Case 1:16-cv-00455-RGA Document 322 Filed 11/22/17 Page 1 of 7 PageID #: 22077
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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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` C.A. No. 16-454 (RGA)
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` C.A. No. 16-455 (RGA)
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`ACCELERATION BAY LLC.
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` Plaintiff,
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`v.
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`ACTIVISION BLIZZARD, INC.,
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` Defendant.
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`ACCELERATION BAY LLC,
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` Plaintiff,
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`v.
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`ELECTRONIC ARTS INC.,
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` Defendant.
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`ACCELERATION BAY LLC,
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` Plaintiff.
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`v.
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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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`SPECIAL MASTER ORDER NO. 13
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`On November 9, 2017 the parties filed two motions. Plaintiff Acceleration Bay’s motion
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`to strike as described in the motion as the Alagar prior art reference (the “Alagar Motion”).
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`Defendants filed their motion to compel production of certain documents related to Hamilton
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`Capital (the “Hamilton Capital Motion”). Responsive briefs and exhibits were filed on
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`RD 10439333v.2
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`Case 1:16-cv-00455-RGA Document 322 Filed 11/22/17 Page 2 of 7 PageID #: 22078
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`November 16, 2017. A hearing was held before the Special Master on November 20, 2017.
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`Below is a discussion of each motion, followed by my Order as to each motion.
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`The Alagar Motion
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`Plaintiff’s Alagar motion is based upon its argument that the Defendants did not include
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`the Alagar prior art reference in their initial election of prior art and have not sought leave to
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`amend their election to include this new reference. The Scheduling Order required Defendants
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`to provide a preliminary election of prior art, which would limit the prior art they could present
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`in the case. Defendants May 6, 2016 election included the maximum 12 references but did not
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`include Alagar. Defendants updated their contentions on June 8 and July 31, 2017, but they also
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`did not include Alagar. It was not until September 15, 2017, that Defendants served a final
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`election of prior art adding Alagar as a reference. Defendants opening invalidity report filed
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`September 25, 2017 relied on the Alagar prior art reference. Within 5 days of Defendants
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`assertion of Alagar prior art, Plaintiff contacted Defendants and requested that the Defendants
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`either withdraw the reference or seek leave from the Court to amend their prior art election.
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`According to Plaintiff, Defendants dragged out the meet and confer process on this request.
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`Approximately one month later, on October 23, 2017, Defendants indicated to Plaintiff that they
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`would not present the Alagar issue to the Court.
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`Plaintiff argues that it has been prejudiced and will be subject to more prejudice if the
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`Alagar prior art is not dismissed because of the delay by the Defendants and the schedule to
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`present expert reports. Plaintiff also contends that prior rulings of this Court support Plaintiff’s
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`position that it is too late for Defendants to add the Alagar prior art reference. Plaintiff cites to
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`the Court’s earlier decision precluding the Plaintiff from adding new prior contentions. Plaintiff
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`RD 10439333v.2
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`Case 1:16-cv-00455-RGA Document 322 Filed 11/22/17 Page 3 of 7 PageID #: 22079
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`alleges that it is prejudiced by having to devote resources for its expert to respond to the Alagar
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`prior art that was not disclosed during fact discovery.
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`In response, Defendants take the position that they had properly identified and gave clear
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`notice of their intent to rely on the Alagar reference and that Defendants have good cause to elect
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`Alagar given the Plaintiff’s claim construction positions and infringement reports. Defendants
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`point to their May 6, 2016 invalidity contentions. Defendants brief is a thorough explanation as
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`to how allegedly the Plaintiff has changed its infringement allegations and is now attempting to
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`recapture claim scope that it gave up during prosecution. During prosecution, to avoid Alagar,
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`Plaintiff amended its claims to add certain claim limitations. As to any delay in presenting the
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`issue to the Court for the Special Master, Defendants point to positions taken by the parties with
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`respect to who and when this issue should be raised.
