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`Paper No. ____
`Filed: February 19, 2019
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________________________
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`BUNGIE, INC.,
`Petitioner,
`
`v.
`
`WORLDS INC.,
`Patent Owner.
`_____________________________
`
`Case IPR2015-01264 (Patent No. 7,945,856)
`Case IPR2015-01319 (Patent No. 8,082,501)
`Case IPR2015-01321 (Patent No. 8,145,998)1
`
`_____________________________
`
`
`BUNGIE’S REPLY ON REMAND FROM CAFC
`RESPONDING TO WORLDS RESPONSE BRIEF
`(PAPER 55 in 2015-01264 and 2015-01319 AND PAPER 56 in 2015-01321)
`
`
`
`1 This caption is used and identical papers are being filed in each captioned case
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`pursuant to the Board’s November 29, 2018 order (Paper 48).
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`
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`TABLE OF CONTENTS
`INTRODUCTION ................................................................................................. 1
`I.
`II. WORLDS’S ATTEMPTS TO ESCAPE ISSUE PRECLUSION FAIL. ............................ 1
`A. Worlds errs by arguing IPR decisions cannot be preclusive. ................ 1
`B.
`There is no material difference between the RPI issues. ...................... 3
`C. Worlds’s new issue preclusion exception should be rejected. .............. 5
`III. WORLDS MISCONSTRUES AIT AND THE EVIDENCE OF RECORD. ....................... 6
`A. Worlds’s speculative control arguments are unfounded. ...................... 6
`B. Worlds’s settlement discussions contradict Worlds’s
`speculation to the Board. ....................................................................... 8
`C. Worlds misconstrues AIT. ..................................................................... 9
`D.
`The equities favor finding Activision is not an RPI. ........................... 10
`IV. WORLDS’S PRIVITY ARGUMENTS ARE IMPROPER AND INCORRECT. ................. 11
`V.
`CONCLUSION ................................................................................................... 12
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`-i-
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`TABLE OF AUTHORITIES
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`Page
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`CASES
`Atlanta Gas Light Co. v. Bennett Regulator Guards, Inc., IPR2013-
`00453, Paper 88 ............................................................................................... 4
`B&B Hardware, 135 S. Ct. 1293, 1303 (2015) ..................................................... 2, 5
`Google LLC v. Seven Networks, LLC, IPR2018-01052, Paper 28 ........................ 7, 9
`In re Cygnus Telecom. Tech. LLC, Patent Litig., 536 F.3d 1343 (Fed.
`Cir. 2008). ........................................................................................................ 5
`Intel Corp. v. ITC, 946 F.2d 821 (Fed. Cir. 1991) ............................................. 11, 12
`Maxlinear, Inc. v. CF Crespe LLC, 880 F.3d 1373, 1376-77
`(Fed. Cir. 2018) ............................................................................................ 1, 4
`Merck Sharp & Dohme Corp. v. GlaxoSmithKline Biologicals SA,
`IPR2018-01229, Paper 13 ................................................................................ 9
`Nestle USA Inc. v. Steuben Food, Inc., 884 F.3d 1350 (Fed. Cir. 2018) ................... 4
`Return Mail, Inc. v. USPS, 17-1594, 2019 WL 169139 (Jan. 9, 2019) ..................... 2
`Urbain v. Knapp Bros. Mfg. Co., 217 F.2d 810 (2d Cir. 1954) ............................... 12
`VirnetX Inc. v. Apple, Inc., 909 F.3d 1375 ................................................................ 2
`Webpower, Inc. et al. v. WAG Acquisition, LLC, IPR2016-01239,
`Paper 21 ........................................................................................................... 2
`Weyerhaeuser Timber Co. v. Bostitch, Inc., 178 F. Supp. 757 (D.R.I.
