`
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`____________
`
`PETROLEUM GEO-SERVICES INC.
`and
`ION GEOPHYSICAL CORPORATION
`AND ION INTERNATIONAL S.A.R.L.
`
`Petitioners,
`
`v.
`
`WESTERNGECO L.L.C.
`
`Patent Owner.
`
`____________
`
`Case IPR2014-006891
`
`U.S. Patent No. 7,293,520
`
`____________
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`PATENT OWNER’S REQUEST FOR REHEARING
`UNDER 37 C.F.R. § 42.71
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`
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`
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`
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`1 Case IPR2015-00565 has been joined with this proceeding.
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`Patent Owner’s Request for Rehearing
`Case IPR2014-00689
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`Pursuant to 37 C.F.R. § 42.71(d), Patent Owner, WesternGeco L.L.C.
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`
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`(“Patent Owner” or “WesternGeco”), requests rehearing of the Board’s Order (1)
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`denying Patent Owner’s request to file a Motion for Additional Discovery on the
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`subjects of privity and real party-in-interest (“RPI”) as they relate to the
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`relationship between ION Geophysical Corporation and ION International
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`S.A.R.L. (collectively, “ION”) and Petroleum Geo-Services Inc. (“PGS”)
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`(collectively, “Petitioners”); and (2) setting unequal time limits for petition and
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`reply declaration testimony. Paper No. 59.
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`I.
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`INTRODUCTION
`The opportunity to be heard before forfeiting one’s property is a
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`fundamental right. See U.S. CONST. amend. V; amend. XIV § 1. Here, the Board
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`deprives Patent Owner of this fundamental right by refusing to allow it to file a
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`motion for additional discovery on privity between ION and PGS. The focused
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`question of Petitioners’ relationship with each other—which they concede is
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`broader than what they have disclosed—is potentially dispositive of the entire
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`proceeding. Yet, the Board refuses to even hear Patent Owners’ motion to expose
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`this hidden relationship.
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`If Petitioners are in privity, or if ION is a RPI to PGS, this review must
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`terminate immediately. It is therefore not surprising that ION and PGS have
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`worked to prevent the disclosure of this information, which is in their sole
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`1
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`possession and otherwise unavailable to Patent Owner. PGS has produced one
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`Case IPR2014-00689
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`indemnification agreement between ION and PGS (Ex. 2069)—which ION denies
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`even exists—while publicly conceding that multiple indemnification agreements
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`exist. See Ex. 2018 at 14. Thus, the existence of additional indemnification
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`agreements is not mere speculation. Despite this, the Board refuses to authorize
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`Patent Owner to file a motion seeking additional discovery on (1) all agreements
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`between PGS and ION containing any warranty, indemnification, or intellectual
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`property defense provisions; and (2) other relevant communications.2 Paper No.
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`59; see also IPR2014-01478, Paper No. 10. As strong evidence exists to support
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`Patent Owner’s request to move for additional discovery, Patent Owner
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`respectfully requests that the Board allow its motion to be heard.
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`Accordingly, Patent Owner respectfully requests that this Board (1) vacate
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`the Order (Paper No. 59) and (2) authorize Patent Owner to file a Motion for
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`Additional Discovery on the subjects of privity and RPI.
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`II. LEGAL STANDARD
`“A party dissatisfied with a decision may file a request for rehearing,
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`without prior authorization from the Board.” 37 C.F.R. § 42.71(d). “The request
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`must specifically identify all matters the party believes the Board misapprehended
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`2 See infra at § V.
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`2
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`or overlooked, and the place where each matter was previously addressed in a
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`Patent Owner’s Request for Rehearing
`Case IPR2014-00689
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`motion, an opposition, or a reply.” Id.
