Bungie Reply
Paper No. ____
Filed: February 19, 2019
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 No. 7,945,856)
Case IPR2015-01319 (Patent No. 8,082,501)
Case IPR2015-01321 (Patent No. 8,145,998)1
_____________________________
BUNGIE’S REPLY ON REMAND FROM CAFC
RESPONDING TO WORLDS RESPONSE BRIEF
(PAPER 55 in 2015-01264 and 2015-01319 AND PAPER 56 in 2015-01321)
1 This caption is used and identical papers are being filed in each captioned case
pursuant to the Board’s November 29, 2018 order (Paper 48).
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TABLE OF CONTENTS
I. INTRODUCTION ................................................................................................. 1
II. WORLDS’S ATTEMPTS TO ESCAPE ISSUE PRECLUSION FAIL. ............................ 1
A. Worlds errs by arguing IPR decisions cannot be preclusive. ................ 1
B. There is no material difference between the RPI issues. ...................... 3
C. Worlds’s new issue preclusion exception should be rejected. .............. 5
III. WORLDS MISCONSTRUES AIT AND THE EVIDENCE OF RECORD. ....................... 6
A. Worlds’s speculative control arguments are unfounded. ...................... 6
B. Worlds’s settlement discussions contradict Worlds’s
speculation to the Board. ....................................................................... 8
C. Worlds misconstrues AIT. ..................................................................... 9
D. The equities favor finding Activision is not an RPI. ........................... 10
IV. WORLDS’S PRIVITY ARGUMENTS ARE IMPROPER AND INCORRECT. ................. 11
V. CONCLUSION ................................................................................................... 12
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TABLE OF AUTHORITIES
Page
CASES
Atlanta Gas Light Co. v. Bennett Regulator Guards, Inc., IPR2013-
00453, Paper 88 ............................................................................................... 4
B&B Hardware, 135 S. Ct. 1293, 1303 (2015) ..................................................... 2, 5
Google LLC v. Seven Networks, LLC, IPR2018-01052, Paper 28 ........................ 7, 9
In re Cygnus Telecom. Tech. LLC, Patent Litig., 536 F.3d 1343 (Fed.
Cir. 2008). ........................................................................................................ 5
Intel Corp. v. ITC, 946 F.2d 821 (Fed. Cir. 1991) ............................................. 11, 12
Maxlinear, Inc. v. CF Crespe LLC, 880 F.3d 1373, 1376-77
(Fed. Cir. 2018) ............................................................................................ 1, 4
Merck Sharp & Dohme Corp. v. GlaxoSmithKline Biologicals SA,
IPR2018-01229, Paper 13 ................................................................................ 9
Nestle USA Inc. v. Steuben Food, Inc., 884 F.3d 1350 (Fed. Cir. 2018) ................... 4
Return Mail, Inc. v. USPS, 17-1594, 2019 WL 169139 (Jan. 9, 2019) ..................... 2
Urbain v. Knapp Bros. Mfg. Co., 217 F.2d 810 (2d Cir. 1954) ............................... 12
VirnetX Inc. v. Apple, Inc., 909 F.3d 1375 ................................................................ 2
Webpower, Inc. et al. v. WAG Acquisition, LLC, IPR2016-01239,
Paper 21 ........................................................................................................... 2
Weyerhaeuser Timber Co. v. Bostitch, Inc., 178 F. Supp. 757 (D.R.I.
1959) .............................................................................................................. 12
Worlds, Inc. v. Bungie, Inc., 903 F.3d 1237 (Fed. Cir. 2018) ................................... 4
XY, LLC v. Trans Ova Genetics, L.C., 890 F.3d 1282 (Fed. Cir. 2018) .................... 1
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STATUTES
15 U.S.C. §1069 ......................................................................................................... 2
35 U.S.C. §315(e) .................................................................................................. 2, 3
RULES
37 C.F.R. §42.23(a) ................................................................................................... 8
37 C.F.R. §42.6(a)(3) ................................................................................................. 3
77 Fed. Reg. 48756, 48759 (August 14, 2012) ........................................................ 11
OTHER AUTHORITIES
FPP §4433 .................................................................................................................. 5
Rest. 2d Judgments § 28 ............................................................................................ 5
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I. Introduction
This case should be resolved by finding Worlds precluded from relitigating
the RPI issue. Worlds incorrectly argues issue preclusion can never apply to IPRs,
or to the RPI issue specifically. Worlds identifies no exception that would shield it
from the well-established principle that a party may not relitigate an issue resolved
previously with finality. Worlds must live with its strategic decision not to appeal
three final written decisions (“FWDs”) finding Activision is not an RPI.
