Worlds Inc (WDDD)

[madprophet]

Bungie redacted intital brief
Filed: January 4, 2019


UNITED STATES PATENT AND TRADEMARK OFFICE
_____________________________
BEFORE THE PATENT TRIAL AND APPEAL BOARD
_____________________________
BUNGIE, INC.,
Bungie,
v.
WORLDS INC.,
Patent Owner.
_____________________________
Case IPR2015-01264 (Patent No. 7,945,856)
Case IPR2015-01319 (Patent No. 8,082,501)
Case IPR2015-01321 (Patent No. 8,145,998)1
_____________________________
PETITIONER BUNGIE’S BRIEF ON REMAND FROM CAFC

1
This caption is used and identical papers are being filed in each captioned case
pursuant to the Board’s November 29, 2018 order (Paper 48).
Patent Owner's Exhibit 2101
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-iTABLE OF CONTENTS
I. INTRODUCTION ................................................................................................. 1
II. ISSUE PRECLUSION BARS WORLDS’S RPI ARGUMENTS. .................................... 3
A. Worlds litigated the same issue in the final and appealed IPRs. .......... 3
B. The Board’s RPI determinations were essential to the judgment. ........ 5
C. The appealed IPRs are subsequent actions to the valid final
written decisions in the final IPRs. ....................................................... 6
III. NO EXCEPTION APPLIES HERE. ........................................................................... 8
A. Worlds’s disagreement with the decision does not create an
exception to issue preclusion. ................................................................ 8
B. Worlds waived any challenge to the denial of discovery
motions. ............................................................................................... 11
C. Worlds proposed “issue of law” exception does not exist. ................. 12
D. The Board did not consolidate the appealed and final IPRs. .............. 14
IV. THE BOARD SHOULD REINSTATE ITS FINDING THAT ACTIVISION IS NOT
AN RPI. ........................................................................................................... 15
A. Legal Standards ................................................................................... 15
B. Statements of Material Fact (“SMF”) ................................................. 17
C. The evidence demonstrates Activision is not an RPI. ......................... 19
i. Lack of control supports finding Activision is not an RPI. ...... 19
ii. Bungie is not Activision’s proxy. ............................................. 22
iii. Bungie’s relationship with Activision does not make
Activision a RPI in Bungie’s IPRs. .......................................... 25
D. Equities ................................................................................................ 28
V. CONCLUSION ................................................................................................... 30

Patent Owner's Exhibit 2101
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-iiTABLE OF AUTHORITIES
Page
CASES
Applications in Internet Time, LLC v. RPX Corp., 897 F.3d 1336 (Fed.
Cir. 2018) ............................................................................................. 2, 13, 16
23, 26
B &B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293 (2015) .................. 3, 6,
8, 11, 14
Cisco Sys., Inc. v. Hewlett Packard Enter. Co., IPR2017-01933,
Paper 9 ........................................................................................................... 23
-iiiUniv. of Tenn. v. Elliott, 478 U.S. 788 (1986) ....................................................... 8, 9
WesternGeco LLC v. Ion Geophysical Corp., 889 F.3d 1308 (Fed. Cir.
2018) ............................................................................................ 13, 16, 21, 25
Wi-Fi One, LLC v. Broadcom Corp., 887 F.3d 1329 (Fed. Cir. 2018) ........... 2, 9, 12
13, 21
25
Wickham Contracting Co. Inc. v. Board of Educ. of City of New York,
715 F.2d 21 (2d Cir. 1983) ............................................................................ 12
Worlds Inc. v. Bungie, Inc., 903 F.3d. 1237 (Fed. Cir. 2018) ........................... 1, 2, 3
11, 12
XY, LLC v. Trans Ova Genetics, L.C., 890 F.3d 1282 (Fed. Cir. 2018) .............. 7, 13
STATUTES
35 U.S.C. §§ 312(a)(2), 315(b) .................................................................................. 3
35 U.S.C. § 315 ........................................................................................................ 30
35 U.S.C. § 318(a) ..................................................................................................... 5
35 U.S.C. §§ 319, 141-144 ........................................................................................ 6
42 U.S.C. § 1983 ........................................................................................................ 9
RULES
37 C.F.R. § 42.2 ......................................................................................................... 7
37 C.F.R. § 42.8(b)(1) ................................................................................................ 3
37 C.F.R. § 42.73 ....................................................................................................... 5
37 C.F.R. § 42.73(a) ................................................................................................... 7
37 C.F.R. § 42.73(d)(3) .............................................................................................. 7
37 C.F.R. § 90.3(a)(1) ................................................................................................ 6
77 Fed. Reg. 48,756, 48,759 (Aug. 14, 2012) ............................................... 2, 13, 15
MISCELLANEOUS
18A Wright & Miller, Fed. Prac. & Proc. (3d ed. 2002) .............6, 15, 16, 28, 29, 30
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I. Introduction
After Worlds first threatened to accuse Bungie’s Destiny product of
infringement in November 2014, Bungie independently decided to file six different
IPR challenges to Worlds’s patents to protect Bungie’s own interests as a video
game developer. Worlds separately opposed each of the IPRs, arguing with almost
identical language and evidence that Activision was an unnamed real party-ininterest (“RPI”) in Bungie’s IPRs. The Board determined the issue adversely to
Worlds each time as a prerequisite to finding claims of the involved patents
unpatentable. Worlds failed to exercise its right to appeal the decisions in
IPR2015-01268, IPR2015-01269, IPR2015-01325 (hereinafter, the “final IPRs”).
The other three IPRs are now remanded to “first address whether Worlds is
estopped from arguing the real-party-in-interest issue.” Worlds Inc. v. Bungie, Inc.,
903 F.3d. 1237, 1248 (Fed. Cir. 2018). The Federal Circuit remanded for
consideration whether “the ‘issue’ is the same between the now-final IPRs and the
IPRs currently on appeal” because “[t]he record before us is scant on details
regarding the [RPI] issues raised in the three unappealed IPRs.” Id. at 1247. As
explained above, the RPI issue Worlds litigated in the appealed IPRs is identical to
what Worlds litigated in the final IPRs. The Board should find Worlds estopped
from relitigating the RPI issue and re-instate its decisions of unpatentability.
