`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________
`
`Askeladden LLC
`Petitioner
`v.
`Sean McGhie and Brian Buchheit
`Patent Owner
`_____________
`
`Case IPR2015-00133
`U.S. Patent No. 8,297,502
`
`_____________
`
`PETITIONER’S AUTHORIZED REPLY BRIEF
`TO
`PATENT OWNER’S PRELIMINARY RESPONSE
`
`
`
`TABLE OF CONTENTS
`
`I.
`
`II.
`
`Introduction......................................................................................................1
`
`Petitioner is the sole real party-in-interest.......................................................3
`
`A.
`
`B.
`
`PayCo and its member banks do not control or directly
`fund this IPR..........................................................................................3
`
`Patent Owners’ arguments that The Clearing House is a
`real party-in-interest have been rejected by the Board and
`Supreme Court.......................................................................................6
`
`1.
`
`2.
`
`3.
`
`4.
`
`Corporate ownership does not make the nonparty
`parent a real party-in-interest......................................................6
`
`Common legal representation does not make the
`nonparty a real party-in-interest..................................................7
`
`Joint press releases do not make the nonparty a
`real party-in-interest....................................................................7
`
`Overlapping personnel does not make the nonparty
`a real party-in-interest.................................................................9
`
`III.
`
`The Petition is not time-barred regardless of the Board’s
`determination on the real party-in-interest, and Patent Owners
`improperly seek an advisory opinion. ...........................................................12
`
`IV. Conclusion .....................................................................................................13
`
`
`
`I.
`
`Introduction
`
`Pursuant to the Board’s February 17, 2015 Order (Paper 13), Petitioner
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`Askeladden LLC (“Askeladden”) hereby replies to the Patent Owners’ Preliminary
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`Response and, in particular, to allegations therein that The Clearing House
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`Payments Company LLC (“PayCo”) is a real party-in-interest. Askeladden is the
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`only real party-in-interest because no other entity funds or controls this inter partes
`
`review (“IPR”) proceeding. Therefore, Patent Owners’ allegations are incorrect.
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`In 2014, PayCo formed Askeladden as an independent subsidiary for the
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`purposes of, among others, implementing an initiative intended to improve the
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`understanding, use and reliability of patents in financial services and elsewhere
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`(“the Patent Quality Initiative”), including by (i) educating patent examiners and
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`others about technology and systems employed by the financial services industry;
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`(ii) developing a repository of prior art to patents in the field; (iii) filing amicus
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`briefs in cases and proceedings; and (iv) challenging the validity of low-quality
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`patents relating to the financial services sector, including in Inter Partes Review
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`(“IPR”) proceedings. Ex. 1531 ¶¶ 6-7.
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`Askeladden, independently and in its sole discretion, identifies and selects
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`those patents that Askeladden challenges in IPR proceedings, and directs all
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`aspects of those proceedings. Ex. 1531 ¶¶ 11, 18. PayCo does not provide
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`direction or exert control in connection with Askeladden’s IPR petitions. Ex. 1531
`
`1
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`
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`¶¶ 11-12. Nor has PayCo funded Askeladden’s specific IPR proceedings,
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`including those at issue here. Ex. 1531 ¶ 16. For these reasons, PayCo is not a real
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`party-in-interest in this proceeding. For the same reasons, PayCo’s member banks
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`are not real parties-in-interest in this proceeding.
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`Moreover, Patent Owners’ purported evidence to the contrary - (1) that
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`Askeladden is a subsidiary of PayCo; (2) that Askeladden and PayCo use the same
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`law firm; (3) that certain press releases mention both PayCo and Askeladden; and
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`(4) that Directors of Payco and Askeladden allegedly overlap - have all been held
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`insufficient to overcome the presumption that distinct legal entities operate
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`independently. As such, Patent Owners’ argument that PayCo controls
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`Askeladden’s IPR proceedings, and this proceeding specifically, fails.
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`Furthermore, by asserting that the Board must address whether other parties
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`would be estopped in a subsequent action, Patent Owners confuse the requirements
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`of 35 U.S.C. § 312(a) (content of the petition) with estoppel of named parties and
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`their privies under 35 U.S.C. § 315(e). See IPR2015-00133, Paper 10, at 54.
