EXHIBIT 2004EXHIBIT 2004
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`Case3:11-cv-06637-RS Document145 Filed12/12/12 Page1 of 22
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`
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`Brooke A. M. Taylor, WSBA 33190 (Admitted Pro Hac Vice)
`btaylor@susmangodfrey.com
`Jordan W. Connors, WSBA 41649 (Admitted Pro Hac Vice)
`jconnors@susmangodfrey.com
`SUSMAN GODFREY L.L.P.
`1201 Third Avenue, Suite 3800
`Seattle, WA 98101-3000
`Telephone: (206) 516-3880
`Facsimile: (206) 516-3883
`
`Stephen E. Morrissey, CA Bar 187865
`smorrissey@susmangodfrey.com
`SUSMAN GODFREY L.L.P.
`1901 Avenue of the Stars, Suite 950
`Los Angeles, CA 90067-6029
`
`Telephone: (310) 789-3103
`Facsimile: (310) 789-3150
`
`Plaintiff Vasudevan Software, Inc.
`
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN FRANCISCO DIVISION
`
`
`Case No. 3:11-06637-RS-PSG
`
`PLAINTIFF VASUDEVAN SOFTWARE,
`INC.’S NOTICE OF MOTION AND
`MOTION FOR SANCTIONS AGAINST
`MICROSTRATEGY
`
`Date: January 17, 2013
`Time: 1:30 pm
`Location: 450 Golden Gate Avenue
`San Francisco, California
`
`
`
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`VASUDEVAN SOFTWARE, INC.,
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`vs.
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`MICROSTRATEGY INCORPORATED,
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`Plaintiff,
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`Defendant.
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`PLAINTIFF VSI’S MOTION FOR SANCTIONS -i
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`2490307v1/012934
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`Case3:11-cv-06637-RS Document145 Filed12/12/12 Page2 of 22
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`TABLE OF CONTENTS
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`MicroStrategy Is Attempting to Win This Case, Not on the Merits, But By
`Threatening, Intimidating, and Extorting VSi, Susman Godfrey, and Susman
`Godfrey’s Other Clients ..................................................................................................... 3
`
`A. MicroStrategy Threatened to Harm VSi and its Counsel if VSi Refused to
`Dismiss its Case ..................................................................................................... 3
`
`MicroStrategy Has Begun to Carry Out its Threats to Harm VSi and Susman
`Godfrey .................................................................................................................. 5
`
`B.
`
`
`C.
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`MicroStrategy’s Petition for Inter Partes Review of Zillow’s Patent is
`Unrelated to MicroStrategy’s Business and Is Clearly Intended to Harm
`Susman Godfrey and VSi ....................................................................................... 6
`
`
`The Court Should Issue Sanctions Against MicroStrategy ................................................ 9
`
`The Court Should Fashion an Appropriate Set of Sanctions Designed to Punish
`MicroStrategy and Deter Similar Bad Faith Conduct ...................................................... 13
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`Conclusion ....................................................................................................................... 16
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`I.
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`II.
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`III.
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`IV.
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`PLAINTIFF VSI’S MOTION FOR SANCTIONS -ii
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`2490307v1/012934
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`Case3:11-cv-06637-RS Document145 Filed12/12/12 Page3 of 22
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`
`TABLE OF AUTHORITIES
`
`
`
`
`
`Cases
`
`Allergan Inc. v. Cayman Chem. Co.,
`2009 WL 8591844 (C.D. Cal. Apr. 9, 2009) ............................................................................... 7
`
`Ashker v. Rowland,
`131 F.3d 145 (9th Cir. 1997)...................................................................................................... 13
`
`B.K.B. v. Maui Police Dept.,
`276 F.3d 1091 (9th Cir. 2002).................................................................................................... 10
`
`Cf. Kramer v. Tribe,
`156 F.R.D. 96 (D.N.J. 1994) ........................................................................................................ 9
`
`Chambers v. NASCO, Inc.,
`
`501 U.S. 32 (1991) ................................................................................................................. 9, 14
`
`Cvgnus Telecomms. Tech., LLC v. United
`World Telecom, L.C.,
`385 F. Supp. 2d 1022 (N.D. Cal. 2005) ....................................................................................... 7
`
`Dubuc v. Green Oak Twp.,
`2010 WL 3245324 (E.D. Mich. Aug. 16, 2010) ........................................................................ 13
`
`Erickson v. Newmar Corp.,
`87 F.3d 298 (9th Cir. 1996)........................................................................................................ 13
`
`Fidelity Nat. Title Ins. Co. of New York v.