If the Board finds it necessary to revisit its RPI determination, the record
strongly supports its earlier conclusion that Activision is not an RPI (a fact Worlds
knows to be true based at least on its dealings with Bungie). Worlds thus ignores
and mischaracterizes the evidence, speculates wildly, misconstrues AIT, and turns
the inequities of its own litigation choices and improper gaming of the RPI issue
upside down. The Board should reject Worlds’s request to dismiss these IPRs.
II. Worlds’s Attempts to Escape Issue Preclusion Fail.
A. Worlds errs by arguing IPR decisions cannot be preclusive.
Worlds argues (at 12-14) that IPR decisions cannot be preclusive. Worlds is
wrong, as the Federal Circuit and the Board have repeatedly held final IPR
decisions are preclusive. See, e.g., XY, LLC v. Trans Ova Genetics, L.C., 890 F.3d
1282, 1294 (Fed. Cir. 2018) (affirmance of FWD “renders final a judgment” of
unpatentability and “has an immediate issue-preclusive effect on any pending or
co-pending actions involving the patent”); Maxlinear, Inc. v. CF Crespe LLC, 880
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F.3d 1373, 1376-77 (Fed. Cir. 2018) (“The preclusive effect of the prior [IPR
FWD] adjudications, and subsequent affirmations, has finally resolved the issue of
the unpatentability...in this Proceeding.”); VirnetX Inc. v. Apple, Inc., 909 F.3d
1375, 1378 (Fed. Cir. 2018) (FWD on printed publication status made final by
Rule 36 affirmance was preclusive in IPR); Webpower, Inc. et al. v. WAG
Acquisition, LLC, IPR2016-01239, Paper 21, at 20, 26-28 (unappealed FWD
preclusive in IPR).
In contrast, the intervenor brief Worlds cites (at 12-14) argues that the Board
was not bound in an IPR by a reexamination decision because the reexamination
lacked any opportunity to cross-examine the experts. Besides having zero
authoritative value, the intervenor brief is inapposite. The Solicitor General of the
United States recently affirmed in briefing to the Supreme Court the official
position of the U.S. government: B&B Hardware “strongly suggests that decisions
of the PTAB would have preclusive effect where ‘the ordinary elements of issue
preclusion are met.’” Respondents’ Brief, Return Mail, Inc. v. USPS, 17-1594,
2019 WL 169139, at *41-*43 (Jan. 9, 2019). As explained in the Solicitor’s brief,
35 U.S.C. §315(e) does not preempt common law issue preclusion. Id.
Worlds’s argument (at 14) based on 15 U.S.C. §1069 conflates the defense
of equitable estoppel with the distinct principle of issue preclusion and ignores
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differences in the substantive nature of trademark rights that are inapplicable to
patentability adjudications in IPRs.
Worlds’s argument (at 13 n.2) that Bungie is estopped “from maintaining”
IPR2015-01321 is untimely. Worlds never raised this argument during its appeal,
improperly raised it now in an opposition footnote, and it is therefore waived. 37
C.F.R. §42.6(a)(3). It is also a red herring, because Bungie could not “reasonably
have raised” grounds from IPR2015-01321 when filing IPR2015-01325 as it had
already raised them in IPR2015-01321. See 35 U.S.C. §315(e)(1). Moreover,
because the petitions were filed and FWDs were issued simultaneously, Worlds’s
argument would result in the absurdity of prohibiting Bungie from maintaining
grounds from either IPR simply because they were not included in the petition for
the other IPR on the same claims. Worlds permitted the final IPRs to become
preclusive with respect to matters actually litigated therein. This includes RPI, but
not the grounds in IPR2015-01321.
B. There is no material difference between the RPI issues.
Worlds spends pages (at 2-3, 8-9) arguing that the RPIs theoretically could
be different for Bungie’s petitions, but Worlds identifies no actual differences.
