Case 4:18-cv-06185-HSG Document 58 Filed 04/05/19 Page 1 of 22
`
`
`
`
`Sarah G. Hartman (Cal. Bar No. 281751)
`shartman@brownrudnick.com
`Peter Lambrianakos (pro hac vice)
`plambrianakos@brownrudnick.com
`Vincent J. Rubino, III (pro hac vice)
`vrubino@brownrudnick.com
`Brown Rudnick LLP
`7 Times Square
`New York, NY 10036
`Telephone: (212) 209-4800
`Facsimile: (212) 209-4801
`
`Arjun Sivakumar (Cal. Bar No. 297787)
`asivakumar@brownrudnick.com
`Brown Rudnick LLP
`2211 Michelson Drive, Seventh Floor
`Irvine, California 92612
`Telephone: (949) 752-7100
`Facsimile: (949) 252-1514
`
`
`Attorneys for Defendant
`AGIS SOFTWARE DEVELOPMENT LLC
`
`
`
`
`
`ZTE (USA) INC.,
`
`v.
`
`
`
`Plaintiff,
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`OAKLAND DIVISION
`
`
` Case No. 18-cv-06185-HSG
`
`REPLY IN SUPPORT OF MOTION FOR
`SANCTIONS
`
`
`
`
`Hearing Date:
`Time:
`Trial Date:
`
`
`AGIS SOFTWARE DEVELOPMENT LLC,
`et al.
`
`Defendants.
`
`June 6, 2019
`2:00 p.m. PST
`None set
`
`
`
`
`
`
`
`
`REPLY IN SUPPORT OF MOTION FOR SANCTIONS, CASE NO. 18-cv-06185-HSG
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 4:18-cv-06185-HSG Document 58 Filed 04/05/19 Page 2 of 22
`
`Page(s)
`ZTE HAS FILED FRIVOLOUS COMPLAINTS IN VIOLATION OF RULE 11 ............1
`
`TABLE OF CONTENTS
`
`A.
`
`B.
`
`C.
`
`ZTE’s New Imputation Theory Fails and Cannot Save ZTE from Sanctions .........2
`
`ZTE Lacked a Good Faith Basis to Assert General Jurisdiction over AGIS
`Software ...................................................................................................................6
`
`ZTE Lacked A Good Faith Basis To Assert Specific Jurisdiction Over AGIS
`Software ...................................................................................................................8
`
`ZTE SHOULD BE SANCTIONED FOR ITS RULE 11 VIOLATIONS .........................13
`
`ZTE’S REQUEST FOR FEES AGAINST AGIS SOFTWARE MUST BE DENIED .....14
`
`CONCLUSION ..................................................................................................................15
`
`i
`REPLY IN SUPPORT OF MOTION FOR SANCTIONS, CASE NO. 18-cv-06185-HSG
`
`
`
`I.
`
`II.
`
`III.
`
`IV.
`
`
`
`
`
`
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 4:18-cv-06185-HSG Document 58 Filed 04/05/19 Page 3 of 22
`
`
`
`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`Cases
`
`3D Sys., Inc. v. Aarotech Labs., Inc.,
`160 F.3d 1373 (Fed. Cir. 1998)........................................................................................................3
`
`Adobe Sys. Inc. v. Tejas Research, LLC,
` 2014 WL 4651654 (N.D. Cal. 2014) ........................................................................................9, 10
`
`AGIS Software Dev. LLC v. Apple, Inc.,
`2018 WL 2721826 (E.D. Tex. 2018) ...........................................................................................2, 4
`
`AGIS Software Dev. LLC v. HTC Corp.,
`2018 WL 4680557 (E.D. Tex. 2018) ...............................................................................................5
`
`In re Apple, Inc.,
`No. 2018-151 (Fed. Cir. 2018).........................................................................................................5
`
`AU Optronics Corp. Am. v. Vista Peak Ventures, LLC,
`2019 WL 690282 (N.D. Cal. 2019) ....................................................................................... passim
`
`Autonomy, Inc. v. Adiscov, LLC,
`2011 WL 2175551 (N.D. Cal. 2011) .............................................................................................10
`
`Avocent Huntsville Corp. v. Aten Int’l Co., Ltd.,
`552 F.3d 1324 (Fed. Cir. 2008)..............................................................................................6, 9, 10
`
`Biogenex Labs. v. Sentara Healthcare,
`2010 WL 889282 (N.D. Cal. 2010) .................................................................................................8
`
`Brown v. Stroud,
`2014 WL 1308342 (N.D. Cal. 2014) .............................................................................................14
`
`Cambrian Sci. Corp. v. Cox Commc’ns, Inc.,
