Case 1:16-cv-00455-RGA Document 238 Filed 08/24/17 Page 1 of 14 PageID #: 18880
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`C.A. No. 16-453 (RGA)
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`REDACTED
`REDACTED
`CPONFIDENTIAL –
`PUBLIC VERSION
`OUTSIDE COUNSEL ONLY
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`C.A. No. 16-454 (RGA)
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`FILED UNDER SEAL
`REDACTED
`CONFIDENTIAL –
`PUBLIC VERSION
`OUTSIDE COUNSEL ONLY
`
`C.A. No. 16-455 (RGA)
`
`FILED UNDER SEAL
`REDACTED
`CONFIDENTIAL –
`PUBLIC VERSION
`OUTSIDE COUNSEL ONLY
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`)))))))))
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`))))))))))))))))))))
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`ACCELERATION BAY LLC,
`
`Plaintiff,
`
`v.
`
`ACTIVISION BLIZZARD, INC.,
`
`Defendant.
`ACCELERATION BAY LLC,
`
`Plaintiff,
`
`v.
`
`ELECTRONIC ARTS INC.,
`
`Defendant.
`ACCELERATION BAY LLC,
`
`Plaintiff,
`
`v.
`
`TAKE-TWO INTERACTIVE SOFTWARE,
`INC., ROCKSTAR GAMES, INC. and
`2K SPORTS, INC.,
`
`Defendants.
`
`DEFENDANTS’ RESPONSE TO PLAINTIFF ACCELERATION BAY LLC’S
`OBJECTIONS TO SPECIAL MASTER ORDER NO. 6
`
`OF COUNSEL:
`Michael A. Tomasulo
`Gino Cheng
`David K. Lin
`Joe S. Netikosol
`WINSTON & STRAWN LLP
`333 S. Grand Avenue, 38th Floor
`Los Angeles, CA 90071
`(213) 615-1700
`
`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 Defendant
`
`

`

`Case 1:16-cv-00455-RGA Document 238 Filed 08/24/17 Page 2 of 14 PageID #: 18881
`
`David P. Enzminger
`WINSTON & STRAWN LLP
`275 Middlefield Road, Suite 205
`Menlo Park, CA 94025
`(650) 858-6580
`
`Dan K. Webb
`Kathleen B. Barry
`WINSTON & STRAWN LLP
`35 West Wacker Drive
`Chicago, IL 60601
`(312) 558-5600
`
`Krista M. Enns
`WINSTON & STRAWN LLP
`101 California Street, 35th Floor
`San Francisco, CA 94111
`(415) 591-1000
`
`Michael M. Murray
`WINSTON & STRAWN LLP
`200 Park Avenue,
`New York, NY 10166
`(212) 294-6700
`
`August 17, 2017
`Original Filing Date: August 17, 2017
`Redacted Filing Date: August 24, 2017
`
`

`

`Case 1:16-cv-00455-RGA Document 238 Filed 08/24/17 Page 3 of 14 PageID #: 18882
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`I.
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`Introduction
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`The documents the Special Master ordered produced go to a central issue: the truth of
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`claims made by Acceleration Bay in its pleadings about itself and the damages it has supposedly
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`suffered. Acceleration has pled and argued throughout this litigation that it is an operating
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`company, that litigation is not its sole business, that it incubates businesses, invests in companies,
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`collaborates with research institutions, and brings solutions to market through partnerships with
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`companies and startups. App.Ex. C, F5 (Complaint) at ¶¶ 3-4.1 Acceleration has also pled that
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`Defendants’ alleged infringement is causing it “irreparable harm,” and presumably it will argue
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`that the alleged infringement has impaired its supposed non-litigation business operations.
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`But the facts tell another story.
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` The documents ordered produced by the Special Master bear
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`relevance to the “impeachment or corroboration” of Acceleration’s assertions. Hickman v. Taylor,
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`329 U.S. 495, 511 (1947). For example, the companies Acceleration claims to incubate are the
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`same companies it uses to argue that the patents can be commercialized. Some of the documents
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`may show that Acceleration’s incubation of and investment in these companies is not genuine,
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`which would undermine Acceleration’s claims about commercialization of the patents.
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`is “part and parcel” of the agreements by which Acceleration acquired its interest in the patents,
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`1 Citations to “App.Ex. __” refer to Plaintiff’s Appendix (C.A. No. 16-453, D.I. 254).
`1
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` Thus, the Loan Agreement
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`