`Intercounty Nat. Title Ins. Co.,
`2002 WL 1433717 (N.D. Ill. July 2, 2002) .......................................................................... 10, 12
`
`Fink v. Gomez,
`239 F.3d 989 (9th Cir. 2001)...................................................................................................... 12
`
`Fresenius Med. Care Holdings, Inc. v. Baxter
`Int'l, Inc.,
`2007 U.S. Dist. LEXIS 44107 (N.D.Cal.2007)............................................................................ 7
`
`
`Fuoco v. Wells,
`2005 WL 2317750 (M. D. Fla. Jul. 25, 2005)............................................................................ 11
`
`Galanis v. Szulik,
`841 F. Supp. 2d 456 (D. Mass. 2011) ........................................................................................ 11
`
`Hall v. Cole,
`412 U.S. 1 (1973) ....................................................................................................................... 10
`
`Kelly v. U.S. Bank,
`2010 WL 2817292 (D. Or. June 25, 2010) ................................................................................ 15
`
`Kopitar v. Nationwide Mut. Ins. Co.,
`266 F.R.D. 493 (E.D. Cal. 2010) ............................................................................................... 13
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`PLAINTIFF VSI’S MOTION FOR SANCTIONS -iii
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`Case3:11-cv-06637-RS Document145 Filed12/12/12 Page4 of 22
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`
`
`Lone Ranger Television, Inc. v. Program
`Radio Corp.,
`740 F.2d 718 (9th Cir. 1984)........................................................................................................ 2
`
`Martin v. Automobili Lamborghini
`Exclusive, Inc.,
`307 F.3d 1332 (11th Cir. 2002).................................................................................................. 12
`
`MicroStrategy v. Crystal Decisions,
`555 F. Supp. 2d 475 (D. Del. 2008) ......................................................................................... 8, 9
`
`Molski v. Mandarin Touch Restaurant,
`347 F. Supp. 2d 860 (C.D. Cal. 2004) ................................................................................. 11, 15
`
`Oliveri v. Thompson,
`803 F.2d 1265 (2d Cir. 1986) ..................................................................................................... 10
`
`Roadway Express, Inc. v. Piper,
`
`447 U.S. 752 (1980) ................................................................................................................... 10
`
`Saint–Gobain Performance Plastics Corp. v.
`Advanced Flexible Composites, Inc.,
`436 F. Supp. 2d 252 (D. Mass. 2006) .......................................................................................... 8
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`PLAINTIFF VSI’S MOTION FOR SANCTIONS -iv
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`Case3:11-cv-06637-RS Document145 Filed12/12/12 Page5 of 22
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`NOTICE OF MOTION AND MOTION
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`TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:
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`NOTICE IS HEREBY GIVEN that on January 17, 2013, at 1:30 p.m., or as soon
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`thereafter as counsel may be heard by the above-titled Court, located at the United States
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`Courthouse, 450 Golden Gate Avenue, San Francisco, California, plaintiff Vasudevan Software,
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`Inc. (“VSi”) shall move the Court for sanctions against defendant MicroStrategy Incorporated
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`(“MicroStrategy”) for its misconduct in attempting to intimidate VSi into dismissing its lawsuit,
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`by threatening to harm and harming the interests of VSi and its counsel.
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`VSi, hereby, respectfully requests an order sanctioning MicroStrategy.
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`PLAINTIFF VSI’S MOTION FOR SANCTIONS
`AGAINST MICROSTRATEGY - 1
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`Case3:11-cv-06637-RS Document145 Filed12/12/12 Page6 of 22
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`
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`MEMORANDUM OF POINTS AND AUTHORITIES
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`“While zealous advocacy is laudable, it has its limits.”
`
`- Lone Ranger Television, Inc. v. Program Radio Corp., 740 F.2d 718, 727 (9th Cir. 1984)
`(Wallace, J.)
`
`MicroStrategy, a large corporation with revenues of more than half-a-billion dollars per
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`
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`year, is boldly and explicitly wielding its resources as a club to threaten and injure its adversary in
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`this litigation, VSi, and the law firm representing its adversary, Susman Godfrey LLP (“Susman
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`Godfrey”). MicroStrategy’s General Counsel, Mr. Jonathan Klein, recently threatened VSi and
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`promised “to take action” against Susman Godfrey unless VSi dismisses its lawsuit against
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`MicroStrategy. In response, VSi declined, and just a few weeks later MicroStrategy began to
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`deliver on its threats.
