Case 1:10-cv-00258-SLR-MPT Document 441 Filed 08/16/12 Page 1 of 17 PageID #: 8452
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`IN THE UNITED STATES DISTRICT COURT
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`FOR THE DISTRICT OF DELAWARE
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`MOBILEMEDIA IDEAS, LLC,
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`Plaintiff,
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`v.
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`APPLE INC.,
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`Defendant.
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`)
`)
`)
`)
`) Civ. No. 1 0-258-SLR
`)
`)
`)
`)
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`Jack B. Blumenfeld, Esquire, Rodger D. Smith II, Esquire, and Jeremy A. Tigan, Esquire
`of Morris, Nichols, Arsht & Tunnell LLP, Wilmington, Delaware. Counsel for Plaintiff. Of
`Counsel: Steven M. Brauer, Esquire, Justin J. Daniels, Esquire, Safraz W. Ishmael,
`Esquire, Kenneth Rubenstein, Esquire, Anthony C. Coles, Esquire and Alan Federbush,
`Esquire of Proskauer Rose LLP.
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`Richard K. Hermann, Esquire, Mary B. Matterer, Esquire and Kenneth L. Dorsney,
`Esquire of Morris James LLP, Wilmington, Delaware. Counsel for Defendant. Of
`Counsel: George A. Riley, Esquire, Luann L. Simmons, Esquire, and David S.
`Almeling, Esquire of O'Melveny & Myers LLP.
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`MEMORANDUM OPINION
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`Dated: August 16, 2012
`Wilmington, Delaware
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`

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`Case 1:10-cv-00258-SLR-MPT Document 441 Filed 08/16/12 Page 2 of 17 PageID #: 8453
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`~~udge
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`I. INTRODUCTION
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`Plaintiff MobileMedia Ideas LLC ("MMI") filed its patent infringement complaint
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`against Apple Inc. ("Apple") on March 31, 2010, alleging that Apple's iPhone and iPod
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`products infringe the following U.S. Patent Nos.: 6,253,075 ("the '075 patent"),
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`6,427,078 ("the '078 patent"), RE 39,231 ("the '231 patent"), 5,737,394 ("the '394
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`patent"), 6,002,390 ("the '390 patent"), 6,070,068 ("the '068 patent"), 6,393,430 ("the
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`'430 patent"), 6,446,080 ("the '080 patent"), 6,549,942 ("the '942 patent"), 6,760,477
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`("the '477 patent"), 7,313,647 ("the '647 patent"), 7,349,012 ("the '012 patent"), and
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`5,915,239 ("the '239 patent"). (0.1. 1) Prior to Apple's answer, on July 16, 2010, MMI
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`amended its complaint to add allegations of infringement of U.S. Patent Nos. 6,441,828
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`("the '828 patent"), 6,725,155 ("the '155 patent"), and 5,490,170 ("the '170 patent").
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`(0.1. 8) Apple answered and asserted affirmative defenses of, inter alia,
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`noninfringement, invalidity, unenforceability, failure to state a claim, "waiver, laches
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`and/or estoppel," prosecution history estoppel and lack of standing. (D. I. 10 at~~ 114-
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`23) Apple also brought counterclaims of non infringement of each of the sixteen
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`patents-in-suit. (/d. at~~ 129-208) Discovery proceeded in the case and has now
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`closed. (D. I. 225) The '390 and '647 patents were subsequently dismissed from suit by
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`joint stipulation. (0.1. 263) On March 2, 2012, Apple filed a motion to dismiss on the
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`ground that MMI lacks standing to sue for infringement of the patents-in-suit. (0.1. 226)
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`That motion is currently pending before the court. On June 21, 2012, Apple filed an
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`unopposed motion for leave to file a supplemental brief in support of its motion. (D. I.
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`361) On June 29, 2012, MMI filed an unopposed motion for leave to supplement its
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`

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`Case 1:10-cv-00258-SLR-MPT Document 441 Filed 08/16/12 Page 3 of 17 PageID #: 8454
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`own papers. (D. I. 402) For the following reasons, the court grants the motions to
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`supplement the record, and denies the motion to dismiss.