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`Case 1:16-cv-00455-RGA Document 238 Filed 08/24/17 Page 4 of 14 PageID #: 18883
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`and is therefore directly relevant to the issues of damages and ownership for this reason alone.
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`Acceleration Bay’s objections to the Special Master’s Order depend on the erroneous
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`allegations that Defendants seek to “tar” Plaintiff and seek its litigation budget. Neither argument
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`is correct. Acceleration’s $15 million litigation budget, including its total expenditures to date, is
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`already matter of public record in an unrelated criminal proceeding. Ex. 1 (Burstein Declaration),
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`¶¶ 8-13. Nor are Defendants attempting to “tar” plaintiff; but Defendants are certainly permitted to
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`full discovery to challenge Plaintiff’s pleaded assertions that it is an operating technology
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`company that has been “irreparably harmed” by Defendants. See Avago Techs. Fiber IP
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`(Singapore) Pte. Ltd. v. IPtronics Inc., No. 10-CV-02863-EJD, 2011 WL 3267768, at *5 (N.D.
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`Cal. July 28, 2011) (noting that whether plaintiff is a “non-practicing entity” or a competitor is
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`relevant to irreparable harm).
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`undermines Acceleration’s pleaded allegations that it is an “investor” and “incubator.” The
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`documents are thus discoverable and the Order was not an “abuse of discretion.” See Callwave
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`Commc’ns LLC v. AT&T Mobility LLC, 2016 WL 3450736, at *1 & n.3 (D. Del. June 16, 2016).
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`Acceleration’s objections to the Order should be overruled and Acceleration should be required to
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`immediately produce documents in compliance with the Special Master’s Order.
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`II.
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`The Unredacted Hamilton Capital Agreement.
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`Acceleration asserts that the Special Master’s Order countermands a previous order by the
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`Court. It does not. Eighteen months ago and in the context of the narrow issue of standing, the
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`Court allowed production of the February 27, 2015 litigation finance agreement with Hamilton
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`Capital (App.Ex. D, G3) with the litigation budget redacted because the financial information was
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`not relevant to standing. The Court did not address whether the information was relevant to other
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`issues. The Special Master recognized correctly that the testimony of Acceleration’s designee,
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`coupled with the apparently contradictory Complaint, and Acceleration’s refusal to commit to not
`2
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`

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`Case 1:16-cv-00455-RGA Document 238 Filed 08/24/17 Page 5 of 14 PageID #: 18884
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`making this argument at trial makes this information relevant. The Order should be sustained.
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`A.
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`Background and History of Dispute
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`On February 27, 2015, two months after it had supposedly bought the patents from Boeing,
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`Acceleration entered into the Loan Agreement with Hamilton Capital. Ex. 1 at ¶¶ 8-13.
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`Defendants sought production of the Loan Agreement and Plaintiff objected to producing it.
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`App.Ex. D, G4 (February 12, 2016 Hearing), 51:12-18. In evaluating whether a redacted version
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`of the document would satisfy the concerns of both parties, this Court asked Defendants’ counsel
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`whether a redaction of the numbers would affect its arguments on standing to sue. Id. at 52:4-11,
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`56:19-57:2 (“if I redact the litigation budget, you don't care, because that's not what you are
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`interested in; right?”). Defendants’ counsel confirmed that the numbers were not relevant to
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`standing, and the Court ordered the production of a redacted version. Id. at 52:8-11.
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`But Acceleration redacted more than just its litigation budget, it redacted how Acceleration
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`could use the funds (App.Ex. D, G3 at 2335), how licensing and litigation proceeds would be
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`distributed (id. at 2336), and the amount to be repaid (id. at 2323, 2330, 2337, 2345, 2347).
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`3
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`

