Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 1 of 28 PageID #: 4500
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
`
`ACCELERATION BAY LLC,
`
`
`
`
`
`
`C.A. No. 15-228 (RGA)
`
`
`
`ACTIVISION BLIZZARD, INC.
`
`Defendant.
`
`
`
`ACCELERATION BAY LLC,
`
`
`
`
`
`ELECTRONIC ARTS INC.,
`
`Defendant.
`
`
`
`ACCELERATION BAY LLC,
`
`
`
`
`
`TAKE-TWO INTERACTIVE SOFTWARE,
`INC., ROCKSTAR GAMES, INC. and
`2K SPORTS, INC.,
`
`
`
`
`
`
`
`C.A. No. 15-282 (RGA)
`
`
`
`
`
`
`C.A. No. 15-311 (RGA)
`
`
`
`
`
`
`
`
`
`
`)))))))))
`
`)))))))))
`
`)))))))))
`
`))
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Plaintiff,
`
`
`
`v.
`
`Plaintiff,
`
`Plaintiff,
`
`
`
`v.
`
`
`
`v.
`
`
`
`Defendants.
`
`DEFENDANTS’ OPENING BRIEF IN SUPPORT OF THEIR
`MOTION FOR AN AWARD OF ATTORNEYS’ FEES
`
`MORRIS, NICHOLS, ARSHT & TUNNELL LLP
`Jack B. Blumenfeld (#1014)
`Stephen J. Kraftschik (#5623)
`1201 North Market Street
`P.O. Box 1347
`Wilmington, DE 19899
`(302) 658-9200
`jblumenfeld@mnat.com
`skraftschik@mnat.com
`
`Attorneys for Defendants
`
`
`
`
`
`
`
`
`
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 2 of 28 PageID #: 4501
`
`OF COUNSEL:
`Michael A. Tomasulo
`Gino Cheng
`David K. Lin
`WINSTON & STRAWN LLP
`333 South Grand Avenue, 38th Floor
`Los Angeles, CA 90071
`(213) 615-1700
`
`David P. Enzminger
`WINSTON & STRAWN LLP
`275 Middlefield Road
`Suite 205
`Menlo Park, CA 94025
`(650) 858-6500
`
`Daniel K. Webb
`Kathleen B. Barry
`WINSTON & STRAWN LLP
`35 West Wacker Drive
`Chicago, IL 60601
`(312) 558-5600
`
`
`
`
`
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 3 of 28 PageID #: 4502
`
`TABLE OF CONTENTS
`
`
`Page
`
`NATURE AND STAGE OF THE PROCEEDINGS ........................................................1
`
`SUMMARY OF ARGUMENT. ......................................................................................1
`
`STATEMENT OF FACTS ..............................................................................................3
`
`LEGAL STANDARDS ...................................................................................................8
`
`
`V.
`
`VI.
`
`
`
`VII. DEFENDANTS SHOULD BE AWARDED THEIR FEES UNDER 35 U.S.C. § 285
`
`BECAUSE ACCELERATION BAY LITIGATED THIS CASE IN A VEXATIOUS
`
`MANNER ..................................................................................................................... 16
`
`VIII. ALTERNATIVELY, THE COURT SHOULD AWARD DEFENDANTS
`THEIR FEES AND COSTS UNDER ITS INHERENT POWER ................................... 18
`
`
`
`I.
`
`II.
`
`III.
`
`IV.
`
`
`
`IX.
`
`
`A.
`B.
