transfer a patent litigation must be
particularly alert for forum shopping. See Codex Corp. v. Milgo Elec. Corp., 553 F. 2d 735, 738,
740 (1st Cir. 1977) (noting that “special principles” are necessary to diminish forum shopping
made “particularly appealing” by the “one-strike-and-you’re-out” doctrine of patent invalidity);
Davox v. Digital Sys. Int’l, 846 F. Supp. 144, 148 (D. Mass. 1993) (transferring declaratory
judgment action “filed [by the accused patent infringer] in an evident effort to obtain a forum
more convenient to it”). To this end, although a plaintiff’s initial choice of forum is favored in a
venue transfer analysis, its subsequent choices for a change of venue are not given deference for
fear that “a motion to transfer venue could become an unchecked tool for the plaintiff to shop
among forums and between judges.” Leiker v. Jarvis Products Corp., No. 90–1179–C, 1990 WL
112974, at *2 (D. Kan. July 10, 1990); see Health Discovery Corp. v. Ciphergen Biosystems,
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 5 of 17
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Inc., 2:06-CV-260, 2007 WL 128283, at *3 (E.D. Tex. Jan 11, 2007); Tiffany v. Hometown
Buffet, Inc., C 06-2524 SBA, 2006 WL 2792868, at *2 (N.D. Cal. Sept. 28, 2006).
2. This Action Is Unlikely To Be Consolidated With the California Action Worlds seeks to justify its change of heart by arguing that there are efficiencies to be
gained by transferring this case to California. But the California case involves different patents,
different accused products, and non-identical parties. Specifically, in the present action Worlds,
Inc., asserts five related Worlds patents against Activision Blizzard’s Call of Duty franchise and
Blizzard Entertainment’s World of Warcraft franchise. In contrast, in California, Activision
Publishing, Inc., asserts two unrelated patents owned by Activision against the Worlds Player
product. See Decl. of Ryan V. Caughey In Support Of Plaintiff’s Motion to Transfer Venue (D.I.
132-1), Exs. 2–4. Even the patents relate to different subject matter: the Worlds patents relate to
communications between network and client computers, while Activision’s patents relate to user
interface technology. Thus, Activision Blizzard and Blizzard Entertainment are not parties to the
California case, and there is no overlap in the accused products or the asserted patents.
Worlds’ assertion that “[l]itigation over . . . the same products is now pending in
California” is, at best, a mischaracterization. D.I. 132 at 2. As noted above, the accused
products in this action are Activision’s Call of Duty and World of Warcraft video games. The
parties are not litigating over either of these products in California – indeed, those Activision
products will have no role in the California case. Likewise, the accused product in California is
Worlds Player – obviously not an accused Activision product, and not a product that the parties
are litigating here. Worlds’ software such as Worlds Player or Worlds Chat are potentially
relevant in this case to just two issues: (1) the invalidity of Worlds’ patents in view of Worlds’
own prior art products, and (2) Worlds’ assertion that its products embody its asserted patents,
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 6 of 17
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which is potentially relevant to any “commercial success” of Worlds’ patents (a secondary issue
relating to Worlds’ contention that its patents are not obvious in view of prior art). The first of
these issues has already been decided by the Court’s ruling that Worlds’ asserted patents are
invalid in view of Worlds Chat and AlphaWorld prior to their correction by the USPTO in
September 2013. And the second of these issues is separate from and unrelated to Activision’s
infringement claims in California, so discovery concerning Worlds’ products will have little or
no overlap between the two lawsuits.
Because the California case involves different patents, different accused products, and
non-identical parties, there is no basis on which the California Court could consolidate the
actions for purposes of trial. 35 U.S.C. § 299, codified in 2011 and applicable to both the
California and Massachusetts actions, states that patent actions may be consolidated for trial
“only if any right to relief is asserted against the parties jointly, severally, or in the alternative
with respect to or arising out of the same transaction, occurrence, or series of transactions or
occurrences relating to the making, using, importing into the United States, offering for sale, or
selling of the same accused product or process.” See Digitech Image Techs., LLC v. Agfaphoto
Holding GmbH, No. 8:12–cv–1153–ODW, 2012 WL 4513805, at *1 (“Newly enacted statute, 35
U.S.C. § 299, requires a higher standard for joinder, and prohibits joinder unless the relief arises
out of the same transactions relating to infringement of the patent-in-suit by the same accused
product.” (emphasis added)). As between the California and Massachusetts actions, there are no
common allegations of infringement involving the same accused product or process, so
consolidation would be improper.
Further, the differences in subject matter make it unlikely that these cases would even be
consolidated under Fed. R. Civ. P. 42(a) for purposes of discovery. Joinder may be refused “in
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 7 of 17
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the interest of avoiding prejudice and delay” or to “safeguard[] principles of fundamental
fairness.” See In re EMC Corp., 677 F. 3d 1351, 1360 (Fed. Cir. 2012) (noting that a district
court is “justified in exercising its discretion to deny joinder when different witnesses and
documentary proof would be required”); Wang Labs., Inc. v. Mistubishi Elecs. Am., Inc., No. CV
92 4698 JGD, 1993 WL 645934, at *2-3 (C.D. Cal. 1993) (declining to consolidate infringement
claims brought by accused infringer in separate action because the patents-in-suit were neither
“factually related” nor “related per se”). Here, allowing common discovery across unrelated
patents and products serves no purpose and, conversely, could unfairly prejudice both Worlds’
and Activision’s cases. Not surprisingly, Worlds does not cite a single case where two unrelated
suits such as those under consideration here were “cross-consolidated” for discovery or for trial.
3. Worlds’ Description Of Itself As A Small Company With “Meek Resources” Is Disingenuous Worlds argues that transfer and consolidation would alleviate the purported hardship it
faces as a “small,” “tiny” company with “meek resources” forced to litigate in two venues.
(D.I. 132 at 3, 6, 11.) As noted above, the cases will likely not be consolidated, and Worlds will
continue to face two separate litigations whether or not this case is transferred. But even more
important, Worlds’ descriptions of itself and the circumstances of this lawsuit are quite
misleading.
Worlds has made sophisticated and substantial financial arrangements to pay for the cost
of this litigation. Worlds is represented by experienced and accomplished counsel who represent
Worlds on a contingency basis. Shortly after Worlds filed this lawsuit, its CEO, Mr. Kidrin, was
interviewed for an article in Forbes in which he stated:
We were fortunate that Max L. Tribble, lead counsel for Susman Godfrey LLP who has a stellar record for patent infringement wins against large organizations, was eager to be lead counsel on this case on a contingency basis following
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 8 of 17
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Susman Godfrey’s review of the patents, our history as an operating company since 1994 and other details. (Moffa Decl. Ex. B.) Furthermore, in March 2013, Worlds announced that it had secured $2.3
million in debt financing to fund its patent assertion efforts, including this litigation. (Moffa
Decl. Ex. C.) And in 2012 and 2013, Worlds completed private placements that raised additional
hundreds of thousands of dollars. (Moffa Decl. Ex. H.)
In reality, Worlds is a publicly traded patent assertion entity (stock symbol WDDD)
whose primary purpose and goal is to assert and monetize its patent portfolio.
On May 16, 2011, the Company transferred, through a spin-off to its then wholly owned subsidiary, Worlds Online Inc., the majority of its operations and related operational assets. The Company retained its patent portfolio which it intends to continue to increase and to more aggressively enforce against alleged infringers. The Company also entered into a License Agreement with Worlds Online Inc. to sublicense its patented technologies. (Id. (emphasis added); accord Ex. D (“The Company’s principle [sic] goal will be to continue to
grow its IP portfolio, while protecting and monetizing it through patent infringement
litigation.”).)
Worlds had its sights set on Activision years before filing this action. Worlds previously
asserted its patents in litigation against a videogame developer called NCsoft. (Moffa Decl.
Ex. A.) During that lawsuit, Mr. Kidrin publicly proclaimed as early as 2009 his intention to sue
Activision Blizzard (and other companies) if Worlds is successful against NCsoft. (Id.) Mr.
Kidrin also publicly stated that its litigation counsel spent nine months evaluating Worlds’ case
before agreeing to be engaged for this action. (Moffa Decl. Ex. E.)
Whatever its size, Worlds is in the business of filing lawsuits, and it has made
considerable financial arrangements to pursue its business plans. After choosing to sue
Activision in Massachusetts with the assistance of well-financed contingent fee counsel, Worlds
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 9 of 17
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should not be heard to complain about the burden of litigation in the forum it originally chose or
Activision’s decision to enforce its own patents.
With no serious prospect of consolidation and no actual financial concern, the real
explanation for Worlds’ motion is that Worlds seeks to flee an unfavorable Summary Judgment
ruling in favor of a different forum that it rejected two years ago. Permitting such forum
shopping is not in the interest of justice.
B. California Is Not A Clearly More Convenient Venue For This Case 1. The Circumstances Do Not “Strongly” Favor California Worlds concedes that, at the time it filed this suit, Massachusetts was the most convenient
venue for Worlds. That fact has not changed. Instead, Worlds argues that now the
circumstances strongly favor California because there is another litigation between the parties in
California, and Activision’s employees and documents are located there.
Preliminarily, we note that Worlds’ discussion of transfer-related factors includes those
that affect Activision’s convenience. But Activision has not complained that it will be
inconvenienced by litigating this action in Massachusetts. Indeed, if Activision had believed that
Massachusetts was inconvenient for this action, it would have sought transfer at the outset of this
case, two years ago. Worlds should not be permitted to rely on any supposed inconvenience to
Activision to force transfer of a case that Worlds chose to file in Massachusetts.
(a) There Is No Duplicative Litigation As noted above, the California and Massachusetts cases involve non-identical parties,
different accused products and different patents. Further contrary to Worlds’ assertions, the
cases will also involve different witnesses and different documents. The vast majority of
Activision’s documents produced in this case, including its source code, relates to the Activision
products accused here and are not relevant to the California action. Likewise, none of the
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 10 of 17
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Activision employees who are relevant to this case is likely to be a witness in the California case.
Those witnesses are only relevant in this case because they have knowledge of technical or
financial aspects of Activision’s accused Call of Duty and Worlds of Warcraft products, which
are not at issue in California.
In view of the differences in subject matter between this case and the California case, the
existence of a co-pending suit between the parties is irrelevant to the transfer analysis. See
NETGEAR, Inc. v. Ruckus Wireless, Inc., Civ. No. 10–999–SLR2011 WL 3236043, at *3 (D.
Del. July 28, 2011) (denying transfer despite pending suit brought by accused infringer in the
transferee forum) (“The patents at issue in the pending litigation in the Northern District of
California originated from different companies, have different inventors, and are of different
patent families from the patents-in-suit. The fact that the pending California actions involve the
same basic wireless router technology as that at issue in this lawsuit is not compelling.” (citations
omitted)); World Energy Alts., LLC v. Settlemyre Indus., Inc., 671 F. Supp. 2d 215 (D. Mass.
2009) (disregarding existence of pending suit between the parties for liability under a separate
contract, because “the two actions do not arise from the ‘same common nucleus of operative
facts’”).
Indeed, in the cases cited by Worlds regarding the relevance of litigation pending in
another forum, the same defendant was facing the same or similar claims for the same acts. See
Johnson v. New York Life Ins., C.A. No. 12–11026–MLW, 2013 WL 1003432 at *1 (D. Mass.
Mar. 14, 2013); Wiley v. Gerber Prods. Co., 667 F. Supp. 2d 171 (D. Mass. 2009). No such facts
exist here. Worlds also ignores that neither Johnson nor Wiley resulted in consolidation after
transfer. (See Moffa Decl. Ex. F (noting that the judge overseeing the pending case in the
transferee forum declined the transferred case as “not similar”); Ex. G (noting that transferred
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 11 of 17
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plaintiff ultimately dismissed the case without moving for consolidation)). Johnson and Wiley
thus highlight the danger of basing a transfer decision on any expectation of consolidation.
2. The Remaining Factors Are Neutral Or Disfavor Transfer (a) California Is Not Clearly More Convenient For The Witnesses Because Activision contests transfer, Worlds should not be able to support its motion by
pointing to the convenience of Activision’s own employee witnesses. See Campbell v.
Mitsubishi Aircraft Intern., Inc., 416 F. Supp. 1225, 1226 (W.D. Pa. 1976).
With respect to non-party witnesses, Activision acknowledges that seven of twelve reside in California.1 However, all seven of those witnesses are not likely to testify in court. All seven
(Thomas Adler, Philip Albert, S. Mitra Ardron, Judith Challinger, David Leahy, Daniel
Tagliaferri, and Anatoly Weiser) reside more than 100 miles from the Los Angeles Courthouse,
and would incur substantial expense to testify at trial. Thus, most will likely testify only by
deposition, which can be taken at Activision’s Counsel’s offices in California. Moreover, the
remaining four non-party witnesses reside on the East coast (Neil Cohen is in Virginia, Paul
Lerner is in Connecticut, Alexander Poltorak is in New York and Jean-Marc Zimmerman is in
New Jersey); if significant court testimony is required in this case, these witnesses will be
inconvenienced by any transfer.
Therefore, California is not clearly more convenient for the witnesses and this factor does
not support transfer.
1 Worlds also identifies Ron Britvich as a “non-party witness” whose “last known location” is Sacramento, California. (D.I. 132 at 16.) Mr. Britvich was already deposed by Activision in this case. At Worlds’ request, that deposition took place in Houston. And Worlds’ own Initial Disclosures identify him as a “Developer” employed by Worlds Online. (D.I. 132-8 at 2.) It is, therefore, overstatement for Worlds to suggest that he is a non-party or that his location in California matters in the transfer analysis.
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 12 of 17
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(b) Worlds Sued Activision In Massachusetts On The Basis Of Activision’s Alleged Activities There Worlds’ complaint in this case goes to great lengths to demonstrate the purported ties
between Activision’s alleged acts of infringement and the state of Massachusetts. For example:
18. This Court has personal jurisdiction over Activision because Activision has committed acts of infringement in violation of 35 U.S.C. § 271 and has offered and provided to customers in Massachusetts subscription to and use of Activision’s World of Warcraft and Call of Duty video games. Additionally, Activision regularly does business or solicits business, engages in other persistent courses of conduct, and/or derives substantial revenue from products and/or services provided to individuals in this district and has purposefully established substantial, systematic, and continuous contacts with this district and expects, or should reasonably expect, to be haled into court here…. 19. These acts cause injury to Worlds within the district. On information and belief, Activision’s products continue to be offered in channels of commerce with the intent that customers located in this district make use of Activision’s World of Warcraft and Call of Duty Video games within this district. 20. On information and belief, Activision will derive substantial revenue from the use of Activision’s World of Warcraft and Call of Duty video games within this district, and/or expects or should reasonably expect its actions to have consequences within the district, and derives substantial revenue from interstate and international commerce. (D.I. 1 at ¶¶ 18–20; D.I. 32 at ¶¶ 18–20.)