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`II. BACKGROUND
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`A. Formation of MMI
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`MMI is a Delaware LLC and has its principal place of business in Chevy Chase,
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`Maryland. (D.I. 8 at~ 1) MMI was formed pursuant to a "Formation and Framework
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`Agreement" (the "Formation Agreement") executed by Sony Corporation of America
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`("Sony USA"), 1 Nokia Corporation ("Nokia"), 2 and MPEG LA, LLC ("MPEG LA")3
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`. (/d.,
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`ex. C) The Formation Agreement states that MMI was formed by three Delaware
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`corporations: Tagivan, LLC ("Tagivan"), a wholly-owned subsidiary of MPEG LA; Nokia
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`Capital, Inc. ("Nokia Capital"), a wholly owned subsidiary of Nokia; and SCA IPLA
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`Holdings, Inc. ("SCA"), a wholly-owned subsidiary of Sony America. (/d. at preamble)
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`MMI was formed "to acquire, develop, administer and manage Intellectual Property
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`rights" contributed to it by Nokia Capital and SCA. (/d.)
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`MMI obtained rights in the patents-in-suit (as well as dozens of other patents and
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`patent applications) in January 2012 from Nokia Capital and SCA pursuant to two
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`Patent Purchase Agreements ("the Purchase Agreements"). (D. I. 228, ex. D; ex. G)
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`Prior to the transfer to MMI, SCA received the patents through assignments from Sony
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`1 A New York corporation and a subsidiary of Sony Corporation ("Sony"),
`headquartered in Tokyo, Japan. Sony USA has several principal United States
`businesses, including Sony Electronics, Inc. ("Sony Electronics"). See
`http://www.sony.com/SCA/index.shtml.
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`2A Finland-based company.
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`3A Delaware LLC.
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`2
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`Electronics and Sony Corporation (id., ex. E; ex. F), and Nokia Capital received its
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`patents from Nokia (id., ex. G). Each respective agreement states that the seller or
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`transferor "sells, assigns, transfers and conveys [] all of [its] right, title and interest in
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`and to the [assigned] patents and all inventions and discoveries described therein,
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`including without limitation, all [its] rights [] under the Assignment Agreements, and all
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`[its] rights [] to license and collect royalties, including royalties for past infringement,
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`under such [Assigned] Patents." (/d. at ex. Eat§ 3.1; ex. Fat§ 2.1 ;4 ex. Gat§ 3.1; ex.
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`Hat§ 3.1)
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`The Purchase Agreements between MMI and SCA and Nokia Capital also
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`contain an "Assignment of Patent Rights" addendum providing that:
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`its
`[MMI], and
`transfers to
`[Nokia Capitai/SCA] sells, assigns, and
`successors, assigns, and legal representatives, the entire right, title and
`interest in the United States and all foreign countries, in and to the U.S.
`Patents . . . in and to any and all inventions and improvements that are
`disclosed therein; in and to all divisional, continuing, substitute, renewal,
`reissue, and all other patent applications that have been or shall be filed in
`the United States and all foreign countries that are based upon the patents
`... ; in and to all original and reissued patents that have been or shall be
`issued in the United States and all foreign countries based upon the patents
`... ; and in and to all rights of priority based upon the patents ... ; agrees
`that [MMI] may apply for and receive a patent or patents for said inventions
`and improvements in its own name .... [and] covenants [ ] that no
`assignment, grant, mortgage, license or other agreement affecting the rights
`and property herein conveyed has been made to others by the undersigned,
`and that full right to convey the same as herein expressed is possessed by
`the undersigned.
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`(D. I. 228, ex. D at MMI-A_00000504 (agreement exhibit B); ex. Gat MMI-A_00000464
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`(agreement exhibit B)) (emphasis added)
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`4The Sony Corporation/Sony Electronics contract is entitled "Patent Transfer
`Agreement," and replaces reference to the "Seller" with the "Transferor," and the
`"Assigned Patents" with the "Transferred Patents."
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`3
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`The Purchase Agreements transferring the patents to MMI also include a "limited
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`license" to SCA and Nokia Capital to practice the patents, as follows:
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`6.1 The Seller License (as defined below) is a limited license and
`Purchaser's grant of such license does not include all rights in the Assigned
`Patents ....
