Monday, February 25, 2019 9:23:17 PM
Worlds Reply
UNITED STATES PATENT AND TRADEMARK OFFICE
____________
BEFORE THE PATENT TRIAL AND APPEAL BOARD
____________
BUNGIE, INC.,
Petitioner,
v.
WORLDS INC.,
Patent Owner.
_______________
Case IPR2015-01264 (Patent 7,945,856 B2)
Case IPR2015-01319 (Patent 8,082,501 B2)
Case IPR2015-01321 (Patent 8,145,998 B2)
____________
PATENT OWNER WORLDS INC.’S
RESPONSE ON REMAND FROM CAFC
- i -
TABLE OF CONTENTS
I. INTRODUCTION ........................................................................................... 1
II. ISSUE PRECLUSION DOES NOT BAR WORLDS’ ARGUMENTS ON
REAL PARTY IN INTEREST ........................................................................ 2
A. The Identification of All RPIs to Each Petition is Not an Identical
Issue Among the Appealed and Non-Appealed IPRs ........................... 2
1. Federal Circuit Cases Applying Issue Preclusion to Board
Decisions are Not On Point to the Differing Issues Here ................ 6
2. Identity of Issue Does Not Exist Where the Burden of Proof is
Different Between a First Action and a Second Action ................... 7
3. Bungie’s Argument for Issue Preclusion on the RPI Issue Would
Lead to Absurd Results .................................................................... 8
B. Bungie Fails to Meaningfully Address B&B Hardware’s Concern for
Quality, Extensiveness, and Fairness of Procedures Followed ............. 9
C. The Policy Behind Cygnus’s Exemplary Exception Applies Here ..... 11
D. The Solicitor’s Office Agrees That Common Law-Based Issue
Preclusion Does Not Apply at the PTAB ............................................ 12
III. BUNGIE FAILS TO CARRY ITS BURDEN OF ESTABLISHING THAT
ACTIVSION IS NOT AN RPI TO BUNGIE’S PETITIONS ...................... 14
A. Bungie Has No Relevant Evidence to Carry Its Burden ..................... 15
1. The Agreement Executed in 2010 Cannot Prove That Activision is
Not an RPI in 2015 ......................................................................... 16
2. The Timing of Bungie’s Petitions Does Not Establish That
Activision is Not an RPI .............................................
- ii -
B. Bungie Ignores the Federal Circuit’s Specific Instructions and Fails to
Apply the Legal Test for RPI Set Forth in AIT ................................... 20
C. Bungie Attempts to Avoid the Proper RPI Conclusion By Invoking
Due Process Without Any Evidence ................................................... 24
D. Activision is also a Privy of Bungie in These IPR Petitions ............... 26
E. Bungie’s Refusal to Submit Evidence Should Not Create an Equitable
Escape from the Statutory Requirement to Name all RPIs ................. 28
IV. CONCLUSION .............................................................................................. 30
- iii -
TABLE OF AUTHORITIES
Cases
A.B. Dick Co. v. Burroughs Corp.,
713 F.2d 700 (Fed. Cir. 1983), cert. denied, 464 U.S. 1042 (1984) ...........3, 9
Applications in Internet Time, LLC v. RPX Corp.,
897 F.3d 1336 (Fed. Cir. 2018) ............................................................. passim
Aruze Gaming Macau, Ltd. v. MGT Gaming, Inc.,
IPR2014-01288, Paper 13 (PTAB Feb. 20, 2015) .......................................... 5
Astoria Fed. Sav. & Loan Ass’n v. Solimino,
501 U.S. 104 (1991)....................................................................................... 13
Atlanta Gas Light Co. v. Bennett Regulator Guards, Inc.,
IPR2013-00453, Paper 88 (PTAB Jan. 6, 2015) ........................................... 29
B&B Hardware, Inc. v. Hargis Indus., Inc.,
135 S.Ct. 1293 (2015) ............................................................................... 9, 10
Clark v. Bear Stearns & Co.,
966 F.2d 1318 (9th Cir. 1992) ......................................................................... 7
Cobb v. Pozzi,
363 F.3d 89 (2d Cir. 2004) .............................................................................. 7
Commil USA, LLC v. Cisco Sys., Inc.,
135 S. Ct. 1920 (2015) ................................................................................... 16
FCC v. Schreiber,
381 U.S. 279 (1965)....................................................................................... 13
Guenther v. Holmgreen,
738 F.2d 879 (7th Cir. 1984) ........................................................................... 7
In re Cygnus Telecom. Tech., LLC Patent Litig.,
536 F.3d 1343 (Fed. Cir. 2008) .......................................................... 9, 11, 12
Intel Corp. v. U.S. Int’l Trade Comm’n,
946 F.2d 821 (Fed. Cir. 1991) ....................................................................... 28
- iv -
Johnson v. Whitehead,
647 F.3d 120 (4th Cir. 2011) .......................................................................... 13
Killep v. Office of Personnel Mgmt.,
991 F.2d 1564 (Fed. Cir. 1991) ..................................................................... 13
Litttlejohn v. United States,
321 F.3d 915 (9th Cir. 2003) ........................................................................... 7
MaxLinear, Inc. v. CF Crespe LLC,
880 F.3d 1373 (Fed. Cir. 2018) ....................................................................... 6
Nestle USA Inc. v. Steuben Food, Inc.,
884 F.3d 1350 (Fed. Cir. 2018) ...................................................................6, 7
Unified Patents v. Realtime Adaptive Streaming, LLC,
IPR2018-00883, Paper 29 (PTAB Oct. 11, 2018) ......................................... 25
VirnetX Inc. v. Apple, Inc.,
909 F.3d 1375 (Fed. Cir. 2018) ...................................................................2, 4
WesternGeco LLC v. ION Geophysical Corp.,
889 F.3d 1308 (Fed. Cir. 2018) ........................................................ 20, 26, 27
WiFi One LLC v. Broadcom Corp.,
887 F.3d 1329 (Fed. Cir. 2018) ..................................................................... 10
Worlds Inc. v. Bungie, Inc.,
903 F.3d 1237 (Fed. Cir. 2018) ............................................................. passim
XY, LLC v. Trans Ova Genetics, L.C.,
890 F.3d 1282 (Fed. Cir. 2018) ....................................................................... 6
Statutes
15 U.S.C. § 1069 ...................................................................................................... 14
35 U.S.C. § 312(a)(2) .............................................................................................3, 5
35 U.S.C. § 315(b) ........................................................................................... passim
35 U.S.C. § 315(d) ................................................................................................... 13
35 U.S.C. § 315(e) ...................................................................................... 13, 14, 30
- v -
35 U.S.C. § 315(e)(1) ............................................................................................... 13
35 U.S.C. § 325(d) ............................................................................................ 13, 14
Rules
37 C.F.R. § 42.8(b)(1) ................................................................................................ 3
37 C.F.R. § 42.20(c) ................................................................................................... 4
37 C.F.R. § 42.24(b) .................................................................................................. 2
37 C.F.R. § 42.51(b)(2)(i) ........................................................................................ 10
Other Authorities
157 Cong. Rec. S1376 (daily ed. March 8, 2011) (statement of Sen. Kyl) ............. 26
157 Cong. Rec. S5432 (Sept. 8, 2011) (statement of Sen. Schumer) ...................... 26
18 Charles Alan Wright, et al., Federal Practice and Procedure § 4422 (2d ed.
2002) ................................................................................................................ 8
18 James Wm. Moore, et al., Moore’s Federal Practice § 132.02[4][e] (3d ed.
1997) ................................................................................................................ 8
Brief for Intervenor, Biodelivery Sciences Int’l, Inc. v. Monosol RX, LLC,
2017 WL 2666499 (Fed. Cir. 2017) .............................................................. 12
Federal Rule of Civil Procedure 26 .................................................................... 9, 10
Restatement (Second) of Judgments § 27 .................................................................. 9
Restatement (Second) of Judgments § 28(4) (1982) ................................................. 7
Worlds Inc. v. Bungie, Inc. Oral Argument Recording (Mar. 9, 2018), available at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2017-1481.mp3 ....10,
17, 29
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-1-
I. INTRODUCTION
Bungie’s opening sentence in its Brief (“Bungie Br.”) raises the ultimate
question here: what communications from Activision caused Bungie to file six
different IPR petitions against Worlds’ patents, challenging the very claims at issue
in the Activision Litigation? Bungie all but admits the communications occurred,
but without evidence, it cannot carry its burden of proving that Activision is not an
unnamed real party in interest (“RPI”) to Bungie’s petitions under the Federal
Circuit’s test in Applications in Internet Time, LLC v. RPX Corp., 897 F.3d 1336
(Fed. Cir. 2018) (“AIT”). Because Worlds served Activision with a complaint for
infringement of the challenged patents more than a year before Bungie’s petitions
were filed, Bungie’s petitions are time-barred due to Activision’s RPI status. See
Ex. 2007 at 4-7; Ex. 2003; Ex. 2010 at 10-13; Ex. 2011.
Evidence of Bungie and Activision’s pre-existing legal relationship is
established by the DevPub Agreement (Ex. 2002, “Agreement”) dated April 16,
2010, under which Bungie developed “Destiny,” a game published by Activision in
2014. Ex. 2002 at 1 (Recital B), Ex. 1064, ¶¶2-3. On its face, the Agreement
establishes that Activision had at least the opportunity to review and approve
arguments advanced in this IPR.
This evidence includes Section 7A.15(j) (Bungie must conduct “legal
reviews” of Destiny to “ensure that all Intellectual Property and other rights are
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-2-
fully cleared for use”1
and such legal reviews are subject to “prior review and
approval by Activision, (budget to [be] mutually approved).”); Section 14.1.2
(Bungie warrants that “the use, development, distribution and publishing” of the
product intellectual property “shall not infringe upon or violate the rights of, nor
require consent of, any other party”); and Section 15.1, which requires Bungie to
indemnify Activision for “Claims” (not just lawsuits, see Section 15.1) of patent
infringement against Destiny.
Bungie’s Brief fails to establish that Worlds is estopped from raising this
RPI dispute on remand, fails to carry its burden of establishing that Activision is
not an RPI to Bungie’s petitions, and fails to meaningfully address key points
required by the Federal Circuit decision. Further, it would be improper for Bungie
to raise its leading arguments on these issues for the first time on Reply. See 37
C.F.R. § 42.24(b).
II. ISSUE PRECLUSION DOES NOT BAR WORLDS’ ARGUMENTS
ON REAL PARTY IN INTEREST
A. The Identification of All RPIs to Each Petition is Not an Identical
Issue Among the Appealed and Non-Appealed IPRs
It has been long-held that for issue preclusion to apply, the law requires that
the issues be identical. VirnetX Inc. v. Apple, Inc., 909 F.3d 1375, 1377 (Fed. Cir.
2018); see also A.B. Dick Co. v. Burroughs Corp., 713 F.2d 700, 702 (Fed. Cir.
1
“Intellectual Property” includes patents and patent rights. Ex. 2002, Sec. 6.1.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-3-
1983), cert. denied, 464 U.S. 1042 (1984). As a critical defect in its argument for
issue preclusion, Bungie fails to establish that the issue of whether Activision was
an RPI to each petition was an identical issue among all petitions.
In its opinion remanding these IPRs back to the Board, the Federal Circuit
took the view that the RPI determination may be unique to each petition. Worlds
Inc. v. Bungie, Inc., 903 F.3d 1237, 1247 (Fed. Cir. 2018) (“But in our view, the
determination of whether a party is a real party in interest may differ from one IPR
to the next, even among a set of seemingly related IPRs.”). Bungie fails to deal
with this statement, and instead glosses over the identical issue requirement by
concluding without analysis that “[t]he RPI issue in the final IPRs was identical to
the RPI issue in the appealed IPRs.” Bungie Br., 3. It goes on to say that “n
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.” Id. But just as the Federal Circuit acknowledged, the identification of a
petition’s RPIs is specific to that petition. This is in accordance with governing
statute. See 35 U.S.C. § 312(a)(2) (requiring each petition to identify all real
parties in interest to that petition). The Federal Circuit similarly explained that
“[c]orrectly identifying all real parties in interest with respect to each petition is
important, as the determination may impact whether a petition may be instituted.”
Worlds, Inc., 903 F.3d at 1240 (emphasis added).
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-4-
Indeed, the Federal Circuit’s view was correct under the law: the questions
of whether Activision was an RPI to the petitions in IPR2015-01268, -01269, and -
01325 are not identical to whether Activision was an RPI to the petition in
IPR2015-01264, the petition in IPR2015-01319, or the petition in IPR2015-01321.
More precisely, the issue in IPR2015-01264 is whether Activision was an RPI to
the petition filed in IPR2015-01264. The issue in IPR2015-01319 is whether
Activision was an RPI to the petition filed in IPR2015-01319. The issue in
IPR2015-01321 is whether Activision was an RPI to the petition filed in IPR2015-
01321. These are not identical issues to issues in the unappealed IPRs.
This is logical. Two petitions filed by the same petitioner could have
different RPIs. For example, a non-party who neither funds nor controls a first
petition could later fund and exert control over a second petition filed by the same
petitioner. The RPI question in the second proceeding is unique to that proceeding.