Bungie did not argue RPI issues could never be different across multiple petitions
(the “absurdity” Worlds ascribes to Bungie), but only that there is no material
difference here. Cases need not be identical for issues to be materially identical for
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issue preclusion. See Nestle USA Inc. v. Steuben Food, Inc., 884 F.3d 1350, 1351
(Fed. Cir. 2018) (claim construction preclusive in different patent); Maxlinear, 880
F.3d at 1375-76 (FWD finding unpatentability based on prior art not asserted in
subsequent IPR was preclusive in subsequent IPR). Because the RPI issues are
identical here, issue preclusion bars Worlds from relitigating them.
Unable to identify any differences in the RPI issues presented to the Board
in the six IPRs, Worlds further errs (at 8-9, 11) by assuming the Board imposed an
erroneous burden of proof on Worlds (an assumption the Federal Circuit did not
make). The Board has long recognized that the burden of proof rests on the
petitioner. See, e.g., Atlanta Gas Light Co. v. Bennett Regulator Guards, Inc.,
IPR2013-00453, Paper 88, at 6-7 & n.2 (Jan. 6, 2015). The Federal Circuit
remanded to the Board because it could not “discern whether the Board placed the
burden on Worlds.” Worlds, Inc. v. Bungie, Inc., 903 F.3d 1237, 1246 (Fed. Cir.
2018). The Board is best positioned to clarify that it did not impose a burden of
proof on Worlds and that its RPI determinations did not turn on one.
Worlds also criticizes (at 10) the Board’s denial of its discovery motions,
alleging this places the “quality, extensiveness, and fairness” of the Board’s RPI
determination in doubt. But Worlds did not appeal denial of its discovery motion,
nor did it seek to reopen the record on remand. Worlds cannot use denial of its
motion, and accompanying speculation about what it hoped to discover, as a basis
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to revisit an issue resolved with finality in FWDs it chose not to appeal.
Worlds’s argument (at 9-10) that differences between Board procedures and
district court procedures render IPR decisions invalid for issue preclusion also
fails. No procedural differences exist between the final IPRs and the appealed IPRs
because the forum at issue is exactly the same. See B&B Hardware, 135 S. Ct.
1293, 1303 (2015) (Rest. 2d Judgments § 28 exception warranted by “differences
in the quality or extensiveness of the procedures followed” in the two courts).
C. Worlds’s new issue preclusion exception should be rejected.
This case does not fit within the rule applied in In re Cygnus. Worlds argues
(at 11) that the IPRs had common schedules, depositions, and hearings, but does
not argue that the cases themselves were consolidated. The Board never
consolidated them and Worlds never asked it to, instead permitting the final IPRs
to become preclusive. Whether the cases are consolidated into a single action is
necessary to the exception to issue preclusion applied in Cygnus. Otherwise,
Worlds’s proposed exception would swallow the rule that the failure to appeal a
judgment cannot destroy the judgment’s preclusive effect. FPP §4433 ([P]reclusion
cannot be defeated by electing to forgo an available opportunity to appeal.”).
Worlds’s argument (at 12) that appealing the RPI issue in the final IPRs
would have wasted resources is belied by its failure to identify any factual
distinction between the RPI facts in the final and appealed IPRs. On appeal, the
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parties submitted consolidated briefing to address RPI. Worlds easily could have
appealed the identical issue in all six cases without requiring any further judicial or
litigant resources. Worlds finds itself precluded due to its own litigation decision to
selectively appeal some IPR decisions while letting others proceed to finality.
III. Worlds Misconstrues AIT and the Evidence of Record.
A. Worlds’s speculative control arguments are unfounded.
Worlds’s RPI arguments until now were premised on its erroneous
construction of the DevPub agreement. The Federal Circuit found no fault with the
Board’s previous findings that Worlds misconstrued the DevPub agreement. Yet,
Worlds continues to misconstrue that agreement on remand, arguing (at 17-18, 25)
that it gives Activision control of Bungie’s IPRs unless “indemnification was
actually demanded by Activision or accepted by Bungie.” As explained in
Bungie’s opening brief, however, the DevPub agreement does not provide
Activision with control over Bungie’s IPRs regardless of whether an
indemnification request was “made or accepted.” Nor could Bungie have
controlled the Activision litigation because it is undisputed Bungie’s products were
never accused in that litigation. SMF Nos. 1-4.