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`6.2 Seller License. Upon assignment of the Assigned Patents to Purchaser,
`Purchaser hereby grants to Seller and its Subsidiaries, under the Assigned
`Patents and for the lives thereof, the Seller License set out in the entirety of
`this Article 6.2: a fully paid up, royalty-free, irrevocable, non-exclusive non(cid:173)
`sublicensable, nontransferable right and license ("Seller License") to practice
`the methods and to make, have made, use, distribute, lease, sell, offer for
`sale, import, export, develop and otherwise dispose of and exploit (a) any
`Seller and/or Subsidiary products or services covered by the Assigned
`Patents ("Covered Products") and (b) any intermediate products, chips or
`other components ("Components") for Seller or its Subsidiaries which
`Components are incorporated into any Seller and/or Subsidiary product
`and/or service ....
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`(/d., ex. D at§§ 6.1, 6.2; ex. Gat§§ 6.1, 6.2) MMI also granted to SCA and Nokia
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`Capital a release for any liability of infringement for the assigned patents. (/d., ex. D at
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`§ 6.3; ex. Gat§ 6.3) MMI was given all rights to "pursue damages, injunctive relief, and
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`other remedies for past, current and future infringement of the Assigned Patents." (/d.,
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`ex. D at § 3.2; ex. G at § 3.2)
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`B. Ownership and Operation of MMI
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`MMI's equity ownership is divided between Tagivan, with a majority 50.2% share,
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`and Nokia Capital and SCA, each with 24.9% shares. (/d., ex. Cat§ 1.02) At the end
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`of each fiscal year, MMI allocates its net income (as well as net loss) among SCA,
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`Nokia Capital and Tag ivan. (/d. at§ 6.2) An "Early Dissolution" provision of the
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`Formation Agreement specifies that if, as of the third anniversary of the effective date of
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`the Formation Agreement, the MMI Board does not reasonably anticipate that MMI will
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`4
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`(within 60 days) reach $5 million in revenue, or "issue[] a patent license to at least four
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`(4) different Persons" not associated with MMI or its owners, Nokia Capital or SCA "may
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`cause the early dissolution" of MMI after appropriate notice is given. 5 (D.I. 228, ex. Cat
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`§ 4.03) Otherwise, MMI's interests "shall be sold" on January 11, 2020 (via the "Tenth
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`Anniversary Sale Procedure") unless the involved parties unanimously agree
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`otherwise. 6 (D.I. 228, ex. Cat§ 4.04)
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`The Formation Agreement specifies that MMI shall adopt an operating
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`agreement which governs its activities. (/d. at§ 1.01 (a)) That agreement, the
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`"Amended and Restated Limited Liability Company Operating Agreement of
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`MobileMedia Ideas LLC, A Delaware Limited Liability Company," is also of record
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`(hereinafter, the "Operating Agreement"). (/d., ex. I) Pursuant to the Operating
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`Agreement, MMI's "Members" (Nokia Capital, SCA, and Tagivan) are bound
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`not to directly or indirectly transfer, sell, gift, exchange, assign, pledge,
`mortgage or otherwise dispose of or encumber any or all of its Interests or
`any legal or beneficial ownership therein [] unless such Member shall have
`first received the written approval of all other Members.