Having trumpeted these allegations to establish this Court’s jurisdiction over Activision,
it is remarkable that Worlds now seeks transfer on the grounds that the accused products were
developed in California. That fact existed equally at the time this suit was filed but obviously
did not deter Worlds from filing its complaint in Massachusetts.
Moreover, Worlds seeks to recover for Activision’s allegedly infringing sales, and
Worlds concedes that Activision’s sales activities “are nationwide and worldwide in scope.”
(D.I. 132 at 19.) While “there is nothing unique about [Activision’s] sales and marketing activity
in Massachusetts,” id., there is likewise nothing unique about its sales and marketing activity in
California. Thus, this factor does not “strongly” favor transfer.
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 13 of 17
13 43876740_10
(c) At This Point In The Case, The Location Of Documents Is Irrelevant Again, because Activision does not seek transfer, Worlds should not be permitted to rely
on the location of Activision’s own documents to support its motion. See Campbell, 416 F.
Supp. at 1226. In any event, because this action is two years old, both parties have largely
completed their document productions in this case. Worlds has also inspected the source code
for each of the accused products, and provided infringement contentions (see D.I. 119) based on that source code.2 The location of documents should no longer bear on the transfer analysis.
Indeed, relevant documents are now located in the offices of the parties’ outside counsel. At this
point, any future documents will likely be produced electronically, so “their location is entitled to
little weight.” Boateng v. Gen, Dynamics Corp., 460 F.Supp.2d 270, 276 (D. Mass. 2006). This
factor is therefore neutral – it certainly does not strongly favor transfer.
(d) The Law To Be Applied Is Uniform Because Federal patent law is uniform, any difference that exists in the application of the
patent laws across courts would only underscore the need to vigilantly guard against forum-
shopping. This factor disfavors transfer at this late date.
(e) Public Interests Favor No Party Finally, although Worlds identifies that Activision employs over 3,000 Californians, it is
Worlds—not Activision—that seeks transfer to California. Worlds demonstrated its lack of
concern for Activision’s California employees when it chose to sue here two years ago. Worlds
cites no precedent that a plaintiff should be able to invoke the defendant’s interest in its home
2 Worlds’ argument that its outside counsel and expert have had to travel to California many times to inspect source code has no bearing on this motion because Worlds is not trying to transfer this case to the location of its expert or outside counsel. Worlds’ counsel is located in Texas and their experts, Thomas Rhyne III and Thomas Rhyne IV, reside in Texas. (See Moffa Decl. Exs. I, J). In any event, Worlds cites no authority for the proposition that convenience to outside counsel or experts is relevant to a transfer analysis.
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 14 of 17
14 43876740_10
forum as creating a “public interest” favoring transfer, where defendant has not invoked its
supposed interest and transfer to defendant’s home forum would be against defendant’s wishes.
Thus, under the facts of this case, this factor does not strongly favor transfer.
IV. CONCLUSION For the reasons stated above, Worlds has not met its burden under Section 1404(a).
Neither its two-year delay nor its transparent forum shopping should be rewarded by transfer to a
district it plainly rejected at the outset of this action. The facts and circumstances at the time the
complaint was filed, and now, do not strongly favor transfer. Activision respectfully submits
that Worlds’ Request for Transfer should be denied.
Dated: May 28, 2014
Respectfully submitted,
By: /s/ Samuel Brenner Samuel L. Brenner (BBO #677812) samuel.brenner@ropesgray.com ROPES & GRAY LLP Prudential Tower 800 Boylston Street Boston, Massachusetts 02199-3600 T: (617) 951-7000 F: (617) 951-7050
Jesse J. Jenner (pro hac vice) jesse.jenner@ropesgray.com Gene W. Lee (pro hac vice) gene.lee@ropesgray.com Brian P. Biddinger (pro hac vice) brian.biddinger@ropesgray.com Matthew J. Moffa (pro hac vice) matthew.moffa@ropesgray.com ROPES & GRAY LLP 1211 Avenue of the Americas New York, New York 10036-8704 T: (212) 596-9000 F: (212) 596-9050
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 15 of 17
15 43876740_10
Kathryn N. Hong (pro hac vice) kathryn.hong@ropesgray.com ROPES & GRAY LLP 1900 University Avenue, 6th Floor East Palo Alto, CA 94303-2284 T: (650) 617-4000 F: (650) 617-4090
ATTORNEYS FOR DEFENDANTS, ACTIVISION BLIZZARD, INC., BLIZZARD ENTERTAINMENT, INC. AND ACTIVISION PUBLISHING, INC.
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 16 of 17
16 43876740_10
CERTIFICATE OF SERVICE I hereby certify that the foregoing document filed through the ECF system will be sent
electronically to the registered participants as identified on the Notice of Electronic Filing (NEF)
this 28th day of May, 2014.
By: /s/ Samuel Brenner Sam Brenner
Case 1:12-cv-10576-DJC Document 136 Filed 05/28/14 Page 17 of 17
Hard to predict as I have seen from days to years. We're getting close to the summer so I would expect it August/September. This is one major problems with the justice system; it is slower than a glacier and hence the saying "justice delayed is justice denied".
Then again she might rule quickly or the parties might settle. Just get used to the wheels turning slowly. I am betting on a great end result for Worlds whether that is this year or in 2016.
REH
Next thing coming today/tomorrow should be Activision's brief arguing why they do not want to consolidate MA and CA. Then we wait for Casper to rule. Looks like the joint brief regarding MA Markman dates have been delayed pending the consolidation decision.
Nothing new on Pacer last time I checked.
REH
OK, SEE THAT BUT NOT VERY SIGNIFICANT
how do you know Buzzy is buying?
I view it as good news. As a patent holder I do not want my IP stolen whether I practice the invention or not.
Patent Reform Bill Removed from Senate Consideration
see > http://www.openmarket.org/2014/05/27/senate-leaders-kill-patent-reform-once-again-thwarting-democracy-to-protect-special-interests/
REH
remember that the judge gave activision until may 28 to reply to the consolidation motion. no other motions in front of the judge in MA or CA as far as I know.
reh
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended March 31, 2014
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission File number 0-24115
WORLDS INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-1848316
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
11 Royal Road
Brookline, MA 02445
(Address of Principal Executive Offices)
(617) 725-8900
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ X ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of May 1, 2014, 95,004,838 shares of the Issuer's Common Stock were outstanding.
Worlds Inc.
Table of Contents
Page
Balance Sheets as of March 31, 2014 (unaudited) and December 31, 2013 (audited) 2
Statements of Operations for the three months ended March 31, 2014 and 2013 (unaudited) 3
Statements of Cash Flows for the three months ended March 31, 2014 and 2013 (unaudited) 4
Notes to Financial Statements 5
( 1 )
Table of Contents
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Worlds Inc.
Balance Sheets
March 31, 2014 and December 31, 2013
Unaudited Audited
March 31, 2014 December 31, 2013
ASSETS:
Current Assets
Cash and cash equivalents $ 57,666 $ 22,132
Due from related party 287,050 295,912
Promissory note 3,000 3,000
Total Current Assets 347,716 321,044
Patents 7,000 7,000
Total assets $ 354,716 $ 328,044
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current Liabilities
Accounts payable $ 797,908 $ 797,908
Accrued expenses 2,055,933 1,986,726
Derivative liability 186,602 429,296
Notes payable 773,279 773,279
Notes payables 325,000 225,000
Convertible notes payable, net 136,043 117,534
Total Current Liabilities 4,274,765 4,329,743
Stockholders' (Deficit)
Common stock (Par value $0.001 authorized 100,000,000 shares, issued and outstanding 95,004,838 and 93,209,823 as of March 31, 2014 and December 31, 2013, respectively) 95,005 93,210
Additional paid in capital 31,825,487 30,078,730
Common stock-warrants 97,869 97,869
Deferred compensation — (12,609 )
Accumulated deficit (35,938,408 ) (34,258,898 )
Total stockholders deficit (3,920,047 ) (4,001,698 )
Total Liabilities and stockholders' deficit $ 354,716 $ 328,044
The accompanying notes are an integral part of these financial statements
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Table of Contents
Worlds Inc.
Statements of Operations
Three Months Ended March 31, 2014 and 2013
Unaudited Unaudited
3/31/2014 3/31/2013
Revenues
Revenue $ — $ —
Total Revenue — —
Cost and Expenses
Cost of Revenue
—
—
Gross Profit/(Loss) — —
Option Expense 1,186,310 —
Common Stock issued for services renderred 36,608 62,263
Selling, General & Admin. 89,535 248,936
Salaries and related 49,038 47,026
Operating loss (1,361,491 ) (358,225 )
Other Income (Expense)
Gain (Loss) on change in fair value of derivative liability (71,173 ) 54,379
Interest Expense (246,846 ) (27,518 )
Net (Loss) $ (1,679,510 ) $ (331,364 )
Weighted Average Loss per share $ (0.02 ) **
Weighted Average Common Shares Outstanding 94,052,429 81,832,238
** Less than 0.01
The accompanying notes are an integral part of these financial statements
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Table of Contents
Worlds Inc.
Statements of Cash Flows
Three Months Ended March 31, 2014 and 2013
Unaudited Unaudited
3/31/2014 3/31/2013
Cash flows from operating activities:
Net (loss) $ (1,679,510 ) $ (331,364 )
Adjustments to reconcile net loss to net cash (used in) operating activities
Fair value of stock options issued 1,186,310 —
Common stock issued for services renderred 36,608 62,263
Amortization of discount to note payable 242,884 21,918
Derivative expenses — 512,637
Changes in fair value of derivative liabilities 71,173 (567,016 )
Prepaid expense — —
Accounts payable and accrued expenses 69,207 (69,384 )
Due from related party 8,862 (102,120 )
Net cash (used in) operating activities: (64,466 ) (473,066 )
Cash flows from financing activities
Proceeds from issuance of common stock — 97,500
Proceeds from exercise of warrants — 78,500
Proceeds from issuance of convertible note payable — 2,400,000
Proceeds from issuance of note payable 100,000 —
Net cash provided by financing activities 100,000 2,576,000
Net increase/(decrease) in cash and cash equivalents 35,534 2,102,934
Cash and cash equivalents, including restricted, beginning of year 22,132 95,069
Cash and cash equivalents, including restricted, end of period $ 57,666 $ 2,198,003
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ — $ —
Income taxes $ — $ —
The accompanying notes are an integral part of these financial statements
( 4 )
Table of Contents
Worlds Inc.
NOTES TO FINANCIAL STATEMENTS
Three Months Ended March 31, 2014
(Unaudited)
NOTE 1 – DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
Description of Business
On May 16, 2011, the Company transferred, through a spin-off to its then wholly owned subsidiary, Worlds Online Inc., the majority of its operations and related operational assets. The Company retained its patent portfolio which it intends to continue to increase and to more aggressively enforce against alleged infringers. The Company also entered into a License Agreement with Worlds Online Inc. to sublicense its patented technologies.
Basis of Presentation
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP"), which contemplates continuation of the Company as a going concern. The Company has always been considered a developmental stage business, has incurred significant losses since its inception and has had minimal revenues from operations. The Company will require substantial additional funds for development and enforcement of its patent portfolio. There can be no assurance that the Company will be able to obtain the substantial additional capital resources to pursue its business plan or that any assumptions relating to its business plan will prove to be accurate. The Company has not been able to generate sufficient revenue or obtain sufficient financing which has had a material adverse effect on the Company, including requiring the Company to reduce operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. For the past year the Company has been operating at a significantly reduced capacity, with only one full time employee, performing primarily consulting services and licensing software and using consultants to perform any additional work that may be required.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents are comprised of highly liquid money market instruments, which have original maturities of three months or less at the time of purchase.
Due from Related Party
Due from related party is comprised of cash payments made by Worlds Inc. on behalf of Worlds Online Inc. for shared operating expenses.
Revenue Recognition
Effective for the second quarter of 2011, the Company spun off its online businesses to Worlds Online Inc. The Company’s sources of revenue after the spin off is anticipated to be from sublicenses of the patented technology by Worlds Online and any revenue that may be generated from enforcing its patents. The Company recognizes revenue when all of the following criteria are met: evidence of an arrangement exists such as a signed contract, delivery has occurred, the price is fixed or determinable, and collectibility is reasonable assured. This will usually be in the form of a receipt of a customer’s acceptance indicating the product has been completed to their satisfaction except for development work and service revenue which is recognized when the services have been performed.
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Table of Contents
Research and Development Costs
Research and development costs are charged to operations as incurred.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided on a straight line basis over the estimated useful lives of the assets ranging from three to five years. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income. Maintenance and repairs are charged to expense in the period incurred.
Impairment of Long Lived Assets
The Company evaluates the recoverability of its fixed assets and other assets in accordance with section 360-10-15 of the FASB Accounting Standards Codification for disclosures about Impairment or Disposal of Long-Lived Assets. Disclosure requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds its expected cash flows. If so, it is considered to be impaired and is written down to fair value, which is determined based on either discounted future cash flows or appraised values. The Company adopted the statement on inception. No impairments of these types of assets were recognized during the three months ended March 31, 2014.
Stock-Based Compensation
The Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.
Income Taxes
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
Notes Payable
The Company has $773,279 in short term notes outstanding at March 31, 2014 and December 31, 2013. The company has $325,000 and $225,000 in notes outstanding at March 31, 2014 and December 31, 2013, respectively.
Comprehensive Income (Loss)
The Company reports comprehensive income and its components following guidance set forth by section 220-10 of the FASB Accounting Standards Codification which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. There were no items of comprehensive income (loss) applicable to the Company during the period covered in the financial statements.
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Table of Contents
Loss Per Share
Net loss per common share is computed pursuant to section 260-10-45 of the FASB ASC. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. As of March 31, 2014, there were 8,600,000 options and 5,273,214 warrants whose effect is anti-dilutive and not included in diluted net loss per share for March 31, 2014. The options and warrants may dilute future earnings per share.
Commitments and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
During 2000 the Company was involved in a lawsuit relating to unpaid consulting services. In April, 2001 a judgment against the Company was rendered for approximately $205,000. As of March 31, 2014, and 2013 the Company recorded a reserve of $205,000 for this lawsuit, which is included in accrued expenses in the accompanying balance sheets.
Risk and Uncertainties
The Company is subject to risks common to companies in the technology industries, including, but not limited to, litigation, development of new technological innovations and dependence on key personnel.
Off Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the three months ended March 31, 2014 and 2013, respectively.