`79 F. Supp. 3d 111 (C.D. Cal. 2015) .............................................................................................15
`
`Daimler AG v. Bauman,
`134 S. Ct. 746 (2014) .......................................................................................................................7
`
`Dainippon Screen Mfg. Co. v. CFMT, Inc.,
`142 F.3d 1266 (Fed. Cir. 1998)................................................................................................4, 5, 6
`
`Doe v. Unocal Corp.,
`248 F.3d 915 (9th Cir. 2001) ...........................................................................................................3
`
`Fid. Nat’l Info. Servs., Inc. v. Plano Encryption Techs., LLC,
`2016 WL 1650763 (D. Del. 2016) ...................................................................................................5
`
`
`
`
`
`ii
`REPLY IN SUPPORT OF MOTION FOR SANCTIONS, CASE NO. 18-cv-06185-HSG
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`

`

`Case 4:18-cv-06185-HSG Document 58 Filed 04/05/19 Page 4 of 22
`
`
`
`G.C. & K.B. Invest., Inc. v. Wilson,
`326 F.3d 1096 (9th Cir. 2003) ...................................................................................................8, 11
`
`Gallagher v. U.S.,
`2017 WL 4390172 (N.D. Cal. 2017) .........................................................................................9, 10
`
`Gametek LLC v. Zynga, Inc.,
`2014 WL 4351414 (N.D. Cal. 2014) .............................................................................................14
`
`Global Hawk Ins. Co. v. Vega,
`2015 WL 7720801 (N.D. Cal. 2015) ...............................................................................................8
`
`Golden Eagle Distrib. Corp. v. Burroughs Corp.,
`801 F.2d 1531 (9th Cir. 1986) .......................................................................................................12
`
`Google Inc. v. Rockstar Consortium U.S. LP,
`2014 WL 1571807 (N.D. Cal. 2014) .......................................................................................4, 5, 6
`
`Holgate v. Baldwin,
`425 F.3d 671 (9th Cir. 2005) ...........................................................................................3, 8, 11, 12
`
`ICU Med., Inc. v. Alaris Med. Sys., Inc.,
`2007 WL 6137003 (C.D. Cal. 2007)..........................................................................................7, 12
`
`Inland Steel Co. v. LTV Steel Co.,
`364 F.3d 1318 (Fed. Cir. 2004)......................................................................................................14
`
`Invisible Fence, Inc. v. Fido’s Fences, Inc.,
`687 F. Supp. 2d 726 (E.D. Tenn. 2009) ...........................................................................................9
`
`Jack Henry & Assocs., Inc. v. Plano Encryption Techs. LLC,
`910 F.3d 1199 (Fed. Cir. 2018)......................................................................................................10
`
`In re Keegan Mgmt. Co., Sec. Litig.,
`78 F.3d 431 (9th Cir. 1996) ...........................................................................................................12
`
`Keister v. PPL Corp.,
`318 F.R.D. 247 (M.D. Pa. 2015) ....................................................................................................11
`
`Klayman v. Deluca,
`2015 WL 427907 (N.D. Cal. 2015) .................................................................................................9
`
`Kyocera Int’l, Inc. v. Semcon IP, Inc.,
`2018 WL 5112056 (S.D. Cal. 2018) ......................................................................................2, 9, 10
`
`Les Shockley Racing, Inc. v. Nat’l Hot Rod Assoc.,
`884 F.2d 504 (9th Cir. 1989) .........................................................................................................12
`
`In re LG Elecs. Inc.,
`No. 2019-107 (Fed. Cir. 2019).........................................................................................................5
`
`
`
`
`
`iii
`REPLY IN SUPPORT OF MOTION FOR SANCTIONS, CASE NO. 18-cv-06185-HSG
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 4:18-cv-06185-HSG Document 58 Filed 04/05/19 Page 5 of 22