`1959) .............................................................................................................. 12
`Worlds, Inc. v. Bungie, Inc., 903 F.3d 1237 (Fed. Cir. 2018) ................................... 4
`XY, LLC v. Trans Ova Genetics, L.C., 890 F.3d 1282 (Fed. Cir. 2018) .................... 1
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`-ii-
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`STATUTES
`15 U.S.C. §1069 ......................................................................................................... 2
`35 U.S.C. §315(e) .................................................................................................. 2, 3
`RULES
`37 C.F.R. §42.23(a) ................................................................................................... 8
`37 C.F.R. §42.6(a)(3) ................................................................................................. 3
`77 Fed. Reg. 48756, 48759 (August 14, 2012) ........................................................ 11
`OTHER AUTHORITIES
`FPP §4433 .................................................................................................................. 5
`Rest. 2d Judgments § 28 ............................................................................................ 5
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`-iii-
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`I.
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`Introduction
`This case should be resolved by finding Worlds precluded from relitigating
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`the RPI issue. Worlds incorrectly argues issue preclusion can never apply to IPRs,
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`or to the RPI issue specifically. Worlds identifies no exception that would shield it
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`from the well-established principle that a party may not relitigate an issue resolved
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`previously with finality. Worlds must live with its strategic decision not to appeal
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`three final written decisions (“FWDs”) finding Activision is not an RPI.
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`If the Board finds it necessary to revisit its RPI determination, the record
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`strongly supports its earlier conclusion that Activision is not an RPI (a fact Worlds
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`knows to be true based at least on its dealings with Bungie). Worlds thus ignores
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`and mischaracterizes the evidence, speculates wildly, misconstrues AIT, and turns
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`the inequities of its own litigation choices and improper gaming of the RPI issue
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`upside down. The Board should reject Worlds’s request to dismiss these IPRs.
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`II. Worlds’s Attempts to Escape Issue Preclusion Fail.
`A. Worlds errs by arguing IPR decisions cannot be preclusive.
`Worlds argues (at 12-14) that IPR decisions cannot be preclusive. Worlds is
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`wrong, as the Federal Circuit and the Board have repeatedly held final IPR
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`decisions are preclusive. See, e.g., XY, LLC v. Trans Ova Genetics, L.C., 890 F.3d
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`1282, 1294 (Fed. Cir. 2018) (affirmance of FWD “renders final a judgment” of
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`unpatentability and “has an immediate issue-preclusive effect on any pending or
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`co-pending actions involving the patent”); Maxlinear, Inc. v. CF Crespe LLC, 880
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`F.3d 1373, 1376-77 (Fed. Cir. 2018) (“The preclusive effect of the prior [IPR
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`FWD] adjudications, and subsequent affirmations, has finally resolved the issue of
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`the unpatentability...in this Proceeding.”); VirnetX Inc. v. Apple, Inc., 909 F.3d
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`1375, 1378 (Fed. Cir. 2018) (FWD on printed publication status made final by
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`Rule 36 affirmance was preclusive in IPR); Webpower, Inc. et al. v. WAG
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`Acquisition, LLC, IPR2016-01239, Paper 21, at 20, 26-28 (unappealed FWD
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`preclusive in IPR).
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`In contrast, the intervenor brief Worlds cites (at 12-14) argues that the Board
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`was not bound in an IPR by a reexamination decision because the reexamination
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`lacked any opportunity to cross-examine the experts. Besides having zero
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`authoritative value, the intervenor brief is inapposite. The Solicitor General of the
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`United States recently affirmed in briefing to the Supreme Court the official
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`position of the U.S. government: B&B Hardware “strongly suggests that decisions
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`of the PTAB would have preclusive effect where ‘the ordinary elements of issue
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`preclusion are met.’” Respondents’ Brief, Return Mail, Inc. v. USPS, 17-1594,
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`2019 WL 169139, at *41-*43 (Jan. 9, 2019). As explained in the Solicitor’s brief,
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`35 U.S.C. §315(e) does not preempt common law issue preclusion. Id.
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`Worlds’s argument (at 14) based on 15 U.S.C. §1069 conflates the defense
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`of equitable estoppel with the distinct principle of issue preclusion and ignores
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`differences in the substantive nature of trademark rights that are inapplicable to
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`patentability adjudications in IPRs.