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`While The Clearing House (and its member banks) do not meet either standard, a
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`determination under § 315(e) is not ripe for adjudication.
`
`2
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`
`
`II.
`
`Petitioner is the sole real party-in-interest.
`
`A.
`
`PayCo and its member banks do not control or directly fund this IPR.
`
`“[A] party does not become a ‘real party-in-interest’ . . . of the petitioner
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`merely through association with another party in an unrelated endeavor.” Office
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`Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,759-60 (August 14, 2012)
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`(“OPTPG”). Indeed, naming a nonparty as a real party-in-interest requires
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`circumventing the “common law rule that normally forbids nonparty preclusion.”
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`RPX Corp. v. Virnetx Inc., No. IPR2014-00171, Paper 49, at 6 (citing Taylor v.
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`Sturgell, 553 U.S. 880, 893-95 (2008)). A narrow exception to this common law
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`rule is where “a [non]party . . . funds and directs and controls an IPR or PGR
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`petition or proceeding [and thereby] constitutes a ‘real party-in-interest.’” OPTPG
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`at 48,760. For the reasons set forth below, neither PayCo nor its member banks
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`meet the standards for control and funding of this IPR.
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`The Board’s analysis of control and funding in Unified Patents Inc. v.
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`Dragon Intellectual Property, LLC is instructive. IPR2014-01252, Paper 37
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`(B.P.A.I. 2015). Petitioner Unified Patents had been created “in view of ‘concerns
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`with the increasing risk of nonpracticing entities (NPEs) asserting poor quality
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`patents against strategic technologies and industries.’” Id. at 8. The patent owner
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`emphasized that member companies created Unified shortly before the petition was
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`filed, allegedly to circumvent IPR estoppel provisions. Id. at 10. The Board
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`3
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`
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`accepted Unified’s representation that it received money from its members but
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`“exercised its sole discretion and control in deciding to file [the subject] petition.”
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`Id. at 9. Accordingly, the nonparty members lacked control over the proceeding.
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`And, with respect to funding, the Board held:
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`[E]ven if we accept Patent Owner’s allegations that Petitioner engages
`in no activity of practical significance other than filing IPR petitions
`with money received from its members, this does not demonstrate that
`any member paid, directed, or suggested to Petitioner to challenge the
`’444 patent, specifically. Nor do Patent Owner’s other circumstantial
`allegations, even if accurate, demonstrate as much.
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`Id. at 12 (emphasis added). The Board in Unified Patents therefore declined to
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`recognize Unified’s nonparty members as real parties-in-interest. Id. In so
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`holding, the Board provided further clarity to its RPX decision, where the alleged
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`real party-in-interest “suggested and compensated the entity for the filing of a
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`request for inter partes re[view] of the [challenged] patent.” Id. at 12-13.
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`Provision of funds for challenging a specific patent was central to the Board’s
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`holding in RPX that the nonparty was a real party-in-interest. Id.
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`Unified Patents compels rejection of Patent Owners’ position here that
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`PayCo or its members are real parties-in-interest.
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`With respect to control of this IPR, PayCo and its member banks did not
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`exercise control over the selection of the challenged patent, contents of the
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`4
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`
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`petition, or conduct of this proceeding. Ex. 1531 ¶¶ 11-12. Askeladden was
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`formed in June 2014,
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`The funding of the IPR at-issue also establishes that PayCo is not a real
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`party-in-interest.
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`But neither PayCo nor any member bank compensates
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`Askeladden for filing IPRs against specific patents. Ex. 1531 ¶¶ 11-12, 16.
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`For these reasons alone, neither The Clearing House nor its member banks
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`constitute a real party-in-interest to this proceeding.
`
`5
`
`
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`B.
`
`Patent Owners’ arguments that The Clearing House is a real party-in-
`interest have been rejected by the Board and Supreme Court.