Moreover, it is Bungie’s burden to set-out in its opening brief how the RPI
issue is identical between IPR2015-01268, -01269 and -01325 and the appealed
IPRs. Bungie avoids such a comparison, and instead argues that since Worlds’ RPI
arguments were the same in each IPR and the result was the same, issue preclusion
applies. Bungie Br., 3-5. That is not the law. In order to apply issue preclusion,
the burden is on Bungie to affirmatively show that the legal issue was identical.
See VirnetX Inc., 909 F.3d at 1377; 37 C.F.R. § 42.20(c).
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-5-
Bungie confuses the legal issue with the outcome reached by the Board in
each IPR, but later acknowledges that each final written decision was specific to
that IPR, stating that the “Board entered a different final written decision … in
each case.” Bungie Br., 5. Bungie made similar concessions regarding the
Board’s institution decision issued in “each case.” Id. at 4. More precisely, the
Board concluded in each IPR that Activision was not an unnamed RPI to that IPR
petition. That does not mean that the legal issue—whether Activision was an RPI
to any petition—was identical for all petitions. See Worlds Inc., 903 F.3d at 1247
(“[I]n our view, … a real party in interest may differ from one IPR to the next …
.”). Statute requires that the issues are different. 35 U.S.C. § 312(a)(2).
This result squares with the Board’s prior analysis. As the Board has
previously held, “RPI is the relationship between a party and a proceeding.” Aruze
Gaming Macau, Ltd. v. MGT Gaming, Inc., IPR2014-01288, Paper 13 at 11 (PTAB
Feb. 20, 2015) (emphasis in original). Whether Activision has a relationship to
each proceeding is a unique question for each proceeding (see 35 U.S.C. §
312(a)(2)), and issue preclusion cannot attach to any one proceeding based on a
relationship (or lack thereof) between Activision and a separate proceeding.
This outcome is also wholly consistent with the statute and with the Federal
Circuit’s observation that the determination of whether a party is an RPI in one
IPR may differ from whether that party is an RPI in the next IPR, even where the
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-6-
IPRs appear to be related. Worlds Inc., 903 F.3d at 1247. Because the RPI
analysis is specific to each petition, there is no identical issue against which issue
preclusion would apply here. The Board should evaluate these separate issues and
determine that Activision is an RPI to each petition currently before it.
1. Federal Circuit Cases Applying Issue Preclusion to Board
Decisions are Not On Point to the Differing Issues Here
Bungie identifies cases where issue preclusion has been applied by the
Federal Circuit to Board decisions. See Bungie Br., 7. Unlike this proceeding,
those cases actually involved identical issues and are therefore distinguishable.
See XY, LLC v. Trans Ova Genetics, L.C., 890 F.3d 1282, 1294 (Fed. Cir. 2018)
(identical issue was patent invalidity); MaxLinear, Inc. v. CF Crespe LLC, 880
F.3d 1373, 1376-77 (Fed. Cir. 2018) (“the collateral-estoppel effect of an
administrative decision of unpatentability generally requires the invalidation of
related claims that present identical issues of patentability.”) (emphasis added).
In Nestle USA Inc. v. Steuben Food, Inc., 884 F.3d 1350 (Fed. Cir. 2018),
the common issue was construction of “aseptic,” where the claims at issue in two
commonly owned patents used the term “aseptic” “in a similar fashion.” Id. at
1351. “More critically, the two patents also provide[d] identical lexicography for
the term ‘aseptic’ in their specifications.” Id. at 1352 (emphasis added). Ensuring
that the issue was identical across two patents, the Federal Circuit noted that
“[n]either party has pointed to any material different between the two patents or
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-7-
their prosecution histories that would give rise to claim construction issues in this
appeal different from those raised in the prior appeal.” Id.
Unlike in XY, MaxLinear, and Nestle, the statutory RPI analysis is specific to
each petition, and there is no identical issue against which preclusion can apply.
2. Identity of Issue Does Not Exist Where the Burden of Proof
is Different Between a First Action and a Second Action
The Board’s previous handling of Bungie’s burden to prove RPI also bars
issue preclusion. Relitigating an issue is not precluded where the “adversary has a
significantly heavier burden [in the second action] than he had in the first action.”
Restatement (Second) of Judgments § 28(4) (1982). “To apply issue preclusion
[when the burden of proof is different in the second action] would be to hold, in
effect, that the losing party in the first action would also have lost had a
significantly different burden [been] imposed.” Id. at § 28, cmt. f.
Logically, “a shift or change in the burden of proof can render the issues in
two different proceedings non-identical,” thereby barring issue preclusion. Cobb v.
Pozzi, 363 F.3d 89, 113-14 (2d Cir. 2004) (citations omitted); Litttlejohn v. United
States, 321 F.3d 915, 923-24 (9th Cir. 2003); see also Clark v. Bear Stearns & Co.,
966 F.2d 1318, 1322 (9th Cir. 1992) (“estoppel does not preclude claims that have
a different burden of proof”); Guenther v. Holmgreen, 738 F.2d 879, 888 (7th Cir.
1984) (“issue preclusion may be defeated by shifts in the burden of persuasion or
by changes in the degree of persuasion required.”) (citation omitted)); see also 18
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-8-
Charles Alan Wright, et al., Federal Practice and Procedure § 4422 (2d ed. 2002);
18 James Wm. Moore, et al., Moore’s Federal Practice § 132.02[4][e] (3d ed.
1997) ( “issue preclusion does not apply when the party seeking to benefit from
preclusion has a significantly heavier burden in the subsequent action”).
Per the Federal Circuit, the Board’s prior decision put the burden of proof on
Worlds, or at best, was unknown, thus confirming that Bungie’s burden was
incorrectly low. Worlds Inc., 903 F.d at 1246. On remand, Bungie must carry the
burden. Under these facts, issue identity cannot be established, and issue
preclusion cannot apply based on the Board’s decisions in the unappealed IPRs.
3. Bungie’s Argument for Issue Preclusion on the RPI Issue
Would Lead to Absurd Results
Bungie also fails to recognize, as the Federal Circuit did, that different IPR
petitions could have different RPIs. Bungie’s argument—that the correct naming
of all RPIs to a petition is a common issue across multiple petitions—would lead to
absurd results. Consider a scenario where a petitioner fails to name a time-barred
party as an RPI to a first petition. If the Board denies the first petition as timebarred under § 315(b), the Board would deny subsequent petitions from that
petitioner without regard to the time-barred party’s relationship to those
subsequent petitions. This result cannot be correct, and Bungie offers no
explanation how the Board would avoid this absurd result.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-9-
B. Bungie Fails to Meaningfully Address B&B Hardware’s Concern
for Quality, Extensiveness, and Fairness of Procedures Followed
Even if the RPI issue were common among all IPRs (which it isn’t), this
issue has not been fully and fairly litigated, another requisite of issue preclusion.
See A.B. Dick Co., 713 F.2d at 702; In re Cygnus Telecom. Tech., LLC Patent
Litig., 536 F.3d 1343, 1349 (Fed. Cir. 2008). Bungie characterizes Worlds’
dissatisfaction with the original Board decision as “disagreement with the
decision” (Bungie Br., 8), but the Federal Circuit itself recognized the defect in the
Board’s weighing of argument over evidence. Worlds Inc., 903 F.3d at 1246
(Board may have placed the burden on Worlds, and its reliance on attorney
argument “seemed to outweigh the actual evidence presented by Worlds.”).
This defect implicates a concern raised by the Supreme Court in B&B
Hardware, Inc. v. Hargis Indus., Inc., 135 S.Ct. 1293 (2015). There, the Court
considered whether a TTAB finding in an opposition proceeding has preclusive
effect on a later federal court proceeding. Citing to the Restatement (Second) of
Judgments § 27, the Supreme Court recognized an exception to issue preclusion
where there were “differences in the quality or extensiveness of the procedures
followed” in a prior suit. Id. at 1303. In holding that estoppel applied to TTAB
proceedings, the Court emphasized the similar discovery procedures before the
TTAB and before federal district courts. Id. at 1300. In particular, noting that the
TTAB has adopted “almost the whole of Federal Rule of Civil Procedure 26,”
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-10-
(“FRCP 26”) the Court stated there was no “reason to doubt the quality,
extensiveness, or fairness” of the TTAB’s procedures because they were, for the
most part, exactly the same as a federal court’s. Id. at 1309.
Unlike in the TTAB, a clear distinction in procedures exists between the
PTAB and federal court. When Congress established the PTAB, it did not adopt
the broad discovery rules of FRCP 26; rather, “[d]iscovery in inter partes review
proceedings is more limited than in proceedings before district courts or even other
proceedings before the PTO. ” WiFi One LLC v. Broadcom Corp., 887 F.3d 1329,
1338 (Fed. Cir. 2018). Unlike the broad discovery standard of FRCP 26, “[t]he
Board’s rules provide that a party seeking additional discovery ‘must show that
such additional discovery is in the interest of justice.’” Id. (citing 37 C.F.R. §
42.51(b)(2)(i)). Here, the Board denied Worlds’ request for routine/additional
discovery despite Worlds having placed the RPI issue in dispute. Worlds Inc., 903
F.3d at 1244 n.8. This implicates questions of quality, extensiveness, and fairness,
particularly since it was Bungie’s burden to refute Activision’s status as RPI, not
Worlds’ burden to seek discovery to prove that status. See Oral Arg. at 47:31-
47:46 (Mar. 9, 2018), available at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2017-1481.mp3 (Judge
O’Malley stating, “But there’s a difference between allowing them discovery and
probing your position beyond attorney argument to require you to submit proofs…
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-11-
or additional proofs. There’s a difference between that.”).
Further, the Federal Circuit has already spoken on the quality, extensiveness,
and fairness of the Board’s RPI findings below, noting its “concern that the Board
may have relied on attorney argument as evidence that Activision was not
controlling or funding these IPRs” and “the Board’s apparent reliance on such
statements seemed to outweigh the actual evidence presented by Worlds.” Worlds,
Inc., 903 F.3d at 1246. If the Board were to apply issue preclusion on remand, it
would perpetuate this improper reliance on Bungie’s attorney argument over the
actual evidence presented by Worlds despite this clear defect in “quality,
extensiveness, or fairness” of procedures followed below.
C. The Policy Behind Cygnus’s Exemplary Exception Applies Here
Bungie also buries its discussion of In re Cygnus Telecom. Tech., which the
Federal Circuit cited as an exemplary exception to issue preclusion “where a party
did not appeal all cases consolidated in a multi-district litigation proceeding.”
Worlds, Inc., 903 F.3d at 1248. Bungie attempts to distinguish Cygnus on the basis
that the six IPRs here were not consolidated below at the Board. Bungie Br., 14.
Notwithstanding that this argument reinforces that the RPI question is unique to
each petition, Bungie overlooks that the six IPRs below had common schedules,
consolidated depositions, and a single, consolidated hearing.
More importantly, Bungie fails to address the underlying policy reason for
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-12-
the issue preclusion exception stated in Cygnus. As the Federal Circuit explained,
“[t]o adopt the defendants’ rule would promote judicial inefficiency and waste the
litigants’ resources, as it would require appellants to prosecute appeals against
every defendant in a multi-defendant case, even if there were strong practical or
legal reasons for narrowing the scope of the appeal.” Cygnus, 536 F.3d at 1350.
Here, in the three unappealed IPRs, Worlds successfully convinced the Board to
rule claims not unpatentable in final written decisions. See Ex. 1061, 135-36; Ex.
1062, 134; Ex. 1063, 70. Under Bungie’s theory, Worlds would have had to
appeal these decisions for the sole purpose of appealing RPI or risk application of
issue preclusion, even if Worlds was satisfied with its victorious defense of the
patentable claims. That Worlds is not pursuing its appellate rights against all
challenged patents should be no basis for preventing Worlds from pursuing those
rights against any of them. Under Cygnus, Bungie’s attempt to “promote judicial
inefficiency and waste the litigants’ resources” should be rejected.
D. The Solicitor’s Office Agrees That Common Law-Based Issue
Preclusion Does Not Apply at the PTAB
In its Brief as intervenor in Biodelivery Sciences Int’l, Inc. v. Monosol RX,
LLC, Case Nos. 2017-1265, -1266, -1268, 2017 WL 2666499 (Fed. Cir. 2017), the
USPTO Solicitor argued against common law issue preclusion at the Board. “[A]ll
authority pursuant to which an agency may act ultimately must be grounded in an
express grant from Congress.” Killep v. Office of Personnel Mgmt., 991 F.2d
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-13-
1564, 1569 (Fed. Cir. 1991). “While judicial preclusion rules ordinarily reflect the
common law, agency preclusion rules are creatures of statute. Courts must thus
refrain from imposing judge-made preclusion principles on agencies unless such a
course is dictated by statute.” Johnson v. Whitehead, 647 F.3d 120, 129 (4th Cir.