Alternatively, the Board should reinstate its decisions of unpatentability
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because the evidence supports the Board’s original finding that Activision is not an
RPI in Bungie’s IPRs. The Board’s decisions did not turn on placing a burden of
proof on Worlds, but on its correct evaluation of the evidence. The Board’s
interpretation of the DevPub Agreement was correct and contradicts Worlds’s
argument that Activision controlled Bungie’s IPRs.
It is well-settled that determining whether a party is an RPI demands a
flexible approach that must take into account equitable considerations and the
practical situation. Worlds Inc., 903 F.3d. at 1246-47; Applications in Internet
Time, LLC v. RPX Corp., 897 F.3d 1336, 1351 (Fed. Cir. 2018) (“AIT”); Wi-Fi
One, LLC v. Broadcom Corp., 887 F.3d 1329, 1349 (Fed. Cir. 2018); Trial Practice
Guide, 77 Fed. Reg. 48,756, 48,759 (Aug. 14, 2012). Here, there simply is no
scenario in which it would be equitable or sensible to subject Bungie to a standing
bar based on a litigation matter in which Bungie has never been involved.
Moreover, the Activision Litigation Worlds identifies as barring Bungie’s standing
in these IPR’s was filed years before Bungie’s product was even released.
Worlds’s attempt to retroactively subject Bungie to the one-year bar is an unjust
attempt to game the estoppel system and is fundamentally incompatible with the
common law embodied in the AIA’s estoppel provisions. Based on the facts of this
case, the Board should reinstate its findings that Activision is not an RPI in the
IPRs.
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II. Issue preclusion bars Worlds’s RPI Arguments.
“The general rule for issue preclusion (also called collateral estoppel) is
‘[w]hen an issue of fact or law is actually litigated and determined by a valid and
final judgment, and the determination is essential to the judgment, the
determination is conclusive in subsequent action between the parties, whether on
the same or a different claim.’” Worlds Inc., 903 F.3d at 1247 (quoting B &B
Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293, 1303 (2015). Each of these
requirements is satisfied here, as discussed in detail below.
A. Worlds litigated the same issue in the final and appealed IPRs.
The RPI issue in the final IPRs was identical to the RPI issue in the appealed
IPRs. In each IPR, Worlds argued that each petition was barred by 35 U.S.C.
§§ 312(a)(2), 315(b) and 37 C.F.R. § 42.8(b)(1) because the petition did not list
Activision as an RPI. Worlds argued that, in a November 2014 letter to Activision,
Worlds triggered indemnification and warranty obligations of Bungie under a
DevPub Agreement (Ex. 2002), that the obligations allegedly required Bungie to
file the IPRs as “legal reviews” of Bungie’s products under Sec. 7A.15(j), and that
Activision allegedly funded and had the opportunity to control the IPRs under Sec.
7A.15(j). Compare Ex. 1052 at 2-3, 41-50; Ex. 1053 at 2-3, 40-49; Ex. 1054 at 3,
24-31 with IPR2015-01264, Paper 12, at 2-3, 30-39; IPR2015-01319, Paper 12, at
3, 39-48; IPR2015-01321, Paper 12, at 3, 23-30. Although some of the preliminary
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responses have minor wording differences, Worlds made and cited all arguments
and evidence in the final IPRs that it made in the appealed IPRs.
The Board entered a different institution decision in each case, in which it
considered and rejected each of Worlds’s RPI allegations. Compare Ex. 1055 at
32-38; Ex. 1056 at 28-35; Ex. 1057 at 20-27 with IPR2015-01264, Paper 13, at 26-
33; IPR2015-01319, Paper 14, at 31-37; IPR2015-01321, Paper 13, at 21-28. The
Board concluded that each of Bungie’s IPRs was not a “legal review of the
Products” under Section 7A.15(j) of the DevPub agreement, and that neither
Section 7A.15(j) nor Sections 18.1-18.2 gave Activision an opportunity to direct or
control Bungie’s IPRs. Id. The Board rejected Worlds’s RPI allegations because
Worlds’s “arguments are based on unreasonable assumptions and interpretations of
various sections of the Agreement.” Compare Ex. 1055 at 34; Ex. 1056 at 30; Ex.
1057 at 22-23 with IPR2015-01264, Paper 13, at 28; IPR2015-01319, Paper 14, at
33; IPR2015-01321, Paper 13, at 23.
In its patent owner responses in each case, Worlds re-asserted the arguments
from its preliminary responses and also argued that the DevPub agreement
establishes that Activision was “unjustly circumventing” the RPI identification
requirements by using a “proxy petitioner.” Compare Ex. 1058 at 47-52; Ex. 1059
at 49-55; Ex. 1060 at 39-44 with IPR2015-01264, Paper 20, at 2-3, 36-42;
IPR2015-01319, Paper 20, at 36-42; IPR2015-01321, Paper 20, at 39-45. Worlds’s
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patent owner responses each argued that Bungie’s opportunity to file an IPR for
each patent expired on April 4, 2013, more than 18 months before Worlds sent the
November 2014 letter to Activision about Bungie’s product. Id. The simple fact is,
there were no arguments or evidence asserted in the appealed IPRs that were not
also asserted in the final IPRs. Id.
The Board entered a different final written decision under 35 U.S.C. §
318(a) and 37 C.F.R. § 42.73 in each case. In each of these decisions, the Board
concluded that the DevPub agreement and Worlds’s November 2014 letter did not
support Worlds’s allegation that Activision was an unnamed RPI. Compare Ex.