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`Defendants’ arguments have more merit, particularly in light of Plaintiff’s burden under
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`the Pennypack case. Pennypack places a heavy burden on the party who seeks to exclude
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`evidence. Plaintiff comes close to meeting its burden, only if it is correct that it had timely and
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`fully disclosed its infringement contentions. If that were true, Defendants should have promptly
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`relied on the Alagar references as prior art. However, Plaintiff’s supplemental disclosures in the
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`few months leading up to the fact discovery cut-off date put pressures on the Defendants to
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`amend their invalidity contentions, including prior art references. Furthermore, the Alagar prior
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`art reference has been known to Plaintiff for a long time, including during proceedings before the
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`Patent Office. This reduces the possibility of prejudice to Plaintiff. On the other hand, the
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`prejudice to Defendants is significant, if its reliance on the Alagar prior art references is stricken.
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`ORDER: PLAINTIFF’S MOTION IS DENIED.
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`RD 10439333v.2
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`Case 1:16-cv-00455-RGA Document 322 Filed 11/22/17 Page 4 of 7 PageID #: 22080
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`Hamilton Capital Motion
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`Time to prepare this Order in light of the schedule in this case and the needs of the
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`parties, as well as the various points and issues raised by the Hamilton Capital Motion, precludes
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`the Special Master from a thorough discussion of the parties’ arguments. The motion concerns
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`documents that Plaintiff provided to Hamilton Capital and/or its counsel, Reed Smith, during
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`their negotiation of a litigation financing agreement in 2014 and 2015. Plaintiff resisted such
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`production and advised the Court in February 2016 that there were no responsive documents to
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`produce or log. In September 2017, Hamilton Capital’s counsel revealed to Defendants counsel
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`for the first time that Plaintiff had exchanged at least 8 emails and 2 dozen documents relating to
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`the asserted patents with Hamilton Capital through its counsel before Hamilton Capital agreed to
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`finance Acceleration Bay in February 2015. Defendants cite a prior order of the Special Master
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`requiring production of some Hamilton Capital documents, which order was upheld by the
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`Court. In addition to the documents, Defendants want an explanation from Plaintiffs as to their
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`failure to produce these documents and for Plaintiff to pay Defendants reasonable fees and
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`expenses in connection with its efforts to obtain the documents from Plaintiff.
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`Defendants maintain that the documents sought are clearly relevant to issues such as
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`patent valuation, damages, royalty rates and Plaintiff’s status as an operating company.
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`Defendants cite to the Court’s prior rejection of Plaintiff’s assertion of privilege. Furthermore,
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`according to Defendants, Plaintiff represented to the Court in February 2016 that it was not
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`claiming any privilege in connection with documents provided to Hamilton Capital. Defendants
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`cite law of this District Court to the conclusion that there is no “common interest” for documents
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`shared with a third party in an effort to obtain an investment. Any analysis by Plaintiff’s expert
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`should also be produced according to Defendants because such analysis was prior to the filing of
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`RD 10439333v.2
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`Case 1:16-cv-00455-RGA Document 322 Filed 11/22/17 Page 5 of 7 PageID #: 22081
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`the suit and was shared with a non-party, Hamilton Capital. It may also be relevant to an
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`examination of Plaintiff’s expert in light of that expert’s report in this case. The Boeing/Airbus
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`agreement was shared by Plaintiff with Hamilton Capital. Therefore even though it may have an
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`extreme level of confidentiality, the sharing of the Boeing agreement with Hamilton Capital,
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`according to Defendants, results in its being available to Defendants in this litigation.
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`In addition to the relief of the production of the documents, Defendants seek to be given
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`leave to amend their positions in light of the withheld documents. According to Defendants,
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`Plaintiff withheld at least 16 references, at least 2 of which are material prior art. Defendants
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`want to supplement their invalidity positions in light of these new references. Finally,
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`Defendants seek reasonable fees and expenses in obtaining these documents from Plaintiff.
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`Plaintiff’s reply brief and exhibits contend that it produced the patents and file histories
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`that are on Reed Smith’s privilege log. It states that it made available for inspection by
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`Defendants the Boeing/ Airbus agreement. Plaintiff also contends that the Agreement is both
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`highly confidential and irrelevant, since it has not been relied on in any expert’s report. Other
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`documents referenced in the privilege log were allegedly produced. Plaintiff maintains that it
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`never shared with Reed Smith any technical or financial work product. As to the emails between
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`Reed Smith and Kramer Levin, Plaintiff asserts that Defendants have represented that it doesn’t
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`seek them. In bold, Plaintiff writes: “Acceleration Bay did not provide any additional materials
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`to Reed Smith.” [Plaintiff reply brief, Nov. 16, 2017, p. 3].