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`Case 1:16-cv-00455-RGA Document 238 Filed 08/24/17 Page 6 of 14 PageID #: 18885
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`Even after Mr. Ward’s testimony, Acceleration refused to produce the unredacted Loan
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`Agreement and Defendants moved to compel its production. App.Ex. D, K. At the hearing,
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`Acceleration argued that Defendants were “clearly” attempting to “get at Acceleration Bay’s
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`litigation budget, and it’s being dressed up as something else.” App.Ex. B at 137:15-18. However,
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`Defendants made clear that this was not true, explaining that the litigation budget was made public
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`because “Hamilton Capital is part of an enterprise -- an interwoven group of companies which are
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`under criminal indictment for operating a Ponzi scheme. As such, its assets are in receivership,
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`and the amount of the litigation budget in this case is public information.” Id. at 152:11-153:2
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`(referencing Ex. 1, ¶¶ 8-13). The amount of the $15 million credit facility is public record as the
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`asset of a receivership estate created by the SEC as part of a criminal case. Ex. 1, ¶¶ 8-13; see Sec.
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`4
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`

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`Case 1:16-cv-00455-RGA Document 238 Filed 08/24/17 Page 7 of 14 PageID #: 18886
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`& Exch. Comm’n v. Platinum Mgmt. (NY) LLC, No. 16-CV-6848 (DLI) (VMS) (E.D.N.Y). On
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`July 17, 2017, the Special Master ordered production of the full Loan Agreement.
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`B.
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`Acceleration Was Correctly Ordered To Produce The Full Loan Agreement
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`The unredacted Loan Agreement is plainly relevant to this litigation. The redacted portions
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`of the Loan Agreement bear directly on claims made by Acceleration in its Complaint (and
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`repeated before this Court as recently as July 10, 2017) regarding its status as an operating
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`company that “incubates” other companies and that collaborates with research institutions.2
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` Defendants are entitled to this information.
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`2 See e.g., Ex. A, ¶ 3-4 (“¶3. Acceleration Bay is an incubator for next generation businesses, in
`particular companies that focus on delivering information and content in real-time. Acceleration
`Bay invests in and supports companies that further the dissemination of technological
`advancements. ¶4. Acceleration Bay also collaborates with inventors and research institutions
`to analyze and identify important technological problems, generate new solutions to these
`problems, and bring those solutions to market through its partnerships with existing companies
`and startups.”).
`
`5
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`

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`Case 1:16-cv-00455-RGA Document 238 Filed 08/24/17 Page 8 of 14 PageID #: 18887
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` The redacted information may also be relevant to assessing the kinds of
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`valuations performed on the Patents.
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`At the hearing, Acceleration argued that Defendants were “fish[ing] around for
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`Acceleration Bay’s litigation budget.” App.Ex. B, at 150:12-18. However, because Acceleration’s
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`litigation budget is now public, there can be no justification for redacting publicly available
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`information. Now, Acceleration raises additional arguments that litigation financing agreements
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`are not discoverable at all. But key terms of an intellectual property loan agreement such as the
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`amount borrowed, the purchaser’s interest rate, and the purchaser’s equity and contribution are
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`discoverable. See Great Lakes Transp. Holding LLC v. Yellow Cab Serv. Corp. of Florida, 2011
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`WL 465507, at *4 (S.D. Fla. Feb. 4, 2011) (requiring production of unredacted loan agreement.)
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`Acceleration also advances the new contention that the redacted terms are attorney work
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`product. Not only did it fail to raise this argument before the Special Master, but it provides no
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`facts showing that the redacted provisions were created in anticipation of litigation.
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`III.
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`Documents Exchanged Between Acceleration And Hamilton Capital.
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`Acceleration broadly claims that its communications with Hamilton Capital are not in any
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`way relevant to the litigation for the same reasons the Loan Agreement is not relevant and because
`6
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`