2011) (citing Astoria Fed. Sav. & Loan Ass’n v. Solimino, 501 U.S. 104, 108
(1991); FCC v. Schreiber, 381 U.S. 279, 290-91 (1965)). Congress, through the
America Invents Act (“AIA”), expressly established the bounds of issue preclusion
to be applied by the USPTO based on prior PTAB decisions. See 35 U.S.C. §§
315(d), 315(e), 325(d). Under the AIA, Congress mandated the instance where
issue preclusion is to be applied by the Board—preclusive effect is given to final
decisions on the same claim of the same patent. 35 U.S.C. § 315(e).2
Beyond that application of statutory estoppel, the AIA gives the agency
discretion whether to apply estoppel in other limited situations. For example, the
AIA permits simultaneous IPR proceedings by a petitioner, and the Director has
discretion to manage co-pending matters. 35 U.S.C. § 315(d). Moreover,
2
Bungie failed to establish unpatentability of claims 2, 3, 7, 8, 12-18, and 20 of the
’998 patent in IPR2015-01325, and did not appeal this final written decision. See
Ex. 1063, 70. Should the Board conclude that these proceedings are not timebarred, it should conclude that Bungie is estopped under 35 U.S.C. § 315(e)(1)
from maintaining its challenges of these claims on remand in IPR2015-01321.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-14-
Congress gave the USPTO authority to determine when and whether to give
preclusive effect to its own prior decisions. See 35 U.S.C. § 325(d). But the
USPTO has not implemented any rule or issued any precedential decisions on the
application of estoppel to situations other than those mandated in § 315(e).
Without rulemaking or other guidance to implement non-statutory estoppel, the
Director has not authorized use of issue preclusion by the Board.
In contrast, Congress expressly provided for broad application of commonlaw estoppel principles in the context of the trademark statute, specifically in 15
U.S.C. § 1069 which states “n all inter partes proceedings equitable principles of
laches, estoppel, and acquiescence, where applicable may be considered and
applied.” No statutory analogue exists for the PTAB during inter partes reviews.
Had Congress intended the AIA to require broader application of common-law
issue preclusion principles beyond § 315(e), it could have provided the PTAB with
the same statutory authority to do so as the trademark statute. It did not.
III. BUNGIE FAILS TO CARRY ITS BURDEN OF ESTABLISHING
THAT ACTIVSION IS NOT AN RPI TO BUNGIE’S PETITIONS
With no relevant evidence to refute Worlds’ RPI challenge, Bungie cannot
carry its burden of establishing that it was the sole RPI. As the Federal Circuit
acknowledged, “Worlds presented more than enough evidence to sufficiently put
this issue into dispute.” Worlds Inc., 903 F.3d at 1244 n.8. With this issue
squarely in dispute, “the Board was required to make any factual determinations
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-15-
necessary to evaluate whether Bungie had satisfied its burden to demonstrate that
its petition was not time-barred based on the complaints served upon Activision,
the alleged real party in interest.” Id. at 1246. Bungie cannot prevail.
A. Bungie Has No Relevant Evidence to Carry Its Burden
On remand, Bungie came forward with no additional evidence, and in fact
blames the Board for the lack of record evidence, stating the “Board declined
Bungie’s offer to provide additional evidence that Activision did not fund or
control the IPRs.” Bungie Br., 21 n.3. But Bungie steadfastly refused to provide
such evidence while the record was open, and failed to establish “good cause”
under the Board’s Standard Operating Procedure 9 to reopen the record on remand.
Moreover, Bungie argued on remand that no further testimonial evidence was
necessary for the Board to decide the issues before it. See Paper 48, 7.
Bungie now points to three pieces of “evidence” that allegedly show that
“Bungie acted independently in filing the IPRs for its own benefit.” Bungie Br.,
15. Bungie relies upon (1) the Agreement, executed in 2010, (2) “the timing of
Bungie’s filings, and [3] Bungie’s independent settlement efforts.” Bungie Br., 22;
but see Ex. 3001, 1 (conceding that this third category of “evidence” is actually
attorney argument). No record evidence disproves Activision’s status as an RPI,
and Bungie cannot carry its burden of proof.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-16-
1. The Agreement Executed in 2010 Cannot Prove That
Activision is Not an RPI in 2015
The 2010 Agreement cannot prove that Activision imparted no influence
over Bungie’s IPR petitions in 2015. Bungie states that the “[A]greement did not
provide Activision the opportunity to control Bungie’s IPRs.” Bungie Br., 20. But
this argument assumes without evidence that the parties treated these IPRs (or their
preparations) in 2015 as outside the scope of the Agreement. Without evidence
establishing the contrary, the sole supportable finding is that the Agreement
offered Activision at least an opportunity to review and approve Bungie’s IPR
petition work before the petitions were filed. Hence, Activision was an RPI, and
Bungie’s IPR petitions are time-barred under 35 U.S.C. § 315(b).
As before, Bungie’s Brief relies heavily on unsupported argument regarding
how Bungie interprets the Agreement. Bungie argues that “these IPRs are not
legal clearance reviews of a product during development as provided for in the
DevPub Agreement.” Bungie Br., 20 (emphasis in original). That argument has
no evidentiary support, and overlooks that clearance reviews of the Destiny
product vis-à-vis the Worlds patents include an infringement analysis of Destiny,
and a validity analysis of the Worlds patents. See Commil USA, LLC v. Cisco Sys.,
Inc., 135 S. Ct. 1920, 1929 (2015) (“To say that an invalid patent cannot be
infringed . . . is in one sense a simple truth, both as a matter of logic and
semantics.”). Indeed, Bungie’s underlying validity analysis leading to these IPR
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-17-
petitions would have constituted “legal reviews” under Section 7A.15(j) of the
Agreement, as the reviews were conducted to clear Destiny from Worlds’ patents.
See Oral Arg. at 28:46-29:01 (Judge Taranto noting that killing a patent is one of
three ways to “clear” intellectual property). Bungie has never introduced evidence
to contradict this reasonable and supportable interpretation of the Agreement.
Further, there is no evidence that Activision and Bungie elected (or agreed)
not to treat any IPR preparation—such as prior art searches, claim construction and
invalidity analyses, claim charts, expert consulting, and formulating and drafting
the petition’s challenges—as “legal reviews” under Section 7A.15(j) of the
Agreement. The Agreement executed in 2010 cannot affirmatively prove how the
parties behaved, or what interpretation they gave to the Agreement, in 2015.
Addressing the Agreement’s indemnification clause, Bungie states that this
does not give Activision the right to control Bungie’s IPRs. Without evidence
establishing whether indemnification was actually demanded by Activision or
accepted by Bungie,3
Bungie states that the Agreement “provides Bungie with the
right to assume the defense of claims arising out of ‘any infringement of a third
party’s rights in Intellectual Property cause’ by a Destiny videogame and provides
3
Activision withheld discovery until Worlds would state whether it intended to add
additional products, including Destiny, as accused products. See Ex. 2004, 1. It
has not been rebutted that Activision communicated Worlds’ letter to Bungie.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-18-
that Bungie is solely responsible for any of its costs relating to such defense.”
Bungie Br., 20-21. But an indemnification clause written in 2010 does not explain
the nature of Activision and Bungie’s communications regarding Destiny, the
Worlds patents, or these IPRs.
Executed five years before Bungie’s IPRs were filed, the Agreement does
not affirmatively disprove Activision’s status as an RPI. Rather, the correct
Agreement interpretation confirms that Activision had the opportunity to review
and approve Bungie’s “legal reviews” of Destiny “to ensure that all Intellectual
Property [including the Worlds patents] and other rights are fully cleared for use.”
See Ex. 2002, Section 7A.15(j); Worlds Inc., 903 F.3d at 1244 n.8.
2. The Timing of Bungie’s Petitions Does Not Establish That
Activision is Not an RPI
Bungie also argues that the timing of its petitions “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.”
Bungie Br., 22. Bungie correctly places focus on the timing of its petitions, but
draws the wrong conclusion. The petition timing, coming after Worlds’ letter,
indicates that Activision’s communications to Bungie triggered Bungie’s filings.
But Bungie fails to address the looming questions that have never been answered:
how did Bungie learn of Worlds’ letter, and what communications occurred
between Activision and Bungie leading up to Bungie’s petition filings? Even the
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-19-
Federal Circuit included the date of Worlds’ litigation letter, before the filing of
Bungie’s petitions, among the evidence that “sufficiently put this issue [of RPI]
into dispute.” Worlds Inc., 903 F.3d at 1244, 1244 n.8.
3. The Board Should Ignore Bungie’s Attorney Argument
Regarding a Self-Serving Settlement Attempt
Bungie’s improper attempt to enter settlement discussions into the record
has numerous problems. First, Bungie’s attorneys represent that settlement
discussions occurred in late 2018. Any such discussions have no probative value
on whether Activision was an RPI to petitions filed in 2015. Second, with the
exception of limited “noncontroversial evidence,” the Board has ordered that “the
evidentiary record remains closed.” Paper 48, 8. Bungie’s inclusion of what they
contend are independent settlement efforts should be disregarded. Third, Bungie
has confirmed that its statements on settlement discussions are, in fact, attorney
argument, not evidence. Ex. 3001, 1.4
Finally, such self-serving statements, timed
after the Federal Circuit’s decision and presumably made in anticipation of
Bungie’s remand arguments, have no probative weight. Collectively, Bungie’s
4
Even Bungie seems confused by what it is trying to accomplish with Statement of
Material Facts (SMF) Nos. 7-11, having improperly argued that those statements
are evidence in its Brief (Bungie Br., 22), yet characterizing them as attorney
argument in a separate communication to the Board. See Ex. 3001 at 1.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-20-
argument based on settlement attempts in late 2018 cannot establish that Activision
was not an RPI to petitions filed in 2015.
B. Bungie Ignores the Federal Circuit’s Specific Instructions and
Fails to Apply the Legal Test for RPI Set Forth in AIT
Snubbing the Federal Circuit’s instructions and focusing its analysis on
WesternGeco, Bungie repeatedly and inaccurately addresses the “privy” factor
rather than the RPI question. See, e.g., Bungie’s Brief at 25-26. As the Federal
Circuit has explained, “n WesternGeco LLC v. ION Geophysical Corp., we shed
additional light on the meaning of ‘privy’ in the context of § 315(b), but did not
elaborate on the scope of ‘real party in interest’ because the patent owner focused
on privity as the key basis of its time-bar challenge.” AIT, 897 F.3d at 1347
(emphasis added). AIT is the leading case on RPI. Under AIT’s test, Bungie
cannot refute that Activision was an RPI.
AIT discusses many relevant facets of the RPI analysis. The “focus of the
[RPI] inquiry is on the patentability of the claims challenged in the IPR petition,
bearing in mind who will benefit from having those claims canceled or
invalidated.” AIT, 897 F.3d at 1348 (emphasis added); see also id., 1349 (“the
common law seeks to ascertain who, from a ‘practical and equitable’ standpoint,
will benefit from the redress that the chosen tribunal might provide.”). As Bungie
noted, Bungie was never a named party to the Activision Litigation, and its Destiny
product was never formally added as an accused product. Ex. 1064, 1-2; Bungie
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-21-
Br., 17-18. Clearly Activision, having been time-barred from filing IPRs against
the Worlds patents, would benefit more than Bungie from Bungie’s IPRs.
AIT also states that determining “whether a non-party is [an RPI] demands a
flexible approach that takes into account both equitable and practical
considerations, with an eye toward determining whether the non-party is a clear
beneficiary that has a preexisting, established relationship with the petitioner.”
AIT, 897 F.3d at 1351. The evidence here shows that Activision is a clear
beneficiary having a preexisting commercial relationship with Bungie to develop
and publish the Destiny game, the common property covered by the Agreement
and also identified in Worlds’ letter to Activision. See Ex. 2002, Ex. 2004.
Further, looking only to Bungie’s own interest in filing the IPRs is too
narrow. Section 315(b) “bars petitions where proxies or privies [or RPIs] would
benefit from an instituted IPR, even where the petitioning party might separately
have its own interest in initiating an IPR.” AIT, 897 F.3d at 1347 (emphasis
added). AIT also looks to other evidence establishing a petitioner’s motivation for
filing an IPR. AIT, 897 F.3d at 1352 n.4. There, facts in evidence spoke “directly
on the issue of whether, and under what circumstances” RPX took its client’s
interests “into account when determining whether to file IPR petitions.” Id. at
1353. Here, Bungie is on worse footing than RPX—there is no evidence to refute
that Bungie was motivated by its commercial relationship, an indemnification
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-22-
obligation, and/or communications with Activision when filing its IPR petitions.