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`Assisted by Mr. Klein, MicroStrategy, a company that describes itself as “a global
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`provider of enterprise software platforms for business intelligence,” filed a petition with the
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`United States Patent and Trademark Office (“USPTO”) challenging a patent owned by one of
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`Susman Godfrey’s other clients Zillow, Inc. (“Zillow”).1 Zillow is a company that offers a real
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`estate information marketplace, including a real estate website and mobile real estate applications,
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`for real estate sellers, buyers, and renters. Zillow’s patent—involving automatic valuation models
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`of real estate—bears no relation to any of MicroStrategy’s business pursuits. Yet MicroStrategy
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`nonetheless expended tens of thousands of dollars to challenge Zillow’s patent and potentially
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`delay and obstruct Zillow’s recently-filed lawsuit involving that patent, all to get back at Susman
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`Godfrey for representing VSi against MicroStrategy.
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`In many cases where one party abuses its power and the legal system, it can prove
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`challenging to decipher the offending party’s malicious motive and intent; but not here. Here,
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`1 Susman Godfrey files this motion on behalf of, and in the best interest of, Susman Godfrey’s
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`PLAINTIFF VSI’S MOTION FOR SANCTIONS
`AGAINST MICROSTRATEGY - 2
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`2490307v1/012934
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`Case3:11-cv-06637-RS Document145 Filed12/12/12 Page7 of 22
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`Mr. Klein explained MicroStrategy’s motive and intent in plain terms when he threatened VSi,
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`threatened Susman Godfrey, and tied those threats directly to MicroStrategy’s demand that VSi
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`dismiss its claims.
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`MicroStrategy’s threats and actions constitute an assault on VSi, Zillow, and Susman
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`Godfrey, but more broadly on the integrity of the judicial process. As a result of MicroStrategy’s
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`action, Zillow has been forced to retain counsel to defend its patent against the re-examination,
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`the time and resources of the USPTO are at risk of being wasted to settle a grudge, and VSi and
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`its counsel have been faced with the prospect of continued harassment and injury if they do not
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`accede to MicroStrategy’s demands.
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`MicroStrategy should be enjoined from further contravening the judicial process by
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`attempting to intimidate and threaten its opponents into submission, and inflicting pain upon
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`attorneys and law firms who dare to represent smaller companies asserting their intellectual
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`property rights against MicroStrategy. MicroStrategy must be punished and deterred from further
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`bad faith conduct designed to resolve its disputes through extortion rather than on the merits. The
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`Court should impose serious sanctions commensurate with MicroStrategy’s actions.2
`
`I.
`MicroStrategy Is Attempting to Win This Case, Not on the Merits,
`But By Threatening, Intimidating, and Extorting VSi, Susman Godfrey,
`and Susman Godfrey’s Other Clients
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`A. MicroStrategy Threatened to Harm VSi and its Counsel if VSi Refused to Dismiss its
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`Case
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`
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`(… cont’d)
`client VSi, and no other party. Susman Godfrey and Zillow are not parties to this lawsuit.
`2 VSi served this motion for sanctions on MicroStrategy on November 20, 2012, explaining that
`VSi would consider withdrawing the motion if MicroStrategy complied with the relief sought by
`the motion. Connors Decl., X-1. In the twenty-one days that passed, MicroStrategy failed to
`respond.
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`PLAINTIFF VSI’S MOTION FOR SANCTIONS
`AGAINST MICROSTRATEGY - 3
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`Case3:11-cv-06637-RS Document145 Filed12/12/12 Page8 of 22
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`VSi filed its initial complaint for patent infringement against MicroStrategy on December
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`23, 2011. Dkt. No. 1. Among VSi’s counsel in this litigation are Brooke Taylor and Jordan
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`Connors from the law firm Susman Godfrey and Leslie Payne and Eric Enger from the law firm
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`Heim, Payne & Chorush LLP. Among MicroStrategy’s counsel is Sean Pak from the law firm
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`Quinn Emanuel Urquhart & Sullivan, LLP.