`
`Standing Is A Controlling Threshold Issue ...........................................................8
`The Exceptional Case Standard, Post-Octane Fitness ...........................................9
`
`DEFENDANTS ARE THE “PREVAILING PARTIES” UNDER 35 U.S.C. § 285 ..........9
`
`DEFENDANTS SHOULD BE AWARDED FEES UNDER 35 U.S.C. § 285
`BECAUSE ACCELERATION BAY'S FACTUAL AND LEGAL POSITIONS
`WERE EXCEPTIONALLY WEAK .............................................................................. 11
`
`CONCLUSION ............................................................................................................. 20
`
`
`i
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 4 of 28 PageID #: 4503
`
`
`
`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`Abbot Labs. v. Diamedix Corp.,
`47 F.3d 1128 (Fed. Cir. 1995).............................................................................................. 13
`
`Advanced Video Techs. LLC v. HTC Corp.,
`Case No. 1:11-CIV-06604, 2015 WL 7621483 (S.D.N.Y. Aug. 28, 2015) ................. 9, 11, 17
`
`Alfred E. Mann Found. For Sci. Research v. Cochlear Corp.,
`604 F.3d 1354 (Fed. Cir. 2010) ..................................................................................... passim
`
`Aspex Eyewear, Inc. v. Miracle Optics, Inc.,
`434 F.3d 1336 (Fed. Cir. 2006) .................................................................................... 2, 8, 15
`
`Chambers v. NASCO, Inc.,
`501 U.S. 32 (1991) .............................................................................................................. 20
`
`Clouding IP, LLC v. Google, Inc.,
`61 F. Supp. 3d 421 (D. Del. 2014) ............................................................................. 8, 15, 17
`
`Clouding IP, LLC v. EMC Corp.,
`C.A. No. 13-1455, 2015 WL 5766872 (D. Del. Sept. 30, 2015) ........................................... 17
`
`CRST Van Expedited, Inc. v. E.E.O.C.,
`136 S. Ct. 1642 (2016) ........................................................................................................ 11
`
`Independent Wireless Tel. Co. v. Radio Corp.,
`269 U.S. 459 (1926) .......................................................................................................... 2, 8
`
`Homeland Housewares, LLC v. Sorensen Research,
`581 F. App’x 877 (Fed. Cir. 2014) ....................................................................................... 19
`
`Inland Steel Co. v. LTV Steel Co.,
`364 F.3d 1318 (Fed. Cir. 2004) ...................................................................................... 10, 11
`
`Ins. Corp. of Ireland, Ltd. v. Campagnie des Bauxites de Guinee,
`456 U.S. 694 (1982) ............................................................................................................ 10
`
`Int’l Gamco Inc. v. Multimedia Games,
`504 F.3d 1273 (Fed. Cir. 2007) .................................................................................. 2, 15, 16
`
`Lakim Indus., Inc. v. Linzer Products Corp.,
`No. 2:12-cv-04976, 2013 WL 1767799 (C.D. Cal. Apr. 24, 2013) ....................................... 18
`
`Luminara Worldwide v. Liown Elecs.,
`814 F.3d 1343 (Fed. Cir. 2016) ............................................................................................ 16
`
`ii
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 5 of 28 PageID #: 4504
`
`
`
`Macauto U.S.A. v. BOS GMBH & KG,
`Case IPR2012-00004 (PTAB Jan. 24, 2013) ........................................................................ 11
`
`MarcTec, LLC v. Johnson & Johnson,
`664 F.3d 907 (Fed. Cir. 2012).............................................................................................. 18
`
`Mathis v. Spears,
`857 F.2d 749 (Fed. Cir. 1988).............................................................................................. 19
`
`Microsoft Corp. v. Parallel Networks Licensing, LLC,
`Case IPR2015-00483 (PTAB July 15, 2015)........................................................................ 11
`
`Octane Fitness, LLC v. ICON Health & Fitness, Inc.,
`134 S. Ct. 1749 (2014) .................................................................................................... 9, 10
`
`Parallel Iron LLC v. NetApp Inc.,
`70 F.Supp.3d 585 (D. Del. 2014) ................................................................................... 19, 20
`
`Prima Tek II, L.L.C. v. A-Roa Co.,
`222 F.3d 1372 (Fed. Cir. 2000) ........................................................................................ 8, 13
`
`Propat Int’l. Corp. v. Rpost,
`473 F.3d 1187 (Fed. Cir. 2007) ............................................................................................ 16