`
`Patent Owners speculate that The Clearing House controls Askeladden’s
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`IPRs because (1) Askeladden is a subsidiary of The Clearing House; (2)
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`Askeladden and PayCo use the same law firm; (3) certain press releases mention
`
`both PayCo and Askeladden; and (4) Directors of PayCo and Askeladden allegedly
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`overlap. Each piece of circumstantial evidence has been rejected as a basis for
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`establishing a real party-in-interest.
`
`1.
`
`Corporate ownership does not make the nonparty parent a real
`party-in-interest.
`
`First, Patent Owners emphasize that “Askeladden L.L.C. is a subsidiary of
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`The Clearing House Payments Company, L.L.C.” IPR2015-00133, Paper 10, at
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`56. The Board has consistently rejected the argument that status as a corporate
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`parent or subsidiary suffices to establish a real party-in-interest. See, e.g., LG
`
`Display Co., Ltd. v. Innovative Display Tech. LLC, No. IPR2014-01096, Paper 11,
`
`at 17 (P.T.A.B. 2015); Alcon Research, Ltd. v. Neev, No. IPR2014-00217, Paper
`
`21, at 7 (P.T.A.B. 2014). Indeed, the Board’s approach is consistent with
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`Delaware corporate law:1 “[i]t was and is the general rule that a corporation is
`
`treated as an independent legal entity . . . even where it is a wholly-owned
`
`1
`
`Both Askeladden and PayCo are organized under Delaware law.
`
`6
`
`
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`subsidiary of another corporation . . . .” 1-8 Delaware Corporation Law and
`
`Practice § 8.02 (Ex. 1532). Accordingly, PayCo’s ownership of Askeladden does
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`not suggest, let alone prove, that PayCo controls this IPR.
`
`2.
`
`Common legal representation does not make the nonparty a real
`party-in-interest.
`
`Second, Patent Owners assert that PayCo and Askeladden use the same law
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`firm. IPR2015-00133, Paper 10, at 56. Again, the Board has consistently found
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`this insufficient to convert a nonparty into a real party-in-interest. See, e.g., LG
`
`Display Co., Ltd. v. Innovative Display Tech. LLC, No. IPR2014-01096, Paper 11,
`
`at 17 (P.T.A.B. 2015); Denso Corp. v. Beacon Nav. BmbH, No. IPR2013-00026,
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`Paper 34, at 10-11 (P.T.A.B. 2014). So use of the same law firm that represents
`
`Askeladden does not render PayCo a real party-in-interest.
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`3.
`
`Joint press releases do not make the nonparty a real party-in-
`interest.
`
`Third, Patent Owners cite statements from press releases, e.g., “The Patent
`
`Quality Initiative is the product of thought leadership provided by The Clearing
`
`House Payments Company.” IPR2015-00133, Paper 10, at 56. Once again, under
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`Board precedent, such statements do not prove that PayCo controls the IPR. For
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`example, in Chi Mei Innolux Corp. v. Semiconductor Energy Lab. Co. Ltd., alleged
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`real party-in-interest co-defendants “refer[ed] to ‘their’ Petition which ‘Defendants
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`have moved expeditiously to prepare and file.’” Chi Mei Innolux Corp. v.
`
`7
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`
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`Semiconductor Energy Lab. Co. Ltd., No. IPR2013-00038, Paper 9, at 7 (P.T.A.B.
`
`2013). The Board found these statements insufficient to make co-defendants real
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`parties-in-interest because the patent owner “ha[d] not shown, for example, that the
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`co-defendants . . . necessarily coauthored the Petition or exerted control over its
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`contents, or will exert any control over the remaining portions of this proceeding.”
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`Id. at 8 (emphasis added). In particular, the Board stated:
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`The statements that [the patent owner] refer[s] to are just that. [The
`patent owner] has not shown persuasively that the statements mean
`what [the patent owner] suggests they mean. For example, the
`statements made in connection with the joint motion to stay may have
`been a short-hand explanation or joint litigation approach (e.g.,
`speaking as one unified voice as opposed to explaining in great length
`who filed the Petition, etc.)