Indeed, the Federal Circuit reversed the Board in AIT, noting that the point
of the RPI analysis is to “probe the extent to which [the unnamed party] has an
interest in and will benefit from [the petitioner’s] actions, and inquire whether [the
petitioner] can be said to be representing that interest after examining its
relationship with” the unnamed party. AIT, 897 F.3d at 1353. Bungie’s refusal to
introduce evidence in the record has impeded the Board’s ability to probe that
relationship. The remaining evidence—the Agreement and Bungie’s timing for
filing its petitions—favors Worlds, not Bungie. Worlds Inc., 903 F.3d at 1244 n.8.
Additional AIT factors also exist here. In AIT, “Salesforce and RPX had
overlapping members on their respective boards of directors.” AIT, 897 F.3d at
1354. Here, Activision has “the right to designate one person to attend and
participate as a non-voting observer in all meetings of the Board of Directors of”
Bungie during the Agreement’s Development Term. Ex. 2002, Sec. 18.2.
Moreover, the absence of any express agreement by Bungie to file IPR petitions on
Activision’s behalf is not conclusive that Activision was not an RPI. AIT, 897 F.3d
at 1354 (“a non-party to an IPR can be a real party in interest even without entering
into an express or implied agreement with the petitioner to file an IPR petition.”).
In AIT, the Federal Circuit concluded that the evidence indicates “that the
very challenges to validity included in the IPR petitions were challenges Salesforce
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-23-
would like to have made if not time-barred from doing so.” AIT, 897 F.3d at 1355.
The overlap between Bungie’s challenged claims and the claims at issue in the
Activision Litigation here confirm the same conclusion vis-à-vis Bungie and
Activision. See, e.g., Ex. 2006, 1 (identifying the asserted claims in litigation as
’856 patent claim 1; ’690 patent claims 1-20; ’558 patent claims 4-9; ’501 patent
claims 1-8, 10, 12, 14-16; and ’998 patent claims 1-3, 7, 8, 11-20).
Finally, Bungie’s actions before the Board suggest that Bungie, at best,
engaged in willful blindness by ascertaining Activision’s desire to have the
asserted patents challenged in IPR by Bungie, while taking “efforts to avoid
obtaining an express statement of such desires.” AIT, 897 F.3d at 1355. This
would explain Bungie’s counsel’s unsworn statement that any efforts into
discovery would have been “an exercise in futility.” Ex. 2001, 32:5-7.
In AIT, the Federal Circuit reversed the Board’s decision on RPI because
nothing in that case’s evidence contradicted “AIT’s theory that RPX filed IPR
petitions challenging the two patents asserted in the Salesforce action to benefit
Salesforce, where Salesforce itself was time-barred from filing petitions.” AIT,
897 F.3d at 1356. The same can be said in this proceeding; nothing in the record
contradicts the evidence that Bungie challenged the Worlds patents that were
asserted against Activision, knowing that Activision would benefit, and where
Activision itself was time-barred from filing its own petitions.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-24-
C. Bungie Attempts to Avoid the Proper RPI Conclusion By
Invoking Due Process Without Any Evidence
Although not transparent about its strategy, Bungie casts aspersions on the
AIT test as if it were Worlds’ own creation rather than the Federal Circuit’s.
Bungie argues, “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.” Bungie Br., 25. But this is the AIT
test that the Federal Circuit has instructed the Board to apply here. Worlds, 903
F.3d at 1248. Further, AIT makes clear that the six Taylor categories are not the
exclusive ways to determine whether a non-petitioner is an RPI; a more “flexible
approach” must be used. AIT, 897 F.3d at 1342-43, 1351. It would be a direct
violation of the Federal Circuit’s order not to apply AIT’s test to this case.
Perhaps because the AIT test conclusively establishes Activision to be an
RPI, Bungie advances a due process argument, stating that RPI cannot be applied
without a due process exception under common law. Bungie Br., 25-26. This
argument has many flaws. First, Bungie bears the burden of proof, and no
evidence exists to protect Bungie under due process. In other words, the lack of
record evidence, which prohibits Bungie from refuting that Activision is an RPI,
cannot simultaneously create a due process exception to the AIT test, particularly
since any requisite evidence is in Bungie’s control. Bungie Br., 16-17.
Second, Bungie cites to Unified Patents v. Realtime Adaptive Streaming,
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-25-
LLC, IPR2018-00883, Paper 29 (PTAB Oct. 11, 2018), relying on the Board’s
conclusion there that was “no evidence of control, direction, or direct financing of
the IPR” by Unified’s client. Bungie Br., 26. But Bungie’s manner of raising this
case overlooks the clear distinction. In Unified, the Board had evidence to reach
its conclusion. Id. at 12-16. Here, there is no such evidence to support a similar
finding. Additionally, unlike in Unified, there is a time-barred party here, and at
least circumstantial evidence that the time-barred party communicated with Bungie
regarding the challenged patents prior to the petition filings. See id. at 17.
Third, Bungie argues that its relationship with Activision “is directed to
selling videogames, not filing IPRs or circumventing the one-year bar.” Bungie
Br., 26. But the 2010 Agreement does not prove the nature of communications
between Bungie and Activision related to the IPR petition filings in 2015. Unlike
in Unified, there is no evidence here to conclude that Activision had no control,
direction, or financing of the IPR petitions. To the contrary, the Agreement
establishes conclusively that Activision possessed at least an opportunity to review
and approve/influence Bungie’s IPRs based on, for example, Section 7A.15(j).
Bungie has no evidence that Activision rejected this opportunity.
Fourth and finally, Bungie’s argument based on its indemnification
obligation (see Bungie Br., 27) is misplaced, as its indemnification clause supports
the existence of “privity” here. See Section III.D, infra.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-26-
D. Activision is also a Privy of Bungie in These IPR Petitions
Bungie’s relationship with Activision also supports a finding that Activision
is a privy of Bungie’s for the purposes of these IPR petitions. As Senator Schumer
stated in Senate debates, “[a] ‘privy’ is a party that has a direct relationship to the
petitioner with respect to the allegedly infringing product or service.” 157 Cong.
Rec. S5432 (Sept. 8, 2011) (statement of Sen. Schumer); see also AIT, 897 F.3d at
1347; WesternGeco LLC, 889 F.3d at 1318 (“privity, as used in the AIA, ‘takes
into account the “practical situation,” and should extend to parties to transactions
and other activities relating to the property in question.’”) (quoting 157 Cong. Rec.
S1376 (daily ed. March 8, 2011) (statement of Sen. Kyl). Activision and Bungie
are both parties to the Agreement, which covers their development, marketing, and
publication of the Destiny game, and Activision received Worlds’ letter identifying
Destiny as a potentially infringing product in the Activision Litigation. These facts
confirm that Senator Schumer’s and Senator Kyl’s statements describe the
relationship between Activision and Bungie here, with the focus squarely on
Destiny as the common property in question.
Focusing exclusively on control, Bungie argues that “[p]reclusion from a
suit thus attaches to an indemnitor who controls that suit.” Bungie Br., 28
(emphasis in original). But even WesternGeco states that “‘control’ is not the
exclusive analytical pathway for analyzing privity.” WesternGeco, 889 F.3d at
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-27-
1320. “[P]re-existing legal relationships” are “additional considerations” to the
privity analysis. Id. The Agreement between Bungie and Activision constitutes
such a legal relationship weighing in favor of Activision as privy.
WesternGeco’s discussion of indemnification is also relevant. There, the
Federal Circuit deferred to the Board’s finding that the indemnification provisions
in that case were “non-specific,” as “[n]one of the correspondence relating to the
indemnity provision shows an expectation that ION would be responsible for
stepping in, or otherwise protecting PGS from a patent infringement suit.”
WesternGeco, 889 F.3d at 1321. Unlike the indemnification provisions in
WesternGeco, which “included options by the ION subsidiary to [only] modify or
replace the equipment if an infringement claim was made against PGS,” (id. at
1321), Bungie admits that “nder the DevPub Agreement, Bungie, the developer
of the Destiny videogame, is responsible for defense of intellectual property claims
against Destiny.” Bungie Br., 20. Bungie also admits that the “Agreement
provides Bungie with the right to assume the defense of claims arising out of ‘any
infringement of a third party’s 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.” Bungie Br., 20-21.5
This establishes privity between
5
Under Section 15.1 of the Agreement, Bungie’s indemnification obligation is not
triggered only by formal additions to lawsuits, but by “Claims,” which are defined
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-28-
Activision and Bungie here. See Intel Corp. v. U.S. Int’l Trade Comm’n, 946 F.2d
821, 839 (Fed. Cir. 1991) (holding that “an indemnification agreement, in other
cases, has alone been enough to find privity.”).
Under WesternGeco, Intel, and according to Bungie’s own admissions
regarding the indemnification provisions of the Agreement, Activision is a privy of
Bungie. For this reason as well, Bungie’s petitions were time-barred due to
Activision’s status as a privy.
E. Bungie’s Refusal to Submit Evidence Should Not Create an
Equitable Escape from the Statutory Requirement to Name all RPIs
Finally, Worlds understands that the Board is concerned about the equity of
Worlds’ litigation letter establishing Activision as an RPI to Bungie’s petitions.
Ex. 1051, 63:12-64:3. Initially, the letter itself reveals that Worlds’ intent in
sending it was not for nefarious purposes. Activision was “unwilling to go forward
with technical 30(b)(6) depositions or … complete their document production until
Defendants know whether Worlds intends to add additional accused products to the
lawsuit.” Ex. 2004, 1. Thus, when prodded by Activision to take a position on
accused products, Worlds identified Destiny only to Activision’s counsel (not to
to include “liabilities,” “claims,” “costs and expenses, including reasonable
attorney’s fees . . . arising out of or related to (i) any breach . . . of its
representations or warranties . . . or (ii) any infringement . . .”
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-29-
Bungie or Bungie’s counsel). Id. Any step to alert Bungie of this letter was solely
Activision’s doing. It was this step, not Worlds’ letter sent to Activision, that
cemented Activision’s relationship to these proceedings, and thereby confirmed
Activision’s status as an RPI to Bungie’s petitions.
Also weighing heavily in Worlds’ favor is that Bungie has the burden of
proof and burden of production, as a “petitioner is far more likely to be in
possession of, or to have access to, evidence relevant to the [RPI] issue than is a
patent owner.” Atlanta Gas Light Co, IPR2013-00453, Paper 88 at 8 (PTAB Jan. 6,
2015). Bungie has never denied that Activision alerted Bungie of Worlds’ letter or
that Activision’s communications led to Bungie’s decision to file its IPR petitions
against the Worlds patents. But the timing and contents of their communications
remain a black box. Arguing for equitable relief, Bungie also alleges that it “never
participated in or controlled any party’s participation in Worlds’s litigation against
Activision and, indeed, never had any opportunity to do so … .” Bungie Br., 29.
But this is also unsupported attorney argument. Had any evidence actually proven
that Activision was not an RPI to these IPRs, Bungie would have introduced it
below, or would have asked to reopen the record on remand. As Judge O’Malley
asked Bungie’s counsel during oral argument, “If this was such a pristine thing on
your part, and Activision had nothing to do with it, why was there no declaration?”
See Oral Arg. at 45:49-45:56. Now on remand, this question is still unanswered.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-30-
On the question of equity, the Board should also consider the equity of
Worlds having to defend patent validity in both District Court and before the
Board, despite the estoppel provisions of § 315(e). See AIT, 897 F.3d at 1349.
Further, the Destiny product had been in development since 2010 with an earliest
anticipated release date of 2013. Ex. 2002, 1-2. Served with Worlds’ initial
complaint in 2012, Activision chose to pursue its invalidity challenges against the
Worlds patents in District Court rather than at the Board.
Under these circumstances, Bungie’s refusal to enter evidence into the
record on Activision’s communications and involvement in the petitions should not
provide an equitable escape from the statutory requirement to identify all RPIs,
including those who are time-barred under § 315(b). Such a result would frustrate
future panels from making evidence-based determinations whether unnamed
parties are an RPI under the Federal Circuit’s “flexible approach.” See AIT, 897
F.3d at 1351. Rewarding Bungie’s withholding of evidence on RPI here can only
encourage future petitioners to do the same, and should not be tacitly endorsed as a
viable strategy.
IV. CONCLUSION
For these reasons, the Board should dismiss these proceedings.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-31-
Dated: February 4, 2019 /s/ Wayne M. Helge
Wayne M. Helge (Reg. No. 56,905)
UNITED STATES PATENT AND TRADEMARK OFFICE
____________
BEFORE THE PATENT TRIAL AND APPEAL BOARD
____________
BUNGIE, INC.,
Petitioner,
v.
WORLDS INC.,
Patent Owner.