`
`
`
`Life360, Inc. v. Advanced Ground Info. Sys., Inc.,
`2015 WL 5612008 (S.D. Fla. 2015) ................................................................................................7
`
`Love v. The Mail on Sunday,
`2006 WL 4046169 (C.D. Cal. 2006)....................................................................................8, 11, 13
`
`Misa Mfg., Inc. v. Pac. Egg & Poultry Assn.,
`1987 WL 119913 (C.D. Cal. 1987)......................................................................................8, 12, 13
`
`Mitchell v. Reg’l Serv. Corp.,
`2014 WL 12607809 (N.D. Cal. 2014) .................................................................................8, 11, 13
`
`Monolithic Power Sys., Inc. v. O2 Micro Intern. Ltd.,
`726 F.3d 1359 (Fed. Cir. 2013)......................................................................................................15
`
`NXP Semiconductors USA, Inc. v. Brevets,
`2014 WL 4621017 (N.D. Cal. 2014) ...............................................................................................6
`
`Ordonez v. Hunt & Henriques, Inc.,
`2017 WL 3537325 (E.D. Cal. 2017) ..............................................................................................13
`
`Pistoresi v. Madera Irrigation Dist.,
`2008 WL 5070051 (E.D. Cal. 2008) ..............................................................................................12
`
`Potter v. Bank of Am., N.A.,
`2013 WL 2558183 (D. Nev. 2013) ................................................................................................13
`
`Provencio v. Vasquez,
`258 F.R.D. 626 (E.D. Cal. 2009) .....................................................................................................3
`
`Radio Sys. Corp. v. Accession, Inc.,
`638 F.3d 785 (Fed. Cir. 2011)..........................................................................................6, 9, 10, 11
`
`Republic of Kazakhstan v. Ketebaev,
`2018 WL 2763308 (N.D. Cal. 2018) ...............................................................................................7
`
`RxHeat LLC v. Thermapure, Inc.,
`2011 WL 998158 (E.D. Mo. 2011) ..................................................................................................6
`
`Sec. & Exch. Comm’n v. Jammin Java Corp.,
`2016 WL 6595133 (C.D. Cal. 2016)................................................................................................3
`
`Slot Speaker Techs., Inc. v. Apple, Inc.,
`2019 WL 315994 (N.D. Cal. 2019) ...............................................................................................14
`
`Stewart v. Screen Gems-EMI Music, Inc.,
`81 F. Supp. 3d 938, 954 (N.D. Cal. 2015) .......................................................................................3
`
`Truesdell v. S. Cal. Permanente Med. Grp.,
`209 F.R.D. 169 (C.D. Cal. 2002) ...................................................................................8, 11, 12, 13
`
`
`
`
`
`iv
`REPLY IN SUPPORT OF MOTION FOR SANCTIONS, CASE NO. 18-cv-06185-HSG
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 4:18-cv-06185-HSG Document 58 Filed 04/05/19 Page 6 of 22
`
`
`
`UUSI, LLC v. U.S.,
`131 Fed. Cl. 244 (Fed. Cl. 2017) ...................................................................................................14
`
`Wedgetail Ltd. v. Huddleston Deluxe, Inc.,
`576 F.3d 1302 (Fed. Cir. 2009)......................................................................................................14
`
`Other Authorities
`
`Fed. R. Civ. P. 11 ......................................................................................................................... passim
`
`Fed. R. Civ. P. 54(d)(2)(A) ..................................................................................................................14
`
`
`
`
`
`
`
`v
`REPLY IN SUPPORT OF MOTION FOR SANCTIONS, CASE NO. 18-cv-06185-HSG
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 4:18-cv-06185-HSG Document 58 Filed 04/05/19 Page 7 of 22
`
`I. ZTE HAS FILED FRIVOLOUS COMPLAINTS IN VIOLATION OF RULE 111
`
`AGIS Software Development LLC (“AGIS Software”) demonstrated that ZTE (USA) Inc.