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`(/d. at Art. 9, § 9.1; see also id. at§ 9.2 (any purported transfer without full compliance
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`is void ab initio)) The Operating Agreement also provides that SCA, Tagivan and Nokia
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`Capital do not have "any interest in specific Company property." (/d., ex. I at§ 1.5)
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`The Operating Agreement further provides that the Board of Representatives of
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`5MMI has submitted the Declaration of Lawrence A. Horn, providing that in or
`after February 2012, "the parties agreed to waive and terminate the dissolution right in
`Section 4.03 of the [Formation] Agreement" in order to facilitate the extension of a line
`of credit. (D. I. 441 at ,-m 5, 6)
`6SCA, Nokia Capital and Tag ivan have a right of first refusal. (D.I. 228, ex. Cat§
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`4.05)
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`5
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`MMI ("the Board") shall comprise seven (7) individuals: two (2) designated by Nokia;
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`two (2) designated by SCA; and three (3) designated by Tag ivan. (Jd. at§ 4.1 (2)) The
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`Board is given all powers necessary to carry out the purposes and businesses of MMI,
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`subject to delineated restrictions. (ld. at§ 4.1 (a))
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`For example, the Board may not, without unanimous approval, "approve any
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`increase in the number or change in the rights and preferences of any authorized
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`Interests" or "approve the purchase or sale of any material asset not in the ordinary
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`course of business." (!d. at§ 4.1 (b )(3)(ix) & (xii)) Unanimous Board approval is also
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`required for MMI to "enter into contingent fee arrangements with law firms or other
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`service providers engaged by or for the purposes of providing services to the
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`Company." (!d. at§ 4.1 (b )(3)(xviii))
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`Section 4.3 of the Operating Agreement describes the duties of the Board and
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`Officers of MMI. While each Board member has "the same fiduciary duty of loyalty and
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`care as a director or officer of a business corporation organized under the General
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`Corporation Law of the State of Delaware," they are also expressly permitted to serve
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`as a director or member representative of other competing business entities and may, in
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`fact, "take the interests of its employer into account in acting as a Representative under
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`this Agreement." (/d. at§ 4.3) Put another way, the Board members delegated by
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`Sonia, Nokia and Tagivan may retain loyalties to those companies.
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`C. Role of Tag ivan
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`Tagivan's activities are governed by the "Services Agreement By and Among
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`MobileMedia Ideas LLC, Tagivan LLC and MPEG LA, LLC" (hereinafter, the "Services
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`Agreement"). (0.1. 228, ex. J) The Services Agreement contains a schedule of services
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`6
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`including, inter alia, "[l]icensing services" as well as patent prosecution, royalty
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`collection, and maintenance of MMI's patent portfolio. (/d., Schedule 2.1) Legal
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`consulting and support for MMI, as well as other corporate and management services,
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`are also delineated. (/d.) Pursuant to the Services Agreement, Tagivan "shall exercise
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`its reasonable discretion and take such actions as [it] may reasonably determine are
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`appropriate or necessary without obtaining prior approval of [MMI] for the provision of
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`the Services[.]" (/d. at§ 2.2(a)) The Services Agreement also provides that Tagivan
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`shall perform the Services in the capacity of an independent contractor of
`[MMI], and shall, unless otherwise expressly provided herein or authorized
`by [MMI] from time to time, have no authority to act for or represent [MMI] in
`any way or otherwise be deemed an agent of [MMI]. [MMI] shall have no
`authority to act for or represent [Tag ivan] in any way or otherwise be deemed
`an agent of [Tagivan]. Nothing contained herein shall be deemed to
`constitute the Parties hereto as members of any partnership, joint venture,
`association, syndicate, trustor other entity; provided, however, that[Tagivan]
`is a limited liability company interest owner of [MMI].