_______________
Case IPR2015-01264 (Patent 7,945,856 B2)
Case IPR2015-01319 (Patent 8,082,501 B2)
Case IPR2015-01321 (Patent 8,145,998 B2)
____________
PATENT OWNER WORLDS INC.’S
RESPONSE ON REMAND FROM CAFC
- i -
TABLE OF CONTENTS
I. INTRODUCTION ........................................................................................... 1
II. ISSUE PRECLUSION DOES NOT BAR WORLDS’ ARGUMENTS ON
REAL PARTY IN INTEREST ........................................................................ 2
A. The Identification of All RPIs to Each Petition is Not an Identical
Issue Among the Appealed and Non-Appealed IPRs ........................... 2
1. Federal Circuit Cases Applying Issue Preclusion to Board
Decisions are Not On Point to the Differing Issues Here ................ 6
2. Identity of Issue Does Not Exist Where the Burden of Proof is
Different Between a First Action and a Second Action ................... 7
3. Bungie’s Argument for Issue Preclusion on the RPI Issue Would
Lead to Absurd Results .................................................................... 8
B. Bungie Fails to Meaningfully Address B&B Hardware’s Concern for
Quality, Extensiveness, and Fairness of Procedures Followed ............. 9
C. The Policy Behind Cygnus’s Exemplary Exception Applies Here ..... 11
D. The Solicitor’s Office Agrees That Common Law-Based Issue
Preclusion Does Not Apply at the PTAB ............................................ 12
III. BUNGIE FAILS TO CARRY ITS BURDEN OF ESTABLISHING THAT
ACTIVSION IS NOT AN RPI TO BUNGIE’S PETITIONS ...................... 14
A. Bungie Has No Relevant Evidence to Carry Its Burden ..................... 15
1. The Agreement Executed in 2010 Cannot Prove That Activision is
Not an RPI in 2015 ......................................................................... 16
2. The Timing of Bungie’s Petitions Does Not Establish That
Activision is Not an RPI .............................................
- ii -
B. Bungie Ignores the Federal Circuit’s Specific Instructions and Fails to
Apply the Legal Test for RPI Set Forth in AIT ................................... 20
C. Bungie Attempts to Avoid the Proper RPI Conclusion By Invoking
Due Process Without Any Evidence ................................................... 24
D. Activision is also a Privy of Bungie in These IPR Petitions ............... 26
E. Bungie’s Refusal to Submit Evidence Should Not Create an Equitable
Escape from the Statutory Requirement to Name all RPIs ................. 28
IV. CONCLUSION .............................................................................................. 30
- iii -
TABLE OF AUTHORITIES
Cases
A.B. Dick Co. v. Burroughs Corp.,
713 F.2d 700 (Fed. Cir. 1983), cert. denied, 464 U.S. 1042 (1984) ...........3, 9
Applications in Internet Time, LLC v. RPX Corp.,
897 F.3d 1336 (Fed. Cir. 2018) ............................................................. passim
Aruze Gaming Macau, Ltd. v. MGT Gaming, Inc.,
IPR2014-01288, Paper 13 (PTAB Feb. 20, 2015) .......................................... 5
Astoria Fed. Sav. & Loan Ass’n v. Solimino,
501 U.S. 104 (1991)....................................................................................... 13
Atlanta Gas Light Co. v. Bennett Regulator Guards, Inc.,
IPR2013-00453, Paper 88 (PTAB Jan. 6, 2015) ........................................... 29
B&B Hardware, Inc. v. Hargis Indus., Inc.,
135 S.Ct. 1293 (2015) ............................................................................... 9, 10
Clark v. Bear Stearns & Co.,
966 F.2d 1318 (9th Cir. 1992) ......................................................................... 7
Cobb v. Pozzi,
363 F.3d 89 (2d Cir. 2004) .............................................................................. 7
Commil USA, LLC v. Cisco Sys., Inc.,
135 S. Ct. 1920 (2015) ................................................................................... 16
FCC v. Schreiber,
381 U.S. 279 (1965)....................................................................................... 13
Guenther v. Holmgreen,
738 F.2d 879 (7th Cir. 1984) ........................................................................... 7
In re Cygnus Telecom. Tech., LLC Patent Litig.,
536 F.3d 1343 (Fed. Cir. 2008) .......................................................... 9, 11, 12
Intel Corp. v. U.S. Int’l Trade Comm’n,
946 F.2d 821 (Fed. Cir. 1991) ....................................................................... 28
- iv -
Johnson v. Whitehead,
647 F.3d 120 (4th Cir. 2011) .......................................................................... 13
Killep v. Office of Personnel Mgmt.,
991 F.2d 1564 (Fed. Cir. 1991) ..................................................................... 13
Litttlejohn v. United States,
321 F.3d 915 (9th Cir. 2003) ........................................................................... 7
MaxLinear, Inc. v. CF Crespe LLC,
880 F.3d 1373 (Fed. Cir. 2018) ....................................................................... 6
Nestle USA Inc. v. Steuben Food, Inc.,
884 F.3d 1350 (Fed. Cir. 2018) ...................................................................6, 7
Unified Patents v. Realtime Adaptive Streaming, LLC,
IPR2018-00883, Paper 29 (PTAB Oct. 11, 2018) ......................................... 25
VirnetX Inc. v. Apple, Inc.,
909 F.3d 1375 (Fed. Cir. 2018) ...................................................................2, 4
WesternGeco LLC v. ION Geophysical Corp.,
889 F.3d 1308 (Fed. Cir. 2018) ........................................................ 20, 26, 27
WiFi One LLC v. Broadcom Corp.,
887 F.3d 1329 (Fed. Cir. 2018) ..................................................................... 10
Worlds Inc. v. Bungie, Inc.,
903 F.3d 1237 (Fed. Cir. 2018) ............................................................. passim
XY, LLC v. Trans Ova Genetics, L.C.,
890 F.3d 1282 (Fed. Cir. 2018) ....................................................................... 6
Statutes
15 U.S.C. § 1069 ...................................................................................................... 14
35 U.S.C. § 312(a)(2) .............................................................................................3, 5
35 U.S.C. § 315(b) ........................................................................................... passim
35 U.S.C. § 315(d) ................................................................................................... 13
35 U.S.C. § 315(e) ...................................................................................... 13, 14, 30
- v -
35 U.S.C. § 315(e)(1) ............................................................................................... 13
35 U.S.C. § 325(d) ............................................................................................ 13, 14
Rules
37 C.F.R. § 42.8(b)(1) ................................................................................................ 3
37 C.F.R. § 42.20(c) ................................................................................................... 4
37 C.F.R. § 42.24(b) .................................................................................................. 2
37 C.F.R. § 42.51(b)(2)(i) ........................................................................................ 10
Other Authorities
157 Cong. Rec. S1376 (daily ed. March 8, 2011) (statement of Sen. Kyl) ............. 26
157 Cong. Rec. S5432 (Sept. 8, 2011) (statement of Sen. Schumer) ...................... 26
18 Charles Alan Wright, et al., Federal Practice and Procedure § 4422 (2d ed.
2002) ................................................................................................................ 8
18 James Wm. Moore, et al., Moore’s Federal Practice § 132.02[4][e] (3d ed.
1997) ................................................................................................................ 8
Brief for Intervenor, Biodelivery Sciences Int’l, Inc. v. Monosol RX, LLC,
2017 WL 2666499 (Fed. Cir. 2017) .............................................................. 12
Federal Rule of Civil Procedure 26 .................................................................... 9, 10
Restatement (Second) of Judgments § 27 .................................................................. 9
Restatement (Second) of Judgments § 28(4) (1982) ................................................. 7
Worlds Inc. v. Bungie, Inc. Oral Argument Recording (Mar. 9, 2018), available at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2017-1481.mp3 ....10,
17, 29
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-1-
I. INTRODUCTION
Bungie’s opening sentence in its Brief (“Bungie Br.”) raises the ultimate
question here: what communications from Activision caused Bungie to file six
different IPR petitions against Worlds’ patents, challenging the very claims at issue
in the Activision Litigation? Bungie all but admits the communications occurred,
but without evidence, it cannot carry its burden of proving that Activision is not an
unnamed real party in interest (“RPI”) to Bungie’s petitions under the Federal
Circuit’s test in Applications in Internet Time, LLC v. RPX Corp., 897 F.3d 1336
(Fed. Cir. 2018) (“AIT”). Because Worlds served Activision with a complaint for
infringement of the challenged patents more than a year before Bungie’s petitions
were filed, Bungie’s petitions are time-barred due to Activision’s RPI status. See
Ex. 2007 at 4-7; Ex. 2003; Ex. 2010 at 10-13; Ex. 2011.
Evidence of Bungie and Activision’s pre-existing legal relationship is
established by the DevPub Agreement (Ex. 2002, “Agreement”) dated April 16,
2010, under which Bungie developed “Destiny,” a game published by Activision in
2014. Ex. 2002 at 1 (Recital B), Ex. 1064, ¶¶2-3. On its face, the Agreement
establishes that Activision had at least the opportunity to review and approve
arguments advanced in this IPR.
This evidence includes Section 7A.15(j) (Bungie must conduct “legal
reviews” of Destiny to “ensure that all Intellectual Property and other rights are
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-2-
fully cleared for use”1
and such legal reviews are subject to “prior review and
approval by Activision, (budget to [be] mutually approved).”); Section 14.1.2
(Bungie warrants that “the use, development, distribution and publishing” of the
product intellectual property “shall not infringe upon or violate the rights of, nor
require consent of, any other party”); and Section 15.1, which requires Bungie to
indemnify Activision for “Claims” (not just lawsuits, see Section 15.1) of patent
infringement against Destiny.
Bungie’s Brief fails to establish that Worlds is estopped from raising this
RPI dispute on remand, fails to carry its burden of establishing that Activision is
not an RPI to Bungie’s petitions, and fails to meaningfully address key points
required by the Federal Circuit decision. Further, it would be improper for Bungie
to raise its leading arguments on these issues for the first time on Reply. See 37
C.F.R. § 42.24(b).
II. ISSUE PRECLUSION DOES NOT BAR WORLDS’ ARGUMENTS
ON REAL PARTY IN INTEREST
A. The Identification of All RPIs to Each Petition is Not an Identical
Issue Among the Appealed and Non-Appealed IPRs
It has been long-held that for issue preclusion to apply, the law requires that
the issues be identical. VirnetX Inc. v. Apple, Inc., 909 F.3d 1375, 1377 (Fed. Cir.
2018); see also A.B. Dick Co. v. Burroughs Corp., 713 F.2d 700, 702 (Fed. Cir.
1
“Intellectual Property” includes patents and patent rights. Ex. 2002, Sec. 6.1.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-3-
1983), cert. denied, 464 U.S. 1042 (1984). As a critical defect in its argument for
issue preclusion, Bungie fails to establish that the issue of whether Activision was
an RPI to each petition was an identical issue among all petitions.
In its opinion remanding these IPRs back to the Board, the Federal Circuit
took the view that the RPI determination may be unique to each petition. Worlds
Inc. v. Bungie, Inc., 903 F.3d 1237, 1247 (Fed. Cir. 2018) (“But in our view, the
determination of whether a party is a real party in interest may differ from one IPR
to the next, even among a set of seemingly related IPRs.”). Bungie fails to deal
with this statement, and instead glosses over the identical issue requirement by
concluding without analysis that “[t]he RPI issue in the final IPRs was identical to
the RPI issue in the appealed IPRs.” Bungie Br., 3. It goes on to say that “n
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.” Id. But just as the Federal Circuit acknowledged, the identification of a
petition’s RPIs is specific to that petition. This is in accordance with governing
statute. See 35 U.S.C. § 312(a)(2) (requiring each petition to identify all real
parties in interest to that petition). The Federal Circuit similarly explained that
“[c]orrectly identifying all real parties in interest with respect to each petition is
important, as the determination may impact whether a petition may be instituted.”
Worlds, Inc., 903 F.3d at 1240 (emphasis added).
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-4-
Indeed, the Federal Circuit’s view was correct under the law: the questions
of whether Activision was an RPI to the petitions in IPR2015-01268, -01269, and -
01325 are not identical to whether Activision was an RPI to the petition in
IPR2015-01264, the petition in IPR2015-01319, or the petition in IPR2015-01321.
More precisely, the issue in IPR2015-01264 is whether Activision was an RPI to
the petition filed in IPR2015-01264. The issue in IPR2015-01319 is whether
Activision was an RPI to the petition filed in IPR2015-01319. The issue in
IPR2015-01321 is whether Activision was an RPI to the petition filed in IPR2015-
01321. These are not identical issues to issues in the unappealed IPRs.
This is logical. Two petitions filed by the same petitioner could have
different RPIs. For example, a non-party who neither funds nor controls a first
petition could later fund and exert control over a second petition filed by the same
petitioner. The RPI question in the second proceeding is unique to that proceeding.
Moreover, it is Bungie’s burden to set-out in its opening brief how the RPI
issue is identical between IPR2015-01268, -01269 and -01325 and the appealed
IPRs. Bungie avoids such a comparison, and instead argues that since Worlds’ RPI
arguments were the same in each IPR and the result was the same, issue preclusion
applies. Bungie Br., 3-5. That is not the law. In order to apply issue preclusion,
the burden is on Bungie to affirmatively show that the legal issue was identical.
See VirnetX Inc., 909 F.3d at 1377; 37 C.F.R. § 42.20(c).