`
`
`
`
`
`(“ZTE”) violated Rule 11 of the Federal Rules of Civil Procedure (“Rule 11”) by signing and filing
`
`three complaints that are “frivolous”—i.e., (1) lack a legal and/or factual basis for the assertion of
`
`personal jurisdiction over AGIS Software; and (2) for which ZTE cannot show that it conducted “a
`
`reasonable and competent inquiry” before signing and filing. ZTE does not —and cannot—dispute
`
`that AGIS Software, a Texas corporation with a principal place of business in Texas, has no relevant
`
`ties to California. Nor can it dispute that AGIS Software has never availed itself of California or its
`
`courts to enforce or defend its patents. Thus, a competent attorney, after a reasonable inquiry, could
`
`not have concluded that a good faith basis existed for the assertion of general or specific personal
`
`jurisdiction over AGIS Software in California.
`
`
`
`Rather than provide an explanation as to the legal and factual shortcomings of its operative
`
`Second Amended Complaint (“SAC”),2 ZTE’s Opposition asserts a new theory of jurisdiction —
`
`namely, that personal jurisdiction is proper over AGIS Software based on the purported contacts of
`
`its sister entity and non-party, AGIS, Inc. But, even if ZTE’s SAC could support this new theory of
`
`jurisdiction (it cannot), and even if imputation was warranted under the law (it is not), ZTE cannot
`
`show that any of AGIS, Inc.’s purported contacts are sufficient to establish personal jurisdiction in
`
`this declaratory judgment action. No reasonably competent attorney could conclude otherwise.
`
`Moreover, by asserting this new theory for the first time in its opposition briefs, ZTE effectively
`
`concedes the insufficiency of its SAC. Thus, ZTE filed frivolous complaints in violation of Rule 11,
`
`and should be sanctioned accordingly. Sanctions are particularly warranted here in light of ZTE’s
`
`
`1 In its brief, ZTE defines “AGIS” to include three entities —Defendant AGIS Software and two
`non-party entities (Advanced Ground Information Systems, Inc. (“AGIS, Inc.”) and AGIS
`Holdings, Inc. (“AGIS Holdings”))—improperly conflating the entities, as well as the arguments
`and activities relevant to each, despite their critical differences. As discussed herein, this is
`improper and unwarranted. The only contacts that can be attributed to AGIS Software, which are the
`only contacts relevant to the personal jurisdiction analysis, are out-of-state enforcement activities
`and the ancillary discovery activities which are alleged in the SAC and discussed in the Motion and
`accompanying exhibits. Dkts. 39 at ¶¶ 8-10, 12-13; Dkt. 48-1 ¶¶ 7-22; Dkt. 48-2 ¶¶ 4-6, 8.
`2 The allegations in the operative SAC are identical to the allegations of personal jurisdiction in
`ZTE’s initial and First Amended Complaint (“FAC”). Dkts. 1; 18; 39.
`
`
`
`
`
`1
`REPLY IN SUPPORT OF MOTION FOR SANCTIONS, CASE NO. 18-cv-06185-HSG
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`

`

`Case 4:18-cv-06185-HSG Document 58 Filed 04/05/19 Page 8 of 22
`
`
`
`refusal to voluntarily withdraw its offending complaints after AGIS Software presented it with legal
`
`and factual evidence demonstrating the insufficiency of its claims which forced AGIS Software to
`
`expend additional time and resources to move this court twice for dismissal. Thus, AGIS Software’s
`
`Motion for Sanctions should be granted, and ZTE’s counsel should be ordered to pay AGIS
`
`Software’s monetary costs resulting from ZTE’s violations.
`A. ZTE’s New Imputation Theory Fails and Cannot Save ZTE from Sanctions
`
`
`
`ZTE’s new imputation theory —that personal jurisdiction is proper over AGIS Software
`
`based on the contacts of its sister entity and non-party AGIS, Inc. (Dkt. 51 at 2-8) —fails for at least
`
`three reasons: (1) ZTE’s SAC does not support, and is actually inconsistent with, an imputation
`
`theory of jurisdiction; (2) ZTE cannot show that imputation is warranted under existing law; and
`
`(3) ZTE could not have concluded that any of AGIS, Inc.’s contacts would be sufficient to establish
`
`personal jurisdiction in this declaratory judgment action. Dkt. 47 at 1-8, 12.