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`Under 37 C.F.R. § 42.71(c), “[w]hen rehearing a decision on petition, a
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`panel will review the decision for an abuse of discretion.” An abuse of discretion
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`“occurs where the decision is based on an erroneous interpretation of the law, on
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`factual findings that are not supported by substantial evidence, or represents an
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`unreasonable judgment in weighing relevant factors.” Star Fruits S.N.C. v. United
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` States, 393 F.3d 1277, 1281 (Fed. Cir. 2005); see also Japanese Found. For
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`Cancer Research v. Lee, 773 F.3d 1300, 1304 (Fed. Cir. 2014) (“An agency abuses
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`its discretion where the decision is based on an erroneous interpretation of the
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`law.”) (internal quotations omitted).
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`III. THE BOARD’S DENIAL OF PATENT OWNER’S REQUEST TO
`FILE A MOTION FOR ADDITIONAL DISCOVERY VIOLATES
`PATENT OWNER’S DUE PROCESS RIGHTS AND CONSTITUTES
`AN ABUSE OF DISCRETION
`The Board’s Order denies Patent Owner authorization to file a Motion for
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`Additional Discovery based on a standard that is impossible to meet. It is
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`undisputed that new privity-related evidence exists that is within Petitioners’
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`control, and that Petitioners refuse to voluntarily produce it. Nevertheless, the
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`Board denied discovery of this new evidence because Patent Owner had “no new
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`evidence” to present. Paper No. 59 at 3. The Board thus sets up an impossible,
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`deadlock situation: it refuses additional discovery because Patent Owner cannot
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`3
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`present the “new evidence” that the Petitioners are withholding. Where case-
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`Patent Owner’s Request for Rehearing
`Case IPR2014-00689
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`dispositive evidence exists and is uniquely within the control of Petitioners, the
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`interests of justice dictate that such discovery should be allowed. See Garmin Int’l,
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`Inc. et al. v. Cuozzo Speed Techs LLC, IPR2012-00001 Paper No. 26 at 5-7 (Mar.
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`5, 2013) (considering whether something “favorable to a contention of the party
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`moving for discovery” will be discovered and whether the requester has the ability
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`to generate the requested information from other means as part of the interests of
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`justice standard analysis).
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`A. The Board’s Denial Violates Patent Owner’s Due Process Rights
`The Board’s Order did not simply deny discovery on agreements and
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`communications from Petitioners that would establish privity. The Board’s Order
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`bars Patent Owner from even filing a Motion to request such discovery. This
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`discovery is necessary in the interests of justice, and the Board’s denial of an
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`opportunity to be heard on this issue deprives Patent Owner of the chance to
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`adequately defend its rights in U.S. Patent No. 7,293,520 (“the ’520 patent”).
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`ION was sued for infringing the ’520 patent in 2009 with its DigiFIN
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`system. PGS—ION’s “launch partner” for DigiFIN from 2007 to present—did not
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`bring this action until the spring of 2014. Section 315(b) establishes, however, that
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`“[a]n inter partes review may not be instituted if the petition requesting the
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`proceeding is filed more than 1 year after the date on which the petitioner, real
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`4
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`party in interest, or privy of the petitioner is served with a complaint alleging
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`Patent Owner’s Request for Rehearing
`Case IPR2014-00689
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`infringement of the patent.” Thus, the issue of privity in this proceeding is case-
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`dispositive. By denying Patent Owner access to discovery on a case-dispositive
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`issue from the only parties able to provide the requested information—PGS and
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`ION—the Board’s Order violates Patent Owner’s due process rights.
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`“The fundamental requirement of due process is the opportunity to be heard
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`at a meaningful time and in a meaningful manner.” Matthews v. Eldridge, 424
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`U.S. 319, 333 (1975) (internal quotations omitted). Thus, “[t]he indispensable
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`ingredients of due process are notice and an opportunity to be heard by a
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`disinterested decision-maker.” Abbott Labs. v. Cordis Corp., 710 F.3d 1318, 1328
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`(Fed. Cir. 2013). When assessing the requirements of due process, courts consider
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`“[f]irst, the private interest that will be affected by the official action; second, the
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`risk of an erroneous deprivation of such interest through the procedures used, and
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`the probable value, if any of additional or substitute procedural safeguards; and
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`finally, the Government’s interest, including the function involved and the fiscal
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`and administrative burdens that the additional or substitute procedural requirement
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`would entail.” Matthews, 424 U.S. at 335.
