Case 1:16-cv-00455-RGA Document 226 Filed 08/08/17 Page 1 of 12 PagelD #: 18660
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
`
`
`ACCELERATION BAY LLC,
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`NewNeeNeNeeSoeeeeNeeeeeeeeeeeeeeeeeeeeeeeee’?ee”?eeeeeeeeeeeeeeeeNe
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`Plaintiff,
`
`V.
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`ACTIVISION BLIZZARD,INC.,
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`Defendant.
`
`
`ACCELERATION BAY LLC,
`
`Plaintiff,
`
`V.
`
`ELECTRONIC ARTSINC.,
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`Defendant.
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`
`ACCELERATION BAYLLC,
`
`Plaintiff,
`
`Vv.
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`TAKE-TWO INTERACTIVE SOFTWARE,
`INC., ROCKSTAR GAMES, INC., and 2K
`SPORTS, INC.,
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`Defendants.
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`C.A. No. 16-453 (RGA)
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`PUBLIC VERSION
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`C.A. No, 16-454 (RGA)
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`C.A. No, 16-455 (RGA)
`
`PLAINTIFF ACCELERATION BAY LLC’S
`OBJECTIONS TO SPECIAL MASTER ORDERNO.6
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`

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`Case 1:16-cv-00455-RGA Document 226 Filed 08/08/17 Page 2 of 12 PagelD #: 18661
`
`Philip A. Rovner (#3215)
`Jonathan A. Choa (#5319)
`POTTER ANDERSON & CORROON LLP
`Hercules Plaza
`P.O. Box 951
`Wilmington, DE 19899
`(302) 984-6000
`provner@potteranderson.com
`jchoa@potteranderson.com
`
`Attorneysfor Plaintiff
`Acceleration Bay LLC
`
`OF COUNSEL:
`
`Paul J. Andre
`Lisa Kobialka
`KRAMER LEVIN NAFTALIS
`- & FRANKEL LLP
`990 Marsh Road
`Menlo Park, CA 94025
`(650) 752-1700
`
`Aaron M.Frankel
`KRAMER LEVIN NAFTALIS
`& FRANKEL LLP
`1177 Avenue of the Americas
`New York, NY 10036
`(212) 715-9 100
`
`Dated: August 7, 2017
`Public version dated: August 8, 2017
`
`

`

`Case 1:16-cv-00455-RGA Document 226 Filed 08/08/17 Page 3 of 12 PagelD #: 18662
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`Pursuant to Rule 53(f)(2) of the Federal Rules of Civil Procedure, Plaintiff Acceleration
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`Bayrespectfully requests that the Court overrule in part the Special Master’s July 17, 2017 Order
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`No. 6 (Ex. A, D.I. 227, the “Order”).'
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`L
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`NATURE AND STAGE OF THE PROCEEDINGS
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`Acceleration Bay timely submits these objections to the Order as to its finding that
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`Acceleration Bay must produce documents responsive to certain of Defendants’ Requests For
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`Production (“RFP”). Specifically, Acceleration Bay objects to being require to produce (i) an
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`untedacted copy of its litigation funding agreement with Hamilton Capital, as the Court
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`previously determined that the redacted portions of the agreement were not relevant, (ii) its
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`reports to Hamilton Capital, which are irrelevant and work product, (iii) financial records
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`evidencing its sources of funding whichare irrelevant and(iv) proofofits initial payment to
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`Boeing for the asserted patents, which is not in dispute. As to the other categories of documents,
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`Acceleration Bay produced its responsive documents or confirmed that it has none.
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`These documents are not relevant to any claims or defenses in these cases. Instead, these
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`discovery requests are part of Defendants’ attempt to tar Acceleration Bay as a supposed non-
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`practicing entity and obtain an unfair tactical advantage through discovery into Acceleration
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`Bay’slitigation budget and strategy, which are not relevant and protected work product.
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`' All docket citations are to C.A. No. 16-453-RGA,and are representative offilings in the related
`cases,
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`