Subsequent Events
A Federal District Court issued a ruling on March 13, 2014 on the Motion for Summary Judgment hearing that allows the company to proceed with its patent infringement suit against Activision Blizzard, Inc., Blizzard Entertainment, Inc. and Activision Publishing, Inc.'s (Activision). The MSJ hearing held October 17, 2013 addressed Activision's dispute of Worlds Inc.'s November 1995 patent priority date. The court did not dismiss the case as requested by Activision. The Court’s ruling does prevent the company from pursuing damages for the period prior to the U.S. Patent and Trademark Office's (USPTO) issuance of Certificates of Correction on September 24, 2013 that amended the Company’s 6219045 and 7181790 patents to include comprehensive priority information, which specifically references World’s November 1995 provisional patent application and confirms World’s 1995 priority date.
Recent Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements up to ASU 2014-05, and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
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Table of Contents
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Since its inception, the Company has had periods where it had only minimal revenues from operations. There can be no assurance that the Company will be able to obtain the additional capital resources to fully implement its business plan or that any assumptions relating to its business plan will prove to be accurate. The Company is pursuing sources of additional financing and there can be no assurance that any such financing will be available to the Company on commercially reasonable terms, or at all. Any inability to obtain additional financing will likely have a material adverse effect on the Company, including possibly requiring the Company to reduce and/or cease operations.
These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3 - PRIVATE PLACEMENTS OF EQUITY
During the three months ended March 31, 2014, the Company issued 1,645,015 common shares by converting $224,375 of the convertible notes payable into common stock.
During the three months ended March 31, 2014, the Company issued an aggregate of 150,000 shares of common stock as payment for services rendered with an aggregate value of $24,000.
During the three months ended March 31, 2013, the Company sold 875,000 common shares for a cash investment of $87,500. The company received $10,000 for stock issued in 2012 and recorded as subscription receivable.
During the three months ended March 31, 2013, the Company raised $78,500 with the exercise of warrants covering 523,333 shares of its common stock at a price of $0.15 per share.
During the three months ended March 31, 2013, the Company issued an aggregate of 1,050,000 shares of common stock as payment for services rendered with an aggregate value of $281,800, $232,037 of which was recorded as deferred compensation as of March 31, 2013.
During the three months ended March 31, 2013, the Company issued 1,500,000 common shares for a cash investment of $150,000 which was received in 2012. The shares were not issued as of December 31, 2012, and were recorded as common stock subscribed but not yet issued at December 31, 2012.
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Table of Contents
NOTE 4 - NOTES PAYABLE
We issued an aggregate of $2.4 million face amount of Senior Secured Convertible Notes (the “Notes”). The Notes are divided into Series A, Series B and Series C with the Series A and B Notes aggregating to $1.95 million and the Series C Notes aggregating to $450,000. The Series A and Series B Notes were exchanged by the return of the face amount of the Notes and for 7 million shares of common stock of the Company. The remaining Series C Note carries a 14% annual interest rate upon default and is payable on March 13, 2016. The Company has determined that the conversion feature of the Notes represent an embedded derivative since the Notes are convertible into a variable number of shares upon conversion. The Notes are classified as a derivative liability and not a note payable, see Note 10 below.
Notes payable at March 31, 2014 consist of the following:
Unsecured note payable to a shareholder bearing 8% interest.
Entire balance of principal and unpaid interest due on demand $ 124,230
Unsecured note payable to a shareholder bearing 10% interest
Entire balance of principal and unpaid interest due on demand $ 649,049
Promissory notes $ 325,000
Total current $ 1,098,279
2014 $ 1,098,279
2015 $ -0-
2016 $ -0-
2017 $ -0-
2018 $ -0-
$ 1,098,279
We issued promissory notes in the amount of $100,000 during the three months ended March 31, 2014. We had issued promissory notes in the amount of $225,000 during the year ended December 31, 2013. One of the Promissory Notes in the amount $50,000 was in lieu of payment of cash for an outstanding balance due to a consultant of the Company. The promissory notes carry a 6% annual interest rate and are payable upon the earlier of (a) 24 months from the date of the promissory note or (b) the Company reaching a settlement(s) on a patent infringement claim(s) and receiving an aggregate of at least $2 million net proceeds from such settlement(s).
The holders of the promissory notes shall receive repayment in the full face amount of the note from the initial $500,000 the Company actually receives from the net proceeds of its patent infringement claim(s) or from the net proceeds of a public offering. In addition the holder shall receive a preferred return (i) in an amount equal to up to 200% of the initial face amount of the note out of available cash by sharing with all other investors in this series of notes in the allocation of 50% of the available cash received by the Company form $2M - $4M and (ii) in an amount equal to up to 100% of the initial face amount of the note out of available cash by sharing with all other investors in this series of notes in the allocation of 25% of the available cash received by the Company from $4M - $6M. In other words, if the Company collects $6M in the net proceeds of available cash, the holder will receive a return equal to 400% of its investment.
NOTE 5 – STOCK OPTIONS
During the three months ended March 31, 2014, the Company issued 450,000 options to the Company’s directors. The directors, Bernard Stolar, Robert Fireman and Edward Gildea each received 100,000 options for serving as board members in 2014. Edward Gildea joined the board on January 10, 2014 and received an additional 150,000 options for joining the Company’s board.
During the three months ended March 31, 2014, the company extended the expiration date on the CEO’s 7,500,000 options. They were set to expire on March 31, 2014 but were extended two years to March 31, 2016. No stock options or warrants were exercised during the three months ended March 31, 2014.
During the three months ended March 31, 2013, the Company issued 4,535,714 warrants as part of the senior secured convertible notes. No stock options were issued. During the three months ended March 31, 2013, 523,333 stock options were exercised for cash proceeds of $78,500.
During the three months ended March 31, 2014, the Company recorded an option expense of $1,186,310, equal to the estimated fair value of the options at the date of grants. The fair market value was calculated using the Black-Scholes options pricing model, assuming approximately 0.93% risk-free interest, 0% dividend yield, 210% volatility, and expected life of 5 years for the Director’s options and 2 years for the CEO’s options.
Stock Warrants and Options
Stock warrants/options outstanding and exercisable on March 31, 2014 are as follows:
Exercise Price per Share Shares Under Option/warrant Remaining Life in Years
Outstanding
$ 1.00 4,535,714 3.96
$ 0.19 200,000 3.75
$ 0.155 200,000 4.75
$ 0.15 737,500 0.75
$ 0.14 250,000 4.97
$ 0.115 300,000 3.58
$ 0.11 150,000 1.05
$ 0.076 7,500,000 2.00
$
Exercisable
$ 1.00 4,535,714 3.96
$ 0.19 200,000 3.75
$ 0.15 737,500 0.75
$ 0.115 300,000 3.58
$ 0.11 150,000 1.05
$ 0.076 7,500,000 2.00
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NOTE 6 - INCOME TAXES
At March 31, 2014, the Company had federal and state net operating loss carry forwards of approximately $42,121,000 that expire in various years through the year 2034.
Due to operating losses, there is no provision for current federal or state income taxes for the three months ended March 31, 2014 and 2013.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.
The Company’s deferred tax asset at March 31, 2014 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating to approximately $16,427,000 less a valuation allowance in the amount of approximately $16,427,000. Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance. The valuation allowance increased by approximately $54,000 and $86,000 for the three months ended March 31, 2014 and 2013, respectively.
The Company’s total deferred tax asset as of March 31, 2014 is as follows:
Net operating loss carry forwards $ 16,427,000
Valuation allowance (16,427,000 )
Net deferred tax asset $ —
The reconciliation of income taxes computed at the federal and state statutory income tax rate to total income taxes for the three months ended March 31, 2014 and 2013 is as follows:
2014 2013
Income tax computed at the federal statutory rate 34 % 34 %
Income tax computed at the state statutory rate 5 % 5 %
Valuation allowance (39 %) (39 %)
Total deferred tax asset 0 % 0 %
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company is committed to an employment agreement with its President and CEO, Thom Kidrin. The agreement, dated as of August 30, 2012, is for five years with a one-year renewal option held by Mr. Kidrin. The agreement provides for a base salary of $175,000, which increases 10% on September 1 of each year; a monthly car allowance of $500; an annual bonus equal to 2.5% of Pre-Tax Income (as defined in the agreement); an additional bonus as follows: $75,000, if Pre-Tax Income for the year is between 150% and 200% of the prior fiscal year’s Pre-Tax Income or (B) $100,000, if Pre-Tax Income for the year is between 201% and 250% of the prior fiscal year’s Pre-Tax Income or (C) $200,000, if Pre-Tax Income for the year is 251% or greater than the prior fiscal year’s Pre-Tax Income, but in no event shall this additional bonus exceed five (5%) percent of Pre-Tax Income for such year; payment of up to $10,000 in life insurance premiums; options to purchase 7.5 million shares of Worlds Inc. common stock at an exercise price of $0.076 per share, all of which vested on August 30, 2012; a death benefit of at least $2 million dollars; and a payment equal to 2.99 times his base amount (as defined in the agreement) in the event of a Change of Control (as defined in the agreement). The agreement also provides that Mr. Kidrin can be terminated for cause (as defined in the agreement) and that he is subject to restrictive covenants for 12 months after termination.
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Table of Contents
NOTE 8 - RELATED PARTY TRANSACTIONS
On May 16, 2011, the Company transferred, through a spin-off to its then wholly owned subsidiary, Worlds Online Inc., the majority of its operations and related operational assets. The Company retained its patent portfolio which it intends to continue to increase and to more aggressively enforce against alleged infringers. The Company also entered into a License Agreement with Worlds Online Inc. to sublicense its patented technologies.
Due from related party is comprised of cash payments made by Worlds Inc. on behalf of Worlds Online Inc. for shared operating expenses. The balance due at March 31, 2014 is $287,050.
NOTE 9 - PATENTS
Worlds Inc. currently has nine patents, 6,219,045 - 7,181,690 - 7,493,558 – 7,945,856, - 8,082,501, – 8,145,998 – 8,161,383, – 8,407,592 and 8,640,028. On March 30, 2012, the Company filed a patent infringement lawsuit against Activision Bizzard Inc., Blizzard Entertainment Inc. and Activision Publishing Inc. in the United States District Court for the District of Massachusetts. Susman Godfrey LLP is lead counsel for the Company. The costs to prosecute those parties that the Company and our legal counsel believe to be infringing on said patents were capitalized under patents until a resolution is reached.
A Federal District Court issued a ruling on March 13, 2014 on the Motion for Summary Judgment hearing that allows the company to proceed with its patent infringement suit against Activision Blizzard, Inc., Blizzard Entertainment, Inc. and Activision Publishing, Inc.'s (Activision). The MSJ hearing held October 17, 2013 addressed Activision's dispute of Worlds Inc.'s November 1995 patent priority date. The court did not dismiss the case as requested by Activision. The Court’s ruling does prevent the company from pursuing damages for the period prior to the U.S. Patent and Trademark Office's (USPTO) issuance of Certificates of Correction on September 24, 2013 that amended the Company’s 6,219,045 and 7,181,790 patents to include comprehensive priority information, which specifically references World’s November 1995 provisional patent application and confirms World’s 1995 priority date.
In early October 2013, Activision Publishing, Inc., a subsidiary of Activision Blizzard, Inc. filed a lawsuit claiming patent infringement against Worlds Inc. and Worlds Online Inc., in the U.S. District Court for the Central District of California. Activision alleges that Worlds violates U.S. Patent No. 6,014,145 entitled “Navigation with optimum viewpoints in three-dimensional workspace interactive displays having three-dimensional objects with collision barriers” and U.S. Patent No. 5,883,628 entitled “Climability: property for objects in 3-D virtual environments.” The Company believes Activision/ Blizzards' suit against Worlds Inc. is without merit and an attempt to apply pressure to Worlds due our lawsuit against them. Worlds' parent patent pre-dates Activision/ Blizzards' patents by more than one year.
There can be no assurance that the Company will be successful in its ability to prosecute its IP portfolio or that we will be able to acquire additional patents.
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Table of Contents
NOTE 10 – DERIVATIVE LIABILITIES
On March 20, 2013 the Company entered into strategic financing agreements with several institutional investors that could provide the Company with up to $2.3 million of debt financing based upon the amount of conversions and redemptions. The transaction documents provide, among other things, that (i) the investors will receive five year warrants in an amount equal to 100% of the number of shares of our common stock the investors would receive if the Notes (defined below) were converted on March 13, 2013, at an exercise price of $0.50 per share, (ii) $1.950 million of the funds will deposited in one of our bank accounts but will be subject to a control account agreement which will provide that the Company can only withdraw funds from the account as the investors convert or redeem the Notes, (iii) the investors have demand and piggy-back registration rights for the shares of common stock underlying the warrants and Notes, (iv) the Notes will be secured by a first priority security interest in all of our assets, other than our patents, (v) each investor may not convert any Note or exercise any warrants if doing so will cause the investor to own more than 4.99% of our outstanding common stock at any time, although under certain circumstances they can each own up to 9.99% of our outstanding common stock, (vi) we paid $40,000 of the investors’ legal fees incurred with respect to this transaction, and (vii) for the next three years the investors have a right to participate in up to 50% of any of our future financings. The warrants and Notes contain standard anti-dilution provisions and the Securities Purchase Agreements contains standard covenants for a financing of this nature. In the event the Company acquires any subsidiaries while the Notes are outstanding, such subsidiaries will be obligated to guaranty the Notes and any other obligations we owe to the investors pursuant to the transaction documents.
On July 15, 2013 we entered into Amendment and Exchange Agreements with each of the existing holders of our Series A, B and C Senior Secured Convertible Notes and related warrants to purchase our common stock, which securities were originally issued pursuant to that certain Securities Purchase Agreement dated as of March 14, 2013 (“Securities Purchase Agreement”), by and among us and such holders.