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`On September 4, 2012, Mr. Pak placed an unsolicited call to Ms. Taylor and asked to set
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`up a meeting between MicroStrategy, VSi, and counsel for both sides. Taylor Decl. ¶ 2. Mr. Pak
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`stated that his client was planning to be “aggressive” in defending against VSi’s claims and
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`planned to take “initiatives” toward that end, that his client planned to file re-examination
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`petitions with the USPTO to reexamine VSi’s patents and that Mr. Pak wished to fly to Seattle to
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`discuss these “initiatives” with VSi and its counsel. Id.
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`On September 10, 2012, Mr. Pak met Ms. Taylor and Mr. Connors at the offices of
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`Susman Godfrey in Seattle. Taylor Decl. ¶ 3; Connors Decl. ¶ 2; Payne Decl. ¶ 2. During the
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`meeting, Mr. Pak initiated a conference telephone call that included MicroStrategy’s Executive
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`Vice President and General Counsel, Jonathan Klein,3 as well as VSi’s counsel, Mr. Enger and
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`Mr. Payne, and VSi’s executives, Mark Vasudevan and Helen Vasudevan. Taylor Decl. ¶ 3;
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`Connors Decl. ¶ 2; Payne Decl. ¶ 2. During the call, Mr. Klein threatened VSi and the law firm
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`Susman Godfrey if VSi did not immediately dismiss its claims against MicroStrategy. Taylor
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`Decl. ¶ 3; Connors Decl. ¶ 2; Payne Decl. ¶ 2. Mr. Klein stated the following:
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`
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`
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`MicroStrategy will not pay VSi anything
`infringement claims against MicroStrategy;
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`MicroStrategy intends to make VSi’s litigation of its claims against
`MicroStrategy as painful as possible for VSi;
`
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`to settle VSi’s patent
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`3 Mr. Klein has recently been promoted, and his new title is President and Chief Legal Officer of
`MicroStrategy.
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`PLAINTIFF VSI’S MOTION FOR SANCTIONS
`AGAINST MICROSTRATEGY - 4
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`Case3:11-cv-06637-RS Document145 Filed12/12/12 Page9 of 22
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`
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`its claims against
`immediately dismiss all of
`If VSi does not
`MicroStrategy, MicroStrategy will file petitions with the USPTO to
`reexamine all of VSi’s patents;
`
`its claims against
`immediately dismiss all of
`If VSi does not
`MicroStrategy, MicroStrategy will take action against Susman Godfrey;
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`Taylor Decl. ¶ 3; Connors Decl. ¶ 2; Payne Decl. ¶ 2. Mr. Payne asked Mr. Klein what he meant
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`
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`when he said that MicroStrategy will take action against Susman Godfrey; Mr. Klein responded
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`with a statement to the effect of: “you’ll have to wait and see.” Taylor Decl. ¶ 4; Connors Decl.
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`¶ 3; Payne Decl. ¶ 3.
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`VSi declined to dismiss its claims in the face of MicroStrategy’s threats.
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`B. MicroStrategy Has Begun to Carry Out its Threats to Harm VSi and Susman
`Godfrey
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`True to its word, MicroStrategy has begun to carry out its threats against VSi and Susman
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`Godfrey.
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`On September 14, 2012, MicroStrategy filed a series of requests with the USPTO for inter
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`partes review of four of VSi’s patents, despite the fact that two of these patents had already been
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`upheld during a prior re-examination over myriad prior art. Connors Decl., X-2; X-3; X-4; X-5.
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`Four of the seven prior art references cited by MicroStrategy’s request have already been before
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`the USPTO and have been found not to invalidate some of VSi’s patents.
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`On October 29, 2012, MicroStrategy filed a petition for inter partes review of a patent
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`owned by Susman Godfrey’s client Zillow. Connors Decl., X-6. Zillow’s patent, U.S. Patent No.
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`7,970,674, entitled Automatically Determining a Current Value for a Real Estate Property, Such
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`as a Home, That is Tailored to Input From a Human User, Such as its Owner (“Zillow Patent”),
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`relates to automatic real estate valuations. Connors Decl., X-7 (Zillow Patent).