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`Worlds’s argument (at 13 n.2) that Bungie is estopped “from maintaining”
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`IPR2015-01321 is untimely. Worlds never raised this argument during its appeal,
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`improperly raised it now in an opposition footnote, and it is therefore waived. 37
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`C.F.R. §42.6(a)(3). It is also a red herring, because Bungie could not “reasonably
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`have raised” grounds from IPR2015-01321 when filing IPR2015-01325 as it had
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`already raised them in IPR2015-01321. See 35 U.S.C. §315(e)(1). Moreover,
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`because the petitions were filed and FWDs were issued simultaneously, Worlds’s
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`argument would result in the absurdity of prohibiting Bungie from maintaining
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`grounds from either IPR simply because they were not included in the petition for
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`the other IPR on the same claims. Worlds permitted the final IPRs to become
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`preclusive with respect to matters actually litigated therein. This includes RPI, but
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`not the grounds in IPR2015-01321.
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`B.
`There is no material difference between the RPI issues.
`Worlds spends pages (at 2-3, 8-9) arguing that the RPIs theoretically could
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`be different for Bungie’s petitions, but Worlds identifies no actual differences.
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`Bungie did not argue RPI issues could never be different across multiple petitions
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`(the “absurdity” Worlds ascribes to Bungie), but only that there is no material
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`difference here. Cases need not be identical for issues to be materially identical for
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`issue preclusion. See Nestle USA Inc. v. Steuben Food, Inc., 884 F.3d 1350, 1351
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`(Fed. Cir. 2018) (claim construction preclusive in different patent); Maxlinear, 880
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`F.3d at 1375-76 (FWD finding unpatentability based on prior art not asserted in
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`subsequent IPR was preclusive in subsequent IPR). Because the RPI issues are
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`identical here, issue preclusion bars Worlds from relitigating them.
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`Unable to identify any differences in the RPI issues presented to the Board
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`in the six IPRs, Worlds further errs (at 8-9, 11) by assuming the Board imposed an
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`erroneous burden of proof on Worlds (an assumption the Federal Circuit did not
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`make). The Board has long recognized that the burden of proof rests on the
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`petitioner. See, e.g., Atlanta Gas Light Co. v. Bennett Regulator Guards, Inc.,
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`IPR2013-00453, Paper 88, at 6-7 & n.2 (Jan. 6, 2015). The Federal Circuit
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`remanded to the Board because it could not “discern whether the Board placed the
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`burden on Worlds.” Worlds, Inc. v. Bungie, Inc., 903 F.3d 1237, 1246 (Fed. Cir.
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`2018). The Board is best positioned to clarify that it did not impose a burden of
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`proof on Worlds and that its RPI determinations did not turn on one.
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`Worlds also criticizes (at 10) the Board’s denial of its discovery motions,
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`alleging this places the “quality, extensiveness, and fairness” of the Board’s RPI
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`determination in doubt. But Worlds did not appeal denial of its discovery motion,
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`nor did it seek to reopen the record on remand. Worlds cannot use denial of its
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`motion, and accompanying speculation about what it hoped to discover, as a basis
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`to revisit an issue resolved with finality in FWDs it chose not to appeal.
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`Worlds’s argument (at 9-10) that differences between Board procedures and
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`district court procedures render IPR decisions invalid for issue preclusion also
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`fails. No procedural differences exist between the final IPRs and the appealed IPRs
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`because the forum at issue is exactly the same. See B&B Hardware, 135 S. Ct.
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`1293, 1303 (2015) (Rest. 2d Judgments § 28 exception warranted by “differences
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`in the quality or extensiveness of the procedures followed” in the two courts).
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`C. Worlds’s new issue preclusion exception should be rejected.