1061 at 127-28; Ex. 1062 at 125-26; Ex. 1063 at 61-62 with IPR2015-01264, Paper
42, at 106-07; IPR2015-01319, Paper 42, at 54-55; IPR2015-01321, Paper 42, at
78-79. As the above discussion demonstrates, Worlds actually litigated the exact
same RPI issue in the final and appealed IPRs.
B. The Board’s RPI determinations were essential to the judgment.
The Board’s final written decisions in the final IPRs each found that claims
Bungie challenged were unpatentable. Ex. 1061 at 135-36; Ex. 1062 at 134; Ex.
1063 at 70. As discussed above in Section II.A, Worlds argued that Activision’s
alleged status as an RPI precluded the Board from instituting each IPR and finding
claims unpatentable. The Board’s RPI determination was thus a prerequisite for
finding the claims unpatentable and essential to the judgment in each final IPR.
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C. The appealed IPRs are subsequent actions to the valid final
written decisions in the final IPRs.
“Ordinary preclusion law teaches that if a party to a court proceeding does
not challenge an adverse decision, that decision can have preclusive effect in other
cases, even if it would have been reviewed de novo.” B&B Hardware, 135 S. Ct. at
1305; 18A Wright & Miller, Fed. Prac. & Proc. § 4433, at 71 (3d ed. 2002)
(“FPP”) (“preclusion cannot be defeated by electing to forgo an available
opportunity to appeal”)); id. (“[O]nce the time for appeal has run, a final
judgment...is res judicata without regard to the fact that appeal might have been
taken to a higher court.”). The final written decisions issued on November 28 and
30, 2016. Exs. 1061-1063. Worlds had a right, for a time, to appeal each of these
decisions to the Federal Circuit. 35 U.S.C. §§ 319, 141-144; 37 C.F.R.
§ 90.3(a)(1). Worlds elected not to appeal. The time for appeal for all three final
IPRs had expired by February 3, 2017. The USPTO thereafter cancelled claims it
found unpatentable in the final IPRs. Worlds’s decision to forgo appeal forever
waived any opportunity to contest their validity and removes any doubt as to their
finality. See B&B Hardware, 135 S. Ct. at 1299, 1302 (holding “a court should
give preclusive effect to TTAB decisions if the ordinary elements of issue
preclusion are met” where, “[d]espite a right to do so, Hargis did not seek judicial
review [of the TTAB decision] in either the Federal Circuit or District Court”);
United States v. Munsingwear, Inc., 340 U.S. 36, 39 (1950) (“Concededly the
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judgment in the first suit would be binding in the subsequent ones if an appeal,
though available, had not been taken or perfected.”).
The Federal Circuit has repeatedly held IPR final written decisions to be
valid and final judgments entitled to issue preclusive effect, including when
deciding issues of law. See, e.g., XY, LLC v. Trans Ova Genetics, L.C., 890 F.3d
1282, 1294 (Fed. Cir. 2018) (exhaustion of appeal rights over final written decision
“renders final a judgment on the invalidity of the Freezing Patent and has an
immediate issue-preclusive effect on any pending or co-pending actions involving
the patent”); Nestle USA Inc. v. Steuben Food, Inc., 884 F.3d 1350, 1351 (Fed. Cir.
2018) (issue preclusion requires applying claim construction from final IPR in IPR
on a related patent); Maxlinear, Inc. v. CF Crespe LLC, 880 F.3d 1373, 1376-77
(Fed. Cir. 2018) (vacating IPR decision based on collateral estoppel effect of other
IPR decisions that became final through exhaustion of appeal rights).
As outlined above, the final written decisions in the final IPRs are now each
a valid, final judgment entitled to issue preclusive effect under common law
principles of issue preclusion applicable in the appealed IPRs. Preclusion is also
required by the Board’s own rules. See 37 C.F.R. § 42.73(a) (“A judgment, except
in the case of a termination, disposes of all issues that were, or by motion
reasonably could have been, raised and decided.”); 37 C.F.R. § 42.2 (“Judgment
means a final written decision by the Board....”); 37 C.F.R. § 42.73(d)(3) (“A
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patent applicant or owner is precluded from taking action inconsistent with the
adverse judgment”). For the reasons discussed above, Worlds is precluded from
arguing in the appealed IPRs that Activision is an RPI.
III. No exception applies here.
A. Worlds’s disagreement with the decision does not create an
exception to issue preclusion.
Worlds argued on appeal that no issue preclusion arises from the final IPRs
because issue preclusion allegedly attaches to an agency decision only when the
agency “properly resolve[s] the dispute before it.” Appeal Rply Br. at 30-31 (citing
United States v. Utah Construction & Mining Co., 384 U.S. 394, 422 (1966));
Univ. of Tenn. v. Elliott, 478 U.S. 788, 799 (1986)). Worlds’s proposed exception
does not exist and would turn issue preclusion doctrine squarely on its head.
General principles of collateral estoppel apply to Board determinations and the
issue preclusive effects of such determinations are not limited to when a
subsequent tribunal believes they were decided correctly. B&B Hardware, 135 S.
Ct. at 1299 (“[W]e hold that a court should give preclusive effect to TTAB
decisions if the ordinary elements of issue preclusion are met.”); id. at 1308 (“The
fact that the TTAB may have erred, however, does not prevent preclusion.”).
Worlds’s argument also is not supported by the Supreme Court precedent it
cites. The Court in Utah Construction held, based upon the parties’ contract as
modified by the Wunderlich Act and “general principles of collateral estoppel,”
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that a federal administrative board’s fact-finding of no delay precluded a breach of
contract action for delay over which the board would not have had jurisdiction.
Utah Construction, 384 U.S. at 418-19 (“Although the Board lacked authority to
consider delay damages under these two claims, it did have authority to consider
the requests for extensions of time under Articles 4 and 9, and these requests called
for an administrative determination of the facts.”). The Court did not inquire
whether the board’s finding was made correctly; preclusion applied because “the
factual disputes resolved were clearly relevant to issues properly before” the board.