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`Even if Defendants seek emails between Reed Smith and Kramer Levin, which Plaintiff
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`argues are irrelevant, they are subject to the ‘common interest’ privilege according to Plaintiff.
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`Plaintiff cites to a comprehensive Court of Chancery case on this privilege. Also, any pre-suit
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`RD 10439333v.2
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`Case 1:16-cv-00455-RGA Document 322 Filed 11/22/17 Page 6 of 7 PageID #: 22082
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`analysis by Dr. Medvidovic of Defendants’ infringement should be work product according to
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`Plaintiff, and Plaintiff maintains that any such analysis was not shared with Reed Smith.
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`Plaintiff opposes Defendants’ seeking leave to amend their invalidity reports based on
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`two publicly available documents regarding the general background of the technology.
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`Apparently the two documents are publicly available, and, according to Plaintiff cumulative of
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`materials already produced.
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`This motion is difficult to resolve without doubting Plaintiff’s representations and with
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`the possibility that Plaintiff’s work product might be disclosed to Defendants if the motion is
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`granted. There are essentially two important parts to the motion: first, what was disclosed to
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`Reed Smith; and second, the law on the common interest privilege.
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`Plaintiff maintains that it has already produced any non-work product documents given to
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`Reed Smith or Hamilton Capital. It appears to take the position that it correctly advised the
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`Defendants that there were no other documents to produce or to log. It is hard, however, to
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`understand why the Boeing/Airbus Agreement would be work product. That Agreement and
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`other allegedly work product documents may well be entitled to confidentiality under the
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`agreement between the parties as to confidentiality. Nevertheless, confidentiality alone does not
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`justify not identifying or logging the documents so as to advise Defendants as to their existence.
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`Defendants should not have to speculate as to what was given by Plaintiff or its counsel to non-
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`parties before a suit was filed.
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`The parties differ on the law as to the common interest privilege. Defendants rely on
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`cases in this Court that were cited in the recent case of Delaware Display Grp. LLC v. Lenovo
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`Grp. Ltd., 2016 WL 720977 [D. Del. Feb. 23, 2016]. Plaintiff argues that a recent Court of
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`Chancery case strongly supports its view that the privilege should apply when the patent holder
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`RD 10439333v.2
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`Case 1:16-cv-00455-RGA Document 322 Filed 11/22/17 Page 7 of 7 PageID #: 22083
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`is seeking funding from another entity. Plaintiff also represented in oral argument at the Hearing
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`that there was an understanding of confidentiality between the two law firms as to the documents
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`provided in Hamilton Capital’s due diligence.
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`However, even accepting Plaintiff’s representation, it doesn’t appear that there was any
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`written agreement at that time to have a legally ‘common interest’ in whatever was provided by
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`Plaintiff. The documents were provided before any agreement was reached between Plaintiff and
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`Hamilton Capital, and before any litigation was filed. As was written in the Delaware Display
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`case at p. 4, Hamilton Capital and Plaintiff were not “..allied in a common legal cause..” when
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`the documents were provided .
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`As to the scope of relief in granting the motion, there is no basis to assess fees or charge
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`Plaintiff with providing ‘an explanation’ for not producing or logging documents .Depending on
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`what is disclosed in the documents ordered hereby to be produced, Defendants can supplement
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`their invalidity contentions although it should have the burden to show why such
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`supplementation is justified.
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`ORDER: DEFENDANTS MOTION IS GRANTED TO THE EXTENT OF
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`REQUIRING PLAINTIFF TO PRODUCE WHAT IT PROVIDED IN WRITING TO
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`HAMILTON CAPITAL OR ITS COUNSEL AT THE TIME OF HAMILTON
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`CAPITAL’S DUE DILIGENCE AND ALL SUCH PRODUCTION SHOULD BE
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`TREATED AS CONFIDENTIAL AT THIS TIME. IF NEW INFORMATION IS
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`LEARNED FROM THE PRODUCTION, DEFENDANTS CAN SUPPLEMENT THEIR
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`INVALIDITY CONTENTIONS.
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`Dated: November 22, 2017
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`RD 10439333v.2
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`/s/ Allen M. Terrell, Jr.
`Allen M. Terrell, Jr., Special Master
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