`
`Ray v. Eyster (In re Orthopedic “Bone Screw” Prods. Liab. Litig.),
`132 F.3d 152 (3d Cir. 1997) ................................................................................................ 20
`
`Reger v. Nemours Found., Inc.,
`599 F.3d 285 (3d Cir. 2010) ................................................................................................ 12
`
`Rite-Hite Corp. v. Kelley Co.,
`56 F.3d 1538 (Fed. Cir. 1995) ............................................................................................. 12
`
`Summit Data Sys., LLC v. EMC Corp,
`C.A. No. 10-749, 2014 WL 4955689 (D. Del. Sept. 25, 2014) ............................................. 19
`
`Vehicle Operation Techs. LLC v. Ford Motor Co.,
`C.A. No. 13-539-RGA, 2015 WL 4036171 (D. Del. July 1, 2015) ....................................... 10
`
`Waterman v. Mackenzie,
`138 U.S. 252 (1891) ...................................................................................................... 12, 15
`
`Walker Digital, LLC v. Expedia, Inc.,
`950 F. Supp. 2d 729 (D. Del. 2013) ..................................................................................... 17
`
`Statutes
`
`35 U.S.C. § 285 .................................................................................................................. passim
`
`iii
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 6 of 28 PageID #: 4505
`
`
`
`35 U.S.C. § 286 ......................................................................................................................... 11
`
`35 U.S.C. § 315(b) .................................................................................................................... 11
`
`Other Authorities
`
`Fed. R. Civ. P. 54(d)(2)(B)(iii), ................................................................................................. 21
`
`D. Del. LR 54.1(a)(1) ................................................................................................................ 12
`
`D. Del. LR 54.1(c) .................................................................................................................... 12
`
`
`
`iv
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 7 of 28 PageID #: 4506
`
`
`
`I.
`
`NATURE AND STAGE OF THE PROCEEDINGS
`On June 20, 2016, the Court dismissed these actions for lack of standing. D.I. 148.1
`
`Defendants Activision | Blizzard, Inc., Electronic Arts Inc., Take-Two Interactive Software, Inc.,
`
`2K Sports, Inc., and Rockstar Games, Inc. (“Defendants”) now move for an award of attorneys’
`
`fees, costs, and other expenses, against Plaintiff Acceleration Bay, LLC (“Acceleration Bay”)
`
`pursuant to 35 U.S.C. § 285 (“Section 285”) and the Court’s inherent power.
`
`II.
`
`SUMMARY OF ARGUMENT
`These cases are exceptional and Defendants should be awarded their fees. Each case
`
`“stands out from others” both for the weakness of Acceleration Bay’s litigation positions and the
`
`unreasonable manner in which it litigated each case. First, Acceleration Bay’s substantive
`
`position on standing was objectively unreasonable, given the clear Federal Circuit law and the
`
`substantial rights retained by Boeing in the asserted patents. Second, Acceleration Bay withheld
`
`from production the relevant purchase agreement, which was only produced by Boeing in
`
`response to a subpoena. Third, Acceleration Bay continued to prosecute its lawsuits aggressively
`
`even after Defendants raised Acceleration Bay’s standing problems, filing multiple motions to
`
`compel and insisting on an aggressive deposition schedule.
`
`Acceleration Bay is a patent assertion entity (“PAE”) whose primary if not sole purpose
`
`was to acquire and assert the Boeing Patents2 against these specific Defendants. Acceleration
`
`Bay asserted the Boeing Patents against Defendants when it knew (or willfully ignored) that it
`
`could not assert the patents without Boeing, because Acceleration Bay lacked sufficient rights to
`
`have standing to prosecute these actions by itself. Even a cursory review of the “Patent Purchase
`
`Agreement” between Acceleration Bay Inc. and The Boeing Company (“Boeing”) (the “Boeing
`
`1
`Unless stated otherwise, all docket references are to Acceleration Bay LLC v. Activision
`Blizzard Inc., C.A. No. 15-228-RGA.
`The Boeing Patents include U.S. Patent Nos. 6,732,147, 6,910,069, 6,920,497, 6,701,344,
`6,714,966 and 6,829,634
`
`2
`
`1
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 8 of 28 PageID #: 4507
`
`
`
`Agreement”) and the overwhelming Federal Circuit law confirms that Acceleration Bay failed to
`
`obtain sufficient rights to bring these lawsuits as a sole plaintiff.