Id. at 422. Worlds’s proposed rule also finds no support in Elliott, in which the
Supreme Court held that “federal courts must give the [state] agency’s factfinding
the same preclusive effect [in an action under 42 U.S.C. § 1983] to which it would
be entitled in the State’s courts.” 478 U.S. at 798-99.
Worlds is also incorrect in the errors it assigns the final IPR decisions.
Worlds argued on appeal that the Board allegedly shifted the burden of proof and
interpreted the Agreement “not in accordance with law.” Appeal Rply Br. at 30-31.
But the Board’s contract interpretation was correct, as demonstrated in the original
briefing and the Board’s decisions. The Board’s RPI determination was also
correct and was supported by substantial evidence. See, e.g., Wi-Fi One, LLC, 887
F.3d at 1339-41 (affirming finding petitioner-manufacturer’s time-barred
customers were not RPIs despite petitioner’s indemnity agreements and litigation
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coordination with them where petitioner clearly had its own interest in challenging
the patent and there was no evidence customers actually controlled the IPR or
petitioner controlled the litigation).
Further, the Board did not improperly shift the burden of proof to Worlds.
Although the Board’s final IPR decisions might have been phrased more expressly
to emphasize the Board was not imposing any burden of persuasion on Worlds,
statements in the final IPR decisions that Worlds had “not shown” that Activision
was an RPI simply reflected the fact that the Board was evaluating the RPI
arguments that Worlds raised. The Board did not err by focusing on the RPI
arguments Worlds raised. See, e.g., Wi-Fi One, 887 F.3d at 1337-38 & n.3 (“[T]he
Board properly focused on the factors that Wi-Fi raised in its argument.”).
Having considered each of Worlds’s arguments, the Board found them to be
erroneous in light of the record evidence. See, e.g., Ex. 1055 at 33-34 (“Patent
Owner argues that Activision is a real party in interest because the second and
fourth categories in Taylor-a ‘pre-existing substantive legal relationship[]’ and
control—are satisfied....We disagree....Instead, we agree with Petitioner that Patent
Owner’s arguments are based on unreasonable assumptions and interpretations of
various sections of the Agreement.”); Ex. 1056 at 30 (same); Ex. 1057 at 22-23
(same); Ex. 1061 at 127-28 (rejecting RPI argument based on Worlds’s discovery
dispute with Activision); Ex. 1062 at 125-26 (same); Ex. 1063 at 61-62 (evidence
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did not support Worlds’s argument that Activision is an unnamed RPI). This was
not an issue that turned on an erroneous burden shift by the Board. Worlds Inc.,
903 F.3d at 1246 (“There is a complete absence of any statement as to which party
should bear the burden of persuasion.”). Instead, it turned on the erroneousness of
Worlds’s speculative and unfounded arguments and the persuasive evidence
establishing Bungie acted for its own benefit, not at Activision’s behest.
Worlds also argued that collateral estoppel does not apply to the Board’s
RPI determinations because “matters must be ‘properly before’ the Board.” Appeal
Rply Br. at 30. But whether Activision was an RPI in the final IPRs was a disputed
issue “properly before” the Board. If Worlds is correct that the Board lacked
jurisdiction to resolve the RPI question in the final IPRs, then the Board would
have no jurisdiction to reach a different RPI conclusion here. Clearly the Board
had jurisdiction as the Patent Office cancelled Worlds’s claims. SMF Nos. 5-6.
B. Worlds waived any challenge to the denial of discovery motions.
Worlds also does not establish that a relitigation is warranted by “differences
in the quality or extensiveness of the procedures” between the original forum and
the later forum. B&B Hardware, 135 S. Ct. at 1303. The discovery procedures
available in the final IPRs were identical to those available in the appealed IPRs.
Worlds did not make any RPI discovery requests after institution and did not
request rehearing from the Board. Worlds also did not seek review of the Board’s
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discovery orders. Worlds Inc., 903 F.3d at 1241. The Board’s denial of Worlds’s
discovery requests was not an abuse of discretion. See Wi-Fi One, 887 F.3d at
1338-39 (denial of RPI discovery was not abuse of discretion). Worlds has
abandoned its discovery requests on remand. Ex. 1051 at 14:4-17:25 (arguing
against opening the evidentiary record). Worlds certainly may not justify
relitigating the RPI issue based on its abandoned discovery requests.
C. Worlds proposed “issue of law” exception does not exist.
On appeal, Worlds also argued for an exception from issue preclusion based
on its assertion that the Board’s RPI determination was a pure question of law.
Appeal Rply Br. at 31-32 (citing Fifth Circuit cases). The Federal Circuit provided
the law of the case to apply on remand in this regard: issue preclusion applies
whether the issue is “an issue of fact or law.” Worlds Inc., 903 F.3d at 1247.
There is no “legal issue” exception to issue preclusion that applies here.
Worlds acknowledged in its brief that courts give preclusive effect to agency
determinations of law. Appeal Rply Br. at 31-32 (citing Wickham Contracting Co.
Inc. v. Board of Educ. of City of New York, 715 F.2d 21, 26 (2d Cir. 1983).
Wickham explains that the Second Circuit joined the Third, Fifth, and Sixth Circuit
in following the general rule that administrative decisions may be “binding as to
fact and law.” 715 F.2d at 26. The Federal Circuit has repeatedly held
administrative decisions binding as to both fact and law. See, e.g., Nestle, 884 F.3d
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at 1351 (IPR decision preclusive on legal question of claim construction); see also
XY, LLC, 890 F.3d at 1294 (IPR decision of obviousness preclusive); Maxlinear,
880 F.3d at 1376-77 (same).
Moreover, RPI determinations are factual determinations. See Wi-Fi One,
887 F.3d at 1340-41 (RPI determinations reviewed for substantial evidence); 77
Fed. Reg. at 48759 (Aug. 14, 2012) (“a highly fact-dependent question”). The
Board’s RPI analysis made a factual determination that Activision was not an RPI
based on the practical and equitable situation.