`This case does not fit within the rule applied in In re Cygnus. Worlds argues
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`(at 11) that the IPRs had common schedules, depositions, and hearings, but does
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`not argue that the cases themselves were consolidated. The Board never
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`consolidated them and Worlds never asked it to, instead permitting the final IPRs
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`to become preclusive. Whether the cases are consolidated into a single action is
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`necessary to the exception to issue preclusion applied in Cygnus. Otherwise,
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`Worlds’s proposed exception would swallow the rule that the failure to appeal a
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`judgment cannot destroy the judgment’s preclusive effect. FPP §4433 ([P]reclusion
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`cannot be defeated by electing to forgo an available opportunity to appeal.”).
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`Worlds’s argument (at 12) that appealing the RPI issue in the final IPRs
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`would have wasted resources is belied by its failure to identify any factual
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`distinction between the RPI facts in the final and appealed IPRs. On appeal, the
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`parties submitted consolidated briefing to address RPI. Worlds easily could have
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`appealed the identical issue in all six cases without requiring any further judicial or
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`litigant resources. Worlds finds itself precluded due to its own litigation decision to
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`selectively appeal some IPR decisions while letting others proceed to finality.
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`III. Worlds Misconstrues AIT and the Evidence of Record.
`A. Worlds’s speculative control arguments are unfounded.
`Worlds’s RPI arguments until now were premised on its erroneous
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`construction of the DevPub agreement. The Federal Circuit found no fault with the
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`Board’s previous findings that Worlds misconstrued the DevPub agreement. Yet,
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`Worlds continues to misconstrue that agreement on remand, arguing (at 17-18, 25)
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`that it gives Activision control of Bungie’s IPRs unless “indemnification was
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`actually demanded by Activision or accepted by Bungie.” As explained in
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`Bungie’s opening brief, however, the DevPub agreement does not provide
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`Activision with control over Bungie’s IPRs regardless of whether an
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`indemnification request was “made or accepted.” Nor could Bungie have
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`controlled the Activision litigation because it is undisputed Bungie’s products were
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`never accused in that litigation. SMF Nos. 1-4.
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`Because the DevPub agreement gives Activision no control over Bungie’s
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`IPRs and gives Bungie no control over the Activision litigation, Worlds now
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`backtracks and argues (at 16-17) that the DevPub agreement cannot prove whether
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`Activision was an RPI. Abandoning the actual evidence of record, Worlds now
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`recklessly speculates that Activision and Bungie might have later decided to treat
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`Bungie’s IPRs as product reviews under Section 7A.15(j) of the DevPub
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`Agreement. Worlds further speculates (at 18) that Activision and Bungie may have
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`agreed subsequent to the DevPub agreement to reverse the indemnification
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`provision and give Activision control over Bungie’s IPRs. There is no truth to
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`Worlds’s speculation. Bungie offered to submit a declaration subject to cross-
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`examination establishing that Activision did not fund or control any of the IPRs.
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`Worlds opposed because it knows the facts do not support its wild speculation.
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`Worlds argues (at 22) that the DevPub agreement makes Activision an RPI
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`in Bungie’s IPRs because of the ability to have a non-voting observer attend board
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`meetings. The Board correctly rejected this argument already. Merely observing
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`board meetings does not translate into controlling Bungie’s IPRs. See, e.g., Google
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`LLC v. Seven Networks, LLC, IPR2018-01052, Paper 28, at 12-19 (finding voting
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`board member, ability to authorize and approve petitioner’s budgets, and other
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`relationship ties insufficient to establish RPI status when a subsidiary-petitioner
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`“operate[s] independently and separately” from its parent). Here, Bungie does not
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`even have a parent-subsidiary relationship with Activision, much less one where
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`Bungie’s IPR decisions are subject to Activision’s control.
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`Adding to its speculation, Worlds repeatedly accuses Bungie (at 15, 22, 28-
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`29) of “refusing” to produce evidence and impeding the Board’s ability to prove
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`Bungie’s relationship with Activision. This irresponsible rhetoric is simply false.
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`Bungie never refused to provide evidence. Worlds previously attempted to engage
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`in a burdensome and unfounded fishing expedition based on wild speculation. The
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`Board properly denied Worlds’s motions. Because there is no merit to Worlds’s
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`shrill accusations, it is axiomatic that there is no evidence to support them.