`
`Id. at 7 (emphasis added). Here too, Patent Owners’ cited statements lack the
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`requisite specificity to prove control. Like the statements in Chi Mei, the
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`statements cited by Patent Owners merely offer a short-hand explanation of the
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`origin and purpose of the Patent Quality Initiative rather than a detailed
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`explanation of “who filed the Petition, etc.” For example, Patent Owners rely on
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`PayCo’s statement that “The Patent Quality Initiative is the product of thought
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`leadership provided by The Clearing House Payments Company” to allege that
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`PayCo’s “thought-leadership presumably includes leadership on IPRs.” IPR2015-
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`00133, Paper 10, at 56-57. But the Board in Chi Mei made clear that patent owners
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`8
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`
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`cannot draw such inferences from general statements. And Patent Owners’
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`inferences here are incorrect. Askeladden and the Patent Quality Initiative are the
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`product of PayCo’s thought leadership. Ex. 1531 ¶ 18. In other words, PayCo
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`formed Askeladden, but
`
`directs its business to
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`achieve the general purposes identified above. And, of specific relevance here,
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`neither PayCo nor any of its member banks gives direction or exercises control
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`with respect to these IPR proceedings. Ex. 1531 ¶¶ 11-12.
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`In fact, the press release statements here are much less specific than those
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`held inadequate as evidence of control in Chi Mei. Unlike the statements in Chi
`
`Mei, Patent Owners’ cited statements do not aver that PayCo and Askeladden
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`collectively “moved expeditiously to prepare and file” the petition. Indeed, the
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`statements do not even mention the particular petitions or patents at-issue, much
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`less attribute preparation of a specific petition to PayCo.
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`4.
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`Overlapping personnel does not make the nonparty a real party-
`in-interest.
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`Fourth, Patent Owners argue that “the Board of Directors for ASK and TCH
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`included identical sets of people – or at least significant overlap.” IPR2015-00133,
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`Paper 10, at 56. As an initial matter, Patent Owners are incorrect.
`
`9
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`
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`Moreover, Patent Owners cite no Board precedent holding that personnel
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`overlap overcomes the presumption of corporate separateness. Indeed, such a
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`holding would be contrary to Delaware law: “[i]t was and is the general rule that a
`
`corporation is treated as an independent legal entity . . . even where its officers or
`
`directors are the same persons who hold those offices in the parent company.” 1-8
`
`Delaware Corporation Law and Practice § 8.02 (Ex. 1532). Here, PayCo is a
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`discrete legal entity from Askeladden. Ex. 1531 ¶ 5-6, 10. Each observes
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`corporate formalities associated with independent companies, including
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`maintenance of separate books and financial records. Ex. 1531 ¶ 10.
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`Accordingly, the presence of officers or directors of PayCo
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`fails to make PayCo a real party-in-interest as a matter of
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`law. “A well-established principle of corporation law recognizes ‘that directors
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`and officers holding positions with a parent and its subsidiary can and do ‘change
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`hats’ to represent the two corporations separately, despite their common
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`ownership.’ . . . Courts ‘generally presume that the directors are wearing their
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`‘subsidiary hats’ and not their ‘parent hats’ when acting for the subsidiary.’”
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`Stilwell Value Partners I, L.P. v. Prudential Mut. Holding Co., No. 06-4432, 2008
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`WL 1900945, at *9 (E.D. Pa. Apr. 24, 2008) (quoting United States v. Bestfoods,
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`10
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`
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`524 U.S. 51, 69 (1998)) (emphasis added). The Supreme Court in Bestfoods
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`recognized that the “presumption that an act is taken on behalf of the corporation
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`for whom the officer claims to act is strongest when the act is perfectly consistent
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`with the norms of corporate behavior,” and is overcome only when “action by a
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`dual officer [is] plainly contrary to the interests of the subsidiary yet nonetheless
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`advantageous to the parent.” Id. at 70 n.13. The Court explained that “the District
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`Court wrongly assumed that the actions of the joint officers and directors are
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`necessarily attributable to [the parent]” and that “automatic attribution of the
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`actions of dual officers and directors to the corporate parent” was an error. Id. at
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`68-70.