Finally, no change in the applicable law justifies revisiting the Board’s RPI
decisions. Recent Federal Circuit decisions have reaffirmed the common law
principles outlined in the Trial Practice Guide and have not announced a new legal
standard. See AIT, 897 F.3d at 1344 n.2 (“[W]e do not believe that any of the
general legal principles expressed in the Trial Practice Guide cited by the Board
here run contrary to the common-law understanding of ‘real party in interest.’”);
Wi-Fi One, 887 F.3d at 1336 (“The interpretation of the concepts of privity and
real party in interest set forth in the PTO's Office Trial Practice Guide and applied
by the Board is consistent with general legal principles.”); id. at 1340;
WesternGeco LLC v. Ion Geophysical Corp., 889 F.3d 1308, 1317-19 (Fed. Cir.
2018) (“[T]hese descriptions of the privity analysis in the Trial Practice Guide
accurately reflect the common law considerations for a privity inquiry.”). The
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Board applied these accepted principles when evaluating Worlds’s arguments in
the final IPRs. Worlds’s argument against repose on the RPI question should be
rejected. See B&B Hardware, 135 S. Ct. at 1307 (“[I]f federal law provides a
single standard, parties cannot escape preclusion simply by litigating anew in
tribunals that apply that one standard differently. A contrary rule would encourage
the very evils that issue preclusion helps to prevent.”).
D. The Board did not consolidate the appealed and final IPRs.
Worlds falsely argued that the appealed IPRs were “consolidated” by the
Board with the final IPRs. Appeal Rply Br. at 32. As discussed above in Section
II.A, Worlds submitted separate briefs in each case and the Board entered separate
decisions in each case. Although the Board coordinated some schedules for
convenience, the cases themselves were never consolidated. The fact that Worlds
filed separate notices of appeal in the cases it appealed and that the Office has
already cancelled claims from the final IPRs confirms they were not consolidated.
The Federal Circuit recognizes that when cases are not consolidated one of
the actions might go “to judgment before the others, resulting in a judgment
adverse to” a party. In re Cygnus Telecom. Tech., LLC, Patent Litig., 536 F.3d
1343, 1349-50 & n.1 (Fed. Cir. 2008). The court recognized that a party’s “failure
to appeal the first judgment could result in the application of collateral estoppel
against it in each of the other cases.” Id. (holding collateral estoppel did not divest
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patent owner of right to appeal decision in consolidated multi-district litigation
based on owner’s decision to settle with one of many defendants). As discussed
above in Section II.C, Worlds’s decision to forgo appeal of the final IPRs removes
any doubt as to their finality and preclusive effect here.
IV. The Board should reinstate its finding that Activision is not an RPI.
If the Board revisits its RPI determinations, it should reinstate its decisions
of unpatentability. The evidence shows Bungie acted independently in filing the
IPRs for its own benefit, not at Activision’s behest. Worlds’s RPI allegations are
nothing more than gamesmanship.
A. Legal Standards
An RPI determination is made “on a case-by-case basis taking into
consideration how courts have viewed” the term. Trial Practice Guide, 77 Fed.
Reg. at 48,759 (citing Taylor v. Sturgell, 553 U.S. 880, 893-95 (2008); FPP, §§
4449, 4451). “[T]he real party-in-interest may be the petitioner itself, and/or it may
be the party or parties at whose behest the petition has been filed.” Id. The Board
“will apply traditional common-law principles” of estoppel and preclusion to
evaluate an RPI allegation. Id. “A common consideration is whether the non-party
exercised or could have exercised control over the proceeding.” Id. (citing FPP §
4451). “Determining whether a non-party is a ‘real party in interest’ demands a
flexible approach that takes into account both equitable and practical
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considerations, with an eye toward determining whether the non-party is a clear
beneficiary that has a preexisting, established relationship with the petitioner." AIT,
897F.3d at 1351.
The RPI inquiry is bounded, however, by the demands of due process. See
Taylor, 553 U.S. at 891 (“The federal common law of preclusion is, of course,
subject to due process limitations.”). “Because nonparty preclusion risks binding
those who have not had a full and fair opportunity to litigate, the Supreme Court
has cautioned that there is a general rule against nonparty preclusion, subject to
certain exceptions.” WesternGeco, 889 F.3d at 1319; FPP §4449 (“The basic
premise of preclusion is that parties to a prior action are bound and nonparties are
not bound.”). The “recognized exceptions” to “the rule against nonparty
preclusion” are (1) when the nonparty stipulates it will be bound by the judgment;
(2) where a qualifying, pre-existing “substantive legal relationship” (e.g.,
successive owner of property, bailee-bailor, or assignee-assignor) justifies nonparty preclusion; (3) when the nonparty enjoyed adequate representation “in
certain limited circumstances” in the prior litigation (i.e., suits brought as class
actions and those brought by trustees, guardians, and other fiduciaries); (4) when a
nonparty assumed control over the prior litigation and thereby had “the opportunity
to present proofs and argument”; (5) when the nonparty in the prior suit is a mere
“proxy” (i.e., “designated representative”) to or agent for a party bound by the
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prior judgment; and (6) bankruptcy or probate proceedings that operate against the
world but are consistent with due process. Taylor, 553 U.S. at 893-95.
The Due Process Clause requires tribunals to limit non-party preclusion to
“discrete exceptions that apply in limited circumstances” to preserve “the general
rule that a litigant is not bound by a judgment to which she was not a party.” Id. at
896-98, 905 (rejecting “virtual representation” doctrine as inconsistent with due
process to the extent it did “not fit within any of the established exceptions”).