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`B. Worlds’s settlement discussions contradict Worlds’s speculation
`to the Board.
`Worlds argues (at 19) that the Board should ignore the various settlement
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`discussions between the parties because, it argues, they are mere attorney
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`argument. But those discussions underscore the gamesmanship at play, and raise
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`serious concerns regarding the impropriety of Worlds’s conduct. No party should
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`candidly acknowledge one position in discussions between the parties, yet
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`perpetuate a known fiction before the Board and the Court. Indeed, Worlds does
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`not and cannot dispute the accuracy of Bungie’s SMF Nos. 7-11. 37 C.F.R.
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`§42.23(a) (undisputed facts are deemed admitted).
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`Worlds argues (at 19-20) that settlement discussions only “occurred in late
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`2018,” and “after the Federal Circuit’s decision.” This is false and contradicted by
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`the parties’ settlement correspondence. SMF No. 7 (referring to previous
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`settlement discussion). Worlds knows full well that discussions to settle
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`independent of Activision predate the Federal Circuit’s decision.
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`C. Worlds misconstrues AIT.
`Worlds argues (at 24) that a bare determination that “Activision and Bungie
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`have a preexisting relationship and if Activision would benefit from Bungie’s
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`IPRs” necessarily and “conclusively establishes Activision to be an RPI.” But
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`Worlds’s reading of AIT is not correct. “Patent Owner’s contention that [the non-
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`party] is a RPI solely because [the non-party] has a preexisting, established
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`relationship with Petitioner and is a clear beneficiary of the Petition, is an
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`incomplete reading of AIT and is unavailing.” Merck Sharp & Dohme Corp. v.
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`GlaxoSmithKline Biologicals SA, IPR2018-01229, Paper 13, at 6-8, 11-13; Google
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`LLC v. Seven Networks, LLC, IPR2018-01052, Paper 28, at 13-14 (“The Court held
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`in Taylor that a broader doctrine of nonparty preclusion, termed ‘virtual
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`representation,’ was inconsistent with common law and risked violating due
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`process.”).
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`Worlds relies heavily (at 18-23, 25, 29) on “circumstantial evidence” that
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`Activision conveyed Worlds’s letter threatening Destiny to Bungie, Worlds never
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`added Destiny to the litigation, and Bungie thus challenged claims Worlds had
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`formally asserted against Activision, not Bungie. Those assertions underscore the
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`inequity of applying estoppel based on a case in which Bungie was never involved.
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`And even conveyance of that letter would not establish that Activision funded or
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`controlled the IPRs or that Bungie brought the IPRs for Activision’s benefit or to
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`represent Activision’s interests. Bungie was not required to wait until Worlds
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`formally sued Bungie to file its IPRs. That Bungie was never involved in the
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`Activision litigation and brought the IPRs to serve its own interests favors finding
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`Activision is not an RPI in Bungie’s IPRs.
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`Worlds relies (at 21-22) on the statement in AIT that the petitioner’s “own
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`interest in initiating an IPR” was not dispositive of whether another party could be
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`an RPI. But in that case, the petitioner had no independent interest in challenging
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`the patents and bragged that its interests were 100% aligned with its clients. In
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`contrast, Bungie’s interests are not 100% aligned with Activision’s, as seen in the
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`undisputed fact that Bungie has repeatedly offered to settle with Worlds
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`independently of Activision. SMF Nos. 7-11. Unlike in AIT, Bungie cannot be said
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`to represent Activision’s interests. Bungie’s commercial relationship with
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`Activision does not warrant depriving Bungie of its right to pursue its IPRs.
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`D. The equities favor finding Activision is not an RPI.
`Worlds argues (at 30) that Activision chose to pursue its invalidity
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`challenges in district court in 2012 rather than at the Board. But Bungie was not
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`afforded that opportunity. It would fundamentally violate due process and equity to
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`retroactively deprive Bungie of its opportunity to challenge World’s patents.