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`Case 1:16-cv-00455-RGA Document 226 Filed 08/08/17 Page 4 of 12 PagelD #: 18663
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`IL.
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`OBJECTIONS
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`The Court reviews the Special Master’s Order de novo. Fed. R. Civ. P. 53(f).
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`Acceleration Bay respectfully objects to the Order on the following grounds:
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`(1) the Order is contrary to the Court’s prior ruling that Acceleration Bay need not
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`produce an unredacted copy ofthe litigation funding agreement between Acceleration Bay and
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`Hamilton Capital.
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`In any event, the agreementis not relevant;
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`(2) the Order requires Acceleration Bay to produce its exchanges with Hamilton Capital,
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`whichare not relevant, contain work product andare subject to commoninterest immunity;
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`(3) the Order requires Acceleration Bay to produce information regarding the sources of
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`its funding, which are irrelevant and have already been established through discovery; and
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`(4) the Order requires Acceleration Bay to produce proof of payment to Boeing for the
`| asserted patents, despite the fact that such paymenthasalready been established.
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`A.
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`The Order is Contrary to the Court’s Prior Ruling Regarding the Hamilton
`Capital Loan Agreement
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`Acceleration Bay objects to the Order requiring production of an unredacted copyof the
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`agreement between Acceleration Bay andits litigation funder, Hamilton Capital (the “Loan
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`Agreement”), because the redacted information was already determined to be irrelevant.
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`Specifically,
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`the Court denied Defendants’ prior request for an unredacted copy of the Loan
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`Agreement after reviewing the redacted portions in-camera, which are directed to specific details
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`of the financial arrangement between Hamilton Capital and Acceleration Bay. Specifically,
`| during a hearing on this same issue in February 2016, the Court found that the redacted portions
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`of the Loan Agreementare not relevant: “my impression is ... with the things that are proposed
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`* Acceleration Bay submits these objections pursuant to the Order Appointing Special Master.
`C.A. No. 15-228-RGA, DI. 94 at 6. In accordance with that Order, Acceleration Bay submits
`herewith an Appendix containing the transcript from the hearing before the Special Master (Ex.
`B)andthe materials submitted by the parties in connection with the hearing.
`
`

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`Case 1:16-cv-00455-RGA Document 226 Filed 08/08/17 Page 5 of 12 PagelD #: 18664
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`to be redacted ... and there are some places where there are some wordsthat are redacted around
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`the numbers, and I’m fine with that, because ...
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`they’re words that have the effect of the
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`numbers, and they are irrelevant to your issue”). Ex. D at Ex, G-4 (2/12/16 Hearing Tr.) at
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`56:19-57:2.
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`Indeed, the Court found that the only potential relevance of the Loan Agreement
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`was to Defendants’ standing defense, which was addressed by production of the redacted copy of
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`the Loan Agreement andis no longer an issue in the case.
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`Id. at 54:1-55:12, 57:4-11 (“That’s
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`kind of hard for me to imagine whatelse could be relevant.”).?
`The Court’s ruling that the Loan Agreement should be produced in redacted form is
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`|
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`consistent with the consensus view that details of litigation financing arrangements are not
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`discoverable becausethey are not relevant and becausethe specific details oflitigation financing
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`are work product. See, e.g., Charge Injection Techs., Inc. y. El. DuPont De Nemours & Co.,
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`C.A. No. 07C-12-134-JRJ, 2015 WL 1540520, at *5 (Del. Super. Ct. Mar. 31, 2015) (“the
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`redacted payment terms in the [litigation] Financing Agreementare entitled to work product
`protection” ; Miller UK Ltd. v. Caterpillar, Inc., 17 F. Supp. 3d 711, 721 (N.D. Ill. 2014)
`(finding funding agreement between a plaintiff and its third-party litigation financier was not
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`-relevant in a trade secrets case: “The terms of[plaintiff]'s actual funding agreement would seem
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`to have no apparent relevance to the claimsor defenses in this case, as required by Rule 26 as a
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`precondition to discovery.”); Kaplan y. S.A.C. Capital Advisors, L.P., No. 12-CV-9350 (VM),
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`2015 WL 5730101, at *3-5 (S.D.N.Y. Sept. 10, 2015) (documents related to litigation funding
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`agreement between class action plaintiffs and their financiers were not discoverable because they
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`were not relevant to any “non-speculative” issue in the case). Thus, Acceleration Bay already
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`° A copy of the redacted Loan Agreementis submitted herewith as Exhibit D at Ex. G-3. To the
`extent it will be helpful to the Court’s resolution of these objections, Acceleration Bay will
`provide a copy of the unredacted Loan Agreementto the Court for in camera inspection.
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`