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`PLAINTIFF VSI’S MOTION FOR SANCTIONS
`AGAINST MICROSTRATEGY - 5
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`2490307v1/012934
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`Case3:11-cv-06637-RS Document145 Filed12/12/12 Page10 of 22
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`MicroStrategy admitted when it filed its petition for review of the Zillow Patent—signed
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`by MicroStrategy’s Mr. Klein—that it was aware that the patent was being asserted by Zillow in a
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`patent infringement lawsuit against Zillow’s online real estate competitor Trulia, Inc:
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`Petitioner is aware that the ‘674 patent has been involved in litigation.
`Specifically, Petitioner understands that the ‘674 patent has been involved in a
`case pending in U.S. District Court for the Western District of Washington,
`stylized Zillow, Inc. v. Trulia, Inc. (Docket No. 4:12cv1549).
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`Connors Decl., X-6 at 1, 62. As is evident from the public docket sheet for the case, Zillow’s
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`counsel in the lawsuit involving the Zillow Patent is Ms. Taylor and Mr. Connors of Susman
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`Godfrey. Connors Decl., X-8 at 1.
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`C. MicroStrategy’s Petition for Inter Partes Review of Zillow’s Patent is Unrelated to
`MicroStrategy’s Business and Is Clearly Intended to Harm Susman Godfrey and VSi
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`MicroStrategy is a publicly-traded business intelligence software corporation. In its most
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`recent Form 10-K Annual Report, MicroStrategy describes its business as involving the sale of
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`business intelligence software to businesses and organizations:
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`MicroStrategy is a global provider of enterprise software platforms for business
`intelligence, mobile intelligence, and social intelligence applications (apps). Our
`business intelligence (BI) software platform enables leading organizations
`worldwide to analyze the vast amounts of data available to their enterprises to
`make better business decisions. Companies choose MicroStrategy BI for its ease-
`of-use, sophisticated analytics, performance, and superior data and user
`scalability. In 2011, MicroStrategy invested significantly in a number of software
`technologies designed to help organizations capitalize on four disruptive
`technology trends: Big Data, Mobile, Cloud, and Social. These forces are
`
`reshaping companies, industries, and economies around the world. The enterprise-
`grade MicroStrategy BI Platform™ — in combination with the MicroStrategy
`Mobile App Platform™, MicroStrategy Cloud™, and the MicroStrategy Social
`Intelligence Platform™ — provides an integrated tool-kit for companies to create
`solutions that harness these forces.
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`Connors Decl., X-9 at 4 (emphasis added). There is no discussion anywhere in MicroStrategy’s
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`Annual Report about any business interest in real estate or online real estate companies. Id.
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`There is no mention of Zillow, Trulia, the Zillow Patent, or any plan to use MicroStrategy’s
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`PLAINTIFF VSI’S MOTION FOR SANCTIONS
`AGAINST MICROSTRATEGY - 6
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`resources to challenge real estate valuation patents, or any patents at all. Id. Zillow, “the leading
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`real estate information marketplace,” is focused on an entirely different industry (real estate rather
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`than business intelligence software) and entirely different consumers (buyers, sellers, and renters
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`of real estate rather than businesses and organizations). See Connors Decl., X-10 at 4 (“Zillow
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`provides vital information about homes, real estate listings and mortgages through our websites
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`and mobile applications, enabling homeowners, buyers, sellers and renters to connect with real
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`estate and mortgage professionals best suited to meet their needs.”).
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`Indeed, MicroStrategy’s petition to place the Zillow Patent into a re-examination before
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`the USPTO is not related to MicroStrategy’s business interests—it is MicroStrategy’s effort to
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`carry out its threat against Susman Godfrey and extort VSi and its counsel into dismissing VSi’s
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`claims in this lawsuit. MicroStrategy’s re-examination petition was signed by Mr. Jonathan
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`Klein, the same MicroStrategy General Counsel who stated just a few weeks earlier that
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`MicroStrategy would take action against Susman Godfrey if VSi did not drop its lawsuit.
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`Connors Decl., X-6 at 62. The only connection between MicroStrategy and the Zillow Patent is
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`the fact that Susman Godfrey—and specifically Ms. Taylor and Mr. Connors of Susman
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`Godfrey—represents Zillow in asserting the Zillow Patent in litigation. MicroStrategy’s petition
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`to the USPTO was made for an improper purpose.
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`MicroStrategy’s re-examination petition threatens needlessly to cause Zillow to incur
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`legal fees to advocate in support of the Zillow Patent and may result in years of proceedings
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`before the USPTO. See, e.g., Allergan Inc. v. Cayman Chem. Co., 2009 WL 8591844 (C.D. Cal.