`
`
`
`First, ZTE’s SAC does not include a single allegation supporting an imputation theory of
`
`personal jurisdiction. Dkt. 39. The SAC does not allege any fact regarding the relationship between
`
`AGIS, Inc. and AGIS Software (beyond that they are sister entities), nor any fact showing that
`
`AGIS, Inc. has any contacts with California (or the details of those contacts). Id. The SAC only
`
`references AGIS, Inc. five times, and none of those references relate to imputation or any purported
`
`connection between AGIS, Inc. and California.3 Instead, the SAC alleges that personal jurisdiction is
`
`proper over AGIS Software based on the alleged activities of AGIS Software. Dkt. 39 ¶ 7; id. at 1
`
`(defining AGIS Software as “AGIS”); id. ¶¶ 8-10, 13-15 (alleging conduct of AGIS Software only).
`
`
`
`AGIS Software informed ZTE on October 26, 2018 via email that ZTE lacked personal
`
`jurisdiction over the AGIS entities. Dkt. 48-2. Attached to that email was the decision in Kyocera
`
`Int’l, Inc. v. Semcon IP, Inc., 2018 WL 5112056, at *3 (S.D. Cal. 2018) in which the court dismissed
`
`a complaint under similar circumstances for lack of personal jurisdiction. Dkt. 48-3. Thereafter, ZTE
`
`
`3 See Dkt. 39 ¶ 3 (alleging that AGIS, Inc. is a Florida corporation with a principal place of business
`in Florida); id. ¶ 9 (referencing AGIS, Inc. in the name of a litigation that took place in Florida and
`involved patents other than the Patents-in-Suit); id. ¶ 11 (alleging that AGIS, Inc. is the sister
`company of AGIS Software, and referencing again the litigation involving AGIS, Inc. that took
`place in Florida); id. ¶ 32 (alleging that ZTE amended its initial complaint to remove AGIS, Inc.
`and AGIS Holdings as defendants).
`
`
`2
`REPLY IN SUPPORT OF MOTION FOR SANCTIONS, CASE NO. 18-cv-06185-HSG
`
`
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 4:18-cv-06185-HSG Document 58 Filed 04/05/19 Page 9 of 22
`
`
`
`twice amended its complaint but never added the new facts and theories it now asserts, even though
`
`it has been in possession of much of the information on which it now relies. See Dkt. 25.4 Instead,
`
`ZTE waited until the filing of its opposition to the Motion to Dismiss the SAC (Dkt. 43) to assert this
`
`entirely new theory of jurisdiction which is inconsistent with the theory asserted in the SAC. See
`
`Dkt. 39 ¶ 7. This is improper, and demonstrates the insufficiency of the SAC. See Holgate v.
`
`Baldwin, 425 F.3d 671, 676 (9th Cir. 2005) (affirming finding that claim lacked legal support where
`
`plaintiff failed to allege evidence of all required elements in complaint); Provencio v. Vasquez, 258
`
`F.R.D. 626, 638 (E.D. Cal. 2009) (“Raising a completely new theory of liability, with only
`
`attenuated connection to the complaint, in a brief in opposition to a motion to dismiss does not grant
`
`Defendant fair notice of Plaintiffs’ claim or the grounds upon which it rests.”); Sec. & Exch.
`
`Comm’n v. Jammin Java Corp., 2016 WL 6595133, at *12 (C.D. Cal. 2016) (court “cannot consider
`
`new facts asserted in the [plaintiff’s] oppositions to the motions”).
`
`
`
`Second, even if ZTE’s SAC could support its new theory, ZTE cannot show that imputation
`
`is warranted. Dkt. 51 at 10-11. The law is well-settled that “the corporate entity should be
`
`recognized and upheld, unless specific, unusual circumstances call for an exception. . . .” 3D Sys.,
`
`Inc. v. Aarotech Labs., Inc., 160 F.3d 1373, 1380 (Fed. Cir. 1998) (declining to impute activities of
`
`one entity to another). Moreover, the existence of a parent-subsidiary or mere sister-sister entity
`
`relationship “is not sufficient to establish personal jurisdiction over the parent on the basis of the
`
`subsidiaries’ minimum contacts with the forum.” Stewart v. Screen Gems-EMI Music, Inc., 81 F.