Each Exchange Agreement provides for, among other things, that:
(i) Various restrictive provisions of the Securities Purchase Agreement and the Class C Senior Secured Convertible Notes were either eliminated by amendment or waived;
(ii) the related warrants, initially exercisable into an aggregate of 4,535,714 shares of Common Stock at an initial exercise price of $0.50, were exchanged for new warrants, initially exercisable into an aggregate of 4,535,714 shares of Common Stock at an initial exercise price of $1.00; and
(iii) the Series A and B Senior Secured Convertible Notes, with an aggregate original principal amount of $1,950,000, were exchanged for an aggregate of 7 million shares of our common stock and the payment by the Company to such holders of an aggregate of approximately $1,951,400 (the remaining cash amount held in a control account pursuant to the terms and conditions of the Series A and B Senior Secured Convertible Notes)
The Company has determined that the conversion feature of the Note represent an embedded derivative since the Note is convertible into a variable number of shares upon conversion. Accordingly, the Note is not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of this derivative instrument has been recorded as a liability on the balance sheet with the corresponding amount recorded as a discount to the Note. Such discount will be accreted from the grant date to the maturity date of the Note. The change in the fair value of the derivative liability will be recorded in other income or expenses in the statement of operations at the end of each period, with the offset to the derivative liability on the balance sheet. The beneficial conversion feature included in the Note resulted in an initial debt discount of $450,000 and an initial loss on the valuation of derivative liabilities of $96,119 based on the initial fair value of the derivative liability of $546,119. The fair value of the embedded derivative liability was calculated at grant date utilizing the following assumptions:
Grant Date Fair Value Term
(Years) Assumed Conversion Price Market Price on Grant Date Volatility Percentage Risk-free
Rate
3/20/13 $ 546,119 3.0 $ 0.326 $ 0.465 238 % 0.0038
During the three months ended March 31, 2014, $224,375 of the convertible notes was converted into 1,645,015 shares of the Company’s common stock. $225,188 in convertible notes remain outstanding.
At March 31, 2014, the Company revalued the embedded derivative liability. For the period from December 31, 2013 to March 31, 2014, the Company decreased the derivative liability of $429,296 by $242,694 resulting in a derivative liability of $186,602 at March 31, 2014.
The fair value of the embedded derivative liability was calculated at March 31, 2014 utilizing the following assumptions:
Date Fair Value Term
(Years) Assumed Conversion Price Market Price Volatility Percentage Risk-free
Rate
3/31/14 $ 186,602 1.97 $ 0.15 $ 0.156 179 % 0.0093
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Item 2. Management's Discussions and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
When used in this Form 10-Q and in other filings by the Company with the Commission, the words or phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will" or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any such forward looking statements, each of which speak only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company has no obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements.
These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different. These factors include, but are not limited to, changes that may occur to general economic and business conditions; changes in political, social and economic conditions in the jurisdictions in which we operate; changes to regulations that pertain to our operations; changes in technology that render our technology relatively inferior, obsolete or more expensive compared to others; delays in the delivery of broadband capacity to the homes and offices of persons who license our technology; general disruptions to Internet service; and the loss of customer faith in the Internet as a means of commerce.
The following discussion should be read in conjunction with the unaudited financial statements and related notes which are included under Item 1.
We do not undertake to update our forward-looking statements or risk factors to reflect future events or circumstances.
Overview
General
Starting in mid-2001 we were not able to generate enough revenue to sustain full operations and other sources of capital were not available. As a result, we have had to significantly curtail our operations since that time and at times almost halt them all together. Since mid-2007, as more funds became available from our financings, we were able to increase operations and become more active operationally.
On May 16, 2011, we transferred, through a spin-off to our then wholly owned subsidiary, Worlds Online Inc., the majority of our operations and related operational assets. We retained our patent portfolio which we intend to continue to increase and to more aggressively enforce against alleged infringers. We also entered into a License Agreement with Worlds Online Inc. to sublicense patented technologies.
The Company’s sources of revenue after the spin off are expected to be from sublicenses of the patented technology by Worlds Online and any revenue that may be generated from enforcing its patents in litigation or otherwise.
Revenues
The Company’s sources of revenue after the spin off are expected to be from sublicenses of the patented technology by Worlds Online and any revenue that may be generated from enforcing its patents in litigation or otherwise.
Prior to the spin-off we generated only modest revenue from VIP subscriptions to the Worlds Ultimate 3-D Chat service.
Expenses
We classify our expenses into two broad groups:
O cost of revenues; and
O selling, general and administration.
Liquidity and Capital Resources
We have had to limit our operations since mid 2001 due to a lack of liquidity. However, we were able to issue equity and convertible debt in the last few years and raise small amounts of capital from time to time that enabled us to begin upgrading our technology, develop new products and actively solicit additional business. We continue to pursue additional sources of capital though we have no current arrangements with respect to, or sources of, additional financing at this time and there can be no assurance that any such financing will become available. If we cannot raise additional capital, form an alliance of some nature with another entity, or start to generate sufficient revenues, we may need to once again scale back operations.
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Table of Contents
RESULTS OF OPERATIONS
Our net revenues for each of the three months ended March 31, 2014 and 2013 were $0. All the operations were transferred over to Worlds Online Inc. in the spin off. The Company’s future sources of revenue after the spin off are anticipated to be from sublicenses of the patented technology to Worlds Online Inc.’s customers and any revenue that may be generated from enforcing our patents in litigation or otherwise.
Three months ended March 31, 2014 compared to three months ended March 31, 2013
Revenue is $0 for the three months ended March 31, 2014 and 2013. We need to raise a sufficient amount of capital to provide the resources required that would enable us to continue running the business.
Cost of revenues is $0 in the three months ended March 31, 2014 and 2013.
Selling general and administrative (SG&A) expenses decreased by $159,401 from $248,936 to $89,535 for the three months ended March 31, 2013 and 2014, respectively. Decrease is due to limited operations in 2014 where last year there was a greater overall level of activity surrounding the lawsuit and professional service fees and consultants with the activity around closing the strategic financing agreement.
Salaries and related increased by $2,012 to $49,038 from $47,026 for the three months ended March 31, 2014 and 2013, respectively. The increase is due to the increase in the CEO’s salary based on the terms of his employment agreement.
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Common stock issued for services rendered decreased by $25,655 to $36,608 from $62,263 for the three months ended March 31, 2014 and 2013 respectively. The Company has only one strategic business consulting and advice agreement for common stock in 2014 where we had several in the past.
For the three months ended March 31, 2014, the Company recorded an option expense of $1,186,310, equal to the estimated fair value of the options at the date of grants. The option expense includes the options that were issued to Directors of the Company and the options that were extended for an additional 2 years for the CEO.
For the three months ended March 31, 2014, the company had a loss on change in fair value of derivative liability of $71,173 and interest expense of $246,846. For the three months ended March 31, 2013, the Company had a gain on change in fair value of derivative liability of $54,379 and interest expense of $27,518, both related to the issuance of the senior secured convertible notes that are required to be recorded as a derivative liability.
As a result of the foregoing, we realized a net loss of $1,679,510 for the three months ended March 31, 2014 compared to a net loss of $331,364 in the three months ended March 31, 2013.
Liquidity and Capital Resources
At March 31, 2014, our cash and cash equivalents were $57,666. We raised an aggregate of $100,000 from issuing notes payable during the quarter.
At March 31, 2013, our cash and cash equivalents were $248,003 and our restricted cash and cash equivalents were $1,950,000. We raised an aggregate of $2,300,000 from issuing the convertible notes payable but then redeemed the Series A and B and returned $1,950,000 . We raised $97,500 from a private placement of common stock; and we raised $78,500 from the exercising of warrants for common stock in the three months ended March 31, 2013.
There were no capital expenditures in the three months ended March 31, 2014 or in the three months ended March 31, 2013.
Historically, our primary cash requirements have been used to fund the cost of operations, development of our products and patent protection, with additional funds having been used in promotion and advertising and in connection with the exploration of new business lines.
The funds raised in our 2013 and 2014 financings were and will be used to develop new products and services, enhance our patent portfolio, pay salaries to management and pay professional fees to our attorneys and auditors to prepare and file reports with the Securities and Exchange Commission. We hope to raise additional funds to be used for further developing our portfolio of patents and to document our technology in order to enforce our patents where there is infringement. No assurances can be given that we will be able to raise any additional funds.
A Federal District Court issued a ruling on March 13, 2014 on the Motion for Summary Judgment hearing that allows the company to proceed with its patent infringement suit against Activision Blizzard, Inc., Blizzard Entertainment, Inc. and Activision Publishing, Inc.'s (Activision). The MSJ hearing held October 17, 2013 addressed Activision's dispute of Worlds Inc.'s November 1995 patent priority date. The court did not dismiss the case as requested by Activision. The Court’s ruling does prevent the company from pursuing damages for the period prior to the U.S. Patent and Trademark Office's (USPTO) issuance of Certificates of Correction on September 24, 2013 that amended the Company’s 6,219,045 and 7,181,790 patents to include comprehensive priority information, which specifically references World’s November 1995 provisional patent application and confirms World’s 1995 priority date.
Item 4. Controls And Procedures
As of March 31, 2014, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2014. The above statement notwithstanding, you are cautioned that no system is foolproof.
Changes in Internal Control Over Financial Reporting
During the quarter covered by this report there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Table of Contents
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
In Cosmo Communications v. Worlds.com. (our former name) in the Superior Court Of New Jersey Law Division, Bergen County, the court rendered a decision in favor of the plaintiff, Cosmo Communications on February 13, 2001. The judgment amount entered in April 2001, is approximately $205,000, of which the full amount is accrued. The judgment related to a consulting agreement for raising capital. The court ruled that the terms of the contract are binding on successors of the company and that Worlds Inc. is a successor company .
In early October 2013, Activision Publishing, Inc., a subsidiary of Activision Blizzard, Inc. filed a lawsuit claiming patent infringement against World’s Inc. and Worlds Online Inc., in the U.S. District Court for the Central District of California. Activision alleges that World’s violates U.S. Patent No. 6,014,145 entitled “Navigation with optimum viewpoints in three-dimensional workspace interactive displays having three-dimensional objects with collision barriers” and U.S. Patent No. 5,883,628 entitled “Climability: property for objects in 3-D virtual environments.” The Company believes Activision/ Blizzards' suit against Worlds Inc. is without merit and an attempt to apply pressure to Worlds due our lawsuit against them. Worlds' parent patent pre-dates Activision/ Blizzards' patents by more than one year.
Item 1A. Risk Factors
We are not obligated to disclose our risk factors in this report, however, limited information regarding our risk factors appears in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Forward-Looking Statements” contained in this Quarterly Report on Form 10-Q and in “Item 1A. RISK FACTORS” of our 2012 Annual Report on Form 10-K. There have been no material changes from the risk factors previously disclosed in our 2012 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosure
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
31.1 Certification of Chief Executive Officer
31.2 Certification of Chief Financial Officer
32.1 Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
101.INS* XBRL Instance Document
101.SCH*XBRL Taxonomy Extension Schema
101.CAL*XBRL Taxonomy Extension Calculation Linkbase
101.DEF* XBRL Taxonomy Extension Definition Linkbase
101.LAB*XBRL Taxonomy Extension Label Linkbase
101.PRE* XBRL Taxonomy Extension Presentation Linkbase
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Table of Contents
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused this Report to be signed on its behalf by the undersigned thereto duly authorized.
Date: May 15, 2014
WORLDS INC.
By: /s/ Thomas Kidrin
Thomas Kidrin
President and CEO
By: /s/ Christopher Ryan
Christopher Ryan
Chief Financial Officer
( 16 )
Table of Contents
INDEX TO EXHIBITS
Exhibit No. Description
31.1 Certification of Chief Executive Officer
31.2 Certification of Chief Financial Officer
32.1 Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 .
32.2 Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema
101.CAL* XBRL Taxonomy Extension Calculation Linkbase
101.DEF* XBRL Taxonomy Extension Definition Linkbase
101.LAB* XBRL Taxonomy Extension Label Linkbase
101.PRE* XBRL Taxonomy Extension Presentation Linkbase
Judge Denise J. Casper: ELECTRONIC ORDER entered granting 133 Motion for Extension of Time to File Response/Reply re 131 MOTION to Transfer Case to Central District of California. Responses due by 5/28/2014 (Hourihan, Lisa) (Entered: 05/09/2014)
Not really any reason to object to a few weeks extra time to reply, pretty normal. There might very well be settlement talks but from my experience as long as it is cheaper to litigate than to pay companies tend to litigate. Delay games are also very often played as Goliath tries to bleed David to death. Worlds advantage is the fact that they are not paying legal fees.
I would also expect that these briefs will delay the joint brief regarding Markman dates.
I firmly believe Worlds have a very strong case but these cases tend to take longer than one expects.
Patience is a virtue.
REH
Worlds agreed to it so I am sure it will be granted
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
WORLDS, INC.,
Plaintiff,
v.
ACTIVISION BLIZZARD, INC.,
BLIZZARD ENTERTAINMENT, INC. and
ACTIVISION PUBLISHING, INC.,
Defendants.
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Civil Action No. 1:12-CV-10576 (DJC)
DEFENDANTS’ MOTION FOR AGREED-TO EXTENSION OF TIME TO RESPOND
TO WORLDS, INC.’S MOTION TO TRANSFER VENUE
Defendants Activision Blizzard, Inc., Blizzard Entertainment, Inc. and Activision
Publishing, Inc. (collectively “Activision”) respectfully request that this Court extend until
May 28, 2014 (a 12-day extension that includes a holiday weekend), the time for Activision to
respond to Worlds, Inc.’s (“Worlds”) Motion to Transfer Venue (D.I. 131), which was filed on
May 2, 2014.
Worlds’ Motion to Transfer Venue seeks to transfer this action to the U.S. District Court
for the Central District of California, where a separate patent litigation between the parties is
pending. The requested extension will permit Activision to address fully why Worlds’ Motion
should be denied.
Case 1:12-cv-10576-DJC Document 133 Filed 05/08/14 Page 1 of 2Activision has conferred with Plaintiff Worlds, which has agreed to this extension.
Respectfully submitted,
Dated: May 8, 2014 By: /s/ Samuel L. Brenner
Samuel L. Brenner (BBO # 677812)
ROPES & GRAY LLP
Prudential Tower
800 Boylston Street
Boston, Massachusetts 02199-3600
samuel.brenner@ropesgray.com
Tel.: (617) 951-7000
Fax: (617) 951-7050
Attorney for Defendants
Activision Blizzard, Inc., Blizzard
Entertainment, Inc., and Activision
Publishing, Inc.
CERTIFICATE OF CONFERENCE
Pursuant to Local Rule 7.1, I hereby certify that counsel for Activision has conferred with
Plaintiff’s counsel in an attempt in good faith to resolve or narrow the issues presented by this
motion. Plaintiff’s counsel has agreed to the requested extension.
Dated: May 8, 2014 By: /s/ Samuel L. Brenner
CERTIFICATE OF SERVICE
I hereby certify that the foregoing document filed through the ECF system will be sent
electronically to the registered participants as identified on the Notice of Electronic Filing (NEF)
this 8th day of May, 2014.