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`Case 1:16-cv-00455-RGA Document 238 Filed 08/24/17 Page 9 of 14 PageID #: 18888
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`these exchanges purportedly do not deal with its infringement claims.3 But the relevance of a
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`document to a litigation is hardly limited to the question of whether it relates to the alleged
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`“infringement of any valid patents.” These communications are relevant for the same reasons that
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`the Loan Agreement is relevant, including evaluating Acceleration’s ongoing claims that it is an
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`operating business that incubates companies and collaborates with research institutions. See e.g.,
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`App.Ex. C, F5 ¶ 3-4; Ex. App.Ex. B at 150:5-6 ([Acceleration’s Counsel:] “So, first of all,
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`Acceleration Bay is an operating company.”). The Special Master granted Defendants’ motion,
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`explaining that “Defendants seek documents in these requests for production that will permit
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`Defendants to cross examine any Plaintiff’s witness who might argue that Plaintiff is engaged in
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`businesses that Defendants do not believe to be true.” App.Ex. A, 8-9. Indeed, the Special Master
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`granted Defendants’ motion as to all the requests for production at issue, implicitly recognizing
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`that Plaintiff’s productions had been deficient and that it was improper for Plaintiff to continue to
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`“strongly resist[] such production.” Id.
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`Acceleration separately argues that certain “updates” that have been communicated to
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`Hamilton Capital are work product, but it does not carry its burden to show the documents are
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`protected. Because these updates were “prepared for a nonparty to the litigation, work product
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`production does not apply.” Delaware Display Group LLC v. Lenovo Group Ltd., Lenovo Holding
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`Co., 2016 WL 720977, at *2 (D. Del. Feb. 23, 2016).
`
`3 This discovery dispute arose from Acceleration’s refusal to provide a complete response to
`Request for Production No. 139 as to documents and communications exchanged with third-
`parties. See e.g., App.Ex. C at 4; App.Ex. E; App.Ex. B, 151:8-14.
`4
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`
`
` Such
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`7
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`

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`Case 1:16-cv-00455-RGA Document 238 Filed 08/24/17 Page 10 of 14 PageID #: 18889
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`communications have not been withheld on the basis of any claim of work product. Rather, they
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`have admittedly (and improperly) been withheld solely on the basis of confidentiality—
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`specifically, a non-disclosure agreement between Acceleration and Hamilton Capital. Id. In light
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`of this, the cases Acceleration cites do not help it. Indeed, in Miller UK Ltd. v. Caterpillar, Inc.,
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`the court found that a plaintiff and its third-party litigation funder shared no common legal interest
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`and that only documents containing plaintiff’s lawyer’s mental impressions and strategies were
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`protected from discovery by the work product doctrine. 17 F. Supp. 3d 711, 733, 735 (N.D. Ill.
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`2014). Mr. Ward’s business communications do not qualify. Acceleration’s objections should
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`accordingly be overruled and it should be ordered to immediately produce the communications and
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`exchanges between Acceleration and Hamilton Capital.
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`IV.
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`Documents Related To Funding.
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`Acceleration’s objections improperly frame RFP Nos. 150 and 165 and the corresponding
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`Order as simply seeking discovery into the source of Acceleration’s funding. But Acceleration’s
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`source of funding and litigation budget are already public. Moreover, the fact that litigation
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`funders are funding or otherwise involved in Acceleration’s supposed non-litigation activities is
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`directly relevant to whether Acceleration has any non-litigation business activities.
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`At core, RFP No. 150 calls for documents reflecting investment in technology related to the
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`Asserted Patents.5 RFP No. 165 calls for documents reflecting revenue related to the litigation, the
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`Asserted Patents, or allegations of the Complaint, and the source of such revenue. See e.g.,
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`App.Ex. C, 2-3; id. at Appendix 1, 4; App.Ex. E. These requests bear on Acceleration’s ongoing
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` The RFPs and Acceleration’s objections are at App.Ex. C, 2-3, Appendix 1, 2-3, and App.Ex.
`E.
`
`8
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`

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`Case 1:16-cv-00455-RGA Document 238 Filed 08/24/17 Page 11 of 14 PageID #: 18890
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`claims that it has invested in technologies related to the Asserted Patents, including SWAN. A
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`complete response is also important to evaluating how (and whether) Acceleration has invested in
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`this technology and whether such investments have generated any revenue, a fact relevant to
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`damages. Acceleration has not shown that these are attorney work product.
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`App.Ex. B, 151:15-20. Yet no documents have been produced that show investment in SWAN or
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`any revenues or income from such investments.
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`Acceleration claims that Defendants seek to tar it as a “purported non-practicing entity”
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`(Objs. at 6), but it was Acceleration that injected its business practices into the case by pleading
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`them in its Complaint and continuing to assert their truth. Indeed, when asked to agree not to make
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`these arguments at trial, Acceleration refused. Defendants expect that at trial, Acceleration will
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`seek to present evidence that it is a technology incubator and investor. But Acceleration’s claims
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`are belied by the facts.
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`Documents related to these matters are now relevant, and as “one of the purposes of
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`discovery is to obtain information for use on cross-examination and for the impeachment of
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`witnesses,” they are discoverable. United States v. Int’l Bus. Machines Corp., 66 F.R.D. 215, 218
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`(S.D.N.Y. 1974). The cases cited by Acceleration do not hold that these matters are categorically
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`irrelevant, rather they prohibited the use of words at trial (Objs. at 8), and one of them even
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`emphasized that the “limine shall not prevent Defendants from arguing that Plaintiff is a patent
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`9
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`