Although “the established grounds for nonparty preclusion could be organized
differently” and the Court did not purport to establish “a definitive taxonomy,” the
fact that privity turns on the facts of the particular case “scarcely implies that
privity is governed by a diffuse balancing test.” Id. at 893 n.6, 899. “The Board
must be careful in making its RPI determination that it does not ‘run afoul of’ the
general rule that a litigant is not bound by a judgment to which she was not a party
except in discrete and limited circumstances.” Unified Patents, Inc. v. Realtime
Adaptive Streaming, LLC, IPR2018-00883, Paper 29 at 15-16.
B. Statements of Material Fact (“SMF”)
1. Neither Bungie nor any Bungie product is identified in Ex. 2007.
2. Neither Bungie nor any Bungie product is identified in Ex. 1031.
3. Neither Bungie nor any Bungie product is identified in Ex. 1036.
4. Bungie’s Destiny product was never added to the Activision Litigation. Ex.
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1051 at 39:7-9; Ex. 1036 at 1-4.
5. On February 9, 2018, the USPTO cancelled the claims found unpatentable
based on the final written decision in IPR No. 2015-01268.2

6. On February 20, 2018, the USPTO cancelled the claims found unpatentable
based on the final written decision in IPR No. 2015-01269.
7. Bungie’s counsel sent an email to counsel for Worlds on October 18, 2018
(“the October 18, 2018 email from M. Rosato”), stating, in part:

2
IPR Certificates are available in the file history kept by the Patent Office for
each involved patent, available at https://portal.uspto.gov/pair/PublicPair.
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8. On October 19, 2018, a telephonic conference occurred (“the October 19,
2018 teleconference”) including counsel for Bungie and counsel for Worlds.
9. During the October 19, 2018 teleconference, the parties discussed that the
settlement terms identified in the October 18, 2018 email from M. Rosato would be
communicated to Worlds by Worlds’ counsel.
10. On November 6, 2018, counsel for Bungie sent an email to counsel for
Worlds (“the November 6, 2018 email from counsel for Bungie”), stating, in part:

11. On November 6, 2018, counsel for Worlds responded to the November 6,
2018 email from counsel for Bungie stating:
C. The evidence demonstrates Activision is not an RPI.
i. Lack of control supports finding Activision is not an RPI.
In each of the appealed IPRs, the evidentiary record as a whole demonstrates
Bungie brought and controlled the IPRs independently of Activision and for its
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own benefit. Worlds premised its RPI arguments on Activision’s alleged
opportunity to fund and control the IPRs as “legal clearance reviews” Activision
allegedly could require Bungie to conduct under Section 7A.15(j) of the DevPub
Agreement (Ex. 2002). See Section II.A, supra. Worlds relied on warranty and
indemnification provisions in the DevPub agreement that Worlds alleged it
triggered in November 2014, allegedly granting Activision control or an
opportunity to control the IPRs as legal clearance reviews. Worlds argued that its
interpretation of the DevPub Agreement satisfied the second and fourth categories
outlined in Taylor. See, e.g., IPR2015-01264, Paper 12, at 32-38; Paper 20 at 36-
38. Worlds did not make any arguments regarding the preexisting relationship
distinct from its arguments regarding control. See, e.g., IPR2015-01264, Paper 13,
at 32. As explained in Bungie’s briefing and in the Board’s decisions, however,
these IPRs are not legal clearance reviews of a product during development as
provided for in the DevPub Agreement. See, e.g., IPR2015-01264, Paper 10, at 6-
7; Paper 13 at 26-32; Paper 31 at 20; Paper 42 at 106-07. The DevPub agreement
did not provide Activision the opportunity to control Bungie’s IPRs.
Under the DevPub Agreement, Bungie, the developer of the Destiny
videogame, is responsible for defense of intellectual property claims against
Destiny. Ex. 2002 at 21. The DevPub Agreement provides Bungie with the right to
assume the defense of claims arising out of “any infringement of a third party’s
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rights in Intellectual Property caused” by a Destiny videogame and provides that
Bungie is solely responsible for any of its costs relating to such defense. See, e.g.,
IPR2015-01264, Paper 10, at 6-7; Ex. 2002 at 21. Nothing in the DevPub
Agreement allows any party other than Bungie to control Bungie’s IPRs. The
Board correctly found the DevPub Agreement does not make Activision an RPI in
Bungie’s IPRs.3 Cf. Wi-Fi One, 887 F.3d at 1340-41 (“On the issue of privity, the
Board reasonably concluded that the evidence failed to show that Broadcom had
sufficient control over the district court litigation to justify treating Broadcom as a
virtual party to that proceeding.”); WesternGeco, 889 F.3d at 1320 (“Substantial
evidence supports the Board’s finding that ION [manufacturer of accused products
and indemnitor] lacked the opportunity to control PGS’s [buyer of accused
products and indemnitee] IPR petitions.”).
In addition to the DevPub agreement, other evidence confirms Activision is
not an RPI in Bungie’s IPRs. This evidence includes the timing of Bungie’s IPR
filings in relation to the Activision litigation. As discussed above, Worlds’s

3
The Board declined Bungie’s offer to provide additional evidence that
Activision did not fund or control the IPRs. Ex. 1051 at 34:18-24 (“[W]e are happy
and perfectly willing to submit testimonial evidence supporting that point.”),
37:14-19, 41:16-18, 46:18-47:2).
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litigation with Activision had been ongoing for years before Bungie filed its IPRs.
Worlds argued that it initiated that litigation in March 2012 and served Activision
with the complaint on April 4, 2012, barring Activision from filing any IPR
petition after April 4, 2013. See, e.g., IPR2015-01264, Ex. 2007; Paper 20, at 37.
Worlds concedes that Bungie’s products were never added to the Activision
Litigation and that Worlds threatened to accuse Bungie’s product of infringement
on November 13, 2014. See e.g., Ex. 1051 at 39:7-9; Ex. 1036 at 1-4; Ex. 2004;
SMF Nos. 1-4 ; Ex. 1064, Stipulations 4-5. If anything, the timing of Bungie’s
filing indicates that Bungie did not file IPR petitions at Activision’s behest, whose
non-Bungie products had been accused years before, but filed its petitions to
further Bungie’s own interests. Moreover, communications between Bungie and
Worlds have repeatedly confirmed Bungie’s independence in the IPRs. SMF Nos.