`
`In a case later incorporated into Rule 19, the Supreme Court held that the presence of
`
`both the patent owner and any exclusive licensee “is indispensable . . . to enable the alleged
`
`infringer to respond in one action to all claims of infringement for his act.” Independent Wireless
`
`Tel. Co. v. Radio Corp., 269 U.S. 459, 466 & 468 (1926) (“[B]oth the owner and the exclusive
`
`licensee are generally necessary parties in the action in equity.”) (citation omitted). The Federal
`
`Circuit has repeatedly followed this precedent and held that a patent owner must join its
`
`exclusive licensee, and vice versa. Int’l Gamco Inc. v. Multimedia Games, 504 F.3d 1273, 1278
`
`(Fed. Cir. 2007); Aspex Eyewear, Inc. v. Miracle Optics, Inc., 434 F.3d 1336, 1344 (Fed. Cir.
`
`2006)); Alfred E. Mann Found. For Sci. Research v. Cochlear Corp., 604 F.3d 1354, 1360 (Fed.
`
`Cir. 2010). Under any reasonable interpretation of the Boeing Agreement, Boeing’s absence
`
`precluded Acceleration Bay from asserting the Boeing Patents.3
`
`Beyond the fact that a patent plaintiff should know the black letter law on standing to
`
`bring a patent suit, Acceleration Bay’s exacerbated matters through its litigation conduct.
`
`Instead of acknowledging and producing the Boeing Agreement, Acceleration Bay’s actions
`
`effectively concealed both its existence and significance. Acceleration Bay filed complaints that
`
`repeatedly—but incorrectly—alleged that it owned “[a]ll rights, title, and interest” in the Boeing
`
`Patents. It prepared, recorded and relied on a misleading “Assignment of Patent Rights” (the
`
`“Recorded Assignment”) that does not mention the substantial rights reserved by Boeing to the
`
`Boeing Patents. Instead, the Recorded Assignment incorrectly states that Acceleration Bay had
`
`been assigned the patents in their entirety, along with all claims for infringement and all rights
`
`3
`Indeed, the defects in standing were so apparent from the Boeing Agreement, Defendants
`notified Acceleration Bay and this Court of Defendants’ intention to bring a motion to
`dismiss for lack of standing less than a month after receiving the Agreement.
`
`2
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 9 of 28 PageID #: 4508
`
`
`
`to damages—to the same extent that Boeing had previously enjoyed them. These statements
`
`were unsupported. The Boeing Agreement—the document governing the transaction—states
`
`that Boeing retained sole right to practice the patents and to sue and pursue infringers in a
`
`specific field of use, as well as many other substantial rights. And because the Recorded
`
`Assignment has no independent legal significance, it may be inferred that it was created to
`
`conceal the facts that so clearly demonstrate Acceleration Bay’s lack of standing.
`
`Acceleration Bay’s bad faith may also be inferred from its failure to produce the Boeing
`
`Agreement in discovery or identify it in its initial disclosures. Nearly a year after these cases
`
`commenced, Defendants finally obtained the Boeing Agreement, not from Acceleration Bay, but
`
`from Boeing by subpoena. Defendants might have never learned of the lack of assignment if
`
`they had accepted as true the representations in the Recorded Assignment.
`
`Even after Defendants told Acceleration Bay that it lacked standing, it continued to
`
`multiply the cost of the proceedings by aggressively pushing forward with all aspects of the
`
`litigations instead of first resolving the controlling threshold issue of standing. Its conduct was
`
`especially reckless given the weakness of its position. Acceleration Bay’s papers consistently
`
`ignored the controlling law, incorrectly represented the law it did cite, and contained no Federal
`
`Circuit or other controlling case law that supported its position. These cases truly stand out from
`
`others. An award of fees is warranted under either Section 285 or this Court’s inherent power.
`
`III.
`
`STATEMENT OF FACTS
`Acceleration Bay, Inc. was formed on August 27, 2014 (see Certificate of Incorporation
`
`(Ex. 1)), presumably for the purpose of acquiring and asserting the Boeing Patents. Hr’g Tr.
`
`(5/2/16) (Ex. 14) at 45:19-22. By that time, it was already working with its litigation counsel,
`
`Kramer Levin, which is identified as the “Sole Incorporator” in the “Certificate of Incorporation
`
`of Acceleration Bay, Inc.” Id. at 2.