Because the DevPub agreement gives Activision no control over Bungie’s
IPRs and gives Bungie no control over the Activision litigation, Worlds now
backtracks and argues (at 16-17) that the DevPub agreement cannot prove whether
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Activision was an RPI. Abandoning the actual evidence of record, Worlds now
recklessly speculates that Activision and Bungie might have later decided to treat
Bungie’s IPRs as product reviews under Section 7A.15(j) of the DevPub
Agreement. Worlds further speculates (at 18) that Activision and Bungie may have
agreed subsequent to the DevPub agreement to reverse the indemnification
provision and give Activision control over Bungie’s IPRs. There is no truth to
Worlds’s speculation. Bungie offered to submit a declaration subject to crossexamination
establishing that Activision did not fund or control any of the IPRs.
Worlds opposed because it knows the facts do not support its wild speculation.
Worlds argues (at 22) that the DevPub agreement makes Activision an RPI
in Bungie’s IPRs because of the ability to have a non-voting observer attend board
meetings. The Board correctly rejected this argument already. Merely observing
board meetings does not translate into controlling Bungie’s IPRs. See, e.g., Google
LLC v. Seven Networks, LLC, IPR2018-01052, Paper 28, at 12-19 (finding voting
board member, ability to authorize and approve petitioner’s budgets, and other
relationship ties insufficient to establish RPI status when a subsidiary-petitioner
“operate[s] independently and separately” from its parent). Here, Bungie does not
even have a parent-subsidiary relationship with Activision, much less one where
Bungie’s IPR decisions are subject to Activision’s control.
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Adding to its speculation, Worlds repeatedly accuses Bungie (at 15, 22, 28-
29) of “refusing” to produce evidence and impeding the Board’s ability to prove
Bungie’s relationship with Activision. This irresponsible rhetoric is simply false.
Bungie never refused to provide evidence. Worlds previously attempted to engage
in a burdensome and unfounded fishing expedition based on wild speculation. The
Board properly denied Worlds’s motions. Because there is no merit to Worlds’s
shrill accusations, it is axiomatic that there is no evidence to support them.
B. Worlds’s settlement discussions contradict Worlds’s speculation
to the Board.
Worlds argues (at 19) that the Board should ignore the various settlement
discussions between the parties because, it argues, they are mere attorney
argument. But those discussions underscore the gamesmanship at play, and raise
serious concerns regarding the impropriety of Worlds’s conduct. No party should
candidly acknowledge one position in discussions between the parties, yet
perpetuate a known fiction before the Board and the Court. Indeed, Worlds does
not and cannot dispute the accuracy of Bungie’s SMF Nos. 7-11. 37 C.F.R.
§42.23(a) (undisputed facts are deemed admitted).
Worlds argues (at 19-20) that settlement discussions only “occurred in late
2018,” and “after the Federal Circuit’s decision.” This is false and contradicted by
the parties’ settlement correspondence. SMF No. 7 (referring to previous
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settlement discussion). Worlds knows full well that discussions to settle
independent of Activision predate the Federal Circuit’s decision.
C. Worlds misconstrues AIT.
Worlds argues (at 24) that a bare determination that “Activision and Bungie
have a preexisting relationship and if Activision would benefit from Bungie’s
IPRs” necessarily and “conclusively establishes Activision to be an RPI.” But
Worlds’s reading of AIT is not correct. “Patent Owner’s contention that [the nonparty]
is a RPI solely because [the non-party] has a preexisting, established
relationship with Petitioner and is a clear beneficiary of the Petition, is an
incomplete reading of AIT and is unavailing.” Merck Sharp & Dohme Corp. v.
GlaxoSmithKline Biologicals SA, IPR2018-01229, Paper 13, at 6-8, 11-13; Google
LLC v. Seven Networks, LLC, IPR2018-01052, Paper 28, at 13-14 (“The Court held
in Taylor that a broader doctrine of nonparty preclusion, termed ‘virtual
representation,’ was inconsistent with common law and risked violating due
process.”).
Worlds relies heavily (at 18-23, 25, 29) on “circumstantial evidence” that
Activision conveyed Worlds’s letter threatening Destiny to Bungie, Worlds never
added Destiny to the litigation, and Bungie thus challenged claims Worlds had
formally asserted against Activision, not Bungie. Those assertions underscore the
inequity of applying estoppel based on a case in which Bungie was never involved.