By: /s/ Samuel L. Brenner
Case 1:12-cv-10576-DJC Document 133 Filed 05/08/14 Page 2 of 2
no problem. they also filed the exhibits etc:
MEMORANDUM in Support re 131 MOTION to Transfer Case to Central District of California. filed by Worlds, Inc.. (Attachments: # 1 Affidavit Decl. of R. Caughey, # 2 Exhibit 1, # 3 Exhibit 2, # 4 Exhibit 3, # 5 Exhibit 4, # 6 Exhibit 5, # 7 Exhibit 6, # 8 Exhibit 7, # 9 Exhibit 8, # 10 Exhibit 9, # 11 Exhibit 10, # 12 Exhibit 11, # 13 Exhibit 12, # 14 Exhibit 13, # 15 Exhibit 14, # 16 Exhibit 15, # 17 Affidavit Decl. of Kidrin)(Caughey, Ryan) (Entered: 05/02/2014)
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3150592v1/013049
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
WORLDS, INC.,
Plaintiff,
vs.
ACTIVISION BLIZZARD, INC.,
BLIZZARD ENTERTAINMENT, INC. and
ACTIVISION PUBLISHING, INC.,
Defendants.
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Civil Action No. 1:12-CV-10576 (DJC)
JURY TRIAL DEMANDED
WORLDS, INC.’S MOTION TO TRANSFER VENUE
Pursuant to 28 U.S.C. § 1404(a), Plaintiff Worlds, Inc. (“Worlds”) moves to transfer venue
to the Central District of California. In support of this Motion, Worlds is contemporaneously
filing: (1) Memorandum in Support of Worlds, Inc.’s Motion to Transfer Venue; (2) Declaration
of Ryan V. Caughey in Support of Worlds, Inc.’s Motion to Transfer Venue (and exhibits thereto);
and (3) Declaration of Thom Kidrin in Support of Worlds, Inc.’s Motion to Transfer Venue.
For the reasons set forth in the accompanying Memorandum and supporting materials,
Worlds respectfully requests that this Court issue an order transferring this case in its entirety to
the U.S. District Court for the Central District of California.
REQUEST FOR ORAL ARGUMENT
Pursuant to Local Rule 7.1(d), Worlds respectfully requests oral argument to aid in resolution
of this Motion.
Case 1:12-cv-10576-DJC Document 131 Filed 05/02/14 Page 1 of 3
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3150592v1/013049
RULE 7.1 CERTIFICATION
Pursuant to Local Rule 7.1(a)(2), Worlds hereby certifies that counsel for Worlds has
conferred with counsel for Defendants about the subjects raised in this Motion, and Defendants
are opposed to transferring venue.
Dated: May 2, 2013 Respectfully submitted,
Worlds, Inc.
By its attorneys,
By: /s/ Ryan V. Caughey________
Max L. Tribble (admitted pro hac vice)
mtribble@susmangodfrey.com
Chanler Langham (pro hac vice pending)
clangham@susmangodfrey.com
Ryan Caughey (admitted pro hac vice)
rcaughey@susmangodfrey.com
SUSMAN GODFREY L.L.P.
1000 Louisiana Street, Suite 5100
Houston, Texas 77002
Telephone: (713) 651-9366
Facsimile: (713) 654-6666
Joel R. Leeman (BBO # 292070)
jleeman@sunsteinlaw.com
SUNSTEIN KANN MURPHY & TIMBERS LLP
125 Summer Street
Boston, MA 02110-1618
Telephone: (617) 443-9292
Facsimile: (617) 443-0004
Attorneys for Plaintiff Worlds, Inc.
Case 1:12-cv-10576-DJC Document 131 Filed 05/02/14 Page 2 of 3
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3150592v1/013049
CERTIFICATE OF SERVICE
I certify that on the above date, this document and supporting materials identified above
were filed through the ECF system and thereupon sent electronically to the registered participants
as identified on the Notice of Electronic Filing (NEF).
/s/ Ryan V. Caughey
Ryan V. Caughey
Case 1:12-cv-10576-DJC Document 131 Filed 05/02/14 Page 3 of 3
No news is probably the reason. I check pacer on a daily basis and will post if there's any court updates.
REH
Pacer: nothing as of right now
WHERE DO YOU SEE ANY COURT DATES GIVEN IN MASS CASE?
Latest Pacer filing is this, signed by judge, combined protective order so things are moving along in Califoania. What we need next would be for the parties to agree in the MASS case to a Markman date.
[PROPOSED] STIPULATED PROTECTIVE ORDER
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
ACTIVISION PUBLISHING, INC.,
Plaintiff,
v.
WORLDS INC. and WORLDS ONLINE
INC.,
Defendants.
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Case No. CV-13-7380 CBM (PLAx)
Hon. Consuelo B. Marshall
STIPULATED PROTECTIVE
ORDER
WORLDS INC. and WORLDS ONLINE
INC.
Counter Claimants,
v.
ACTIVISION PUBLISHING, INC.,
Counter Defendants
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Case 2:13-cv-07380-CBM-PLA Document 35 Filed 04/25/14 Page 1 of 29 Page ID #:211
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[PROPOSED] STIPULATED PROTECTIVE ORDER
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Pursuant to Fed. R. Civ. P. 26(c), Plaintiff Activision Publishing, Inc.
(“Activision”), and Defendants, Worlds, Inc. and Worlds Online, Inc. (collectively
“Worlds”), (collectively, the “parties”), by and through their respective undersigned
counsel, hereby stipulate and agree to the request for, and entry of, the following
Protective Order.
Good Cause Statement
1.1 Disclosure and discovery activity in this action are likely to involve
production of trade secrets or other confidential research, development, commercial,
proprietary, or private information for which special protection from public disclosure
and from use for any purpose other than this litigation is warranted. Accordingly, the
parties hereby stipulate to and request that the Court enter the following First
Stipulated Protective Order pursuant to Rule 26(c) of the Federal Rules of Civil
Procedure.
1.2 The parties believe that good cause exists for the entry of this Order
because Protected Material (as defined below) constitutes trade-secret or other
confidential or proprietary information, the disclosure of which is likely to have the
effect of harming the competitive position of the Designating Party (as defined below)
or violating an obligation of confidentiality owed to a third party.
1.3 Protected Material designated under the terms of this Order shall be used
by a Receiving Party (as defined below) solely for this litigation and shall not be used
directly or indirectly for any other purpose whatsoever, and its disclosure is prohibited
except as expressly provided in this Order.
1.4 The parties acknowledge that this Order does not confer blanket
protections on all disclosures or responses to discovery. Designations of
confidentiality shall be made with care and shall not be made absent a good faith
belief that the Protected Material satisfies the criteria set forth below for each
category.
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I. SCOPE OF PROTECTION
A. This Order shall govern any record of information, designated
pursuant to ¶ 3 of this Order, produced in this action, including all designated
deposition testimony, all designated testimony taken at a hearing or other proceeding,
all designated interrogatory answers, documents and other discovery materials,
whether produced informally or in response to interrogatories, requests for
admissions, requests for production of documents or other formal method of
discovery.
B. This Order shall also govern any designated record of information
produced in this action pursuant to required disclosures under any federal procedural
rule or United States District Court for the District of Massachusetts Local Rule or
judge’s individual practice or order, and any supplementary disclosures thereto.
2. Definitions
“Confidential” information, as used herein, means any type or classification of
information, so designated, that is nonpublic, proprietary, commercially or otherwise
sensitive, or that falls within the term “trade secret” containing or reflecting financial
information, contractual terms, or the design and operation of products such as
financial statements and records, design specifications, computer code, etc.
“Producing Party” shall mean a party or non-party, on behalf of which
documents, things or information are produced, furnished, or disclosed, during the
course of this Action, in response to requests for production of documents,
interrogatories, requests for admissions, depositions or any other request for discovery
pursuant to the Federal Rules of Civil Procedure, or in the form of pleadings, briefs,
memoranda, testimony adduced at trial, materials introduced into evidence or other
form of information produced, furnished or disclosed by or on behalf of such a party
or non-party.
“Designating Party” shall mean a Producing Party that designates Confidential
information according to the provisions of this Protective Order.
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“Receiving party” shall mean any party to which documents, things or
information are produced, furnished, or disclosed, whether voluntarily or in response
to formal or informal discovery requests, subpoena, deposition notice, or court order,
by any Producing Party in this Action.
3. Designations
A. Any Producing Party may designate as CONFIDENTIAL -
OUTSIDE COUNSEL ONLY any information furnished to a Receiving Party during
discovery that is believed to contain Confidential information.
B. A designation of any information as CONFIDENTIAL -
OUTSIDE COUNSEL ONLY or HIGHLY RESTRICTED – CONFIDENTIAL
SOURCE CODE shall only be made if the Designating Party has a reasonable, goodfaith
belief that (a) such information contains Confidential information as defined
herein, and (b) disclosure of such information without restriction would be
detrimental to that party in the conduct of its business and cause cognizable harm.
C. Any Producing Party may designate any item as CONFIDENTIAL
- OUTSIDE COUNSEL ONLY or HIGHLY RESTRICTED – CONFIDENTIAL
SOURCE CODE by placing or affixing to such item, in a manner that will not
interfere with the legibility thereof, a notice identifying the item as CONFIDENTIAL
- OUTSIDE COUNSEL ONLY or HIGHLY RESTRICTED – CONFIDENTIAL
SOURCE CODE.
4. Computer Source Code
A. Some Confidential materials may include computer source code
(“Source Code”). The Producing Party may designate those Confidential materials
that contain computer source code as HIGHLY RESTRICTED – CONFIDENTIAL
SOURCE CODE. All computer source code that is produced and designated
HIGHLY RESTRICTED – CONFIDENTIAL SOURCE CODE in this action shall be
subject to the disclosure and dissemination restrictions applicable to documents or
information marked CONFIDENTIAL - OUTSIDE COUNSEL ONLY or other
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similar designation, and shall be further be subject to the following protections:
B. Information designated as HIGHLY RESTRICTED –
CONFIDENTIAL SOURCE CODE, to the extent in electronic format, will be
provided on two standalone computers (i.e., the computer system and/or secure video
game console may not be linked to any network, including a local area network
(“LAN”), an intranet, or the Internet) (“Standalone Computers”). The Standalone
Computers shall be maintained in the sole control and custody of the Producing Party,
counsel of record for the Producing Party or an agent of such counsel and, at the
election of the Producing Party, shall be made available to a requesting party at an
office of the Producing Party or counsel of record for the Producing Party. The
Producing Party shall provide the Receiving Party with information explaining how to
start, log on to, and operate the Standalone Computers in order to access the produced
Source Code Material on the Standalone Computers. The Producing Party will
produce Source Code in computer searchable format on the Standalone Computers as
described above. Computer searchable format means electronic files containing
native text not produced through any process involving optical character recognition.
Each Standalone Computer shall be provided with software allowing for efficient
searching and review of the Source Code. In addition to software provided by the
Producing Party, the Receiving Party may request installation of additional review
software on the Standalone Computers, provided that at least five business days
advanced notice of the request is provided to the Producing Party, and the Producing
Party’s consent shall not be unreasonably withheld so long as the Receiving Party
provides a valid license to the software requested. The Producing Party shall have the
right to object to software applications that are deemed unsecure by the Producing
Party.
a. The Producing Party shall allow access to the Standalone
Computers containing its computer source code for as long as reasonably
practicable, no less than regular business hours, upon notice by the Receiving
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Party, two days before the day upon which access is desired. The Receiving
Party shall make reasonable efforts to restrict its requests for such access to the
Standalone Computers to normal business hours, which for purposes of this
Paragraph shall be 8:00 a.m. through 6:00 p.m.
b. Access to the Standalone Computers shall be contingent upon the
provision of proper identification of all persons qualified to have access under
Section 6(b) (“Qualified Persons”). Proper identification is defined as a photo
identification card issued by the government of a U.S. state, by the United
States federal government, or by the nation state of the Qualified Person’s
current citizenship. Except as provided in ¶ 4.2(d), outside electronic devices
shall not be permitted in the room with the Standalone Computers. The
Producing Party will provide a secure, protected area for storage of any
belongings of a Qualified Person who will be reviewing source code on the
Standalone Computers.
c. Except as specified herein, the Receiving Party shall not copy,
transmit or duplicate HIGHLY RESTRICTED – CONFIDENTIAL SOURCE
CODE materials in any manner, including scanning or otherwise creating an
electronic image of the HIGHLY RESTRICTED – CONFIDENTIAL
SOURCE CODE materials. The Producing Party shall provide a printer with a
supply of pre-Bates numbered, watermarked paper marked HIGHLY
RESTRICTED – CONFIDENTIAL SOURCE CODE attached to the
Standalone Computers. Under no circumstances are original printouts of the
Source Code to be made except for directly onto the watermarked and
numbered sides of the paper provided by the Producing Party. The Receiving
Party may use the printer to print specific lines of the HIGHLY RESTRICTED
– CONFIDENTIAL SOURCE CODE that the Receiving Party believes in good
faith are necessary to understand a relevant feature of an accused product
(“Printouts”). The Receiving Party may not, however, remove the Printouts
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from the room in which the Standalone Computer is located. When Printouts
are made, the Receiving Party shall notify the Producing Party and, within four
business days of receiving such notice, the Producing Party shall provide a
copy of the Printouts to the Receiving Party, subject to any objections by the
Producing Party, as described more fully hereafter. If the Producing Party
objects to the relevance of any or all of the Printouts, the Producing Party shall
make such objection known to the Receiving Party before the end of the four
business day period. If the Producing Party and the Receiving Party cannot
resolve the objection the Parties may seek relief from the Court pursuant the
Local Rule 37 and the Court’s Scheduling Order.
d. The Receiving Party shall be permitted to bring a laptop computer
inside the Standalone Computer room, so long as all external data ports are
rendered unusable, either by covering the ports with black silicone or by
another method agreed upon by the parties, and any wireless network
connectivity devices are disabled. The Receiving Party is prohibited from
bringing into the room with the Standalone Computers outside electronic
devices that may be used to electronically copy information from a Standalone
Computer, including but not limited to external floppy drives, zip drives, flash
drives, Ethernet cables, USB cables, cellphones, personal data assistants, or
other similar hardware. If any individual inspecting the Producing Party’s
Source Code seeks to take notes on hardcopy paper, all such notes will be taken
on bound (spiral or other type of permanently bound) notebooks. No loose
paper or other paper that can be used in a printer may be brought into the secure
room. The Producing Party will provide a secure, protected area for storage of
any belongings of a Qualified Person who will be reviewing source code on the
Standalone Computers.
e. All hard (non-electronic) copies of Source Code shall be clearly
labeled HIGHLY RESTRICTED – CONFIDENTIAL SOURCE CODE and
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maintained in a secured locked area in the custody and control of (i) the
Producing Party’s outside counsel of record, (ii) the Receiving Party’s outside
counsel of record, or (iii) the Receiving Party’s experts and technical advisors
who are authorized hereunder to view HIGHLY RESTRICTED –
CONFIDENTIAL SOURCE CODE.
f. The Receiving Party’s outside counsel of record and authorized
experts shall maintain and store the source code at their respective offices in a
manner that prevents unauthorized access to the source code.