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`Due process applies to the improper taking of property rights, and courts
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`have routinely held that patents are considered property for the purpose of a due
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`process analysis. Fla. Prepaid Postsecondary Educ. Expense Bd. v. College Sav.
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`5
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`Bank, 527 U.S. 627, 642 (1999) (“Patents . . . have long been considered a species
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`of property”); see also Abbott Labs., 710 F.3d at 1327 (“a patent is a property right
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`protected by the Due Process Clause”). The validly issued ’520 patent is
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`considered Patent Owner’s property, and Patent Owner therefore has a significant
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`interest in retaining its rights in it. The Board’s Order, however, impermissibly
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`deprives Patent Owner of these rights by preventing Patent Owner from acquiring
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`evidence to establish that ION is a privy of PGS and PGS was thus time-barred
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`from bringing this proceeding.
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`With the enactment of the America Invents Act, Congress required the
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`United States Patent and Trademark Office (“USPTO”) to set “forth standards and
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`procedures for discovery of relevant evidence” including for when such evidence is
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`“necessary in the interests of justice.” See 35 U.S.C. § 316(a)(5)(B). The USPTO,
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`in turn, provided that if the parties fail to agree on additional discovery, “a party
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`may move for additional discovery.” 37 C.F.R. § 42.51(b)(2) (emphasis added).
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`Before a party can file any motion in these proceedings, however, the Board must
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`first authorize the filing. 37 C.F.R. § 42.20(b).
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`Here, the Board is aware that (1) PGS has admitted to the existence of
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`multiple indemnification agreements and requests for indemnification under those
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`agreements; (2) PGS has produced only one such agreement (while ION denies
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`that the produced agreement even exists); and (3) Patent Owner has attempted to
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`6
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`seek the additional agreements and communications regarding such agreements,
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`Patent Owner’s Request for Rehearing
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`including those related to contract negotiations and indemnification requests, from
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`PGS to no avail. See Ex. 3002 at 21:21−22:17, 25:16−26:21. Thus, Patent Owner
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`followed the USPTO established process and requested an opportunity to file a
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`motion seeking additional discovery on this case-dispositive issue, but that process
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`is proving completely ineffective.
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`Indeed, the USPTO recently recognized that its rules pose the very problem
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`of which Patent Owner now complains. The USPTO Director recognized the
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`concern of ensuring “ample discovery to establish the real-party-in-interest (RPI)”
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`and stated that “we want to be sure that the availability of appropriate RPI
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`evidence does not pose a problem for patent owners.” See Ex. 2137. In fact, the
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`Director said the USPTO is updating “the Trial Practice Guide to emphasize the
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`importance of RPI discovery” and that the “Board increasingly has been granting
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`motions for such discovery.” Id. While other Patent Owners apparently have been
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`the beneficiary of the USPTO’s new liberalization of RPI-related additional
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`discovery, this Patent Owner has not.
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`The Board refuses to give Patent Owner the chance to even move for
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`additional discovery. Patent Owner is rendered unable to fully brief how the
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`requested information is in the interests of justice, let alone given a chance to
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`receive information establishing that PGS was time-barred from filing this action.
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`7
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`Patent Owner respectfully submits that (1) the Board’s application of its additional
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`Patent Owner’s Request for Rehearing
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`discovery rules (37 C.F.R. §§ 42.20(b), 42.51(b)(2)) violates Patent Owner’s due
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`process rights; (2) the USPTO’s implementation of the additional discovery statute
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`(35 U.S.C. § 316(a)(5)) violates Patent Owner’s due process rights; and (3) the
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`statutory standard (35 U.S.C. § 316(a)(5)(B)) violates Patent Owner’s due process
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`rights. As the Board’s Order impermissibly deprives Patent Owner of the ability to
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`defend its rights in the ’520 patent, Patent Owner respectfully requests that the
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`Order be vacated and that Patent Owner be permitted the opportunity to file a
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`Motion for Additional Discovery.
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`B.