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`Apr. 9, 2009) (“Many courts have acknowledged that the reexamination process can take ‘years
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`to run its course.’” (quoting Fresenius Med. Care Holdings, Inc. v. Baxter Int'l, Inc., 2007 U.S.
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`Dist. LEXIS 44107 at *18 (N.D.Cal.2007)); Cvgnus Telecomms. Tech., LLC v. United World
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`Telecom, L.C., 385 F. Supp. 2d 1022, 1023 (N.D. Cal. 2005) (noting reexaminations “generally
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`Case3:11-cv-06637-RS Document145 Filed12/12/12 Page12 of 22
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`take six months to three years”); Saint–Gobain Performance Plastics Corp. v. Advanced Flexible
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`Composites, Inc., 436 F. Supp. 2d 252, 253 (D. Mass. 2006) (observing that average
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`reexamination takes 21 months). MicroStrategy’s effort to interfere with Susman Godfrey’s
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`separate litigation matter is evidently the grand reveal of the attack with which Mr. Klein
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`threatened VSi and Susman Godfrey when he said that MicroStrategy planned to harm Susman
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`Godfrey, but he declined to disclose his method of attack. Taylor Decl. ¶¶ 3-4; Connors Decl. ¶¶
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`2-3; Payne Decl. ¶¶ 2-3.
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`By attacking Susman Godfrey’s client’s case in a completely unrelated action, and
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`threatening to do so in other actions, MicroStrategy is threatening Susman Godfrey in an attempt
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`to force Susman Godfrey to abandon the instant case. Vendetta re-examination petitions from
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`completely unrelated parties are harmful to the administration of justice and to the functions of
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`the federal court, as well as that of the patent office. MicroStrategy should litigate with
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`arguments on the merits, not with extortionate threats and actions.
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`Moreover, by threatening and harming VSi’s counsel, MicroStrategy seeks to deprive VSi
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`of its choice of counsel. MicroStrategy is a large corporation with vast resources. Mr. Klein’s
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`threat that MicroStrategy will use its resources to attack Susman Godfrey’s unrelated clients is an
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`attempt to deter Susman Godfrey, or any other firm for that matter, continuing to represent VSi
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`against MicroStrategy.
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`MicroStrategy’s Rambo litigation tactics in this case are part of a larger pattern of
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`behavior in which MicroStrategy employs legal and administrative procedures as weapons in bad
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`faith to harm its adversaries.
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` In MicroStrategy’s recent patent infringement lawsuit,
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`MicroStrategy v. Crystal Decisions, 555 F. Supp. 2d 475 (D. Del. 2008), the court found that
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`MicroStrategy pursued its claims in bad faith, stating: “MicroStrategy was clearly notified of the
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`defects in its case, yet continued to assert those claims in light of overwhelming evidence to the
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`PLAINTIFF VSI’S MOTION FOR SANCTIONS
`AGAINST MICROSTRATEGY - 8
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`Case3:11-cv-06637-RS Document145 Filed12/12/12 Page13 of 22
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`contrary, and proceeded with arguments that a reasonable attorney would have known were baseless.
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`Such conduct supports bad faith.” Crystal Decisions, 555 F. Supp. 2d at 481. The court also stated:
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`[MicroStrategy] proceeded on a new theory of infringement that was in direct
`contrast
`to representations before
`the PTO on reexamination. Furthermore,
`Microstrategy fails to provide an explanation for the mistakes made by Dr.
`Alexander, or why it was unable to recognize the errors he made. In addition, the
`timing of Microstrategy's reassessment of the claims calls into question its motives
`and whether it, in fact, continued this action in good faith. Such conduct by
`Microstrategy supports bad faith, especially since this court, as affirmed by the
`Federal Circuit, found the arguments to be so one sided, that is, strongly in favor of
`BOA.
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`Id. at 482. As a result of MicroStrategy’s bad faith in the Crystal Decisions case, the court sanctioned
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`MicroStrategy and ordered it to pay Crystal Decision’s reasonable fees and expenses. Id. at 482.