`
`3
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 10 of 28 PageID #: 4509
`
`
`
`On December 10, 2014, Acceleration Bay, Inc. and Boeing entered into the Boeing
`
`Agreement relating to multiple patents assigned to Boeing. D.I. 109 at 5; see also Boeing
`
`Agreement (Ex. 2). Acceleration Bay made only a
`
`
`
` in the Boeing Patents—an interest that was far from
`
`sufficient to allow it to fulfill its raison d'être of asserting the Boeing Patents. Ex. 2 at 003031.
`
`That same day, Kramer Levin filed the Recorded Assignment with the U.S. Patent and
`
`Trademark Office (“USPTO”). See Ex. 3 at 5. Thus, it appears that Acceleration Bay had the
`
`ability to rely on advice of litigation counsel to negotiate and draft the Boeing Agreement.4
`
`The Recorded Assignment mischaracterized the Boeing Agreement. The Recorded
`
`Assignment wrongly states that the Assignment transfers to Acceleration Bay the patents in their
`
`entirety such that the Asserted Patents would be “held and enjoyed by [Acceleration Bay] for its
`
`own use and enjoyment . . . as fully and entirely as the same would have been held and enjoyed
`
`by [Boeing] . . .” Ex. 3 at 7. And it also wrongly states that Acceleration Bay received “all
`
`claims for damages…with the right to sue for and collect the same for its own use and behalf .
`
`. . .” Id. (emphasis added).
`
`Far from granting all rights and claims as Acceleration Bay contended, the Boeing
`
`Agreement actually provided for Boeing’s retention of substantial rights, including, inter alia,
`
`exclusive rights in Boeing’s field of use, such as:
`
`
`4
`Plaintiff’s counsel has made several statements that have implied involvement with the
`negotiation and drafting of the Boeing Agreement. At the February 12, 2016 hearing, in
`defense of Plaintiff’s paltry production of documents relating to the negotiation and
`drafting of the Boeing Agreement, Plaintiff’s counsel stated “[w]ithout waiver of
`privilege or any immunity, sometimes people are careful not to create a lot of documents,
`and we’ve produced the relevant documents.” Hr’g Tr. (2/12/2016) (Ex. 13) at 61:9-14.
`At the May 2, 2016 hearing, Acceleration Bay’s counsel made several representations
`regarding the intent of the parties that deviated from the contents of the Boeing
`Agreement. For instance, Acceleration Bay’s counsel stated that “Boeing knew who
`Acceleration Bay was going to sue and try to license these patents, enforce these patents
`against them.” Hr’g Tr. (5/2/2016) (Ex. 14) at 45:19-22.
`
`4
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 11 of 28 PageID #: 4510
`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 11 of 28 PagelD #: 4510
`
`Indeed, the requirement that Acceleration Bay join if Boeing filed a counterclaim in
`
`Acceleration Bay’s field of use, demonstrates that Boemg and Acceleration Bay knew the
`
`standing requirements for an exclusive licensee. Jd.ee
`
`Notably, the Boeing Agreement also acknowledges Sony’s rights from an earlier license
`
`that Boeing granted to Sony, which license gave Sony extensive rights within the Sony “Field of
`
`Use.” See Sony License (Ex. 4), § 2.1 with Ex. 2 at 003045.
`
`Ss
`
`Acceleration Bay knew the Boemg Agreement did not, and could not, grant any exclusive right
`
`to Acceleration Bay for products operating on the Sony platform.°
`
`In March and April of 2015, Acceleration Bay filed these cases.
`
`In each of the
`
`Complaints, Acceleration Bay alleged as to each of the six asserted patents: “/a/ll rights, title,
`
` 5
`
`
`
`Nevertheless, Plaintiff continued to accuse products operating on the Sony platform and
`continued to pursue discovery on these issues.
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 12 of 28 PageID #: 4511
`
`
`
`and interest in the . . . Patent have been assigned to Acceleration Bay, who is the sole owner of
`
`the . . . Patent,” even though that was not the case. E.g. D.I. 1 (Activision) at ¶¶ 11, 14, 17, 20,
`
`23, 26 (emphasis added). Acceleration Bay quickly advised that it was seeking a financial
`
`windfall, stating that it was seeking “50 to 150 million per defendant” at the parties’ first
`
`conference with this Court,
`
`(10/13/2016) (Ex. 10) at 40:24-41:2.