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`The Board Overlooked Evidence in Denying Patent Owner’s
`Request to File a Motion for Additional Discovery
`New evidence exists. Petitioners concede this fact; yet they refuse to
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`provide that evidence to Patent Owner. PGS has publicly admitted that “PGS
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`affiliates do have agreements with ION that contain warranty or indemnification
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`provisions that, for example, protect against claims ‘made by third parties.’” Ex.
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`2018 at 14 (emphasis added). Despite admitting the existence of multiple
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`agreements containing indemnity provisions, however, PGS has only provided
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`Patent Owner with one such agreement. See Ex. 2069. And, despite multiple
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`requests from Patent Owner, PGS refuses to produce the additional agreements.
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`ION, in turn, has refused to produce any agreements and remarkably denies
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`the very existence of any indemnification agreements. See Ex. 1064 at 17:15-21.
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`8
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`This comes as no surprise because ION is seeking to overturn a large district court
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`Patent Owner’s Request for Rehearing
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`judgment against it. There are contradictions between what PGS admits exists,
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`what PGS has actually produced, what ION admits exists, and what ION has
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`refused to produce. This proceeding should not continue without allowing Patent
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`Owner to move for discovery to find out the truth.
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`Petitioners are simply playing games, and the Board should not tolerate this
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`behavior. Despite feigning compliance, PGS went out of its way to avoid
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`answering Patent Owner’s interrogatories regarding indemnification agreements.3
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`Patent Owner’s interrogatories called for PGS to answer on behalf of itself as well
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`as its sister-company RPIs in this proceeding about their relationship with ION.
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`Yet, PGS refused to disclose its RPIs’ relationship with ION. PGS even went so
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`far as to redefine the meaning of “PGS” to exclude its RPI subsidiaries (Ex. 2138
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`at 2) and to mean only “Petroleum Geo-Services, Inc.” Ex. 2018 at 5. Thus,
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`despite listing PGS Geophysical AS and Petroleum Geo-Services ASA as RPIs in
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`this proceeding (Paper No. 18), PGS refuses to provide discovery on
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`indemnification agreements relating to these and any other related PGS entities.
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`3 Moreover, even though some interrogatories were ostensibly answered, PGS’s
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`interrogatory responses are not verified under oath, and amount to nothing more
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`than mere attorney argument.
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`9
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`Patent Owner’s Request for Rehearing
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`Petitioners’ gamesmanship is simply part of their ongoing pattern of
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`
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`conduct. For example, in the past ION has been obstructive regarding
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`indemnification agreements related to the DigiFIN system. During the ION
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`litigation, David Gentle, ION’s director of marine sales, admitted that he made
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`multiple misrepresentations of fact in his sworn deposition testimony related to
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`indemnification between ION and one of its DigiFIN customers, Fugro. See Ex.
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`2139. Specifically, at his deposition, Mr. Gentle denied any knowledge of
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`discussions between ION and Fugro regarding indemnity when in fact he had been
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`communicating with Fugro regarding that very issue just one week earlier. Id. It
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`was not until Fugro produced indemnity discussions and agreements between ION
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`and Fugro, which ION had withheld from its own document productions, that
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`ION’s misrepresentations were revealed.
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`The only action the Board has taken is to warn Petitioners that 37 C.F.R. §
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`42.51 requires the production of any information that is inconsistent with a position
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`Petitioners have taken. See Ex. 3002 at 27:6-15. Unfortunately, this warning
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`accomplishes nothing because it gives Petitioners an opportunity to creatively
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`interpret what constitutes “inconsistent information.” Petitioners’ position is that
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`indemnification agreements are somehow irrelevant even though the PTAB has
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`relied on such agreements as the basis for terminating cases. See e.g., Gen. Elec.
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`Co. v. Transdata, Inc., IPR2014-01559, Paper No. 23 (Apr. 15, 2015).