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`Case 1:16-cv-00455-RGA Document 226 Filed 08/08/17 Page 6 of 12 PagelD #: 18665
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`produced the relevant portions of the litigation funding agreement in 2016 and Defendants have
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`no groundsor need for the unredacted portions.
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`When the Court issued this ruling, Defendants did not seek to have the Court reconsider
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`its ruling. Now, however, Defendants seek the specifics of the financial arrangement, arguing to
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`the Special Master that they need discovery into Acceleration Bay’s financing to explore the
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`extent of its operational activities, which is simply not relevant to whether Defendants infringe
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`Acceleration Bay’s valid patents. This is nothing more than a fishing expedition in the hopes of
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`bolstering an irrelevant, collateral attack on Acceleration Bayto claim that this start-up company
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`that is developing technology is nothing more than a purported non-practicing entity. The
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`Special Master accepted this argumentas the sole basis for ordering production of the agreement.
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`Order at 9 (“Defendants believe the agreements may demonstrate an inconsistency with the
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`complaint as to the business of the Plaintiff’). Acceleration Bay already provided ample
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`evidence of its operations with the testimony of its CEO and 30(b)(6) corporate designee on
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`these topics, who answered all of Defendants’ questions on these issues. See, e.g., Ex. E at Ex.
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`29 (Ward Tr.) at 11-12, 29, 122-124 (discussing incubation activities), 31, 45-54, 67-70, 89-91
`‘(discussing development activities). Acceleration Bay also produced corroborating documents.
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`See, e.g. id. at Ex, E at Exs. 30, 31 (Ward Exs. 119, 120) (development documents). Disclosing
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`the redacted portionsofthelitigation funding agreement will not provide any further insight into
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`the nature of Acceleration Bay’s operational activities.
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`Moreover, even if there were some marginal relevance to the specific terms of the
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`financing agreement (and there is not, for the reasons discussed above), that would not be
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`enough to require the disclosure of work product, which must be protected “unless the requesting
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`party can show that it is directed to the pivotal issue in the litigation and the need for the
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`

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`Case 1:16-cv-00455-RGA Document 226 Filed 08/08/17 Page 7 of 12 PagelD #: 18666
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`information is compelling.” Charge Injection Techs., 2015 WL 1540520 at *4, citing Tackett v.
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`State Farm Fire & Cas. Ins. Co., 653 A.2d 254, 262 (Del. 1995). Defendants made no such
`| showing here.*
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`Thus, the redacted portions of the Loan Agreement are not relevant to any claim or
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`defense in the case, and the Court should sustain Acceleration Bay’s objection to production of
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`an unredacted copy of the Loan Agreement.
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`B.
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`Acceleration Bay’s Exchanges With Hamilton Capital Are Work
`Product and Irrelevant
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`Acceleration Bay objects to the production ofits exchanges with Hamilton Capital, |
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`are irrelevant to the claims and defenses in these cases for the same reason that the Loan
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`Agreement is irrelevant. Whether Acceleration Bayis receiving any funds and what fundsit has
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`received simply has no bearing on Defendants’ infringement of any valid patents. Further,
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`Defendants’ pursuit of these exchanges between Acceleration Bay and its funder is an
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`improper attempt to gain insight into Acceleration Bay’s litigation expenditures, strategy and
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`views on this action, which are plainly work product and protected by commoninterest privilege.
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`4 While not referenced or relied upon in the Order, Defendants also argued that the Loan
`.Agreement is relevant to damages by shedding light on the purchase price of the asserted patents
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`and_on potential witness bias. Both contentions are without merit.
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`Ex. E at Ex. 34 (Purchase Agreement) at BOEING 003031-32. The specific
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`details of Acceleration Bay’s loan have norelevance to the purchaseprice and the amount ofthe
`loan also has no relevance to any purported “bias of witnesses.” Acceleration Bay’s employees
`and consultants already disclosed how they
`are being
`compensated,
`See Ex. E (Acceleration Bay’s 7/12/17
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`‘Opposition Letter Brief) at 15-16.
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`