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-5-
Bungie confuses the legal issue with the outcome reached by the Board in
each IPR, but later acknowledges that each final written decision was specific to
that IPR, stating that the “Board entered a different final written decision … in
each case.” Bungie Br., 5. Bungie made similar concessions regarding the
Board’s institution decision issued in “each case.” Id. at 4. More precisely, the
Board concluded in each IPR that Activision was not an unnamed RPI to that IPR
petition. That does not mean that the legal issue—whether Activision was an RPI
to any petition—was identical for all petitions. See Worlds Inc., 903 F.3d at 1247
(“[I]n our view, … a real party in interest may differ from one IPR to the next …
.”). Statute requires that the issues are different. 35 U.S.C. § 312(a)(2).
This result squares with the Board’s prior analysis. As the Board has
previously held, “RPI is the relationship between a party and a proceeding.” Aruze
Gaming Macau, Ltd. v. MGT Gaming, Inc., IPR2014-01288, Paper 13 at 11 (PTAB
Feb. 20, 2015) (emphasis in original). Whether Activision has a relationship to
each proceeding is a unique question for each proceeding (see 35 U.S.C. §
312(a)(2)), and issue preclusion cannot attach to any one proceeding based on a
relationship (or lack thereof) between Activision and a separate proceeding.
This outcome is also wholly consistent with the statute and with the Federal
Circuit’s observation that the determination of whether a party is an RPI in one
IPR may differ from whether that party is an RPI in the next IPR, even where the
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-6-
IPRs appear to be related. Worlds Inc., 903 F.3d at 1247. Because the RPI
analysis is specific to each petition, there is no identical issue against which issue
preclusion would apply here. The Board should evaluate these separate issues and
determine that Activision is an RPI to each petition currently before it.
1. Federal Circuit Cases Applying Issue Preclusion to Board
Decisions are Not On Point to the Differing Issues Here
Bungie identifies cases where issue preclusion has been applied by the
Federal Circuit to Board decisions. See Bungie Br., 7. Unlike this proceeding,
those cases actually involved identical issues and are therefore distinguishable.
See XY, LLC v. Trans Ova Genetics, L.C., 890 F.3d 1282, 1294 (Fed. Cir. 2018)
(identical issue was patent invalidity); MaxLinear, Inc. v. CF Crespe LLC, 880
F.3d 1373, 1376-77 (Fed. Cir. 2018) (“the collateral-estoppel effect of an
administrative decision of unpatentability generally requires the invalidation of
related claims that present identical issues of patentability.”) (emphasis added).
In Nestle USA Inc. v. Steuben Food, Inc., 884 F.3d 1350 (Fed. Cir. 2018),
the common issue was construction of “aseptic,” where the claims at issue in two
commonly owned patents used the term “aseptic” “in a similar fashion.” Id. at
1351. “More critically, the two patents also provide[d] identical lexicography for
the term ‘aseptic’ in their specifications.” Id. at 1352 (emphasis added). Ensuring
that the issue was identical across two patents, the Federal Circuit noted that
“[n]either party has pointed to any material different between the two patents or
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-7-
their prosecution histories that would give rise to claim construction issues in this
appeal different from those raised in the prior appeal.” Id.
Unlike in XY, MaxLinear, and Nestle, the statutory RPI analysis is specific to
each petition, and there is no identical issue against which preclusion can apply.
2. Identity of Issue Does Not Exist Where the Burden of Proof
is Different Between a First Action and a Second Action
The Board’s previous handling of Bungie’s burden to prove RPI also bars
issue preclusion. Relitigating an issue is not precluded where the “adversary has a
significantly heavier burden [in the second action] than he had in the first action.”
Restatement (Second) of Judgments § 28(4) (1982). “To apply issue preclusion
[when the burden of proof is different in the second action] would be to hold, in
effect, that the losing party in the first action would also have lost had a
significantly different burden [been] imposed.” Id. at § 28, cmt. f.
Logically, “a shift or change in the burden of proof can render the issues in
two different proceedings non-identical,” thereby barring issue preclusion. Cobb v.
Pozzi, 363 F.3d 89, 113-14 (2d Cir. 2004) (citations omitted); Litttlejohn v. United
States, 321 F.3d 915, 923-24 (9th Cir. 2003); see also Clark v. Bear Stearns & Co.,
966 F.2d 1318, 1322 (9th Cir. 1992) (“estoppel does not preclude claims that have
a different burden of proof”); Guenther v. Holmgreen, 738 F.2d 879, 888 (7th Cir.
1984) (“issue preclusion may be defeated by shifts in the burden of persuasion or
by changes in the degree of persuasion required.”) (citation omitted)); see also 18
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-8-
Charles Alan Wright, et al., Federal Practice and Procedure § 4422 (2d ed. 2002);
18 James Wm. Moore, et al., Moore’s Federal Practice § 132.02[4][e] (3d ed.
1997) ( “issue preclusion does not apply when the party seeking to benefit from
preclusion has a significantly heavier burden in the subsequent action”).
Per the Federal Circuit, the Board’s prior decision put the burden of proof on
Worlds, or at best, was unknown, thus confirming that Bungie’s burden was
incorrectly low. Worlds Inc., 903 F.d at 1246. On remand, Bungie must carry the
burden. Under these facts, issue identity cannot be established, and issue
preclusion cannot apply based on the Board’s decisions in the unappealed IPRs.
3. Bungie’s Argument for Issue Preclusion on the RPI Issue
Would Lead to Absurd Results
Bungie also fails to recognize, as the Federal Circuit did, that different IPR
petitions could have different RPIs. Bungie’s argument—that the correct naming
of all RPIs to a petition is a common issue across multiple petitions—would lead to
absurd results. Consider a scenario where a petitioner fails to name a time-barred
party as an RPI to a first petition. If the Board denies the first petition as timebarred under § 315(b), the Board would deny subsequent petitions from that
petitioner without regard to the time-barred party’s relationship to those
subsequent petitions. This result cannot be correct, and Bungie offers no
explanation how the Board would avoid this absurd result.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-9-
B. Bungie Fails to Meaningfully Address B&B Hardware’s Concern
for Quality, Extensiveness, and Fairness of Procedures Followed
Even if the RPI issue were common among all IPRs (which it isn’t), this
issue has not been fully and fairly litigated, another requisite of issue preclusion.
See A.B. Dick Co., 713 F.2d at 702; In re Cygnus Telecom. Tech., LLC Patent
Litig., 536 F.3d 1343, 1349 (Fed. Cir. 2008). Bungie characterizes Worlds’
dissatisfaction with the original Board decision as “disagreement with the
decision” (Bungie Br., 8), but the Federal Circuit itself recognized the defect in the
Board’s weighing of argument over evidence. Worlds Inc., 903 F.3d at 1246
(Board may have placed the burden on Worlds, and its reliance on attorney
argument “seemed to outweigh the actual evidence presented by Worlds.”).
This defect implicates a concern raised by the Supreme Court in B&B
Hardware, Inc. v. Hargis Indus., Inc., 135 S.Ct. 1293 (2015). There, the Court
considered whether a TTAB finding in an opposition proceeding has preclusive
effect on a later federal court proceeding. Citing to the Restatement (Second) of
Judgments § 27, the Supreme Court recognized an exception to issue preclusion
where there were “differences in the quality or extensiveness of the procedures
followed” in a prior suit. Id. at 1303. In holding that estoppel applied to TTAB
proceedings, the Court emphasized the similar discovery procedures before the
TTAB and before federal district courts. Id. at 1300. In particular, noting that the
TTAB has adopted “almost the whole of Federal Rule of Civil Procedure 26,”
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-10-
(“FRCP 26”) the Court stated there was no “reason to doubt the quality,
extensiveness, or fairness” of the TTAB’s procedures because they were, for the
most part, exactly the same as a federal court’s. Id. at 1309.
Unlike in the TTAB, a clear distinction in procedures exists between the
PTAB and federal court. When Congress established the PTAB, it did not adopt
the broad discovery rules of FRCP 26; rather, “[d]iscovery in inter partes review
proceedings is more limited than in proceedings before district courts or even other
proceedings before the PTO. ” WiFi One LLC v. Broadcom Corp., 887 F.3d 1329,
1338 (Fed. Cir. 2018). Unlike the broad discovery standard of FRCP 26, “[t]he
Board’s rules provide that a party seeking additional discovery ‘must show that
such additional discovery is in the interest of justice.’” Id. (citing 37 C.F.R. §
42.51(b)(2)(i)). Here, the Board denied Worlds’ request for routine/additional
discovery despite Worlds having placed the RPI issue in dispute. Worlds Inc., 903
F.3d at 1244 n.8. This implicates questions of quality, extensiveness, and fairness,
particularly since it was Bungie’s burden to refute Activision’s status as RPI, not
Worlds’ burden to seek discovery to prove that status. See Oral Arg. at 47:31-
47:46 (Mar. 9, 2018), available at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2017-1481.mp3 (Judge
O’Malley stating, “But there’s a difference between allowing them discovery and
probing your position beyond attorney argument to require you to submit proofs…
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-11-
or additional proofs. There’s a difference between that.”).
Further, the Federal Circuit has already spoken on the quality, extensiveness,
and fairness of the Board’s RPI findings below, noting its “concern that the Board
may have relied on attorney argument as evidence that Activision was not
controlling or funding these IPRs” and “the Board’s apparent reliance on such
statements seemed to outweigh the actual evidence presented by Worlds.” Worlds,
Inc., 903 F.3d at 1246. If the Board were to apply issue preclusion on remand, it
would perpetuate this improper reliance on Bungie’s attorney argument over the
actual evidence presented by Worlds despite this clear defect in “quality,
extensiveness, or fairness” of procedures followed below.
C. The Policy Behind Cygnus’s Exemplary Exception Applies Here
Bungie also buries its discussion of In re Cygnus Telecom. Tech., which the
Federal Circuit cited as an exemplary exception to issue preclusion “where a party
did not appeal all cases consolidated in a multi-district litigation proceeding.”
Worlds, Inc., 903 F.3d at 1248. Bungie attempts to distinguish Cygnus on the basis
that the six IPRs here were not consolidated below at the Board. Bungie Br., 14.
Notwithstanding that this argument reinforces that the RPI question is unique to
each petition, Bungie overlooks that the six IPRs below had common schedules,
consolidated depositions, and a single, consolidated hearing.
More importantly, Bungie fails to address the underlying policy reason for
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-12-
the issue preclusion exception stated in Cygnus. As the Federal Circuit explained,
“[t]o adopt the defendants’ rule would promote judicial inefficiency and waste the
litigants’ resources, as it would require appellants to prosecute appeals against
every defendant in a multi-defendant case, even if there were strong practical or
legal reasons for narrowing the scope of the appeal.” Cygnus, 536 F.3d at 1350.
Here, in the three unappealed IPRs, Worlds successfully convinced the Board to
rule claims not unpatentable in final written decisions. See Ex. 1061, 135-36; Ex.
1062, 134; Ex. 1063, 70. Under Bungie’s theory, Worlds would have had to
appeal these decisions for the sole purpose of appealing RPI or risk application of
issue preclusion, even if Worlds was satisfied with its victorious defense of the
patentable claims. That Worlds is not pursuing its appellate rights against all
challenged patents should be no basis for preventing Worlds from pursuing those
rights against any of them. Under Cygnus, Bungie’s attempt to “promote judicial
inefficiency and waste the litigants’ resources” should be rejected.
D. The Solicitor’s Office Agrees That Common Law-Based Issue
Preclusion Does Not Apply at the PTAB
In its Brief as intervenor in Biodelivery Sciences Int’l, Inc. v. Monosol RX,
LLC, Case Nos. 2017-1265, -1266, -1268, 2017 WL 2666499 (Fed. Cir. 2017), the
USPTO Solicitor argued against common law issue preclusion at the Board. “[A]ll
authority pursuant to which an agency may act ultimately must be grounded in an
express grant from Congress.” Killep v. Office of Personnel Mgmt., 991 F.2d
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-13-
1564, 1569 (Fed. Cir. 1991). “While judicial preclusion rules ordinarily reflect the
common law, agency preclusion rules are creatures of statute. Courts must thus
refrain from imposing judge-made preclusion principles on agencies unless such a
course is dictated by statute.” Johnson v. Whitehead, 647 F.3d 120, 129 (4th Cir.