`
`Supp. 3d 938, 954 (N.D. Cal. 2015) (citing Doe v. Unocal Corp., 248 F.3d 915, 925 (9th Cir. 2001)).
`
`
`
`ZTE argues that imputation is warranted based solely on the “de facto alter ego exception”5
`
`(Dkt. 51 at 10-14), a rare exception that has been applied only where a parent company has engaged
`
`in a deliberate scheme to create a “sham” subsidiary in another state in order to shield itself from
`
`
`4 On January 22, 2019, AGIS Software filed its motion to dismiss the FAC, which included
`citations to numerous authorities illustrating the insufficiency of ZTE’s jurisdictional claims (see
`Dkt. 30), as well as sworn declaration testimony confirming that AGIS Software has no relevant ties
`to California. Dkt. 30-1 ¶¶ 8-22 (“AGIS Software’s efforts to enforce its rights in the Patents-in-
`Suit consist only of litigating patent infringement actions filed in the [EDTX].”); Dkt. 30-2¶ 8-9.
`5 ZTE explicitly abandons any reliance on an “alter ego” or “agency” exception for imputation. Dkt.
`51 at 12. Both theories are inapplicable in any event. See Dkt. 47 at 3-6.
`
`3
`REPLY IN SUPPORT OF MOTION FOR SANCTIONS, CASE NO. 18-cv-06185-HSG
`
`
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 4:18-cv-06185-HSG Document 58 Filed 04/05/19 Page 10 of 22
`
`
`
`jurisdiction in a forum in which it engages in jurisdictionally significant activities. See Dainippon
`
`Screen Mfg. Co. v. CFMT, Inc., 142 F.3d 1266, 1271 (Fed. Cir. 1998) (holding it would be
`
`“reasonable and fair” to exercise jurisdiction over a parent and subsidiary where the parent company
`
`intentionally tried to insulate itself from jurisdiction by creating a sham subsidiary in another state,
`
`transferring its patents to the subsidiary, arranging for an exclusive license back to itself by virtue of
`
`its complete control over the subsidiary, and then continuing to “operate[] under the patent” and
`
`engage in other jurisdictionally sufficient activities in the forum); Google Inc. v. Rockstar
`
`Consortium U.S. LP, 2014 WL 1571807, at *4 (N.D. Cal. 2014) (applying exception because the
`
`defendants failed to rebut evidence that the subsidiary was created solely to insulate parent from
`
`jurisdiction in California). In these cases, the following factors were also relevant to the analysis:
`
`(1) both parent and subsidiary were defendants; (2) the parent entities had jurisdictionally significant
`
`contacts with the forum (and continued to “operate under the patents” after forming the subsidiaries);
`
`(3) the subsidiaries also had independent contact with the forum; and (4) the undisputed evidence
`
`showed that the defendants had “created continuing obligations with a forum resident to marshal the
`
`asserted patents such that it would not be unreasonable to require [them] to submit to the burdens of
`
`litigation in this forum.” Rockstar, 2014 WL 1571807, at * 8 (subsidiary traveled to California to
`
`attempt to negotiate license, and unrebutted evidence showed defendants created continuing
`
`obligations with California-resident, Apple, which was an active majority shareholder of the parent);
`
`Dainippon, 142 F.3d at 1271 (subsidiary made threats of infringement in California, engaged in
`
`negotiations to sublicense patent in California, entered into exclusive license with parent, which
`
`maintained sales agents in the forum specifically to make, use, and sell products covered by the
`
`relevant patent nationwide, and derived substantial licensing revenues from the parent’s forum-based
`
`sales).
`
`
`
`The same is not true here, and the “de facto alter ego exception” cannot apply. Dkt. 47 at 6-8.
`
`Importantly, ZTE cannot show that AGIS Software is a “sham” entity that was created to shield
`
`AGIS, Inc. from jurisdiction in California. In fact, Judge Gilstrap of the EDTX has already twice
`
`rejected the argument in the context of transfer motions that AGIS Software was a sham entity
`
`established for the purpose of supporting venue in East Texas. See AGIS Software Dev. LLC v.