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`Case 1:16-cv-00455-RGA Document 226 Filed 08/08/17 Page 8 of 12 PagelD #: 18667
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`See Carlyle Inv. Mgmt. LLC v. Moonmouth Co. S.A., C.A. No. 7841—VCP, 2015 WL 778846,
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`*8-9 (Del. Ch. Feb, 24, 2015) (granting protective order and finding to be non-discoverable work
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`“product documents exchanged between plaintiff and litigation funder that “more likely than not
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`include discussion of the merits of the [litigation] and potential strategies”); MobileMedia Ideas
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`LLC y. Apple Inc., 890 F. Supp. 2d 508, 515, 517-19 (D. Del. 2012) (commoninterest privilege
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`applies between entities with commoninterest in the successful enforcementof patents); Miller,
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`-17 F, Supp. 3d at 734-38 (finding documents shared with litigation funders protected under the
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`work product doctrine due to expectation of confidentiality); Devon IT, Inc. y. IBM Corp., No.
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`10-2899, 2012 WL 4748160, at *1, n.1 (E.D. Pa. Sept. 27, 2012) (holding that communications
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`with funders and funding agreement drafts were protected as work product).
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`Defendants did not make any argumentto the Special Master, nor did the Special Master
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`make any findings, that Acceleration Bay waived work product, that there is no commoninterest
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`between Acceleration Bayor that the information in these documents “is directed to the pivotal
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`issue in the litigation and the need for the information is compelling,” as required to compelthe
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`production of work product. Charge Injection Techs., 2015 WL 1540520 at *4.
`Instead, in the
`| Order, the Special Master noted Acceleration Bay’s objections and reasonedthat, “The Court can
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`determine at the appropriate time if any of the documents are admissible.” Order at 8. The
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`possibility of a future evaluation of admissibility, however, is a far cry from the very high bar to
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`require the production of work product protected or irrelevant
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`information. The harm to
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`‘Acceleration Bayif it is required to disclose work product to Defendants cannot be undone by
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`subsequently precluding Defendants from relying on these documentsattrial.
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`Indeed, this type
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`of knowledge would, at a minimum, give Defendants an unfair advantage in any mediation or
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`settlement discussions.
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`Thus,
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`the Court should overrule the Special Master’s Order that
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`

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`Case 1:16-cv-00455-RGA Document 226 Filed 08/08/17 Page 9 of 12 PagelD #: 18668
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`Acceleration Bay produce documents in response to RFP No. 139, as the only responsive
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`‘documents are irrelevant and protected work product.°
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`C.
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`The Source of Acceleration Bay’s Funding is Not Relevant
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`Acceleration Bay objects to being required to produce documents responsive to RFP Nos.
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`150 and 165, which seek discovery into the source of Acceleration Bay’s funding,||
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`Po As explained above,
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`this information is irrelevant and
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`Defendants’ requests illustrate their abusive tactics of pursuing irrelevant information, even in
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`the face of undisputed testimony confirming the facts at hand in deposition. There is no
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`relevance to documents showing Acceleration Bay’s receipt of funding and, as discussed above,
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`such information is non-discoverable work product. Moreover, Defendants admit that the only
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`purpose for seeking such irrelevant information is to develop a themeattrial that Acceleration
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`Bay is not
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`spending significant sums on operational activities, which is prejudicial
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`to
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`Acceleration Bay andirrelevant to the issue of infringement of Acceleration Bay’s valid patents.
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`“See Ex. C (Defs.’ Brief F) at 1-2 (“This information is relevant because Plaintiff has repeatedly
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`asserted that it is an operating company that incubates technical companies”). Acceleration Bay
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`should not be unduly burdened in being required to produce these irrelevant documents, which
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`° The Order requires production of documents in response to Request For Production No. 139,
`which seeks communications with various third parties, including Hamilton Capital. Defendants
`‘narrowed the request to seek only non-email documents. See Ex. C (Defs.’ Br. in Support of
`Motion F) at 4 (“Defendants are not moving to compel on emails, and this request calls for
`documents aside from email communications”), Acceleration Bay confirmed that it has no
`documents responsive to this request other the documents exchanged with Hamilton Capital
`related to funding.
`
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`® Acceleration Bay’s CEO and corporate designee under Rule 30(b)(6 testified that
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`
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`Ex. G (Ward Tr.) at 118:14-120:8; Ex. D at Def. Ex. G-5 (Ward Tr.) at
`146:23-147:2; Ex. E (Plt. Opp. Br.) at 15-16.
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`