`
`. Hr’g Tr.
`
`Discovery opened on September 29, 2015. On September 30, 2015, Defendants served
`
`their first discovery requests. D.I. 25. And on October 9, 2015, Defendants served a subpoena
`
`on Boeing. D.I. 29. This discovery included specific requests directed to the Boeing Agreement
`
`and related documents. See RFP Nos. 87-89 (Ex. 5); Interrogatory No. 8 (Ex. 6); Subpoena and
`
`Request Nos. 7, 12, 13, 17, 18 (Ex. 7).
`
`The parties exchanged their Rule 26 initial disclosures on November 2, 2015. D.I. 38.
`
`Acceleration Bay did not, however, identify the Boeing Agreement or any Boeing witness. See
`
`Ex. 8A-C. The parties also exchanged their disclosures under Section 1(c) of the Court’s Rule
`
`16 Scheduling Order on November 12, 2015. D.I. 43. Those disclosures also did not mention
`
`the Boeing Agreement or any Boeing witness. See Ex. 9A-C.
`
`Acceleration Bay made a first production of documents on November 2, 2015. That
`
`production included website printouts of the USPTO assignment search showing a recordation of
`
`the purported patent assignment, publicly available documents, and the file wrappers for the
`
`Boeing Patents. Acceleration Bay never produced the Boeing Agreement, and both Acceleration
`
`Bay and Boeing refused to produce any of the communications that led to the agreement. See
`
`Exs. 11, 12 highlighted.
`
`6
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 13 of 28 PageID #: 4512
`
`
`
`On January 15, 2016, more than three months after having been subpoenaed, Boeing—
`
`which was represented by Acceleration Bay’s counsel—produced the Boeing Agreement.
`
`Defendants quickly learned that the Boeing Agreement did not transfer ownership to, or confer
`
`standing on, Acceleration Bay. On February 12, 2016, Defendants advised this Court and
`
`Acceleration Bay’s counsel that Defendants intended to bring a motion to dismiss for lack of
`
`standing. See Hr’g Tr. (2/12/2016) (Ex. 13) at 48:17-56:2.
`
`Defendants filed the motion to dismiss on March 1, 2016. D.I. 100. Acceleration Bay
`
`opposed the motion (D.I. 109), but could not identify a single Federal Circuit case that supported
`
`its arguments and significantly misrepresented the cases it did cite. Of note, Acceleration Bay
`
`did not, or could not, explain how the specific provisions of the Boeing Agreement cited by
`
`Defendants could be reconciled with Acceleration Bay’s indefensible position that it had all
`
`substantial rights under the patents. Notwithstanding this, even after receiving Defendants’
`
`motion to dismiss, Acceleration Bay pressed forward on all aspects of discovery.
`
`At the May 2 hearing on the motion, Acceleration Bay repeatedly relied on the Recorded
`
`Assignment instead of the actual terms of the Boeing Agreement. At the conclusion of the
`
`hearing, Defendants asked the Court to stay the case pending its decision. Ex. 14 at 68:8-13.
`
`Even though Acceleration Bay had represented to the Court that Boeing was “highly unlikely” to
`
`join as a party, Hr’g Tr. (5/2/16) (Ex. 14) at 34:20; see also id. at 34:12-18, Acceleration Bay
`
`objected to the request for a stay. Id. at 68:8-13. The Court directed the parties to file letter
`
`briefs on Defendants’ motion to stay. Acceleration Bay opposed Defendants’ request for a stay
`
`on May 5, 2016, calling it an improper effort to evade discovery and claiming that “[b]ecause
`
`Acceleration Bay may cure any defect in prudential standing, there is no benefit to staying the
`
`7
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 14 of 28 PageID #: 4513
`
`
`
`cases while the motion is resolved.” D.I. 132 at 1. After the hearing, Acceleration Bay pressed
`
`forward with e-discovery, depositions and still more discovery motions.
`
`On May 11, 2016, the Court directed the parties to file supplemental briefing on the
`
`question: “If the Court concludes that Acceleration Bay is the owner of the patents-in-suit, is
`
`Boeing required to be joined as a party under Fed. R. Civ. P. 19?” D.I. 135. The parties did so.