7-11.
ii. Bungie is not Activision’s proxy.
Activision’s lack of control over Bungie’s IPRs, as demonstrated by the
DevPub agreement, the timing of Bungie’s filings, and Bungie’s independent
settlement efforts, also confirms that Bungie is not Activision’s proxy. When
evaluating preclusion of a non-party as an alleged proxy of a bound party, “courts
should be cautious about finding preclusion on this basis” because “principles of
agency law...indicate that preclusion is appropriate only if the putative agent’s
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conduct of the suit is subject to the control of the party who is bound by the prior
adjudication.” Taylor, 553 U.S. at 906. Bungie, not Activision controlled the IPRs.
Some decisions have found that a time-barred entity that expressly, tacitly,
or through “willful blindness” engages an agent or proxy who has only a derivative
interest in invalidating the patent to file an IPR may be an RPI even though the
entity has relinquished control over the IPR to the petitioner in order to circumvent
the one-year time bar. See AIT, 897 F.3d at1338-42, 1347-53, 1355-56; RPX Corp.
v. Virnetx Inc., IPR2014-00171, Paper 49, at 7-10, 17 (“RPX’s actions appeared
tailored to benefit [time-barred client] specifically” offering its services as an
attorney-in-fact on behalf of time-barred client); Cisco Sys., Inc. v. Hewlett
Packard Enter. Co., IPR2017-01933, Paper 9, at 10-15 (concluding Petitioner
Cisco’s “interest in this proceeding is derived from that of Springpath” and that
Petitioner was “pursuing its Petition as a proxy for Springpath where Cisco had no
potential infringement liability of its own, timed its investment of $34 million to
acquire Springpath just after it filed its petition, and “failed to explain adequately
what ‘independent reason’ it had to file the IPR petition”); see also United States v.
Des Moines Valley R. Co., 84 F. 40, 44–45 (8th Cir. 1897) (non-party precluded
because it “had no substantial interest in the controversy, and was merely a
nominal plaintiff.”). None of these cases apply here.
Bungie is not an entity engaged in marketing a workaround for the one-year
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bar; nor is it an Activision entity. Bungie is a private, independent videogame
developer in the business of designing and creating videogames. See, e.g., Ex.
2002 at 7-8. Bungie has developed numerous videogames since the company was
established in 1991, including the highly successful Halo franchise in conjunction
with Microsoft. As such, Bungie has its own interest in developing and selling its
videogames free from threat of infringement litigation.
Unlike each of the proxy cases discussed above, Bungie is not a nominal
petitioner or a petitioner with an interest that is wholly derivative of Activision’s
interests. Bungie serves its own substantial interests in challenging the patents.
After filing its suit against Activision, the CEO of Worlds proclaimed that Worlds
intended to sue any company that made a successful massively-multiplayer
videogame. Ex. 1034. Worlds stated that it “intends to continue to increase and to
more aggressively enforce against alleged infringers.” Ex. 1035 at 8. Over 2.5
years into its litigation with Activision, Worlds threatened to accuse Bungie’s
Destiny videogame of infringing the involved patents. Ex. 2004; Ex. 2007. Under
the DevPub agreement, Bungie remains the owner of the Destiny intellectual
property. Ex. 2002 at 6. Of course, Bungie has its own interest in defending itself,
its intellectual property, and its current and future games from threats of patent
infringement litigation. It is appropriate for the Board to give weight to the fact that
petitioner has a strong and independent interest in challenging the patents that is
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not merely derivative of the alleged RPI’s interests. See Wi-Fi One, 887 F.3d at
1340 (“Broadcom clearly has an interest of its own in challenging the ’215 patent,
based on its manufacture of the allegedly infringing chips.”).
Bungie’s settlement efforts with Worlds similarly demonstrate that Bungie is
not Worlds’s proxy. Bungie has pursued its own interests in conflict with
Activision’s, as Worlds well knows, by, among other things, offering to settle with
Worlds independently of Activision. SMF Nos. 7-11. The evidence as a whole
confirms that Bungie is not a proxy for Activision.
iii. Bungie’s relationship with Activision does not make
Activision an RPI in Bungie’s IPRs.
Worlds apparently argues that Activision is an RPI in Bungie’s IPRs simply
if Activision and Bungie have a preexisting relationship and if Activision would
benefit from Bungie’s IPRs. As discussed above, however, this rule would
contravene binding Supreme Court precedent governing common law principles
for applying preclusion to a non-party. See WesternGeco, 889 F.3d at 1319
(discussing the six Taylor categories and noting that, “importantly, the reach of
privity cannot extend beyond the limits of due process”). The Federal Circuit has
repeatedly and correctly held that Congress adopted these common law preclusion
principles for IPRs. See Wi-Fi One, 887 F.3d at 1335 (“The use of the familiar
common law terms ‘privy’ and ‘real party in interest’ indicate that Congressed
intended to adopt common law principles to govern the scope of the section
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315(b)-one-year bar.”); see also AIT, 897 F.3d at 1357 (same); WesternGeco, 889
F.3d at 1317 (same).
The Board has thus correctly recognized that “[t]he RPI analysis set out in
AIT and the common law require[s] more than simply confining the analysis to
determining whether a [non]-party benefits generally from the filing of this Petition
and also has a relationship with the Petitioner.” Unified Patents, IPR2018-00883,
Paper 29 at 12-16 (petitioner’s client not an RPI even though it funded petitioner
with full knowledge that most of its fees will be used to file petitions to reduce its
own litigation risk where there was no evidence of control, direction, or direct
financing of the IPR). Indeed, “a common desire among multiple parties to see a
patent invalidated, without more, does not establish privity.” WesternGeco, 889
F.3d at 1321 (“pre-existing business alliance between ION and PGS before the
ION lawsuit commenced” and “indemnity provisions contained in the purchase
agreements for the products accused of infringing WesternGeco’s patents” were
“insufficient to make PGS and ION privies within the meaning of the statute”).