`
`(!d. at § 2.2(b))
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`While MMI has the sole right to collect royalties for the patents (D.I. 228, ex. D at
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`§ 3.1; ex. Gat§ 3.1 ), Tag ivan actually collects the royalties (id. at ex. J at Schedule 2.1,
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`MMI-A_00000553), and all of the profits pass through MMI to SCA, Nokia Capital and
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`Tagivan (id., ex. I at§ 6.2). SCA and Nokia Capital also receive profits from the patents
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`via pre-existing licensing agreements that were not assigned to MMI; the Purchase
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`Agreements each carved out such pre-existing licenses from the transfer. (!d., ex. D at
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`§ 3.3; ex. Gat§ 3.3) Although MMI has "right, title, and interest in and to all causes of
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`action and enforcement rights, whether currently pending, filed, or otherwise, for the
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`[a]ssigned [p]atents" and the right to pursue all "remedies for past, current and future
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`7
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`

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`infringement;"7 as well as the responsibility for patent maintenance, 8 MMI has delegated
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`the management of its legal affairs to Tagivan. 9 The Services Agreement generally
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`delineates Tag ivan's "Legal" and "Intellectual Property" responsibilities, for example,
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`"[h]andling and resolving claims, disputes or controversies (including litigation,
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`arbitration, settlement or other proceedings or negotiations)," "[l]icensing services" and
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`the "collection and verification of royalties[.]" (0.1. 228, ex. J at Schedule 2.1, MMI-
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`A_ 00000553-54)
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`Absent breach or other extenuating circumstances, the Services Agreement may
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`only be terminated by mutual written consent of both MMI and Tagivan. (0.1. 228, ex. J
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`at§ 7.2(e)) Moreover, MMI cannot re-assign the patents-in-suit without full Board
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`approval, i.e., the consent of SCA, Nokia Capital and Tagivan. (0.1. 228, ex. I at§§
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`4.1 (b)(3)(ix) & (xii)) Tag ivan, SCA and Nokia Capital effectively have veto power over
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`any such sales by virtue of their Board seats. SCA and Nokia Capital have also
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`retained unrestricted licenses to practice the patented technology without fear of
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`litigation. (0.1. 228, ex. 0 at§§ 6.1-6.3; ex. Gat§§ 6.1-6.3)
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`Ill. STANDARDS
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`Once jurisdiction is challenged, the party asserting subject matter jurisdiction has
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`the burden of proving its existence. See Carpet Group lnt'l v. Oriental Rug Importers
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`Ass'n, Inc., 227 F.3d 62, 69 (3d Cir. 2000). Under Rule 12(b)(1 ), the court's jurisdiction
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`7(0.1. 228, ex. 0 at§ 3.2; ex. Gat§ 3.2)
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`8(0.1. 228, ex. 0 at§ 4.4 & Assignment of Patent Rights (ex. B); ex. Gat§ 4.4 &
`Assignment of Patent Rights (ex. B))
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`9(0.1. 228, ex. I at§§ 2.1 (a), 2.2(b), Schedule 2.1)
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`8
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`may be challenged either facially (based on the legal sufficiency of the claim) or
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`factually (based on the sufficiency of jurisdictional fact). See 2 James W. Moore,
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`Moore's Federal Practice § 12.30[4] (3d ed. 1997). Under a facial challenge to
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`jurisdiction, the court must accept as true the allegations contained in the complaint.
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`See id. Dismissal for a facial challenge to jurisdiction is "proper only when the claim
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`'clearly appears to be immaterial and made solely for the purpose of obtaining
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`jurisdiction or ... is wholly insubstantial and frivolous.'" Kehr Packages, Inc. v. Fide/cor,
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`Inc., 926 F.2d 1406, 1408-09 (3d Cir. 1991) (quoting Bell v. Hood, 327 U.S. 678, 682
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`(1946)). Under a factual attack, however, the court is not "confine[d] to allegations in
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`the ... complaint, but [can] consider affidavits, depositions, and testimony to resolve
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`factual issues bearing on jurisdiction." Gotha v. United States, 115 F.3d 176, 179 (3d
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`Cir. 1997); see also Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891-92
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`(3d Cir. 1977). In such a situation, "no presumptive truthfulness attaches to plaintiff's
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`allegations, and the existence of disputed material facts will not preclude the trial court
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`from evaluating for itself the merits of jurisdictional claims." Carpet Group, 227 F.3d at
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`69 (quoting Mortensen, 549 F.2d at 891 ).
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`IV. DISCUSSION
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`A. Standing Requirements
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`MMI bears the burden of establishing that it has standing to bring an action for
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`patent infringement. Sicom Sys., Ltd. v. Agilent Techs., Inc., 427 F.3d 971, 976 (Fed.
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`Cir. 2005). The Patent Act provides that "[a] patentee" is entitled to bring a civil action
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`for patent infringement. 35 U.S.C. § 281. The term "patentee" includes "not only the
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`patentee to whom the patent was issued but also the successors to the patentee." /d. at
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`§ 1 OO(d). These sections "have been interpreted to require that a suit for infringement
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`of patent rights ordinarily be brought by a party holding legal title to the patent." Propat
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`Intern. Corp. v. RPost, Inc., 473 F.3d 1187, 1189 (Fed. Cir. 2007) (citing Sicom Sys.