C. Nothing in this Protective Order shall obligate the parties to
produce any Source Code, nor act as an admission that any particular Source Code is
discoverable.
5. Limit on Use and Disclosure of Designated Information
A. Each party and all persons bound by the terms of this Order shall
only use any information or document designated CONFIDENTIAL - OUTSIDE
COUNSEL ONLY or HIGHLY RESTRICTED – CONFIDENTIAL SOURCE CODE
in connection with the prosecution or defense of this action, and not for any other
purpose, including, but not limited to, use in any business or commercial enterprise,
except as permitted by this Order or by prior written agreement with counsel for the
Producing Party. Except as provided for in this Order, no party or other person shall
disclose or release any information or document governed by this Order to any person
not authorized pursuant to this Order to receive such information or document.
B. It is understood that counsel for a party may give advice and
opinions to his or her client based on his or her evaluation of designated
CONFIDENTIAL - OUTSIDE COUNSEL ONLY or HIGHLY RESTRICTED –
CONFIDENTIAL SOURCE CODE information received by the party, provided that
such rendering of advice and opinions shall not reveal the content of such
information, except as permitted by this Order or by prior written agreement with
counsel for the Producing Party.
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C. The attorneys of record for the parties and other persons receiving
information governed by this Order shall exercise reasonable care to ensure that the
information and documents governed by this Order are (a) used only for the purposes
specified herein, and (b) disclosed only to authorized persons.
6. Disclosure of Information Designated CONFIDENTIAL - OUTSIDE
COUNSEL ONLY or HIGHLY RESTRICTED – CONFIDENTIAL
SOURCE CODE
A. Except as provided in ¶¶ 16, 17, and 18, documents or information
designated CONFIDENTIAL - OUTSIDE COUNSEL ONLY shall be disclosed by
the recipient thereof only on a need-to-know basis to:
a. counsel of record for the parties, and other lawyers in outside
counsel’s firms and their authorized secretarial, clerical and legal assistant staff
who are actively engaged in assisting such counsel with the prosecution or
defense of this action;
b. the Court and Court personnel;
c. consultants or experts and their staff, retained by the parties or
their attorneys solely for purposes of this action, who first agree to be bound by
the terms of this Order by executing a Confidentiality Undertaking in
accordance with ¶¶ 7-8;
d. court reporters, videographers, and their respective staffs
employed in connection with this action;
e. persons who appear on the face of the information designated
CONFIDENTIAL - OUTSIDE COUNSEL ONLY as an author, addressee, or
recipient thereof or employees of the producing party who are authorized to
access the information;
f. non-technical outside consultants, including jury consultants and
mock jurors, who are not existing employees or affiliates of a Party, an affiliate
of a Party or a competitor of a Party, retained for the purpose of this litigation,
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provided that they first agree to be bound by the terms of this Order by
executing a Confidentiality Undertaking in the form attached hereto as
Exhibit C; and
g. any designated arbitrator or mediator who is assigned to hear this
matter, or who has been selected by the Parties, and his or her staff, provided
that they first agree to be bound by the terms of this Order by executing a
Confidentiality Undertaking in the form attached hereto as Exhibit C; and
h. non-parties specifically retained to assist counsel of record with
copying and computer services necessary for document handling, and other
litigation support personnel (e.g., graphic designers and animators, database
entry personnel).
B. Except as provided in ¶¶ 16, 17, and 18, documents or information
designated HIGHLY RESTRICTED – CONFIDENTIAL SOURCE CODE shall be
disclosed by the recipient thereof only on a need-to-know basis to:
a. outside counsel for the parties, including other lawyers in their
firms and their authorized secretarial, clerical and legal assistant staff who are
actively engaged in assisting such counsel with the prosecution or defense of
this action;
b. the Court and Court personnel;
c. not more than three (3) consultants or experts, retained by the
parties or their attorneys solely for purposes of this action, who first agree to be
bound by the terms of this Order by executing a Confidentiality Undertaking in
accordance with ¶¶ 7-8, except that any party may in good faith request another
party’s consent to designate one or more additional consultant or expert, the
other party shall not unreasonably withhold such consent, and the requesting
party may seek leave of Court to designate such additional consultant(s) or
expert(s) if the requesting party believes the other party has unreasonably
withheld such consent; and
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d. court reporters, videographers, and their respective staffs
employed in connection with this action.
7. Identification of Experts or Consultants
A. If any party desires to disclose information designated
CONFIDENTIAL - OUTSIDE COUNSEL ONLY or HIGHLY RESTRICTED –
CONFIDENTIAL SOURCE CODE to any expert or consultant pursuant to ¶¶
6(a)(iii) or 6(b)(iii) above, it must first provide written notice to the attorneys for the
Producing Party identifying each such expert or consultant. Attorneys for the
Producing Party shall have five (5) business days from receipt of such notice to object
to the disclosure of such information to any of the experts or consultants so identified.
Such objection must be for good cause, stating with particularity the reasons for the
objection, and must be in writing served on all parties. The Producing Party shall
have the burden of proof by preponderance of the evidence on the issue of the
sufficiency of the objections. Any party that fails to object within five (5) business
days of receiving such notice shall be deemed to have agreed upon disclosure to the
expert or consultant but shall not be precluded from later objecting to continued
access where facts suggesting a basis for objection could not have been earlier
discovered by exercising due diligence within the period for making a timely
objection. No CONFIDENTIAL - OUTSIDE COUNSEL ONLY or HIGHLY
RESTRICTED – CONFIDENTIAL SOURCE CODE information may be disclosed
to any proposed expert or consultant until such time as the parties have agreed upon
disclosure to the expert or consultant or until the Court rules on a timely motion made
pursuant to ¶ 7(C) below.
B. Written notice identifying a proposed expert or consultant under
¶ 7.1 above shall include the full name and professional address and/or affiliation of
the proposed expert or consultant, an up-to-date curriculum vitae or resume (including
(1) their present employer and title, and (2) a list of any known present or former
relationships or engagements between them and any party or known competitor of a
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party), an executed Confidentiality Undertaking in the form attached hereto as
Exhibit A, a list of any prior or current employments or consultancies during the
previous five (5) years, a list of cases in which the expert or consultant has testified at
deposition, hearing or trial within the last five (5) years and an indication of whether
or not they are involved in preparing, prosecuting, supervising, or assisting in the
preparation or prosecution (including interferences, reexaminations, inter partes
review, and other proceedings) of any patent or patent application pertaining to the
Patents-in-Suit, the field of technology or subject matter of the Patents-in-Suit, or any
online or networked gaming technologies). A proposed expert or consultant may only
receive HIGHLY RESTRICTED – CONFIDENTIAL SOURCE CODE after being
expressly identified to the Producing Party as seeking access to HIGHLY
RESTRICTED – CONFIDENTIAL SOURCE CODE.
C. The parties shall attempt to resolve any objections informally. If
the objections cannot be resolved, the party opposing disclosure of the
CONFIDENTIAL - OUTSIDE COUNSEL ONLY or HIGHLY RESTRICTED –
CONFIDENTIAL SOURCE CODE information to the proposed expert or consultant
may move the Court for an Order prohibiting the disclosure pursuant to Civil Local
Rule 37.
8. Agreement of Confidentiality
In no event shall any information designated CONFIDENTIAL - OUTSIDE
COUNSEL ONLY or HIGHLY RESTRICTED – CONFIDENTIAL SOURCE CODE
be disclosed to any person authorized pursuant to ¶¶ 6(a)(iii), 6(a)(vi), 6(a)(vii),
6(b)(iii) and 7 until such person has executed a written Confidentiality Undertaking
(in the form set forth in the exhibits attached hereto) acknowledging and agreeing to
be bound by the terms of this Order. Counsel for the party seeking to disclose
material designated under this Order to any such person pursuant to this paragraph
shall be responsible for retaining the executed originals of all such Confidentiality
Undertakings.
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9. Related Documents
The restrictions contained herein on the use of information designated
CONFIDENTIAL - OUTSIDE COUNSEL ONLY or HIGHLY RESTRICTED –
CONFIDENTIAL SOURCE CODE shall apply to any and all (a) portions of
documents, copies, extracts, and complete or partial summaries prepared from or
containing such information; (b) portions of deposition transcripts and exhibits thereto
which contain or reflect the content of any such documents, copies, extracts, or
summaries; (c) portions of briefs, memoranda or any other papers filed with the Court
and exhibits thereto which contain or reflect the content of any such documents,
copies, extracts, or summaries; and/or (d) deposition testimony designated in
accordance with ¶ 10.
10. Designation of Deposition Transcripts
A. Any and all portions of deposition transcripts containing
CONFIDENTIAL - OUTSIDE COUNSEL ONLY or HIGHLY RESTRICTED –
CONFIDENTIAL SOURCE CODE information may be designated as such either on
the record during the deposition or by providing, within thirty (30) days following
receipt of the official transcripts of the deposition to the reporter and all counsel of
record, written notice of the specific pages and lines that contain Confidential
information.
B. All deposition transcripts not previously designated shall be
deemed to be and treated as CONFIDENTIAL - OUTSIDE COUNSEL ONLY or
HIGHLY RESTRICTED – CONFIDENTIAL SOURCE CODE for a period of thirty
(30) days after receipt of the official transcript of the deposition, and the transcript
shall not be disclosed during such time by a non-Designating Party to persons other
than those persons named or approved according to ¶¶ 6 or 7. For purposes of this
paragraph, a deposition transcript shall be deemed to be and treated as HIGHLY
RESTRICTED – CONFIDENTIAL SOURCE CODE if it contains or reflects the
content of any Source Code.
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C. The Designating Party shall have the right, before the taking of
testimony which the Designating Party designates as CONFIDENTIAL - OUTSIDE
COUNSEL ONLY or HIGHLY RESTRICTED – CONFIDENTIAL SOURCE CODE
and subject to this Protective Order, to exclude from portions of a deposition all
persons other than those persons previously qualified to receive such information
pursuant to ¶¶ 6 or 7.
11. Designation of Hearing Testimony or Argument
With respect to testimony elicited during hearings and other proceedings,
whenever counsel for any party deems that any question or line of questioning calls
for the disclosure of information designated as CONFIDENTIAL - OUTSIDE
COUNSEL ONLY or HIGHLY RESTRICTED – CONFIDENTIAL SOURCE
CODE, counsel may designate on the record prior to such disclosure that the
disclosure is subject to confidentiality restrictions.
12. Designation of Documents Under Seal
Any party wishing to make of record any CONFIDENTIAL - OUTSIDE
COUNSEL ONLY or HIGHLY RESTRICTED – CONFIDENTIAL SOURCE CODE
information shall contemporaneously file an application for leave to file under seal the
filing containing the confidential material. The application must show good cause for
the under seal filing. The application shall be directed to the judge to whom the papers
are directed. The party filing any paper which reflects, contains or includes any
information or document subject to this Order shall title such paper in a sealed
envelope, or other appropriately sealed container, which includes the title of the
action, the party filing the materials, the nature of the materials filed, and the legend
CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE
ORDER: TO BE OPENED ONLY BY OR AS DIRECTED BY THE COURT.
Pending a ruling on the application, the papers or portions thereof subject to the
sealing application shall be lodged under seal.
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13. Prosecution Bar
Any person who obtains, receives, or otherwise learns information designated
HIGHLY RESTRICTED – CONFIDENTIAL SOURCE CODE, or other information
expressly designated as being subject to the Prosecution Bar of this section, relating to
a Producing Party’s current or planned gaming products shall not prepare, prosecute,
supervise, or assist in the preparation or prosecution (including interferences,
reexaminations, inter partes review, and other proceedings) of any patent or patent
application pertaining to the Patents-in-Suit or the field of technology of the Patentsin-
Suit, including the United States Patent and Trademark Office. This prohibition on
patent prosecution shall begin when access to such HIGHLY RESTRICTED –
CONFIDENTIAL SOURCE CODE or other expressly designated information is first
received by the affected individual, and shall end one (1) year after the conclusion of
this Action, including all appeals. This prosecution bar is personal to the person
obtaining, receiving, or learning such CONFIDENTIAL ¬ OUTSIDE COUNSEL
ONLY or HIGHLY RESTRICTED – CONFIDENTIAL SOURCE CODE and shall
not be imputed to any other person or entity.
14. Challenges to Confidentiality
A. This Order shall not preclude any party from seeking and
obtaining, on an appropriate showing, such additional protection with respect to the
confidentiality of documents or other discovery materials as that party may consider
appropriate. Nor shall any party be precluded from: (a) claiming that any matter
designated hereunder is not entitled to the protections of this Order; (b) applying to
the Court for an Order permitting the disclosure or use of information or documents
otherwise prohibited by this Order; or (c) applying for a further Protective Order
modifying this Order in any respect. No party shall be obligated to challenge the
propriety of any designation, and failure to do so shall not preclude a subsequent
challenge to the propriety of such designation.
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B. On any challenge to the designation of any information, the burden
of proof shall lie with the Producing Party to establish that the information is, in fact,
CONFIDENTIAL - OUTSIDE COUNSEL ONLY or HIGHLY RESTRICTED –
CONFIDENTIAL SOURCE CODE information. If a party seeks declassification or
removal of particular items from a designation on the ground that such designation is
not necessary to protect the interests of the party that designated the information, the
procedure set forth under Local Rule 37 shall be utilized.
C. Notwithstanding any objection to the designation of information as
CONFIDENTIAL - OUTSIDE COUNSEL ONLY or HIGHLY RESTRICTED –
CONFIDENTIAL SOURCE CODE, information so designated shall be treated as
such and shall be subject to the provisions hereof unless and until one of the following
occurs: (i) the party who designated the information changes or removes such
designation in writing; or (ii) the Court orders the Producing Party to change or
remove such designation.
15. Inadvertent Failure to Designate or Inadvertent Disclosure
A. A Producing Party or non-party that inadvertently fails to
designate an item pursuant to this Order at the time of production may at any time
prior to the final pretrial conference in this Action make a designation pursuant to this
Order by serving notice thereof in writing, accompanied by substitute copies of each
item, appropriately designated. Those individuals who reviewed the documents or
information prior to the notice of mis-designation or failure to designate by the
Producing Party shall return to counsel of record or destroy all copies of the
mis-designated documents and shall honor, to the extent reasonably practicable, the
provisions of this Order with respect to the use and disclosure of confidential
information in the mis-designated documents. Individuals who reviewed the
documents or information prior to the notice of mis-designation or failure to designate
shall only be subject to the prosecution bar provisions of Section 13 with respect to
any review of such documents or information occurring after notice of
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mis-designation or failure to designation is received.