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And even conveyance of that letter would not establish that Activision funded or
controlled the IPRs or that Bungie brought the IPRs for Activision’s benefit or to
represent Activision’s interests. Bungie was not required to wait until Worlds
formally sued Bungie to file its IPRs. That Bungie was never involved in the
Activision litigation and brought the IPRs to serve its own interests favors finding
Activision is not an RPI in Bungie’s IPRs.
Worlds relies (at 21-22) on the statement in AIT that the petitioner’s “own
interest in initiating an IPR” was not dispositive of whether another party could be
an RPI. But in that case, the petitioner had no independent interest in challenging
the patents and bragged that its interests were 100% aligned with its clients. In
contrast, Bungie’s interests are not 100% aligned with Activision’s, as seen in the
undisputed fact that Bungie has repeatedly offered to settle with Worlds
independently of Activision. SMF Nos. 7-11. Unlike in AIT, Bungie cannot be said
to represent Activision’s interests. Bungie’s commercial relationship with
Activision does not warrant depriving Bungie of its right to pursue its IPRs.
D. The equities favor finding Activision is not an RPI.
Worlds argues (at 30) that Activision chose to pursue its invalidity
challenges in district court in 2012 rather than at the Board. But Bungie was not
afforded that opportunity. It would fundamentally violate due process and equity to
retroactively deprive Bungie of its opportunity to challenge World’s patents.
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Worlds argues (at 30) that it would be inequitable to require it to defend its
patents in the Activision litigation and before the Board. However, Worlds chose
whom to sue and threaten and when to do it. It chose to threaten to accuse Bungie’s
product and also chose not to add Bungie to the Activision litigation so that Bungie
would have no ability to participate. Worlds cannot credibly claim it is inequitable
to allow Bungie its first and only opportunity to challenge Worlds’s patents.
IV. Worlds’s privity arguments are improper and incorrect.
Because its RPI arguments are not supported by the record, Worlds now tries
to introduce a new argument on remand that Bungie and Activision are in privity.
“The notion of ‘privity’ is more expansive” than the notion of real party-in-interest.
Office Patent Trial Practice Guide, 77 Fed. Reg. 48756, 48759 (August 14, 2012).
Bungie thus discussed due process limitations on privity because such constraints
necessarily apply to the narrower RPI analysis at issue. It is inappropriate for
Worlds to stray beyond the scope of remand. The Board should reject Worlds’s
privity arguments as untimely and inconsistent with the Federal Circuit’s order.
Worlds’s privity arguments also fail on the merits. Worlds cites (at 28) Intel
Corp. v. ITC, 946 F.2d 821, 838 (Fed. Cir. 1991), for the proposition that, in two
cases it cites, certain indemnification agreements were sufficient to find privity. In
each of the cases cited in Intel, the court stayed a case against a customerindemnitee
in favor of any earlier-filed case against the manufacturer-indemnitor,
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finding the case against the manufacturer-indemnitor would be dispositive
regarding indemnitor’s products. Urbain v. Knapp Bros. Mfg. Co., 217 F.2d 810
(2d Cir. 1954) (affirming injunctive stay where indemnitor had “acknowledge[d]
that it is defending the [indemnitee’s] case and is responsible for any damages
which may be awarded therein”); Weyerhaeuser Timber Co. v. Bostitch, Inc., 178
F. Supp. 757, 759-762 (D.R.I. 1959) (granting stay of case against indemnitee
because case against indemnitor could “be dispositive of the instant action”). Here,
Worlds attempts to reverse the polarity to bind Bungie as indemnitor to an action
in which Bungie did not participate and in which its products were never accused.
Intel is also inapplicable here. In Intel, the Court concluded that assignor
estoppel applied to a joint venture the inventor was involved in because the joint
venture “unquestionably availed itself of the inventor’s and Atmel’s knowledge
and assistance” for the infringing product and because the “indemnity agreement
between [the inventor] and [the joint venturer] created a significant relationship
between them.” 946 F.2d at 838. This case lacks the special circumstances present
in Intel, where the inquiry focused on whether an entity with a relationship with the
inventor availed itself of the inventor’s knowledge to avoid infringement liability.
None of Worlds’s privity arguments are persuasive.
V. Conclusion
The Board should reject Worlds’s invitation to dismiss these IPRs.
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Respectfully submitted,
Dated: February 19, 2019 / Michael T. Rosato /
Michael T. Rosato, Lead Counsel
Reg. No. 52,182
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