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`Ltd., 427 F.3d at 976)); see also Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359, 1367
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`(Fed. Cir. 2008); Mentor HIS, Inc. v. Med. Device Alliance, Inc., 240 F.3d 1016,1017
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`(Fed. Cir. 2001 ).
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`[P]Iaintiffs in patent suits fall into three categories for standing purposes:
`those that can sue in their own name alone; those that can sue as long as
`the patent owner is joined in the suit; and those that cannot even participate
`as a party to an infringement suit. In the first category (i.e., those who can
`sue in their own name alone) are those plaintiffs that hold all legal rights to
`the patent, including assignees and those to whom "all substantial rights to
`the patent" have been transferred. Exclusive licensees who do not receive
`all substantial rights fall into the second category and must join the patent
`owner as co-plaintiff to satisfy prudential concerns (i.e., to avoid the
`possibility that the accused infringer could later be sued by the patentee
`also). Finally, the third category (those who cannot be parties at all) includes
`those who lack exclusionary rights, i.e., those licensees who are authorized
`to make, use, and sell the patented product but who have no right to prevent
`others from also doing so.
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`Aspex Eyewear, Inc. v. Altair Eyewear, Inc., 288 Fed. Appx. 697 (Fed. Cir. 2008) (citing
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`Morrow, 499 F .3d at 1339) (internal citations and quotations omitted). A party that holds
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`the exclusionary rights to a patent suffers constitutional injury-in-fact. See Morrow v.
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`Microsoft Corp., 499 F.3d 1332, 1341 (Fed. Cir. 2007). Viewing the test in terms of
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`such injury, to have constitutional standing, a party's interests in the patents must
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`"include sufficient exclusionary rights such that [it] suffers an injury in fact from infringing
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`activities. If [it] holds all substantial rights, it can sue in its name alone. If [it] holds less
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`than all substantial rights but sufficient exclusionary rights that it suffers injury in fact, it
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`can sue as a co-party[.]" /d.
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`B. Substantial Rights
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`A patent is "a bundle of rights which may be divided and assigned or retained in
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`whole or in part." Vaupel Textilmaschinen KG v. Meccanica Euro ltalia SPA, 944 F.2d
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`870, 875 (Fed. Cir. 1991 ). "When a sufficiently large portion of this bundle of rights is
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`held by one individual, we refer to that individual as the owner of the patent, and that
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`individual is permitted to sue for infringement in his own name." Alfred E. Mann
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`Foundation for Scientific Research v. Cochlear Corp., 604 F.3d 1354, 1360 (Fed. Cir.
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`2010) (hereinafter, "Alfred E. Mann Foundation"); see also Propat, 473 F.3d at 1189
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`("Even if the patentee does not transfer formal legal title, the patentee may effect a
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`transfer of ownership for standing purposes if it conveys all substantial rights to the
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`patent to the transferee ... [which is then] treated as the patentee and has standing to
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`sue in its own name.") (citations omitted). The court must "look to the agreement
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`between the parties and analyze the respective rights allocated to each party" in order
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`to determine whether substantial rights have been transferred. Propat, 473 F.3d at
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`1189; see also Prima Tek II, LLC v. A-Roo Co., 222 F.3d 1372, 1378 (Fed. Cir. 2000)
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`("[W]e must ascertain the intention of the parties and examine the substance of what
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`was granted.") (citation omitted).
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`The Federal Circuit has articulated some of the rights that should be examined
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`for this purpose, as follows.
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`[T]ransfer of the exclusive right to make, use, and sell products or services
`under the patent is vitally important to an assignment. We have also
`examined the scope of the licensee's right to sublicense, the nature of license
`provisions regarding the reversion of rights to the licensor following breaches
`of the license agreement, the right of the licensor to receive a portion of the
`recovery in infringement suits brought by the licensee, the duration of the
`license rights granted to the licensee, the ability of the licensor to supervise
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`and control the licensee's activities, the obligation of the licensor to continue
`paying patent maintenance fees, and the nature of any limits on the
`licensee's right to assign its interests in the patent.