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`Case 1:16-cv-00455-RGA Document 238 Filed 08/24/17 Page 12 of 14 PageID #: 18891
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`assertion entity that does not manufacture or sell products in this field.” Rembrandt Wireless
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`Techs., LP v. Samsung Elecs. Co., No. 2:13-CV-213-JRG-RSP, 2015 WL 627430, at *1 (E.D. Tex.
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`Jan. 31, 2015) (emphasis in original). Acceleration should be ordered to respond to RFP Nos. 150
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`and 165.
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`V.
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`Proof Of Payment To Boeing For The Asserted Patents.
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`Acceleration objects to the production of documents in response to RFP No. 167, arguing
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`that the proof of payment to Boeing is not relevant to any issues in the litigation.
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`paid the purchase price of the Asserted Patents.
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` Defendants are entitled to disclosure of who actually
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` Acceleration has no basis to withhold easily accessible, relevant
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`documents. Acceleration’s objections should be overruled.
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`10
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`

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`Case 1:16-cv-00455-RGA Document 238 Filed 08/24/17 Page 13 of 14 PageID #: 18892
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`OF COUNSEL:
`Michael A. Tomasulo
`Gino Cheng
`David K. Lin
`Joe S. Netikosol
`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
`Dan K. Webb
`Kathleen B. Barry
`WINSTON & STRAWN LLP
`35 West Wacker Drive
`Chicago, IL 60601
`(312) 558-5600
`
`Krista M. Enns
`WINSTON & STRAWN LLP
`101 California Street, 35th Floor
`San Francisco, CA 94111
`(415) 591-1000
`
`Michael M. Murray
`WINSTON & STRAWN LLP
`200 Park Avenue,
`New York, NY 10166
`(212) 294-6700
`
`Andrew R. Sommer
`WINSTON & STRAWN LLP
`1700 K Street, N.W.
`Washington, DC 20006
`(202) 282-5000
`
`August 17, 2017
`
`MORRIS, NICHOLS, ARSHT & TUNNELL LLP
`
`/s/ Stephen J. Kraftschik
`__________________________________
`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
`
`11
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`

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`Case 1:16-cv-00455-RGA Document 238 Filed 08/24/17 Page 14 of 14 PageID #: 18893
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`CERTIFICATE OF SERVICE
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`I hereby certify that on August 24, 2017, I caused the foregoing to be electronically
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`filed with the Clerk of the Court using CM/ECF, which will send notification of such filing
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`to all registered participants.
`
`I further certify that I caused copies of the foregoing document to be served on August
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`24, 2017, upon the following in the manner indicated:
`
`Philip A. Rovner, Esquire
`Jonathan A. Choa, Esquire
`POTTER ANDERSON & CORROON LLP
`1313 North Market Street, 6th Floor
`Wilmington, DE 19801
`Attorneys for Plaintiff
`
`Paul J. Andre, Esquire
`Lisa Kobialka, Esquire
`James R. Hannah, Esquire
`Hannah Lee, Esquire
`Yuridia Caire, Esquire
`KRAMER LEVIN NAFTALIS & FRANKEL LLP
`990 Marsh Road
`Menlo Park, CA 94025
`Attorneys for Plaintiff
`
`Aaron M. Frankel, Esquire
`Marcus A. Colucci, Esquire
`KRAMER LEVIN NAFTALIS & FRANKEL LLP
`1177 Avenue of the Americas
`New York, NY 10036
`Attorneys for Plaintiff
`
`VIA ELECTRONIC MAIL
`
`VIA ELECTRONIC MAIL
`
`VIA ELECTRONIC MAIL
`
`/s/ Stephen J. Kraftschik
`Stephen J. Kraftschik (#5623)
`
`