`
`
`
`
`
`4
`REPLY IN SUPPORT OF MOTION FOR SANCTIONS, CASE NO. 18-cv-06185-HSG
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 4:18-cv-06185-HSG Document 58 Filed 04/05/19 Page 11 of 22
`
`
`
`Apple, Inc., 2018 WL 2721826, at *3 (E.D. Tex. June 6, 2018) (rejecting argument that AGIS
`
`Software is a “sham” entity and ephemeral because the party making the affirmative assertion failed
`
`to present concrete evidence that the business is actually a sham and has no real operations); see also
`
`AGIS Software Dev. LLC v. HTC Corp., 2018 WL 4680557, at *10 (E.D. Tex. 2018) (denying LG
`
`Electronics, Inc.’s motion to dismiss or transfer). Both of these decisions were left undisturbed by
`
`the Federal Circuit on petitions for writs of mandamus. In re LG Elecs. Inc., No. 2019-107 (Fed. Cir.
`
`2019); In re Apple, Inc., No. 2018-151 (Fed. Cir. 2018). ZTE does not, because it cannot, dispute
`
`this.6
`
`
`
`Additionally, none of the other factors relevant to the courts’ analyses in Dainippon or
`
`Rockstar are present here: (1) it is undisputed that AGIS, Inc. is not a defendant; (2) as discussed
`
`below, ZTE cannot show that AGIS, Inc. has contacts sufficient to subject it to jurisdiction in this
`
`declaratory judgment action (see Dkt. 47 at 12); (3) AGIS Software has no independent contacts
`
`with California (Dkt.48-1 ¶¶ 9-22); and (4) ZTE has provided no evidence that AGIS Software has
`
`created continuing obligations with a forum resident to marshal the asserted patents. ZTE cannot
`
`show otherwise.7 Thus, ZTE could not have reasonably concluded that “the de facto exception” of
`
`Dainippon and Rockstar applies. See Fid. Nat’l Info. Servs., Inc. v. Plano Encryption Techs., LLC,
`
`2016 WL 1650763, at *8 (D. Del. 2016) (rejecting argument that subsidiary “had no real separate
`
`identity” from parent for purposes of personal jurisdiction because “[Plaintiff] has alleged merely
`
`that, in the span of a few months, the Defendants were formed and [subsidiary] acquired the asserted
`
`
`6 ZTE’s only attempt at rebuttal is to argue that, here, the burden should be on AGIS Software to
`show that it is not a sham entity and that it would be unreasonable for the Court to impute the
`activities of AGIS, Inc. to AGIS Software. Dkt. 51 at 12 & n.6. This is incorrect, as the burden does
`not shift to AGIS Software until ZTE satisfies its burden to establish a prima facie case of personal
`jurisdiction over AGIS Software, which it has not and cannot do. See, e.g., AU Optronics Corp. Am.
`v. Vista Peak Ventures, LLC, 2019 WL 690282, at *3 (N.D. Cal. 2019) (Gilliam, Jr., J.).
`7 ZTE’s other arguments (Dkt. 51 at 12) are inaccurate and insufficient. As discussed, the SAC does
`not contain a single allegation supporting imputation, much less any regarding a “sham” status. Dkt.
`39. ZTE’s argument that the AGIS entities are “closely connected,” even if true, is unavailing, as is
`ZTE’s suggestion that AGIS Software’s failure to rebut a statement purportedly conflating the
`entities in an opponent’s brief responding to a motion to strike an expert report. Finally, ZTE’s
`arguments in its now stricken opposition to the MTD that AGIS, Inc. employees made statements
`on behalf of AGIS Software (Dkt. 43), is not accurate, does not relate to the Patents-in-Suit, and is
`insufficient. Dkt. 47 at 3-8.
`
`
`5
`REPLY IN SUPPORT OF MOTION FOR SANCTIONS, CASE NO. 18-cv-06185-HSG
`
`
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 4:18-cv-06185-HSG Document 58 Filed 04/05/19 Page 12 of 22
`
`
`
`patents. Those facts, and the fact that Mr. Liddle has a connection to both Defendant entities provide
`
`no suggestion that the relationship between [parent] and [subsidiary] is one promoting injustice or
`
`inequity. . .[Plaintiff] is proffering little more than speculation on these grounds.”); RxHeat LLC v.