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`Case 1:16-cv-00455-RGA Document 226 Filed 08/08/17 Page 10 of 12 PagelD #: 18669
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`are only being sought for the improper purpose of prejudicing the Court and the jury against
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`Acceleration Bay. See, e.g, TMC Fuel Injection Sys., LLC y. Ford Motor Co., No. 2:12-cv-
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`04971-NS (E.D. Pa. May 15, 2014) (precludingparties in limine from referring to each otherat
`trial as “non-practicing entity” or “patent troll”), attached as Ex. F; Rembrandt Wireless Techs.,
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`LP y. Samsung Elecs. Co., No. 2:13-CV-213-JRG-RSP, 2015 WL 627430, at *1 (E.D. Tex. Jan.
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`30, 2015) (excluding useat trial of terms such as “patent assertion entity,” “a company that
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`doesn’t make anything,” “‘a companythat doesn't sell anything” and “patenttroll”).
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`Indeed, Defendants vigorously opposed, and the Special Master denied, Acceleration
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`Bay’s motion to compel production of a wide variety of financial documents on grounds of
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`purported burden and limited relevance. See Order at 4-5. These included documents far more
`‘relevant than the documents Defendants seek from Acceleration Bay, such as sales forecasts,
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`data regarding usage of the accused products, evidence of any purported non-infringing
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`alternatives, marketing materials, and contracts, licenses and manuals Defendants exchanged
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`with their customers, developers and vendors, all of which are routinely produced as evidence of
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`‘damages in patent cases.
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`Jd. Accordingly, there is no basis to compel production of these
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`documents and the Court should sustain Acceleration Bay’s objections.
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`D.
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`Proof of Payment to Boeing is Not at Issue
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`Acceleration Bay objects to being required to produce documents in response to
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`_Defendants’ RFP No. 167, which seeks documents reflecting payments to Boeing. In addition to
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`the fact that such documents are irrelevant, the request is a further attempt to gain insight into
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`Acceleration Bay’s finances and further demonstrates Defendants’ abuse of the discovery
`process in seeking irrelevant information,[i
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`8
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`

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`Case 1:16-cv-00455-RGA Document 226 Filed 08/08/17 Page 11 of 12 PagelD #: 18670
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`already been established in discovery and is not disputed. Specifically, Acceleration Bay’s CEO
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`confirmed
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`has
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`The
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`Assignmentof the patents-in-suit recorded with the PTO further confirms Boeing’s receipt of the
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`payment.
`Ex, E at Ex. 27 (PTO Assignment) at FRAME 0367 (“For good and valuable
`consideration, the receipt of which is hereby acknowledged, Assignor does herebysell, assign,
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`transfer and set over to Assignee,
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`the Patents aforesaid”). Thus, while wholly irrelevant,
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`Defendants already obtained what they allegedly need onthis issue, but nonetheless continue to
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`pursue production of documents as they continue their campaign of discovery abuses in the
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`hopes of uncovering irrelevant discovery that they want to use to malign Acceleration Bayat
`‘trial.
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`Accordingly, further discovery into Acceleration Bay’s financial records regarding this
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`payment is duplicative, and, to the extent it is not redundant, irrelevant. The Court should
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`sustain Acceleration Bay’s objections as to RFP No. 167.
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`TIL=CONCLUSION
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`For the foregoing reasons, Acceleration Bay respectfully requests that the Court sustain
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`Acceleration Bay’s objectionsto the portions of the Order requiring production of an unredacted
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`copy of the Loan Agreement and documents responsive to Defendants’ RFP Nos. 139, 150, 165
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`_and 167.
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`

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`Case 1:16-cv-00455-RGA Document 226 Filed 08/08/17 Page 12 of 12 PagelD #: 18671
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`POTTER ANDERSON & CORROON LLP
`
`
`By: /s/Philip A. Rovner
`Philip A. Rovner (#3215)
`Jonathan A. Choa (#5319)
`Hercules Plaza
`P.O. Box 951
`Wilmington, DE 19899
`(302) 984-6000
`provner@potteranderson.com
`jchoa@potteranderson.com
`
`Attorneysfor Plaintiff
`Acceleration Bay LLC
`
`‘OF COUNSEL:
`
`Paul J. Andre
`Lisa Kobialka
`KRAMER LEVIN NAFTALIS
`& FRANKEL LLP
`990 Marsh Road
`Menlo Park, CA 94025
`(650) 752-1700
`
`Aaron M.Frankel
`KRAMERLEVIN NAFTALIS
`& FRANKEL LLP
`1177 Avenueof the Americas
`New York, NY 10036
`(212) 715-9100
`
`‘Dated: August 7, 2017
`Public version dated: August 8, 2017
`5349533
`
`10
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