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`Frequently, though, the nature and scope of the exclusive licensee's
`purported right to bring suit, together with the nature and scope of any right
`to sue purportedly retained by the licensor,
`is the most important
`consideration. Where the licensor retains a right to sue accused infringers,
`that right often precludes a finding that all substantial rights were transferred
`to the licensee. It does not, however, preclude such a finding if the licensor's
`right to sue
`is rendered
`illusory by the licensee's ability to settle
`licensor-initiated litigation by granting royalty-free sublicenses to the accused
`infringers. Under the prior decisions of this court, the nature and scope of the
`licensor's retained right to sue accused infringers is the most important factor
`in determining whether an exclusive license transfers sufficient rights to
`render the licensee the owner of the patent.
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`Alfred E. Mann Foundation, 604 F .3d at 1360-61 (internal citations omitted) (collecting
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`cases).
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`C. Analysis
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`Typically, courts are presented with the situation where an exclusive licensee
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`sues an alleged infringer, and it must be determined whether the licensee has standing.
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`Similar to Alfred E. Mann Foundation, the court is presented with the rather unique,
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`converse scenario "in which the patent owner seeks to bring suit, requiring [the court] to
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`determine whether the patent owner transferred away sufficient rights to divest it of any
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`right to sue." 604 F.3d at 1359.
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`Apple asserts that MMI is a "category 3" plaintiff (without sufficient rights to sue
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`for infringement at all) and, as such, this court should dismiss the suit entirely.
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`Alternatively, Apple argues that MMI is a "category 2" plaintiff (without sufficient rights to
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`sue for infringement without joining others), in which case the court should dismiss the
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`suit with leave to amend to add Sony and Nokia as parties. (D. I. 227 at 15)
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`Case 1:10-cv-00258-SLR-MPT Document 441 Filed 08/16/12 Page 14 of 17 PageID #: 8465
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`Notably, while Apple asserts that Tagivan commands all of MMI's litigation and
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`licensing, Apple does not argue that Tag ivan (or its parent, MPEG LA) should be joined
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`as plaintiffs. From the court's perspective, Tagivan has more authority vis a vis MMI
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`than do Sony or Nokia. The Services Agreement (from which MMI cannot withdraw)
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`enumerates dozens of responsibilities for which Tagivan has control. As discussed
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`supra, Tagivan retains and oversees litigation counsel, handles and resolves all of
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`MMI's legal disputes, identifies prospective licensees and negotiates licenses, and
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`collects all royalties owed to MMI. (0.1. 228, ex. J at Schedule 2.1) There is no
`
`indication that MMI has veto power over Tag ivan's decisions to bring suit against a
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`potential infringer or to indulge infringement. See Propat, 473 F.3d at 1191 (the "right to
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`veto licensing and litigation decisions" considered); Prima Tek II, 222 F.3d at 1378-79.
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`The only litigation-related responsibility not delegated solely to Tagivan concerns the
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`ability to enter into contingent fee arrangements with law firms, for which unanimous
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`Board approval is required. 10 (ld., ex. Cat§ 4.1(b)(3)(xviii))
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`While Tagivan was delegated the "responsibility" to bring suit, the "right" to sue
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`lies with MMI. The right to sue is of paramount importance in the "substantial rights"
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`analysis. See Sicom Sys., Ltd. v. Aligent Techs., Inc., 427 F.3d 971, 979 (Fed. Cir.
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`2005) ("[A]n important substantial right is the exclusive right to sue for patent
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`infringement"); Vaupel, 944 F.2d at 875 (Grant of the right to sue is "particularly
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`dispositive" to the substantial rights inquiry in view of the Court's policy to "prevent the
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`10As explained by counsel at oral argument, this is consistent with the unanimous
`Board approval required for the divestiture of assets, as contingency fee litigation
`essentially divests all of MMI's owners of profit. (0.1. 433 at 17 -18)
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`

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`Case 1:10-cv-00258-SLR-MPT Document 441 Filed 08/16/12 Page 15 of 17 PageID #: 8466
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`possibility of two suits on the same patent against a single infringer").