`
`Thermapure, Inc., 2011 WL 998158, at *4 n.3 (E.D. Mo. 2011) (“As there exists no exclusive
`
`licensee in the instant case, Dainippon does not support a finding of personal jurisdiction.”); NXP
`
`Semiconductors USA, Inc. v. Brevets, 2014 WL 4621017, at *12 (N.D. Cal. 2014); (finding Google
`
`inapplicable because Google had shown that defendants had “created continuing obligations with a
`
`forum resident to marshal the asserted patents”).
`
`
`
`Third, even if imputation was warranted, ZTE could not have reasonably concluded that any
`
`purported contacts of AGIS, Inc. would be sufficient to justify the exercise of specific jurisdiction in
`
`this declaratory action. Dkt. 47 at 12-14. Among other reasons (discussed infra Section I.C and Dkt.
`
`47 at 12-14), none of the purported contacts of AGIS, Inc. upon which ZTE relies actually relate to
`
`the enforcement or defense of the Patents-in-Suit, as is required to establish personal jurisdiction in
`
`the declaratory judgment action. See, e.g., Radio Sys. Corp. v. Accession, Inc., 638 F.3d 785, 789
`
`(Fed. Cir. 2011). In fact, AGIS, Inc. does not hold an ownership interest in the Patents-in-Suit
`
`sufficient to enforce or defend rights in the Patents-in-Suit. Dkts. 48 at 2, 4; 48-1 ¶ 7. ZTE does not
`
`contend otherwise or argue that any of the activities of AGIS, Inc. upon which it relies actually does
`
`relate to the enforcement or defense of the Patents-in-Suit. Dkts. 51; 43. Other purported contacts
`
`related to the enforcement or defense of other patents, even if “related” to the Patents-in-Suit, do not
`
`“arise out of or relate to” the declaratory judgment action, and are, therefore, insufficient. Dkt. 47 at
`
`12-13 (citing Avocent Huntsville Corp. v. Aten Int’l Co., Ltd., 552 F.3d 1324, 1338 (Fed. Cir. 2008)).
`
`Thus, ZTE’s new imputation theory cannot save its frivolous complaints.
`B. ZTE Lacked a Good Faith Basis to Assert General Jurisdiction over AGIS Software
`
`
`
`As explained in the Motion, the lack of general jurisdiction over AGIS Software is a matter
`
`of well-settled law. Dkts. 48 at 9-11; 48-1 ¶¶ 10-19, 21; 48-2 ¶ 7. ZTE’s SAC admits that AGIS
`
`Software is a Texas entity with its principal place of business in Texas (Dkt. 39 ¶ 3), and fails to
`
`include any other allegation purporting to establish “continuous and systematic” contacts between
`
`AGIS Software and California. See Dkt. 39. Moreover, ZTE had evidence that AGIS Software is not
`
`
`
`
`
`6
`REPLY IN SUPPORT OF MOTION FOR SANCTIONS, CASE NO. 18-cv-06185-HSG
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 4:18-cv-06185-HSG Document 58 Filed 04/05/19 Page 13 of 22
`
`
`
`registered to conduct business in California; does not have a registered agent for service of process
`
`in California; does not have offices, employees, equipment, bank accounts or other assets in
`
`California; is not subject to and has never paid taxes in California; does not manufacture products in
`
`California; has not signed contracts in California; does not recruit employees in California; and does
`
`not own, lease, or rent any property in California; does not sell products in California; does not
`
`solicit or engage in business in California; and, with the exception of the present suit, has never
`
`litigated in California. Dkt. 30-1 ¶¶ 10-19, 21. Thus, no competent attorney could have reasonably
`
`concluded that it had a good faith basis to assert general jurisdiction over AGIS Software in
`
`California. See, e.g., Daimler AG v. Bauman, 134 S. Ct. 746, 749 (2014).
`
`
`
`In its Opposition, ZTE does not address general jurisdiction as to AGIS Software, and thus
`
`concedes the point. Compare Dkt. 48 at 8-12 with Dkt. 51; see also Republic of Kazakhstan v.
`
`Ketebaev, 2018 WL 2763308, at *9 (N.D. Cal. 2018) (“[B]y failing to respond to [defendant’s]
`
`argument, [plaintiff] has effectively conced