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`10
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`Patent Owner’s Request for Rehearing
`Case IPR2014-00689
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`Moreover, the Board’s warning will not work on PGS, for it plays semantic
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`
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`games over what constitutes an “indemnification agreement.” Indeed, this Board
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`heard firsthand of the semantic games PGS is playing. (Ex. 3002 at 23:22-
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`25)(“Just to be clear, these are not indemnification agreements. These are
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`agreements that have provisions that relate to indemnification.”). Not surprisingly,
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`Petitioners would rather prevent Patent Owner from adequately raising a case-
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`dispositive defense than play by the rules. This Board should level the playing
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`field.
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`Petitioners’ conduct demonstrates that they will only produce the necessary
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`information if this Board orders such production. Petitioners should not be
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`allowed to shield themselves from this necessary discovery while proceeding to
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`attempt to invalidate Patent Owner’s patents. This is simply unfair to Patent
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`Owner. At a minimum, due process demands that Patent Owner be heard on this
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`issue, rather than summarily silenced. Accordingly, Patent Owner respectfully
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`requests that the Board’s Order be vacated and that Patent Owner be afforded the
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`opportunity to file a Motion for Additional Discovery.
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`C. The Board Misapprehended the Law in Denying Patent Owner’s
`Request to File a Motion for Additional Discovery
`In denying Patent Owner’s request to file a Motion for Additional
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`Discovery, the Board stated that there was no new evidence “demonstrating
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`control, opportunity to control, or financial compensation for litigation or IPR
`
`11
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`
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`proceedings.” Paper No. 59 at 3. The Board, however, misapprehends the law
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`Patent Owner’s Request for Rehearing
`Case IPR2014-00689
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`governing additional discovery on the issue of privity. In particular, the Board
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`misapprehends the law regarding indemnification agreements, which this Board
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`has consistently found can establish privity.
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`Privity “is more expansive” than RPI and “encompass[es] parties that do not
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`necessarily need to be identified in the petition as a ‘real party-in-interest.’” Office
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`Patent Trial Practice Guide, 77 Fed. Reg. 48756, 48759 (Aug. 14, 2012). “[T]he
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`presence or absence of actual control is immaterial to the privity determination.”
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`Gen. Elec. Co. v. Transdata, Inc., IPR2014-01559, Paper No. 23 at 11 (Apr. 15,
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`2015). What is important is whether a party “had the opportunity to exercise
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`control” over a proceeding before this Board or another tribunal, past or present.
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`Id. at 9. The Board has found litigation defense agreements and indemnification
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`agreements to be evidence of such opportunity. Id. at 8-11 (finding a litigation
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`defense agreement established privity); see also First Data Corp. v. Cardsoft
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`(Assignment for the Benefit of Creditors), LLC, IPR2014-00715, Paper No. 9 at 7-
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`10 (Oct. 17, 2014) (finding an indemnitor, who had control and/or an opportunity
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`to control events leading up to the filing of a petition, to be a RPI).
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`Because indemnification can establish the opportunity to exercise control,
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`the Board has found that it is in the interests of justice to authorize additional
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`discovery seeking indemnification agreements. See Arris Grp., Inc. v. C-Cation
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`12
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`
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`Techs., LLC, IPR2014-00635, Paper No. 10 at 6 (May 1, 2015) (finding that
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`Patent Owner’s Request for Rehearing
`Case IPR2014-00689
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`“indemnification agreements referencing or contingent on Petitioner’s ability to
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`control the [litigation]” were necessary discovery in the interests of justice). The
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`Board has also authorized additional discovery seeking communications related to
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`such agreements. See Atlanta Gas Light Co. v. Bennett Regulator Guards, Inc.,
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`IPR2013-00453, Paper 40 at 4-7 (Apr. 23, 2014) (allowing additional discovery on
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`documents and things containing communications regarding a dispute about
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`indemnification). Because the discovery Patent Owner seeks is directly related to
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`the issue of privity, it is in the interests of justice to allow Patent Owner to file a
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`Motion requesting additional discovery on (1) all agreements between PGS and
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`ION containing any warranty, indemnification, or intellectual property defense
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`provisions; and (2) all relevant communications.