Here, the DevPub agreement is directed to the development and publication of a
videogame that was never added to the Activision litigation. SMF Nos. 1-4; Ex.
1064, Stipulations 4-5; Ex. 2007; Ex. 1031; Ex. 1036. The parties’ relationship is
directed to selling videogames, not filing IPRs or circumventing the one-year bar.
There is no basis to bind Bungie to Worlds’s Activision Litigation complaints.
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A distinct legal entity that does business with another legal entity is not
precluded by judgments binding its business partners, even where the transaction
involves an indemnification agreement. For example, a supplier and customer may
both stand accused of infringing the same patent over the supplied product, even
cooperate in attempting to invalidate the patent to permit their use and sale of the
product, and mutually benefit from invalidation of the patent, but this does not
make the customer an RPI in an IPR brought independently by the supplier where
the non-party customer “is not indemnifying” the supplier and “is not involved in”
the supplier’s IPR. Samsung Electronics Co., Ltd et al. v. Seven Networks, LLC,
IPR2018-01106, Paper 21, at 11; see also id. at 14-15, 17 (Google’s
indemnification obligations to petitioner Samsung did not give Google control over
the IPRs and petitioner Samsung’s indemnity obligations to Google did not give it
control of the related infringement action; each party retained its own counsel and
maintained control over its own case); id. at 16 (no evidence petitioner Samsung
was “subjugat[ed] to Google in either the litigation or the IPRs”). Similarly, here,
the DevPub agreement confirms that Activision is not indemnifying Bungie, has no
right to control Bungie’s IPRs, and is not an RPI.
To the extent Worlds argues that a patent owner may bind an indemnitor to a
prior lawsuit in which the indemnitor never participated nor ever had any
opportunity to participate in or control, this argument is also incorrect. The
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existence of an indemnity agreement does not automatically bind an indemnitor to
a prior action because the indemnitee must both “give notice of the action to the
indemnitor and to tender an opportunity to control the defense,” at which point the
indemnitor “can be precluded from relitigating matters determined in the [prior]
action under the control principle explored in [Section 4451].” FPP, §4452.
Preclusion from a suit thus attaches to an indemnitor who controls that suit. Here,
Worlds argues that Bungie is the indemnitor, but that Activision (as the
indemnitee) controls the IPRs. This argument is simply contradictory to the terms
of the DevPub agreement and the particular facts of this case, as discussed above in
Section IV.C.i-ii. Common law principles of estoppel and preclusion incorporated
by the statutory terms privy and RPI do not bind an indemnitor to a litigation
which it never had an opportunity to participate in or control. The substantive legal
relationship between Activision and Bungie does not support finding Activision to
be an RPI in Bungie’s IPRs.
D. Equities
As discussed in Section IV.A above, the common law principles of estoppel
and preclusion adopted by the AIA’s use of the terms privy and RPI require an
equitable analysis of whether preclusion is appropriate consistent with the due
process right of a nonparty to have its opportunity to be heard. The RPI analysis
may not be expanded to swallow the rule that nonparties to a suit generally are not
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subject to preclusion based on that suit. Here, Bungie never participated in or
controlled any party’s participation in Worlds’s litigation against Activision and,
indeed, never had any opportunity to do so because its products were never
accused in that litigation and were not even released or mentioned by Worlds until
more than a year after Worlds alleges the time-bar went into effect. SMF Nos. 1-4;
Ex. 1064, Stipulations 1-5; Ex. 2007; Ex. 1031; Ex. 1036; Ex. 1032 (product
release) ; Ex. 2004 (Nov. 2014 letter). Worlds’s alleged “notice” came well after it
says the one-year bar expired. It would be inequitable to bind Bungie to the
Activision Litigation without timely notice. See, e.g., Jennings v. United States,
374 F.2d 983 (4th Cir. 1967) (“Lack of notice, however, destroys the consensual
element, vitiates the binding effect of the judgment, and entitled the indemnitor to
be heard on the issue of the indemnitee’s liability.”). Like any non-party, an
indemnitor is not precluded by occurrences that predate its notice of and ability to
control the action. FPP, § 4449 (“[A] party is bound only as to matters properly
raised during the period in which he is a party, and litigated as to him....”).
Worlds’s allegation that Activision is an RPI has always been fundamentally
wrong because it is based on the idea that Worlds can unilaterally and retroactively
prohibit Bungie from launching an independent challenge to Worlds’s patents by
threatening to add Bungie’s product to a litigation in which Bungie was never
involved, more than a year after Worlds asserts the one-year bar under 35 U.S.C.
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§ 315 had already expired. This is directly contradictory to well-established
estoppel principles. FPP, § 4448 (“Some substantial justification must be found to
justify preclusion of a nonparty.”); id. § 4449 (“The basic premise of preclusion is
that parties to a prior action are bound and nonparties are not bound...This
presumption [that nonparties are not bound] draws from the due process right to be
heard[.]”); id., § 4449 (“If there is no actual notice to a real defendant, there can be
no preclusion.”); FPP, § 4451 (“Preclusion by participation and control may be
denied more readily than party preclusion by concern that the nature and
consequences on later litigation were not foreseeable at the time of the first
action.”). Applying the equitable principles protecting nonparties from being
precluded without notice and opportunity to participate to the practical situation
here, the Board should find Bungie did not bring the IPRs at Activision’s behest
and Activision is not an RPI.
V. Conclusion
As discussed above, the Board should reinstate its final written decisions
finding Worlds’s claims unpatentable.
Respectfully submitted,
Dated: January 4, 2019 / Michael T. Rosato /
Michael T. Rosato, Lead Counsel
Reg. No. 52,182