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`Recognizing that individuals wear different hats in connection with their
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`roles for distinct corporate entities is “perfectly consistent with the norms of
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`corporate behavior” such that the presumption of corporate separateness applies,
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`and compels the result that PayCo is not a real party-in-interest whether or not
`
`certain of its officers
`
`2
`
`2
`
`Patent Owners focus on Sean Reilly’s positions with both PayCo and
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`Askeladden. See IPR2015-00133, Paper 10, at 56-57. For the reasons discussed,
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`this is irrelevant as a matter of law.
`
`11
`
`
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`III. The Petition is not time-barred regardless of the Board’s determination
`on the real party-in-interest, and Patent Owners improperly seek an
`advisory opinion.
`
`Lastly, the real party-in-interest dispute is not dispositive of any issue in this
`
`proceeding. “An inter partes review may not be instituted” for petitions “filed
`
`more than 1 year after the date on which the . . . real party-in-interest . . . [wa]s
`
`served with a complaint alleging infringement of the patent.” RPX, Paper 49 at 3
`
`(quoting 35 U.S.C. § 315(b)). In RPX, for example, the patent owner had served
`
`alleged real party-in-interest Apple with a complaint for infringement more than
`
`one year prior to the filing of the petitions.3 Upon finding that Apple was a real
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`party-in-interest, the Board denied the petitions for IPR. Id. at 11.
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`3
`
`Apple initially tried to bring IPRs in its own name, but the petitions were
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`denied as time-barred. Id. at 3. Apple, having been found liable to the patent
`
`owner for over $350 million in damages, then tried to institute IPRs against the
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`same patents by paying RPX to file petitions in RPX’s name. Id. at 4, 9 (citing Ex.
`
`2009). The Board recognized that Apple was a real party-in-interest and therefore
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`found that the RPX petitions were also time barred. Id. at 11. As discussed in
`
`Section II, above, here no such evidence exists showing that a nonparty funded and
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`controlled the IPR filings.
`
`12
`
`
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`Here, Patent Owners have not sued PayCo, Askeladden, or any other entity
`
`for infringement of the subject patent. Thus, unlike in RPX where it proved
`
`dispositive, addition of a real party-in-interest here would merely change the filing
`
`date of the Petition. 35 U.S.C. § 312(a); 37 C.F.R. § 42.106(b). As such, Patent
`
`Owners only seek to delay the Board’s decision on institution.
`
`Patent Owners assert that the Board should address the issue to determine
`
`which parties would be estopped in a subsequent action. IPR2015-00133, Paper
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`10, at 54. But estoppel of named parties and their privies under 35 U.S.C. § 315(e)
`
`is a separate issue from the requirements of 35 U.S.C. § 312(a) (content of the
`
`petition), and only the latter is at-issue here. Patent Owners thus improperly seek
`
`an advisory opinion on the possible future application of 35 U.S.C. § 315(e).
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`IV. Conclusion
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`For the foregoing reasons, Petitioner respectfully requests that the Board
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`find that Askeladden is the sole real party-in-interest here.
`
`Respectfully submitted,
`
`/Frank A. DeLucia, Jr./
`Frank A. DeLucia, Jr.
`Attorney for Petitioner
`Registration No. 42,476
`
`FITZPATRICK, CELLA, HARPER & SCINTO
`1290 Avenue of the Americas
`New York, New York 10104-3800
`Facsimile: (212) 218-2200
`
`13
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`
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`CERTIFICATE OF SERVICE
`
`Pursuant to 37 C.F.R. §§ 42.6(e)(4) and 42.105, the undersigned certifies
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`that on this date, a redacted copy of this Petitioner's Authorized Reply Brief to
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`Patent Owner's Preliminary Response, and accompanying exhibits (one of which
`
`also contains redactions) thereto was served via email on the Patent Owner’s
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`counsel at the following address indicated in the Patent Owner’s Mandatory
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`Notices.
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`bbuchheit@gmail.com
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`Upon receipt of an executed Protective Order by Patent Owner, Petitioner agrees to
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`serve the original, un-redacted copies of the above-referenced papers.
`
`Dated: February 23, 2015
`
`Frank A. DeLucia, Jr.
`Attorney for Petitioner
`Registration No. 42,476
`
`FCHS_WS 11232915v1.doc
`
`/Frank A. DeLucia, Jr./