2011) (citing Astoria Fed. Sav. & Loan Ass’n v. Solimino, 501 U.S. 104, 108
(1991); FCC v. Schreiber, 381 U.S. 279, 290-91 (1965)). Congress, through the
America Invents Act (“AIA”), expressly established the bounds of issue preclusion
to be applied by the USPTO based on prior PTAB decisions. See 35 U.S.C. §§
315(d), 315(e), 325(d). Under the AIA, Congress mandated the instance where
issue preclusion is to be applied by the Board—preclusive effect is given to final
decisions on the same claim of the same patent. 35 U.S.C. § 315(e).2
Beyond that application of statutory estoppel, the AIA gives the agency
discretion whether to apply estoppel in other limited situations. For example, the
AIA permits simultaneous IPR proceedings by a petitioner, and the Director has
discretion to manage co-pending matters. 35 U.S.C. § 315(d). Moreover,
2
Bungie failed to establish unpatentability of claims 2, 3, 7, 8, 12-18, and 20 of the
’998 patent in IPR2015-01325, and did not appeal this final written decision. See
Ex. 1063, 70. Should the Board conclude that these proceedings are not timebarred, it should conclude that Bungie is estopped under 35 U.S.C. § 315(e)(1)
from maintaining its challenges of these claims on remand in IPR2015-01321.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-14-
Congress gave the USPTO authority to determine when and whether to give
preclusive effect to its own prior decisions. See 35 U.S.C. § 325(d). But the
USPTO has not implemented any rule or issued any precedential decisions on the
application of estoppel to situations other than those mandated in § 315(e).
Without rulemaking or other guidance to implement non-statutory estoppel, the
Director has not authorized use of issue preclusion by the Board.
In contrast, Congress expressly provided for broad application of commonlaw estoppel principles in the context of the trademark statute, specifically in 15
U.S.C. § 1069 which states “n all inter partes proceedings equitable principles of
laches, estoppel, and acquiescence, where applicable may be considered and
applied.” No statutory analogue exists for the PTAB during inter partes reviews.
Had Congress intended the AIA to require broader application of common-law
issue preclusion principles beyond § 315(e), it could have provided the PTAB with
the same statutory authority to do so as the trademark statute. It did not.
III. BUNGIE FAILS TO CARRY ITS BURDEN OF ESTABLISHING
THAT ACTIVSION IS NOT AN RPI TO BUNGIE’S PETITIONS
With no relevant evidence to refute Worlds’ RPI challenge, Bungie cannot
carry its burden of establishing that it was the sole RPI. As the Federal Circuit
acknowledged, “Worlds presented more than enough evidence to sufficiently put
this issue into dispute.” Worlds Inc., 903 F.3d at 1244 n.8. With this issue
squarely in dispute, “the Board was required to make any factual determinations
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-15-
necessary to evaluate whether Bungie had satisfied its burden to demonstrate that
its petition was not time-barred based on the complaints served upon Activision,
the alleged real party in interest.” Id. at 1246. Bungie cannot prevail.
A. Bungie Has No Relevant Evidence to Carry Its Burden
On remand, Bungie came forward with no additional evidence, and in fact
blames the Board for the lack of record evidence, stating the “Board declined
Bungie’s offer to provide additional evidence that Activision did not fund or
control the IPRs.” Bungie Br., 21 n.3. But Bungie steadfastly refused to provide
such evidence while the record was open, and failed to establish “good cause”
under the Board’s Standard Operating Procedure 9 to reopen the record on remand.
Moreover, Bungie argued on remand that no further testimonial evidence was
necessary for the Board to decide the issues before it. See Paper 48, 7.
Bungie now points to three pieces of “evidence” that allegedly show that
“Bungie acted independently in filing the IPRs for its own benefit.” Bungie Br.,
15. Bungie relies upon (1) the Agreement, executed in 2010, (2) “the timing of
Bungie’s filings, and [3] Bungie’s independent settlement efforts.” Bungie Br., 22;
but see Ex. 3001, 1 (conceding that this third category of “evidence” is actually
attorney argument). No record evidence disproves Activision’s status as an RPI,
and Bungie cannot carry its burden of proof.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-16-
1. The Agreement Executed in 2010 Cannot Prove That
Activision is Not an RPI in 2015
The 2010 Agreement cannot prove that Activision imparted no influence
over Bungie’s IPR petitions in 2015. Bungie states that the “[A]greement did not
provide Activision the opportunity to control Bungie’s IPRs.” Bungie Br., 20. But
this argument assumes without evidence that the parties treated these IPRs (or their
preparations) in 2015 as outside the scope of the Agreement. Without evidence
establishing the contrary, the sole supportable finding is that the Agreement
offered Activision at least an opportunity to review and approve Bungie’s IPR
petition work before the petitions were filed. Hence, Activision was an RPI, and
Bungie’s IPR petitions are time-barred under 35 U.S.C. § 315(b).
As before, Bungie’s Brief relies heavily on unsupported argument regarding
how Bungie interprets the Agreement. Bungie argues that “these IPRs are not
legal clearance reviews of a product during development as provided for in the
DevPub Agreement.” Bungie Br., 20 (emphasis in original). That argument has
no evidentiary support, and overlooks that clearance reviews of the Destiny
product vis-à-vis the Worlds patents include an infringement analysis of Destiny,
and a validity analysis of the Worlds patents. See Commil USA, LLC v. Cisco Sys.,
Inc., 135 S. Ct. 1920, 1929 (2015) (“To say that an invalid patent cannot be
infringed . . . is in one sense a simple truth, both as a matter of logic and
semantics.”). Indeed, Bungie’s underlying validity analysis leading to these IPR
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-17-
petitions would have constituted “legal reviews” under Section 7A.15(j) of the
Agreement, as the reviews were conducted to clear Destiny from Worlds’ patents.
See Oral Arg. at 28:46-29:01 (Judge Taranto noting that killing a patent is one of
three ways to “clear” intellectual property). Bungie has never introduced evidence
to contradict this reasonable and supportable interpretation of the Agreement.
Further, there is no evidence that Activision and Bungie elected (or agreed)
not to treat any IPR preparation—such as prior art searches, claim construction and
invalidity analyses, claim charts, expert consulting, and formulating and drafting
the petition’s challenges—as “legal reviews” under Section 7A.15(j) of the
Agreement. The Agreement executed in 2010 cannot affirmatively prove how the
parties behaved, or what interpretation they gave to the Agreement, in 2015.
Addressing the Agreement’s indemnification clause, Bungie states that this
does not give Activision the right to control Bungie’s IPRs. Without evidence
establishing whether indemnification was actually demanded by Activision or
accepted by Bungie,3
Bungie states that the Agreement “provides Bungie with the
right to assume the defense of claims arising out of ‘any infringement of a third
party’s rights in Intellectual Property cause’ by a Destiny videogame and provides
3
Activision withheld discovery until Worlds would state whether it intended to add
additional products, including Destiny, as accused products. See Ex. 2004, 1. It
has not been rebutted that Activision communicated Worlds’ letter to Bungie.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-18-
that Bungie is solely responsible for any of its costs relating to such defense.”
Bungie Br., 20-21. But an indemnification clause written in 2010 does not explain
the nature of Activision and Bungie’s communications regarding Destiny, the
Worlds patents, or these IPRs.
Executed five years before Bungie’s IPRs were filed, the Agreement does
not affirmatively disprove Activision’s status as an RPI. Rather, the correct
Agreement interpretation confirms that Activision had the opportunity to review
and approve Bungie’s “legal reviews” of Destiny “to ensure that all Intellectual
Property [including the Worlds patents] and other rights are fully cleared for use.”
See Ex. 2002, Section 7A.15(j); Worlds Inc., 903 F.3d at 1244 n.8.
2. The Timing of Bungie’s Petitions Does Not Establish That
Activision is Not an RPI
Bungie also argues that the timing of its petitions “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.”
Bungie Br., 22. Bungie correctly places focus on the timing of its petitions, but
draws the wrong conclusion. The petition timing, coming after Worlds’ letter,
indicates that Activision’s communications to Bungie triggered Bungie’s filings.
But Bungie fails to address the looming questions that have never been answered:
how did Bungie learn of Worlds’ letter, and what communications occurred
between Activision and Bungie leading up to Bungie’s petition filings? Even the
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-19-
Federal Circuit included the date of Worlds’ litigation letter, before the filing of
Bungie’s petitions, among the evidence that “sufficiently put this issue [of RPI]
into dispute.” Worlds Inc., 903 F.3d at 1244, 1244 n.8.
3. The Board Should Ignore Bungie’s Attorney Argument
Regarding a Self-Serving Settlement Attempt
Bungie’s improper attempt to enter settlement discussions into the record
has numerous problems. First, Bungie’s attorneys represent that settlement
discussions occurred in late 2018. Any such discussions have no probative value
on whether Activision was an RPI to petitions filed in 2015. Second, with the
exception of limited “noncontroversial evidence,” the Board has ordered that “the
evidentiary record remains closed.” Paper 48, 8. Bungie’s inclusion of what they
contend are independent settlement efforts should be disregarded. Third, Bungie
has confirmed that its statements on settlement discussions are, in fact, attorney
argument, not evidence. Ex. 3001, 1.4
Finally, such self-serving statements, timed
after the Federal Circuit’s decision and presumably made in anticipation of
Bungie’s remand arguments, have no probative weight. Collectively, Bungie’s
4
Even Bungie seems confused by what it is trying to accomplish with Statement of
Material Facts (SMF) Nos. 7-11, having improperly argued that those statements
are evidence in its Brief (Bungie Br., 22), yet characterizing them as attorney
argument in a separate communication to the Board. See Ex. 3001 at 1.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-20-
argument based on settlement attempts in late 2018 cannot establish that Activision
was not an RPI to petitions filed in 2015.
B. Bungie Ignores the Federal Circuit’s Specific Instructions and
Fails to Apply the Legal Test for RPI Set Forth in AIT
Snubbing the Federal Circuit’s instructions and focusing its analysis on
WesternGeco, Bungie repeatedly and inaccurately addresses the “privy” factor
rather than the RPI question. See, e.g., Bungie’s Brief at 25-26. As the Federal
Circuit has explained, “n WesternGeco LLC v. ION Geophysical Corp., we shed
additional light on the meaning of ‘privy’ in the context of § 315(b), but did not
elaborate on the scope of ‘real party in interest’ because the patent owner focused
on privity as the key basis of its time-bar challenge.” AIT, 897 F.3d at 1347
(emphasis added). AIT is the leading case on RPI. Under AIT’s test, Bungie
cannot refute that Activision was an RPI.
AIT discusses many relevant facets of the RPI analysis. The “focus of the
[RPI] inquiry is on the patentability of the claims challenged in the IPR petition,
bearing in mind who will benefit from having those claims canceled or
invalidated.” AIT, 897 F.3d at 1348 (emphasis added); see also id., 1349 (“the
common law seeks to ascertain who, from a ‘practical and equitable’ standpoint,
will benefit from the redress that the chosen tribunal might provide.”). As Bungie
noted, Bungie was never a named party to the Activision Litigation, and its Destiny
product was never formally added as an accused product. Ex. 1064, 1-2; Bungie
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-21-
Br., 17-18. Clearly Activision, having been time-barred from filing IPRs against
the Worlds patents, would benefit more than Bungie from Bungie’s IPRs.
AIT also states that determining “whether a non-party is [an RPI] demands a
flexible approach that takes into account both equitable and practical
considerations, with an eye toward determining whether the non-party is a clear
beneficiary that has a preexisting, established relationship with the petitioner.”
AIT, 897 F.3d at 1351. The evidence here shows that Activision is a clear
beneficiary having a preexisting commercial relationship with Bungie to develop
and publish the Destiny game, the common property covered by the Agreement
and also identified in Worlds’ letter to Activision. See Ex. 2002, Ex. 2004.
Further, looking only to Bungie’s own interest in filing the IPRs is too
narrow. Section 315(b) “bars petitions where proxies or privies [or RPIs] would
benefit from an instituted IPR, even where the petitioning party might separately
have its own interest in initiating an IPR.” AIT, 897 F.3d at 1347 (emphasis
added). AIT also looks to other evidence establishing a petitioner’s motivation for
filing an IPR. AIT, 897 F.3d at 1352 n.4. There, facts in evidence spoke “directly
on the issue of whether, and under what circumstances” RPX took its client’s
interests “into account when determining whether to file IPR petitions.” Id. at
1353. Here, Bungie is on worse footing than RPX—there is no evidence to refute
that Bungie was motivated by its commercial relationship, an indemnification
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-22-
obligation, and/or communications with Activision when filing its IPR petitions.
Indeed, the Federal Circuit reversed the Board in AIT, noting that the point
of the RPI analysis is to “probe the extent to which [the unnamed party] has an
interest in and will benefit from [the petitioner’s] actions, and inquire whether [the
petitioner] can be said to be representing that interest after examining its
relationship with” the unnamed party. AIT, 897 F.3d at 1353. Bungie’s refusal to
introduce evidence in the record has impeded the Board’s ability to probe that
relationship. The remaining evidence—the Agreement and Bungie’s timing for
filing its petitions—favors Worlds, not Bungie. Worlds Inc., 903 F.3d at 1244 n.8.
Additional AIT factors also exist here. In AIT, “Salesforce and RPX had
overlapping members on their respective boards of directors.” AIT, 897 F.3d at
1354. Here, Activision has “the right to designate one person to attend and
participate as a non-voting observer in all meetings of the Board of Directors of”
Bungie during the Agreement’s Development Term. Ex. 2002, Sec. 18.2.