B. If information designated pursuant to this Order is disclosed to any
person other than in the manner authorized by this Order, through inadvertence or
otherwise, the party responsible for this disclosure must immediately bring all
pertinent facts relating to such improper disclosure to the attention of all interested
parties, without intentionally creating prejudice to other rights and remedies of the
disclosing party, and shall make every effort to obtain the return of the disclosed
material and prevent further improper disclosure. The party responsible for this
disclosure shall further use its best efforts to bind the person or party to whom the
material was disclosed to the terms of this Protective Order and the person to whom
disclosure was made shall be requested to sign a Confidentiality Undertaking in the
form of Exhibit B hereto. Nothing in this Paragraph shall affect the Producing Party’s
remedies under this Protective Order or otherwise for such unauthorized disclosure.
C. The production of any discovery material by any party, whether
inadvertent or not, shall be without prejudice to any subsequent claim by the
Producing Party that such discovery material is privileged or attorney-work product,
and shall not be deemed a waiver of any such privilege or protection in either the
litigation pending before the court, or any other federal or state proceeding. In such
circumstances, the Producing Party must, as soon as practicable after the first time it
learns of the inadvertent disclosure, notify the Receiving Party of the inadvertent
production, and request the return or confirmed destruction of the privileged
materials. If a party receives such a notification, such party shall not use or disclose,
and immediately cease any prior use of, such materials and within five (5) business
days of receiving such notification, the Receiving Party shall return or confirm
destruction of all such materials, including any summaries thereof. Such return or
confirmation of destruction shall not preclude the receiving party from seeking to
compel production of the materials for reasons other than its inadvertent production.
The party or parties returning or destroying inadvertently produced material shall not
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assert as a ground for entering an order compelling production of the material the fact
or circumstances of the inadvertent or unintentional production.
In the event that a Receiving Party discovers a potential inadvertent production
of material potentially subject to a claim of privilege or other protection, that
Receiving Party shall promptly notify the Producing Party in writing of same. No use
shall be made of such documents by the Receiving Party unless the Producing Party
confirms that such material is not subject to a claim of privilege or other protection or
the Receiving Party successfully challenges the claims of privilege on grounds other
than the inadvertent disclosure. If the parties are unable to agree as to the application
of any claim of privilege or immunity, either party may petition the Court for
resolution in compliance with Local Rule 37.
D. Nothing in this Order shall preclude either party from petitioning
the Court for return of later-discovered, inadvertently produced work-product
immunity, attorney-client privilege, common interest/joint defense privilege, or other
privileged documents.
16. Disclosure to Author or Recipient
Notwithstanding any other provisions of this Order, nothing herein shall
prohibit counsel or a party from disclosing a document containing CONFIDENTIAL -
OUTSIDE COUNSEL ONLY or HIGHLY RESTRICTED – CONFIDENTIAL
SOURCE CODE information to any person who appears from the face of the
document to have drafted, prepared, executed, or received the document.
17. Protected Material Subpoenaed or Ordered Produced in Other
Litigation
If a Receiving Party is served with a subpoena or an order issued in other
litigation that would compel disclosure of any information or items designated in this
action as CONFIDENTIAL - OUTSIDE COUNSEL ONLY or HIGHLY
RESTRICTED – CONFIDENTIAL SOURCE CODE, the Receiving Party must so
notify the Designating Party, in writing immediately and in no event more than
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three (3) business days after receiving the subpoena or order. Such notification must
include a copy of the subpoena or court order.
The Receiving Party also must immediately inform in writing the party who
caused the subpoena or order to issue in the other litigation that some or all the
material covered by the subpoena or order is the subject of this Order. In addition, the
Receiving Party must deliver a copy of this Order promptly to the party in the other
action that caused the subpoena or order to issue.
The purpose of imposing these duties is to alert the interested parties to the
existence of this Order and to afford the Designating Party in this case an opportunity
to try to protect its confidentiality interests in the court from which the subpoena or
order issued. The Designating Party shall bear the burdens and the expenses of
seeking protection in that court of its confidential material—and nothing in these
provisions should be construed as authorizing or encouraging a Receiving Party in
this action to disobey a lawful directive from another court.
18. Confidentiality of a Party’s Own Documents
Nothing herein shall affect the right of the Designating Party to disclose to its
officers, directors, employees, attorneys, consultants or experts, or to any other
person, its own information. Such disclosure shall not waive the protections of this
Order and shall not entitle other parties or their attorneys to disclose such information
in violation of it, unless by such disclosure of the Designating Party the information
becomes public knowledge.
19. Prior or Public Knowledge
The restrictions contained in this Order shall not apply to information that is or
was available to the public prior to disclosure or that is or was legitimately and
independently acquired from a source not subject to this Order.
20. Destruction or Return of Designated Information
A. Within sixty (60) days following final termination of this action,
unless otherwise agreed to in writing by an attorney of record for the Designating
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Party, each party shall destroy and certify destruction of, or assemble and return, all
materials containing information designated as CONFIDENTIAL - OUTSIDE
COUNSEL ONLY or HIGHLY RESTRICTED – CONFIDENTIAL SOURCE
CODE, including all copies, extracts and summaries thereof, to the party from whom
the designated material was obtained.
B. Notwithstanding Paragraph 20(a), outside counsel of record in this
case for each party may retain a record including one copy of the following,
irrespective of whether or not information designated as CONFIDENTIAL -
OUTSIDE COUNSEL ONLY of another party or non-party is included: (i) its
correspondence file of this case; (ii) its pleadings file, including all briefs,
memoranda, affidavits, supporting materials, and all papers served on the party; (iii)
any briefs and appendix on appeal; (iv) all legal research memoranda; (v) its file of
deposition transcripts and accompanying exhibits; and (vi) its file of hearing and trial
transcripts and accompanying exhibits. In the instance of information designated as
HIGHLY RESTRICTED – CONFIDENTIAL SOURCE CODE, the foregoing
exception to Paragraph 20(a) shall not apply and no partial or complete Source Code,
and no notes or summaries regarding Source Code, shall be retained under any
circumstances absent written consent from the Producing Party.
21. Privilege Logs
Pursuant to Fed. R. Civ. P. 26(b)(5)(A), any party that withholds documents or
ESI based upon work-product immunity, attorney-client privilege, common
interest/joint defense privilege, or any other privilege shall identify such documents
and/or ESI in a privilege log. This provision does not apply to documents or ESI
generated after the filing of the Complaint.
22. Expert Materials
Draft reports, notes, outlines, and any other writings leading up to an issued
report by a testifying expert are exempt from discovery. Also, all communications to
and from a testifying expert, and all materials generated by a testifying expert with
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respect to his or her work, are exempt from discovery, except insofar as the expert
relies upon them in forming any opinion.
23. Time of Effectiveness
The parties agree to treat this Order as entered by the Court as of the date it
becomes fully executed by the parties. In the event that the fully executed Order
should be rejected by the Court, or that the Court should require any changes in the
executed Order, the parties agree to treat any properly marked material or information
produced in the interim as CONFIDENTIAL ¬ OUTSIDE COUNSEL ONLY or
HIGHLY RESTRICTED – CONFIDENTIAL SOURCE CODE materials according
to the dictates of this Order as originally executed. This Order is effective until the
commencement of trial. The Parties may file an application with the Court to extend
the protections set forth in this Order beyond the commencement of trial.
24. Waiver or Termination of Order
No part of the restrictions imposed by this Order may be waived or terminated,
except by written stipulation executed by counsel of record for each Designating
Party, or by an Order of the Court for good cause shown. The restrictions provided
for herein shall not terminate upon the conclusion of this action, but shall continue
until further Order of this Court.
25. Modification of Order; Prior Agreements
This Order may be modified, and any matter related to it may be resolved, by
written stipulation of the parties without further Order of the Court. This Order
supersedes any agreements between the parties regarding the confidentiality of
particular information entered into before the date of this Order.
26. Availability to Non-Parties
It is expressly contemplated that the protections of this Protective Order apply
to non-parties.
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ORDER
GOOD CAUSE APPEARING, the Court hereby approves this Stipulated
Protective Order.
IT IS SO ORDERED.
Dated: April 25, 2014
Paul L. Abrams
United States Magistrate Judge
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EXHIBIT A
Qualified Consultant
or Qualified Expert
THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA
ACTIVISION PUBLISHING, INC.,
Plaintiff,
v.
WORLDS, INC. and WORLDS
ONLINE, INC.,
Defendants.
)
)
)
)
)
)
)
)
)
)
Case No. CV 13-07380 CBM (PLAx)
AGREEMENT TO ABIDE BY PROTECTIVE ORDER
I, , being duly sworn, state that:
1. My address is
.
2. My present employer is ,
and the address of my present employment is
.
3. My present occupation or job description is ,
.
4. I have attached hereto my current curriculum vitae and, to the best of my
knowledge, a complete list of any present or former relationships or engagements
between myself and any party to the above-captioned action (the “Action”) or any
known competitor thereof.
Case 2:13-cv-07380-CBM-PLA Document 35 Filed 04/25/14 Page 23 of 29 Page ID #:233
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5. I hereby acknowledge that I have read the “Stipulated Protective Order”
(“PROTECTIVE ORDER”) in this Action, that I am familiar with the terms thereof,
and that I agree to be bound by the terms thereof.
6. I hereby acknowledge that, pursuant to the PROTECTIVE ORDER, I
may receive information designated as CONFIDENTIAL ¬ OUTSIDE COUNSEL
ONLY or HIGHLY RESTRICTED – CONFIDENTIAL SOURCE CODE
(collectively, “DESIGNATED INFORMATION”) in this Action, and certify my
understanding that such information is provided to me pursuant to the terms and
restrictions of the PROTECTIVE ORDER. I agree not to reveal any DESIGNATED
INFORMATION or any notes containing DESIGNATED INFORMATION to anyone
not authorized to receive such information pursuant to the terms of the PROTECTIVE
ORDER, and I agree not to use, directly or indirectly, or allow the use of any
DESIGNATED INFORMATION for any purpose other than directly associated with
my duties in this litigation.
7. I understand that I am to retain all copies of the materials that I receive
which have been designated as containing or reflecting DESIGNATED
INFORMATION in a container, cabinet, drawer, room or other safe place in a manner
consistent with the PROTECTIVE ORDER. I understand that all copies of any such
materials are to remain in my custody until the conclusion of this Action or the
completion of my assigned duties, whereupon the copies are to be destroyed or
returned to the Producing Party. Such return or destruction shall not relieve me from
the obligations imposed upon me by the PROTECTIVE ORDER. I understand that
material designated as or reflecting HIGHLY RESTRICTED – CONFIDENTIAL
SOURCE CODE is subject to the additional restrictions listed in the PROTECTIVE
ORDER and that I am familiar with and agree to abide by those restrictions. I further
agree to notify any support personnel (such as paralegals, administrative assistants,
secretaries, clerical and administrative staff) who are necessary to assist me of the
terms of the PROTECTIVE ORDER and of their obligation not to reveal any
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CONFIDENTIAL ¬ OUTSIDE COUNSEL ONLY to anyone not authorized to
receive such information pursuant to the terms of the PROTECTIVE ORDER. I also
agree to notify any support personnel (such as paralegals, administrative assistants,
secretaries, clerical and administrative staff) that they may not access HIGHLY
RESTRICTED – CONFIDENTIAL SOURCE CODE pursuant to the terms of the
PROTECTIVE ORDER.
8. I understand that I shall be subject to the jurisdiction of the U.S. District
Court for the District of Massachusetts in any proceeding relating to my performance
under, compliance with, or violation of the PROTECTIVE ORDER. I further
recognize that, if I violate the PROTECTIVE ORDER in any manner, I may be
subject to such sanctions as the Court on motion and after a hearing deems just.
Signature:
Date:
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EXHIBIT B
Unauthorized Disclosure
THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA
ACTIVISION PUBLISHING, INC.,
Plaintiff,
v.
WORLDS, INC. and WORLDS
ONLINE, INC.,
Defendants.
)
)
)
)
)
)
)
)
)
)
Case No. CV 13-07380 CBM (PLAx)
AGREEMENT TO ABIDE BY PROTECTIVE ORDER
I, , being duly sworn, state that:
1. My address is
.
2. My present employer is ,
and the address of my present employment is
.
3. My present occupation or job description is ,
.
4. I hereby acknowledge that I have read the “Stipulated Protective Order”
(“PROTECTIVE ORDER”) in the above-captioned action (the “Action”), that I am
familiar with the terms thereof, and that I agree to be bound by the terms thereof.
5. I hereby acknowledge that, pursuant to the PROTECTIVE ORDER, I
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received information designated as CONFIDENTIAL OUTSIDE COUNSEL ONLY
or HIGHLY RESTRICTED – CONFIDENTIAL SOURCE CODE (collectively,
“DESIGNATED INFORMATION”) in this Action, and certify my understanding that
such information is subject to the terms and restrictions of the PROTECTIVE
ORDER. I agree not to reveal any DESIGNATED INFORMATION or any notes
containing DESIGNATED INFORMATION to anyone not authorized to receive such
information pursuant to the terms of the PROTECTIVE ORDER, and I agree not to
use, directly or indirectly, or allow the use of any DESIGNATED INFORMATION
for any purpose.
6. I understand that all copies of any such materials are to be destroyed or
returned to the Producing Party. Such return or destruction shall not relieve me from
the obligations imposed upon me by the PROTECTIVE ORDER.
7. I understand that I shall be subject to the jurisdiction of the U.S. District
Court for the District of Massachusetts in any proceeding relating to my performance
under, compliance with, or violation of the PROTECTIVE ORDER.
Signature:
Date:
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EXHIBIT C
Qualified Consultant
or Qualified Expert
THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA
ACTIVISION PUBLISHING, INC.,
Plaintiff,
v.
WORLDS, INC. and WORLDS
ONLINE, INC.,
Defendants.
)
)
)
)
)
)
)
)
)
)
Case No. CV 13-07380 CBM (PLAx)
AGREEMENT TO ABIDE BY PROTECTIVE ORDER
I, , being duly sworn, state that:
1. My address is
.
2. My present employer is ,
and the address of my present employment is
.
3. My present occupation or job description is ,
.
4. I hereby acknowledge that I have read the “Stipulated Protective Order”
(“PROTECTIVE ORDER”) in the above-captioned action (the “Action”), that I am
familiar with the terms thereof, and that I agree to be bound by the terms thereof.