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`Sony, Nokia and Tag ivan, undoubtedly aware of the relevant case law, structured
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`the instant transactions such that MMI had "the entire right, title and interest" in the
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`patents-in-suit. "A transfer of the 'entire interest' of a patentee in a patent is well known
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`to mean a full assignment of the patent- i.e., transfer of title." Mars, 527 F.3d at 1370
`
`(citing Littlefield v. Perry, 88 U.S. 205 (1874)) (mandate recalled and amended by 557
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`F.3d 1377 (Fed. Cir. 2009)); see also 35 U.S.C. §§ 1 OO(d) & 281 (expressly conferring
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`standing to sue for infringement on owners of patents).
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`MMI has other "rights" for which the associated enforcement "responsibilities"
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`have been delegated to Tagivan. MMI has the right to receive patent royalties, for
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`example. This is so irrespective of the fact that MMIIater allocates its profits to the
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`owners. (D.I. 228, ex. D at§ 3.1; ex. Gat§ 3.1; id. at ex. J at§ 6.2) The Federal
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`Circuit has not yet been presented with the situation in which 100% of the patent's
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`proceeds flow back to the former title holder, but its jurisprudence indicates that the
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`retention of profits is not dispositive. See Propat, 473 F.3d at 1191 ("[T]he fact that a
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`patent owner has retained a right to a portion of the proceeds of the commercial
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`exploitation of [a] patent. .. does not necessarily defeat what would otherwise be a
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`transfer of all substantial rights in the patent.").
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`The Federal Circuit has also indicated that "[t]he right to dispose of an asset is an
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`important incident of ownership, and such a restriction on that right is a strong indicator"
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`that not all substantial rights under the patent have been transferred. See Propat, 471
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`F.3d at 1191 (citing Sicom, 427 F.3d at 979) (additional citation omitted). In this case,
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`neither Sony nor Nokia may independently or collectively sell the patents-in-suit;
`
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`Case 1:10-cv-00258-SLR-MPT Document 441 Filed 08/16/12 Page 16 of 17 PageID #: 8467
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`Tagivan's approval (i.e., a unanimous Board) is required. (D. I. 228, ex. I at§
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`4.1 (b )(3)(ix) & (xii))
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`Finally, the court does not view the "Early Dissolution" or "Tenth Anniversary Sale
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`Procedure" provided in the Formation Agreement as dispositive. The former provision
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`provided only that the owners "may" have caused the dissolution of MMI. The latter
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`provision may be voided (in 2020) by the collective agreement of Sony, Nokia and
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`Tagivan. (D.l. 228, ex. Cat§ 4.04) Notwithstanding, the potential for a title holder to be
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`sold or to elect to sell its patents is present in every case, and standing does not hinge
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`on such possibilities.
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`In conclusion, while Sony and Nokia have retained (or have been granted back)
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`certain rights in the patents-in-suit, 11 the court does not deem such rights "substantial"
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`vis a vis those held by MMI. There is no indication that either Sony or Nokia, non-
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`exclusive licensees of MMI holding no legal title to the patents-in-suit, have
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`constitutional standing to sue. Tagivan, having never held legal title or any license to
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`the patents, may not initiate suit in its own name. Thus, the court's decision does not
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`subject Apple to duplicative litigation. See Vaupel, 944 F.2d at 875 (citing Crown Die &
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`Tool Co. v Nye Tool & Machine Works, 261 U.S. 24 (1923)).
`
`11 For example, the right to practice the patented technology and to retain pre(cid:173)
`existing licenses. See Abbott Labs., 47 F.3d at 1132 (fact that transferor retained the
`right to sell patented products "to parties with whom [it] had pre-existing contracts and to
`pre-existing licensees" was among several compelling the conclusion that transferee
`was a licensee and not an assignee); see a/so Sicom, 427 F.3d at 978 (license to
`practice the patents is a right to be considered); see also Asymmetrx, Inc. v. Biocare
`Medical, LLC, 582 F.3d 1314, 1320 (Fed. Cir. 2009) (same).
`
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`Case 1:10-cv-00258-SLR-MPT Document 441 Filed 08/16/12 Page 17 of 17 PageID #: 8468
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`V. CONCLUSION
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`For the aforementioned reasons, the court grants the parties' motions to
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`supplement the record, and denies Apple's motion to dismiss. An appropriate order
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`shall issue.
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`16