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`IV. THE BOARD’S ORDER ON DEPOSITION TIMES OVERLOOKS
`THE DISPARITY IN REDIRECT TIME
`The Board’s Order provides more re-direct testimony to PGS than to Patent
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`Owner, thus creating a disparity that should be corrected. Under the 12-3-2 rule,
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`Patent Owner is afforded only 3 hours of redirect, when defending its patent owner
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`response declaration testimony, whereas PGS is afforded 4 hours of redirect when
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`defending its reply declaration testimony. Paper No. 59 at 4. There is no
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`principled reason why PGS should receive more time to redirect its witnesses than
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`Patent Owner receives. As this was likely an inadvertent application of the default
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`13
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`
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`deposition times to reply declarants, Patent Owner respectfully submits that the
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`Patent Owner’s Request for Rehearing
`Case IPR2014-00689
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`Board overlooked the differences in redirect time provided in the Order, and
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`should adjust Petitioners’ re-direct time to be equal to that afforded Patent Owner’s
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`witnesses.
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`V. CONCLUSION
`This Board overlooked evidence and misapprehended the law governing
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`additional discovery on privity and RPI when it refused to authorize Patent Owner
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`to file a Motion for Additional Discovery. Denying Patent Owner the opportunity
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`to brief these issues violates Patent Owner’s due process rights and amounts to an
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`abuse of discretion. Additionally, Patent Owner submits that the Board overlooked
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`the disparity in redirect examination time provided for petition and reply
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`declaration testimony. For these reasons, Patent Owner respectfully requests that
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`the Board:
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`1. Vacate the Order (Paper No. 59);
`2. Provide Patent Owner with a reasonable opportunity to file a Motion for
`Additional Discovery seeking
`A.
`all agreements between any PGS affiliate and any ION affiliate
`containing any warranty, indemnification, or intellectual
`property defense provisions (“THE PROVISIONS”);
`all communications relating to any agreements containing THE
`PROVISIONS;
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`B.
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`14
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`Dated: May 14, 2015
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`
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`
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`Customer Number
` 22850
`Tel. (703) 413-3000
`Fax. (703) 413-2220
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`Patent Owner’s Request for Rehearing
`Case IPR2014-00689
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`C.
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`all communications between any PGS affiliate and any ION
`affiliate regarding (1) any inter partes reviews of U.S. Patent
`Nos. 7,162,967; 7,080,607; or 7,293,520; (2) any district court
`proceedings involving PGS and Patent Owner or ION and
`Patent Owner, or (3) any of the patents at issue in (1) or (2); and
`3. Reduce the amount of time provided for redirect examination of reply
`declaration testimony to 3 hours or less.
`
`Respectfully submitted,
`
`Oblon, McClelland, Maier &
`Neustadt, LLP
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`
`
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`
`
`
`
`/Michael L. Kiklis/
`Michael L. Kiklis (Reg. No. 38,939)
`Attorney for Patent Owner
`WESTERNGECO L.L.C.
`
`
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`15
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`Patent Owner’s Request for Rehearing
`Case IPR2014-00689
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`CERTIFICATE OF SERVICE
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`Pursuant to 37 C.F.R. § 42.6(e), the undersigned certifies service of
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`PATENT OWNER’S REQUEST FOR REHEARING UNDER 37 C.F.R. § 42.71
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`and EXHIBITS 2137, 2138, and 2139 on the counsel of record for the Petitioners
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`by filing this document through the Patent Review Processing System as well as
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`delivering a copy via electronic mail to the following address:
`
`
`David Berl
`dberl@wc.com
`
`Jessamyn Berniker
`jberniker@wc.com
`
`Thomas S. Fletcher
`tfletcher@wc.com
`
`Christopher Suarez
`csuarez@wc.com
`
`W. Karl Renner
`Roberto Devoto
`IPR37136-0004IP1@fr.com
`
`
`
`
`
`/Michael L. Kiklis/
`Michael L. Kiklis (Reg. No. 38,939)
`Attorney for Patent Owner
`
`WESTERNGECO L.L.C.
`
`
`
`16
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`Dated: May 14, 2015