`
`D.I. 137 and 138. Acceleration Bay ignored or misrepresented the holdings of key cases that had
`
`been addressed at the hearing, including Independent Wireless, Aspex Wireless and Alfred E.
`
`Mann, and Clouding IP, LLC v. Google, Inc., 61 F. Supp. 3d 421, 430 n.8 (D. Del. 2014), each of
`
`which plainly addressed the question presented by the Court and held that a patent owner must
`
`join its exclusive licensee, and vice versa. Compare D.I. 137 with D.I. 138.
`
`On June 3, 2016, consistent with all of the cited authority, the Court issued an Opinion
`
`finding that Acceleration Bay is “an exclusive licensee” that did not hold all substantial rights
`
`and therefore advised that the case must be dismissed. D.I. 148 (“Order”) at 5. Noting
`
`Acceleration Bay’s representation that standing could be cured, the Court gave Acceleration Bay
`
`two weeks to obtain Boeing’s participation in the lawsuit. See id. at 9-11. On June 17,
`
`Acceleration Bay advised the Court that Boeing would not join and on June 20, the Court
`
`dismissed these cases without prejudice. D.I. 152, 153.
`
`IV.
`
`LEGAL STANDARDS
`A.
`Standing Is A Controlling Threshold Issue
`In awarding fees in a similar case, a court observed that obtaining ownership of a patent
`
`is something a potential plaintiff has to accomplish to file an infringement suit. See, e.g.,
`
`Advanced Video Techs. LLC v. HTC Corp., 2015 WL 7621483, at *2 (S.D.N.Y. Aug. 28, 2015).7
`
`And standing is the first thing any potential patent plaintiff must evaluate as part of its pre-suit
`
`
`7
`Currently on appeal as Advanced Video Techs. LLC v. HTC Corp., no. 16-1476.
`
`8
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 15 of 28 PageID #: 4514
`
`
`
`diligence. Id. Indeed, standing is a threshold issue in any case. Prima Tek II, L.L.C. v. A-Roo
`
`Co., 222 F.3d 1372, 1376 (Fed. Cir. 2000).
`
`B.
`The Exceptional Case Standard, Post-Octane Fitness
`Section 285 of the Patent Act provides that “[t]he court in exceptional cases may award
`
`reasonable attorney fees to the prevailing party.” The Supreme Court recently overruled the
`
`Federal Circuit’s “overly rigid” formulation of the “exceptional” case standard in favor of a more
`
`flexible approach. Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756
`
`(2014). The Court explained that “an ‘exceptional’ case is simply one that stands out from
`
`others with respect to the substantive strength of a party’s litigation position (considering both
`
`the governing law and the facts of the case) or the unreasonable manner in which the case was
`
`litigated.” Id. The Court also clarified that § 285 “imposes no specific evidentiary burden, much
`
`less such a high one.” Id. at 1758. A party need only establish that an award of fees is warranted
`
`by a preponderance of the evidence. See id.
`
`V.
`
`DEFENDANTS ARE THE “PREVAILING PARTIES” UNDER 35 U.S.C. § 285
`Under 35 U.S.C. § 285, Defendants are the prevailing parties. To qualify as the
`
`prevailing party, all that is required is “to receive at least some relief” that “alters the legal
`
`relationship of the parties.” Inland Steel Co. v. LTV Steel Co., 364 F.3d 1318, 1320 (Fed. Cir.
`
`2004) (holding that a defendant who won dismissal after the USPTO cancelled the patents was a
`
`prevailing party); see also Vehicle Operation Techs. LLC v. Ford Motor Co., 2015 WL 4036171,
`
`at *2 (D. Del. July 1, 2015) (“[prevailing] party must win a dispute within the case in favor of it
`
`that materially alters the legal relationship between the parties at the time of the judgment.”).
`
`Defendants plainly satisfy that standard here, because they obtained dismissal of the Plaintiff’s
`
`case and a legal judgment (with preclusive effect) that Plaintiff lacked the right to sue alone. D.I.
`
`148 at 5. This dismissal altered the legal relationship of the parties in several material respects.