Moreover, the absence of any express agreement by Bungie to file IPR petitions on
Activision’s behalf is not conclusive that Activision was not an RPI. AIT, 897 F.3d
at 1354 (“a non-party to an IPR can be a real party in interest even without entering
into an express or implied agreement with the petitioner to file an IPR petition.”).
In AIT, the Federal Circuit concluded that the evidence indicates “that the
very challenges to validity included in the IPR petitions were challenges Salesforce
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-23-
would like to have made if not time-barred from doing so.” AIT, 897 F.3d at 1355.
The overlap between Bungie’s challenged claims and the claims at issue in the
Activision Litigation here confirm the same conclusion vis-à-vis Bungie and
Activision. See, e.g., Ex. 2006, 1 (identifying the asserted claims in litigation as
’856 patent claim 1; ’690 patent claims 1-20; ’558 patent claims 4-9; ’501 patent
claims 1-8, 10, 12, 14-16; and ’998 patent claims 1-3, 7, 8, 11-20).
Finally, Bungie’s actions before the Board suggest that Bungie, at best,
engaged in willful blindness by ascertaining Activision’s desire to have the
asserted patents challenged in IPR by Bungie, while taking “efforts to avoid
obtaining an express statement of such desires.” AIT, 897 F.3d at 1355. This
would explain Bungie’s counsel’s unsworn statement that any efforts into
discovery would have been “an exercise in futility.” Ex. 2001, 32:5-7.
In AIT, the Federal Circuit reversed the Board’s decision on RPI because
nothing in that case’s evidence contradicted “AIT’s theory that RPX filed IPR
petitions challenging the two patents asserted in the Salesforce action to benefit
Salesforce, where Salesforce itself was time-barred from filing petitions.” AIT,
897 F.3d at 1356. The same can be said in this proceeding; nothing in the record
contradicts the evidence that Bungie challenged the Worlds patents that were
asserted against Activision, knowing that Activision would benefit, and where
Activision itself was time-barred from filing its own petitions.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-24-
C. Bungie Attempts to Avoid the Proper RPI Conclusion By
Invoking Due Process Without Any Evidence
Although not transparent about its strategy, Bungie casts aspersions on the
AIT test as if it were Worlds’ own creation rather than the Federal Circuit’s.
Bungie argues, “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.” Bungie Br., 25. But this is the AIT
test that the Federal Circuit has instructed the Board to apply here. Worlds, 903
F.3d at 1248. Further, AIT makes clear that the six Taylor categories are not the
exclusive ways to determine whether a non-petitioner is an RPI; a more “flexible
approach” must be used. AIT, 897 F.3d at 1342-43, 1351. It would be a direct
violation of the Federal Circuit’s order not to apply AIT’s test to this case.
Perhaps because the AIT test conclusively establishes Activision to be an
RPI, Bungie advances a due process argument, stating that RPI cannot be applied
without a due process exception under common law. Bungie Br., 25-26. This
argument has many flaws. First, Bungie bears the burden of proof, and no
evidence exists to protect Bungie under due process. In other words, the lack of
record evidence, which prohibits Bungie from refuting that Activision is an RPI,
cannot simultaneously create a due process exception to the AIT test, particularly
since any requisite evidence is in Bungie’s control. Bungie Br., 16-17.
Second, Bungie cites to Unified Patents v. Realtime Adaptive Streaming,
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-25-
LLC, IPR2018-00883, Paper 29 (PTAB Oct. 11, 2018), relying on the Board’s
conclusion there that was “no evidence of control, direction, or direct financing of
the IPR” by Unified’s client. Bungie Br., 26. But Bungie’s manner of raising this
case overlooks the clear distinction. In Unified, the Board had evidence to reach
its conclusion. Id. at 12-16. Here, there is no such evidence to support a similar
finding. Additionally, unlike in Unified, there is a time-barred party here, and at
least circumstantial evidence that the time-barred party communicated with Bungie
regarding the challenged patents prior to the petition filings. See id. at 17.
Third, Bungie argues that its relationship with Activision “is directed to
selling videogames, not filing IPRs or circumventing the one-year bar.” Bungie
Br., 26. But the 2010 Agreement does not prove the nature of communications
between Bungie and Activision related to the IPR petition filings in 2015. Unlike
in Unified, there is no evidence here to conclude that Activision had no control,
direction, or financing of the IPR petitions. To the contrary, the Agreement
establishes conclusively that Activision possessed at least an opportunity to review
and approve/influence Bungie’s IPRs based on, for example, Section 7A.15(j).
Bungie has no evidence that Activision rejected this opportunity.
Fourth and finally, Bungie’s argument based on its indemnification
obligation (see Bungie Br., 27) is misplaced, as its indemnification clause supports
the existence of “privity” here. See Section III.D, infra.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-26-
D. Activision is also a Privy of Bungie in These IPR Petitions
Bungie’s relationship with Activision also supports a finding that Activision
is a privy of Bungie’s for the purposes of these IPR petitions. As Senator Schumer
stated in Senate debates, “[a] ‘privy’ is a party that has a direct relationship to the
petitioner with respect to the allegedly infringing product or service.” 157 Cong.
Rec. S5432 (Sept. 8, 2011) (statement of Sen. Schumer); see also AIT, 897 F.3d at
1347; WesternGeco LLC, 889 F.3d at 1318 (“privity, as used in the AIA, ‘takes
into account the “practical situation,” and should extend to parties to transactions
and other activities relating to the property in question.’”) (quoting 157 Cong. Rec.
S1376 (daily ed. March 8, 2011) (statement of Sen. Kyl). Activision and Bungie
are both parties to the Agreement, which covers their development, marketing, and
publication of the Destiny game, and Activision received Worlds’ letter identifying
Destiny as a potentially infringing product in the Activision Litigation. These facts
confirm that Senator Schumer’s and Senator Kyl’s statements describe the
relationship between Activision and Bungie here, with the focus squarely on
Destiny as the common property in question.
Focusing exclusively on control, Bungie argues that “[p]reclusion from a
suit thus attaches to an indemnitor who controls that suit.” Bungie Br., 28
(emphasis in original). But even WesternGeco states that “‘control’ is not the
exclusive analytical pathway for analyzing privity.” WesternGeco, 889 F.3d at
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-27-
1320. “[P]re-existing legal relationships” are “additional considerations” to the
privity analysis. Id. The Agreement between Bungie and Activision constitutes
such a legal relationship weighing in favor of Activision as privy.
WesternGeco’s discussion of indemnification is also relevant. There, the
Federal Circuit deferred to the Board’s finding that the indemnification provisions
in that case were “non-specific,” as “[n]one of the correspondence relating to the
indemnity provision shows an expectation that ION would be responsible for
stepping in, or otherwise protecting PGS from a patent infringement suit.”
WesternGeco, 889 F.3d at 1321. Unlike the indemnification provisions in
WesternGeco, which “included options by the ION subsidiary to [only] modify or
replace the equipment if an infringement claim was made against PGS,” (id. at
1321), Bungie admits that “nder the DevPub Agreement, Bungie, the developer
of the Destiny videogame, is responsible for defense of intellectual property claims
against Destiny.” Bungie Br., 20. Bungie also admits that the “Agreement
provides Bungie with the right to assume the defense of claims arising out of ‘any
infringement of a third party’s 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.” Bungie Br., 20-21.5
This establishes privity between
5
Under Section 15.1 of the Agreement, Bungie’s indemnification obligation is not
triggered only by formal additions to lawsuits, but by “Claims,” which are defined
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-28-
Activision and Bungie here. See Intel Corp. v. U.S. Int’l Trade Comm’n, 946 F.2d
821, 839 (Fed. Cir. 1991) (holding that “an indemnification agreement, in other
cases, has alone been enough to find privity.”).
Under WesternGeco, Intel, and according to Bungie’s own admissions
regarding the indemnification provisions of the Agreement, Activision is a privy of
Bungie. For this reason as well, Bungie’s petitions were time-barred due to
Activision’s status as a privy.
E. Bungie’s Refusal to Submit Evidence Should Not Create an
Equitable Escape from the Statutory Requirement to Name all RPIs
Finally, Worlds understands that the Board is concerned about the equity of
Worlds’ litigation letter establishing Activision as an RPI to Bungie’s petitions.
Ex. 1051, 63:12-64:3. Initially, the letter itself reveals that Worlds’ intent in
sending it was not for nefarious purposes. Activision was “unwilling to go forward
with technical 30(b)(6) depositions or … complete their document production until
Defendants know whether Worlds intends to add additional accused products to the
lawsuit.” Ex. 2004, 1. Thus, when prodded by Activision to take a position on
accused products, Worlds identified Destiny only to Activision’s counsel (not to
to include “liabilities,” “claims,” “costs and expenses, including reasonable
attorney’s fees . . . arising out of or related to (i) any breach . . . of its
representations or warranties . . . or (ii) any infringement . . .”
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-29-
Bungie or Bungie’s counsel). Id. Any step to alert Bungie of this letter was solely
Activision’s doing. It was this step, not Worlds’ letter sent to Activision, that
cemented Activision’s relationship to these proceedings, and thereby confirmed
Activision’s status as an RPI to Bungie’s petitions.
Also weighing heavily in Worlds’ favor is that Bungie has the burden of
proof and burden of production, as a “petitioner is far more likely to be in
possession of, or to have access to, evidence relevant to the [RPI] issue than is a
patent owner.” Atlanta Gas Light Co, IPR2013-00453, Paper 88 at 8 (PTAB Jan. 6,
2015). Bungie has never denied that Activision alerted Bungie of Worlds’ letter or
that Activision’s communications led to Bungie’s decision to file its IPR petitions
against the Worlds patents. But the timing and contents of their communications
remain a black box. Arguing for equitable relief, Bungie also alleges that it “never
participated in or controlled any party’s participation in Worlds’s litigation against
Activision and, indeed, never had any opportunity to do so … .” Bungie Br., 29.
But this is also unsupported attorney argument. Had any evidence actually proven
that Activision was not an RPI to these IPRs, Bungie would have introduced it
below, or would have asked to reopen the record on remand. As Judge O’Malley
asked Bungie’s counsel during oral argument, “If this was such a pristine thing on
your part, and Activision had nothing to do with it, why was there no declaration?”
See Oral Arg. at 45:49-45:56. Now on remand, this question is still unanswered.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-30-
On the question of equity, the Board should also consider the equity of
Worlds having to defend patent validity in both District Court and before the
Board, despite the estoppel provisions of § 315(e). See AIT, 897 F.3d at 1349.
Further, the Destiny product had been in development since 2010 with an earliest
anticipated release date of 2013. Ex. 2002, 1-2. Served with Worlds’ initial
complaint in 2012, Activision chose to pursue its invalidity challenges against the
Worlds patents in District Court rather than at the Board.
Under these circumstances, Bungie’s refusal to enter evidence into the
record on Activision’s communications and involvement in the petitions should not
provide an equitable escape from the statutory requirement to identify all RPIs,
including those who are time-barred under § 315(b). Such a result would frustrate
future panels from making evidence-based determinations whether unnamed
parties are an RPI under the Federal Circuit’s “flexible approach.” See AIT, 897
F.3d at 1351. Rewarding Bungie’s withholding of evidence on RPI here can only
encourage future petitioners to do the same, and should not be tacitly endorsed as a
viable strategy.
IV. CONCLUSION
For these reasons, the Board should dismiss these proceedings.
IPR2015-01264, -01319, -01321 Patent Owner’s Response on Remand
-31-
Dated: February 4, 2019 /s/ Wayne M. Helge
Wayne M. Helge (Reg. No. 56,905)
Recent WDDD News
- Form 10-Q - Quarterly report [Sections 13 or 15(d)] • Edgar (US Regulatory) • 05/15/2024 08:47:52 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 05/15/2024 12:00:25 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 12/19/2023 09:30:21 PM
- Form 10-Q - Quarterly report [Sections 13 or 15(d)] • Edgar (US Regulatory) • 08/11/2023 06:34:14 PM
Green Leaf Innovations, Inc. Expands International Presence with New Partnership in Dubai • GRLF • Jun 24, 2024 8:30 AM
Bemax Inc. Positions to Capitalize on Industry Growth with New Improved Quality of Mother's Touch® Disposable Diapers • BMXC • Jun 24, 2024 8:00 AM
Last Shot Hydration Drink Announced as Official Sponsor of Red River Athletic Conference • EQLB • Jun 20, 2024 2:38 PM
ATWEC Announces Major Acquisition and Lays Out Strategic Growth Plans • ATWT • Jun 20, 2024 7:09 AM
North Bay Resources Announces Composite Assays of 0.53 and 0.44 Troy Ounces per Ton Gold in Trenches B + C at Fran Gold, British Columbia • NBRI • Jun 18, 2024 9:18 AM
VAYK Assembling New Management Team for $64 Billion Domestic Market • VAYK • Jun 18, 2024 9:00 AM
Start posting your company's news
Only $200 per official company press release!