5. I hereby acknowledge that, pursuant to the PROTECTIVE ORDER, I
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may receive information designated as CONFIDENTIAL - OUTSIDE COUNSEL
ONLY in this Action, and certify my understanding that such information is subject to
the terms and restrictions of the PROTECTIVE ORDER. I agree not to reveal any
CONFIDENTIAL OUTSIDE COUNSEL ONLY or any notes containing
CONFIDENTIAL OUTSIDE COUNSEL ONLY to anyone not authorized to receive
such information pursuant to the terms of the PROTECTIVE ORDER, and I agree not
to use, directly or indirectly, or allow the use of any CONFIDENTIAL OUTSIDE
COUNSEL ONLY for any purpose other than directly associated with my duties in
this Action.
6. No later than the final conclusion of this Action, I will return all material
designated CONFIDENTIAL - OUTSIDE COUNSEL ONLY, and summaries,
abstracts, and indices thereof which come into my possession, and documents and
things which I have prepared relating thereto, to counsel for whom I was employed or
retained or from whom I received information designated as CONFIDENTIAL –
OUTSIDE COUNSEL ONLY.
7. I understand that I shall be subject to the jurisdiction of the U.S. District
Court for the District of Massachusetts in any proceeding relating to my performance
under, compliance with, or violation of the PROTECTIVE ORDER.
Signature:
Date:
Case 2:13-cv-07380-CBM-PLA Document 35 Filed 04/25/14 Page 29 of 29 Page ID #:239
Nothing on Pacer as far as the brief requested by the court regarding markman hearing date(s).
REH
This looks to me as a. the withdrawal of one attorney from one firm who still has 4-5 attorney's on the case, i.e. the firm itself is still representing Activision and b. the addition of a new attorney from a different firm with experience in patent cases and settlement.
Worst case: Tactic to seek delay to get new counsel up to speed.
Best case: Settlement discussion are positive and this attorney's talent is needed to make the deal.
This should become a lot clearer with the joint brief on scheduling of Markman which I would expect in 1-4 weeks.
REH
United States District Court
District of Massachusetts (Boston)
CIVIL DOCKET FOR CASE #: 1:12-cv-10576-DJC
Worlds, Inc. v. Activision Blizzard, Inc. et al
Assigned to: Judge Denise J. Casper
Cause: 28:1338 Patent Infringement
Date Filed: 03/30/2012
Jury Demand: Both
Nature of Suit: 830 Patent
Jurisdiction: Federal Question
Date Filed # Docket Text
04/16/2014 129 NOTICE of Appearance by Samuel L. Brenner on behalf of Activision Blizzard, Inc., Activision Publishing, Inc., Blizzard Entertainment, Inc. (Brenner, Samuel) (Entered: 04/16/2014)
04/16/2014 130 NOTICE of Withdrawal of Appearance by Blake B. Greene (Greene, Blake) (Entered: 04/16/2014)
your posts can be misunderstood so I thought some balance would be in order.
She got this wrong IMHO. This was a mistake on the part of the patent office as WDDD did indeed reference the provisional application. If there was anyone practicing on the invention the patent would simply not have been granted. Markman does not deal with this but the claims of said patent(s) and the definition of the context of each.
REH
I would expect the Markman hearing to be scheduled for Jan/Feb 2015 based upon the same timeline from September 2012 when Casper scheduled the hearing for June 2013 - 9 months out. I am certain that WDDD will argue for a faster track but realistically expect hearing Q1 2015. It will be interesting to read the joint brief when available, I would expect that in about 4 weeks.
REH
03/13/2014 125 NOTICE of Withdrawal of Appearance by Christopher A. Kenney (Kenney, Christopher) (Entered: 03/13/2014)
03/13/2014 126 NOTICE of Withdrawal of Appearance by David R. Kerrigan (Kerrigan, David) (Entered: 03/13/2014)
both for defendant. probably have other cases so just FYI
yes
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
WORLDS, INC., Plaintiff,
v.
ACTIVISION BLIZZARD, INC., BLIZZARD ENTERTAINMENT, INC. and ACTIVISION PUBLISHING, INC.,
Defendants.
)
)
)
)
)
) Civil Action No. 1:12-CV-10576 (DJC)
)
)
)
)
)
)
)
JOINT SUBMISSION CONCERNING SUMMARY JUDGMENT
Pursuant to the Court’s order of March 13 (D.I. 124) allowing Activision Blizzard’s motion for summary judgment, the parties make this joint submission:
Worlds Portion Of Joint Submission
In its Summary Judgment Order, the Court recognized that “Worlds alleges continued infringement through the lives of the Patents-in-Suit,” and that “nothing about the Court’s order prevents Worlds from asserting infringement from the date of the certificate going forward.”
D.I. 124. at 18 n.1. In light of this analysis, the Court ordered the parties to consider whether the Court should “dismiss the instant action (without preventing Worlds from commencing a new action alleging infringement from the date of the certificates going forward), or merely confine this decision to infringement allegedly occurring from the dates of the patents issued through the lives of the Patents-in-Suit.” Id. The parties have conferred and agree that the most appropriate course of action is for the Court to allow this case to proceed, without dismissal or refiling, as to post-correction infringement. The parties’ primary disputes are over whether an amended complaint is necessary, and over the management of the parties’ dispute.
To begin, the parties’ agreed plan to allow Worlds to pursue its post-correction causes of action without refiling is the correct one. Other federal courts have taken exactly that approach. See, e.g., Lamoureaux v. AnazoHealth Corp., 669 F. Supp. 2d 227, 234–36 (D. Conn. 2009) (applying a certificate of correction that was applied for and issued after suit was filed, and recognizing that “the critical date for purposes of determining whether the certificate of correction applies is the date the cause of action arose, i.e., the date the infringing conduct occurred, and not the date the complaint was filed”); Masonite Corp. v. Craftmaster Manufacturing, Inc., 2011 WL 1642518 (N.D. Ill. Apr. 29, 2011) (for “claims directed to infringement occurring on or after the dates the certificate of correction issued, the certificates will be effective in this lawsuit as to those claims”).
Furthermore, contrary to Activision’s position, this case can proceed without an amended complaint. As the Court recognized in its Order, Worlds’ Amended Complaint already “alleges continued infringement through the lives of the Patents-in-Suit.” D.I. 124 at 18 n.10. The Amended Complaint as pleaded is valid because, “as to all causes of action accruing after [the certificates were issued], the certificate[s] of correction [are] to be treated as part of the original patent.” Lamoureaux, 669 F. Supp. 2d at 234. Indeed, because the Amended Complaint already includes claims for infringement occurring after the certificates of correction were issued and through the life of the patents, the Complaint remains valid and operative. The Court need not take any action for this case to proceed. Cf. D.I. 124 n.10 (recognizing that one option is to “merely confine [the Court]’s decision” and allow the case to proceed).
Finally, the Court should be aware that, to facilitate the efficient resolution of the parties’ disputes, Worlds may move to consolidate its disputes with Activision. As the Court knows, after Worlds filed this lawsuit, Activision sued Worlds in the Central District of California, alleging that Worlds’ products — the exact same Worlds products at issue in Activision’s
Motion for Summary Judgment — infringe patents that Activision recently purchased. Both cases, which are proceeding simultaneously on separate coasts, involve many of the same issues, technologies, witnesses, and prior art references. To avoid such gross inefficiency, Worlds has proposed consolidating the parties’ disputes, but Activision will agree neither to transfer the California case to Massachusetts nor to transfer the Massachusetts case to California. Worlds’ desire is straightforward — to resolve the parties’ disputes expediently, and without undue expense or burden, in one case, one trial, and one appeal. Accordingly, Worlds may seek consolidation of the parties’ disputes in one forum.
Activision Portion Of Joint Submission
Pursuant to the Court’s order of March 13 (D.I. 124) allowing Activision Blizzard’s motion for summary judgment, counsel for the parties met and conferred on March 26 about the appropriate course for the future of this action. During the meet and confer, Worlds asked if Activision would be willing to transfer the present action to the Central District of California and consolidate it with Activision’s lawsuit against Worlds Inc. and Worlds Online Inc. In that lawsuit, Activision has brought claims for patent infringement against Worlds based on two patents that are not at issue in this litigation, and directed to different technologies from the Worlds patents-in-suit here. Because there is little, if any, overlap between Activision’s California lawsuit against Worlds and the present action pending before this Court, Activision stated that it would not agree to consolidate the present action with the California lawsuit.
Worlds further asked (1) whether Activision Blizzard would be willing to consent to
Worlds filing an amended complaint in Massachusetts to assert the corrected patents, and (2) whether Activision Blizzard would be willing to agree to toll the deadline for Worlds to pursue an appeal if the Court issues a final judgment. On the night of March 26, Activision responded by email as follows:
On the first question, Activision Blizzard is willing to agree to proceed on the basis of an amended complaint filed in Massachusetts, if Worlds agrees that any further litigation involving its patents against Activision Blizzard would occur in Massachusetts. We believe that such an agreement would obviate your second question. In any event, we believe that your second question is jurisdictional in nature, and we question whether Activision Blizzard’s agreement or consent would have any effect on the timeframe for Worlds to pursue an appeal.
Does Worlds agree to proceed as suggested above?
On the morning of March 27, Worlds declined to agree to this proposal.
To the extent that Worlds would like to assert its corrected patents against Activision for post-correction accused activities, Activision consents to Worlds filing an amended complaint in
the present action to pursue such infringement claims, subject to the possibility of Activision asserting that such infringement claims are barred by res judicata or other legal principles. It is necessary for Worlds to file an amended complaint to assert the corrected patents in this action. The patents that are currently at issue in this action are the uncorrected versions of the asserted patents. Given the Court’s determination that the uncorrected patents are invalid, Worlds cannot continue to claim infringement by Activision on the basis of the existing complaint. Thus, an amended pleading is needed to define Worlds’ legal claims going forward.
Worlds urges that the present action should continue without the filing of an amended complaint, citing Lamoureux v. AnazaoHealth Corp., 669 F. Supp. 2d 227, 236 (D. Conn. 2009), and Masonite Corp. v. Craftmaster Mfg., Inc., 2011 WL 1642518, at *3 (N.D. Ill. Apr. 29, 2011). But both of those cases actually involved an amended or supplemental complaint to assert
patents for which certificates of correction had issued. As explained in Masonite, 2011 WL
1642518 at *3:
Thus, in the present case, there are two applicable time periods for each corrected patent: before the certificate issued, and after. When the lawsuit was filed, Masonite’s Complaint alleged only infringement of the uncorrected patents. (See generally Compl.) Accordingly, the certificates are not considered a part of the patent for the causes of action alleged in the initial complaint. Under the precedent and authority discussed above, this court concludes that if Masonite is allowed to supplement its pleadings to add claims directed to infringement occurring on or after the dates the certificate of correction issued, the certificates will be effective in this lawsuit as to those claims.
Thus, the cases cited by Worlds show that the present action may not proceed without an amended complaint.
Further, based on the recent communications between counsel for the parties, Worlds will seek to consolidate this action with Activision’s lawsuit against Worlds Inc. and Worlds Online Inc., either in this Court or in the Central District of California. Activision expects to oppose
this. Contrary to Worlds’ assertion of overlap, the two lawsuits involve totally different and
unrelated asserted patents and accused products. For example, the accused products in the present action are Activision’s videogames, not Worlds’ virtual world systems. And Worlds’ prior art systems that are relevant to this action existed in 1995 – an eternity ago in the computer age. In Activision’s California action, the accused products are Worlds’ and Worlds Online’s current and recent virtual world systems, not Worlds’ systems of 19 years ago. Moreover, the relevant witnesses, documents, and other evidence will be almost entirely different between the two lawsuits. Given these differences and this Court’s familiarity with some of the important facts and issues in this action, Activision believes that each lawsuit should proceed in the Court in which it was brought. In any event, transfer or consolidation are issues for another day.
Dated: March 27, 2014
Respectfully submitted,
Worlds, Inc.
By: /s/ Ryan V. Caughey Activision Blizzard, Inc.; Blizzard Entertainment, Inc.; and Activision Publishing, Inc.
By: /s/ Blake B. Greene
Max L. Tribble (admitted pro hac vice)
mtribble@susmangodfrey.com
Brian D. Melton (admitted pro hac vice)
bmelton@susmangodfrey.com
Chanler Langham (pro hac vice pending)
clangham@susmangodfrey.com
Ryan V. Caughey (admitted pro hac vice)
rcaughey@susmangodfrey.com
SUSMAN GODFREY L.L.P.
1000 Louisiana Street, Suite 5100
Houston, Texas 77002
Telephone: (713) 651-9366
Facsimile: (713) 654-6666
Joel R. Leeman (BBO # 292070)
jleeman@sunsteinlaw.com
SUNSTEIN KANN MURPHY & TIMBERS LLP
125 Summer Street
Boston, MA 02110-1618
Telephone: (617) 443-9292
Facsimile: (617) 443-0004
ATTORNEYS FOR PLAINTIFF WORLDS, INC. Blake B. Greene (BBO #681781)
blake.greene@ropesgray.com ROPES & GRAY LLP Prudential Tower
800 Boylston Street
Boston, Massachusetts 02199-3600 (617) 951-7000
Jesse J. Jenner (pro hac vice) jesse.jenner@ropesgray.com Gene W. Lee (pro hac vice) gene.lee@ropesgray.com
Brian P. Biddinger (pro hac vice) brian.biddinger@ropesgray.com Matthew Moffa (pro hac vice) matthew.moffa@ropesgray.com ROPES & GRAY LLP
1211 Avenue of the Americas
New York, New York 10036-8704
T: (212) 596-9000
F: (212) 596-9050
Kathryn N. Hong (pro hac vice) kathryn.hong@ropesgray.com ROPES & GRAY LLP
1900 University Avenue
6th Floor
East Palo Alto, CA 94303-2284
T: (650) 617-4000
F: (650) 617-4090
ATTORNEYS FOR DEFENDANTS, ACTIVISION BLIZZARD, INC., BLIZZARD ENTERTAINMENT, INC. AND ACTIVISION PUBLISHING, INC.
CERTIFICATE OF SERVICE
I certify that on the above date, this document was filed through the ECF system and thereupon sent electronically to the registered participants as identified on the Notice of Electronic Filing (NEF).
/s/ Blake B. Greene Blake B. Greene
I view this as good news, very good. Anyone with a Pacer account can view the entire joint statement filed yesterday. Worlds want to consolidate the CA and MA case but Activision does not agree to this. We\ll see how that plays out.
Yes, we will be moving towards Markman in short order. This does increase chances of settlement with Activision and others in my opinion.
REH
The parties have conferred and agree that the most appropriate
course of action is for the Court to allow this case to proceed, without dismissal or refiling, as to
post-correction infringement.
Need someone with Pacer to look at the filed new docs, anyone?
Talked to Casper's clerk and nothing has been filed since the 13th. I suspect both parties will file their respective briefs tomorrow regarding the last ruling.
http://www.mad.uscourts.gov/boston/casper.htm