`
`9
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 16 of 28 PageID #: 4515
`
`
`
`Most obviously, this dismissal prohibited Plaintiff from suing Defendants until Plaintiff
`
`either joined Boeing, the patents’ owner, or acquired the remaining rights in the patents. See,
`
`e.g., Ins. Corp. of Ireland, Ltd. v. Campagnie des Bauxites de Guinee, 456 U.S. 694, 702, n.9
`
`(1982) (“principles of res judicata apply to jurisdictional determinations”).
`
`Additionally, the dismissal obtained by Defendants forever eliminated from contention
`
`more than a year of potential damages. Patent law bars recovery for “infringement committed
`
`more than six years prior to the filing of the complaint.” 35 U.S.C. § 286. Under the original
`
`complaint in this action, Plaintiff could theoretically recover damages for alleged infringement
`
`stretching back to 2009. Plaintiff can no longer recover damages for that alleged infringement.
`
`The dismissal also eliminated the deadline for seeking inter partes reviews of the patents
`
`at the USPTO. Defendants were barred from seeking inter partes reviews because more than
`
`one year had passed since the complaint had been served. See 35 U.S.C. § 315(b). The dismissal,
`
`however, voided those deadlines. See Macauto U.S.A. v. BOS GMBH & KG, Case IPR2012-
`
`00004 (PTAB Jan. 24, 2013) (dismissal without prejudice nullifies the effect of service that
`
`would have triggered the §315(b) bar); Microsoft Corp. v. Parallel Networks Licensing, LLC,
`
`Case IPR2015-00483 (PTAB July 15, 2015) (same). As a result of the dismissal, Defendants
`
`may now file additional petitions for inter partes review.
`
`It does not matter that the dismissal was not based on a finding of non-infringement or
`
`invalidity. Although some cases have suggested that relief must be “on the merits,” e.g., Inland
`
`Steel, 364 F.3d at 1320, the Supreme Court has recently clarified that it is “common sense” that a
`
`“defendant may prevail even if the court’s final judgment rejects the plaintiff’s claim for a
`
`nonmerits reason.” CRST Van Expedited, Inc. v. E.E.O.C., 136 S. Ct. 1642, 1651 (2016). After
`
`all, one of the principal purposes of fee-shifting is “to deter the bringing of lawsuits without
`
`10
`
`

`

`Case 1:15-cv-00311-RGA Document 156 Filed 07/18/16 Page 17 of 28 PageID #: 4516
`
`
`
`foundation,” and “[i]t would make little sense if Congress’ policy of sparing defendants from the
`
`costs of frivolous litigation depended on the distinction between merits-based and non-merits-
`
`based frivolity.” Id. at 1652 (emphasis original, internal quotations and citations omitted). A
`
`defendant has “fulfilled its primary objective whenever the plaintiff’s challenge is rebuffed,
`
`irrespective of the precise reason for the court’s decision.” Id. at 1651. Acceleration Bay’s
`
`challenge has been rebuffed and Defendants are thus the prevailing party.8
`
`VI. DEFENDANTS SHOULD BE AWARDED FEES UNDER 35 U.S.C. § 285
`BECAUSE ACCELERATION BAY’S FACTUAL AND LEGAL POSITIONS
`WERE EXCEPTIONALLY WEAK
`Defendants should be awarded their fees under 35 U.S.C. § 285 because of the
`
`exceptional weakness of Acceleration Bay’s factual and legal positions. Acceleration Bay
`
`alleged in each case that it owned “all, right, title and interest” in the asserted patents. See e.g.
`
`D.I. 1 at ¶¶ 11, 14, 17, 20, 23, 26. There was no factual basis for this statement. Nevertheless,
`
`Acceleration Bay persisted in advancing this statement in opposition to the motion to dismiss.
`
`Instead of acknowledging and attempting to prove ownership and standing under the framework
`
`of Waterman and Rite-Hite and Alfred E. Mann, 9 Acceleration Bay doggedly relied on its own
`
`characterizations as substantive proof of this claim. But no reading of the Boeing Agreement, no
`
`matter how strained, can be said to have granted Acceleration Bay “all rights, title, and interest.”
`
`Any reasonable analysis of Supreme Court and Federal Circuit law on standing in patent
`
`cases would have revealed (and did reveal) that Boeing reserved far too many right