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`Judging by MicroStrategy’s conduct in this case, the Crystal Decisions sanctions have failed to deter
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`MicroStrategy from continuing its “bad faith” litigation conduct. The Court should consider the
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`failure of past sanctions against MicroStrategy to deter its bad faith conduct, as the Court
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`contemplates the severity of the sanctions to impose here. Cf. Kramer v. Tribe, 156 F.R.D. 96, 104
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`(D.N.J. 1994) (“As discussed, both the case law interpreting Rule 11 and the amendments make clear
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`that the purpose of sanctions is to deter future violations, and that sanctions should not be more severe
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`than those necessary to deter repeated violations of the rule. It is, therefore, appropriate to consider
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`past conduct in determining both whether sanctions should be imposed and the nature of any
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`sanctions to be imposed.” (citations omitted))
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`II.
`The Court Should Issue Sanctions Against MicroStrategy
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`In Chambers v. NASCO, Inc., the Supreme Court held that “[c]ourts of justice are
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`universally acknowledged to be vested, by their very creation, with power to impose silence,
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`respect, and decorum, in their presence, and submission to their lawful mandates.” 501 U.S. 32,
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`43 (1991) (internal quotation marks omitted). That inherent power includes discretion “to fashion
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`an appropriate sanction for conduct which abuses the judicial process.” Id. at 44-45.
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`PLAINTIFF VSI’S MOTION FOR SANCTIONS
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`Case3:11-cv-06637-RS Document145 Filed12/12/12 Page14 of 22
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`Under Supreme Court and Ninth Circuit precedent, “conduct that is ‘tantamount to bad
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`faith’ is sanctionable.” B.K.B. v. Maui Police Dept., 276 F.3d 1091, 1107-08 (9th Cir. 2002)
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`(quoting Roadway Express, Inc. v. Piper, 447 U.S. 752, 767 (1980)). Bad faith includes willful
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`actions motivated by vindictiveness, to harass, or for an improper purpose:
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`As we recently stated in Fink, “[f]or purposes of imposing sanctions under the
`inherent power of the court, a finding of bad faith does not require that the legal
`and factual basis for the action prove totally frivolous; where a litigant is
`substantially motivated by vindictiveness, obduracy, or mala fides, the assertion
`of a colorable claim will not bar the assessment of attorney's fees.” 239 F.3d at
`992 (internal quotation marks omitted). In sum, “sanctions are available if the
`court specifically finds bad faith or conduct tantamount to bad faith. Sanctions
`are available for a variety of types of willful actions, including recklessness when
`combined with an additional factor such as frivolousness, harassment, or an
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`improper purpose.”
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`B.K.B. v. Maui Police Dept., 276 F.3d 1091, 1107-08 (9th Cir. 2002) (emphasis added); see also
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`Oliveri v. Thompson, 803 F.2d 1265, 1272 (2d Cir. 1986) (“This bad-faith exception permitting
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`an award of attorneys’ fees is not restricted to cases where the action is filed in bad faith. An
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`inherent power award may be imposed either for commencing or for continuing an action in bad
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`faith, vexatiously, wantonly, or for oppressive reasons. ‘[B]ad faith’ may be found, not only in the
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`actions that led to the lawsuit, but also in the conduct of the litigation.’” (quoting Hall v. Cole,
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`412 U.S. 1, 15 (1973))).
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`Attempts to intimidate or threaten an opposing party’s attorney (even without actually
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`carrying out the threats) can constitute bad faith and justify the imposition of sanctions, including
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`dismissing counterclaims and awarding attorneys’ fees and expenses. In Fidelity Nat. Title Ins.
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`Co. of New York v. Intercounty Nat. Title Ins. Co., the court dismissed the counter-claimant
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`Fidelity’s claims with prejudice and awarded the opposing party its reasonable attorneys fees after
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`Fidelity threatened opposing counsel. 2002 WL 1433717, at *13 (N.D. Ill. July 2, 2002). The
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`court stated:
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`After careful consideration of alternative sanctions, the court finds dismissal of
`Cornell's counterclaims against Fidelity is warranted. Cornell's February 8th
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`PLAINTIFF VSI’S MOTION FOR SANCTIONS
`AGAINST MICROSTRATEGY - 10
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`Case3:11-cv-06637-RS Document145 Filed12/12/12 Page15 of 22
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`letter was a direct attempt to influence the outcome of this action—to thwart
`Fidelity's prosecution of its claims by threatening its attorney. . . . Dismissal with
`prejudice of Cornell's counterclaims against Fidelity is an appropriate sanction.
`In addition, Fidelity is awarded reasonable attorneys' fees and expenses incurred
`in connection with its