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`Worlds argues (at 30) that it would be inequitable to require it to defend its
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`patents in the Activision litigation and before the Board. However, Worlds chose
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`whom to sue and threaten and when to do it. It chose to threaten to accuse Bungie’s
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`product and also chose not to add Bungie to the Activision litigation so that Bungie
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`would have no ability to participate. Worlds cannot credibly claim it is inequitable
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`to allow Bungie its first and only opportunity to challenge Worlds’s patents.
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`IV. Worlds’s privity arguments are improper and incorrect.
`Because its RPI arguments are not supported by the record, Worlds now tries
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`to introduce a new argument on remand that Bungie and Activision are in privity.
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`“The notion of ‘privity’ is more expansive” than the notion of real party-in-interest.
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`Office Patent Trial Practice Guide, 77 Fed. Reg. 48756, 48759 (August 14, 2012).
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`Bungie thus discussed due process limitations on privity because such constraints
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`necessarily apply to the narrower RPI analysis at issue. It is inappropriate for
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`Worlds to stray beyond the scope of remand. The Board should reject Worlds’s
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`privity arguments as untimely and inconsistent with the Federal Circuit’s order.
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`Worlds’s privity arguments also fail on the merits. Worlds cites (at 28) Intel
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`Corp. v. ITC, 946 F.2d 821, 838 (Fed. Cir. 1991), for the proposition that, in two
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`cases it cites, certain indemnification agreements were sufficient to find privity. In
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`each of the cases cited in Intel, the court stayed a case against a customer-
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`indemnitee in favor of any earlier-filed case against the manufacturer-indemnitor,
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`finding the case against the manufacturer-indemnitor would be dispositive
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`regarding indemnitor’s products. Urbain v. Knapp Bros. Mfg. Co., 217 F.2d 810
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`(2d Cir. 1954) (affirming injunctive stay where indemnitor had “acknowledge[d]
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`that it is defending the [indemnitee’s] case and is responsible for any damages
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`which may be awarded therein”); Weyerhaeuser Timber Co. v. Bostitch, Inc., 178
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`F. Supp. 757, 759-762 (D.R.I. 1959) (granting stay of case against indemnitee
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`because case against indemnitor could “be dispositive of the instant action”). Here,
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`Worlds attempts to reverse the polarity to bind Bungie as indemnitor to an action
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`in which Bungie did not participate and in which its products were never accused.
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`Intel is also inapplicable here. In Intel, the Court concluded that assignor
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`estoppel applied to a joint venture the inventor was involved in because the joint
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`venture “unquestionably availed itself of the inventor’s and Atmel’s knowledge
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`and assistance” for the infringing product and because the “indemnity agreement
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`between [the inventor] and [the joint venturer] created a significant relationship
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`between them.” 946 F.2d at 838. This case lacks the special circumstances present
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`in Intel, where the inquiry focused on whether an entity with a relationship with the
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`inventor availed itself of the inventor’s knowledge to avoid infringement liability.
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`None of Worlds’s privity arguments are persuasive.
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`V. Conclusion
`The Board should reject Worlds’s invitation to dismiss these IPRs.
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`Dated: February 19, 2019
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`Respectfully submitted,
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`/ Michael T. Rosato /
`Michael T. Rosato, Lead Counsel
`Reg. No. 52,182
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`-13-
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`CERTIFICATE OF SERVICE
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`Pursuant to 37 C.F.R. § 42.6(e), this is to certify that I caused to be served
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`true and correct copies of the foregoing Petitioner Bungie’s Reply Brief on
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`Remand from CAFC, by electronic service, on this 19th day of February 2019, on
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`the Patent Owner at the correspondence address of the Patent Owner as follows:
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`Wayne Helge
`Alan A. Wright
`Aldo Noto
`DAVIDSON BERQUIST JACKSON & GOWDEY L.L.P.
`whelge@dbjg.com
`awright@dbjg.com
`anoto@dbjg.com
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`Respectfully submitted,
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`Dated: February 19, 2019
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`/ Michael T. Rosato /
`Michael T. Rosato, Lead Counsel
`Reg. No. 52,182
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`-14-
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