throbber

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`
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`Paper No. ____
`Filed: February 19, 2019
`
`
`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________________________
`
`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
`
`pursuant to the Board’s November 29, 2018 order (Paper 48).
`
`

`

`
`
`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 
`
`
`
`-i-
`
`

`

`
`
`TABLE OF AUTHORITIES
`
`Page
`
`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
`
`-ii-
`
`

`

`
`
`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
`
`-iii-
`
`

`

`
`
`I.
`
`Introduction
`This case should be resolved by finding Worlds precluded from relitigating
`
`the RPI issue. Worlds incorrectly argues issue preclusion can never apply to IPRs,
`
`or to the RPI issue specifically. Worlds identifies no exception that would shield it
`
`from the well-established principle that a party may not relitigate an issue resolved
`
`previously with finality. Worlds must live with its strategic decision not to appeal
`
`three final written decisions (“FWDs”) finding Activision is not an RPI.
`
`If the Board finds it necessary to revisit its RPI determination, the record
`
`strongly supports its earlier conclusion that Activision is not an RPI (a fact Worlds
`
`knows to be true based at least on its dealings with Bungie). Worlds thus ignores
`
`and mischaracterizes the evidence, speculates wildly, misconstrues AIT, and turns
`
`the inequities of its own litigation choices and improper gaming of the RPI issue
`
`upside down. The Board should reject Worlds’s request to dismiss these IPRs.
`
`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
`
`wrong, as the Federal Circuit and the Board have repeatedly held final IPR
`
`decisions are preclusive. See, e.g., XY, LLC v. Trans Ova Genetics, L.C., 890 F.3d
`
`1282, 1294 (Fed. Cir. 2018) (affirmance of FWD “renders final a judgment” of
`
`unpatentability and “has an immediate issue-preclusive effect on any pending or
`
`co-pending actions involving the patent”); Maxlinear, Inc. v. CF Crespe LLC, 880
`
`-1-
`
`

`

`
`
`F.3d 1373, 1376-77 (Fed. Cir. 2018) (“The preclusive effect of the prior [IPR
`
`FWD] adjudications, and subsequent affirmations, has finally resolved the issue of
`
`the unpatentability...in this Proceeding.”); VirnetX Inc. v. Apple, Inc., 909 F.3d
`
`1375, 1378 (Fed. Cir. 2018) (FWD on printed publication status made final by
`
`Rule 36 affirmance was preclusive in IPR); Webpower, Inc. et al. v. WAG
`
`Acquisition, LLC, IPR2016-01239, Paper 21, at 20, 26-28 (unappealed FWD
`
`preclusive in IPR).
`
`In contrast, the intervenor brief Worlds cites (at 12-14) argues that the Board
`
`was not bound in an IPR by a reexamination decision because the reexamination
`
`lacked any opportunity to cross-examine the experts. Besides having zero
`
`authoritative value, the intervenor brief is inapposite. The Solicitor General of the
`
`United States recently affirmed in briefing to the Supreme Court the official
`
`position of the U.S. government: B&B Hardware “strongly suggests that decisions
`
`of the PTAB would have preclusive effect where ‘the ordinary elements of issue
`
`preclusion are met.’” Respondents’ Brief, Return Mail, Inc. v. USPS, 17-1594,
`
`2019 WL 169139, at *41-*43 (Jan. 9, 2019). As explained in the Solicitor’s brief,
`
`35 U.S.C. §315(e) does not preempt common law issue preclusion. Id.
`
`Worlds’s argument (at 14) based on 15 U.S.C. §1069 conflates the defense
`
`of equitable estoppel with the distinct principle of issue preclusion and ignores
`
`-2-
`
`

`

`
`
`differences in the substantive nature of trademark rights that are inapplicable to
`
`patentability adjudications in IPRs.
`
`Worlds’s argument (at 13 n.2) that Bungie is estopped “from maintaining”
`
`IPR2015-01321 is untimely. Worlds never raised this argument during its appeal,
`
`improperly raised it now in an opposition footnote, and it is therefore waived. 37
`
`C.F.R. §42.6(a)(3). It is also a red herring, because Bungie could not “reasonably
`
`have raised” grounds from IPR2015-01321 when filing IPR2015-01325 as it had
`
`already raised them in IPR2015-01321. See 35 U.S.C. §315(e)(1). Moreover,
`
`because the petitions were filed and FWDs were issued simultaneously, Worlds’s
`
`argument would result in the absurdity of prohibiting Bungie from maintaining
`
`grounds from either IPR simply because they were not included in the petition for
`
`the other IPR on the same claims. Worlds permitted the final IPRs to become
`
`preclusive with respect to matters actually litigated therein. This includes RPI, but
`
`not the grounds in IPR2015-01321.
`
`B.
`There is no material difference between the RPI issues.
`Worlds spends pages (at 2-3, 8-9) arguing that the RPIs theoretically could
`
`be different for Bungie’s petitions, but Worlds identifies no actual differences.
`
`Bungie did not argue RPI issues could never be different across multiple petitions
`
`(the “absurdity” Worlds ascribes to Bungie), but only that there is no material
`
`difference here. Cases need not be identical for issues to be materially identical for
`
`-3-
`
`

`

`
`
`issue preclusion. See Nestle USA Inc. v. Steuben Food, Inc., 884 F.3d 1350, 1351
`
`(Fed. Cir. 2018) (claim construction preclusive in different patent); Maxlinear, 880
`
`F.3d at 1375-76 (FWD finding unpatentability based on prior art not asserted in
`
`subsequent IPR was preclusive in subsequent IPR). Because the RPI issues are
`
`identical here, issue preclusion bars Worlds from relitigating them.
`
`Unable to identify any differences in the RPI issues presented to the Board
`
`in the six IPRs, Worlds further errs (at 8-9, 11) by assuming the Board imposed an
`
`erroneous burden of proof on Worlds (an assumption the Federal Circuit did not
`
`make). The Board has long recognized that the burden of proof rests on the
`
`petitioner. See, e.g., Atlanta Gas Light Co. v. Bennett Regulator Guards, Inc.,
`
`IPR2013-00453, Paper 88, at 6-7 & n.2 (Jan. 6, 2015). The Federal Circuit
`
`remanded to the Board because it could not “discern whether the Board placed the
`
`burden on Worlds.” Worlds, Inc. v. Bungie, Inc., 903 F.3d 1237, 1246 (Fed. Cir.
`
`2018). The Board is best positioned to clarify that it did not impose a burden of
`
`proof on Worlds and that its RPI determinations did not turn on one.
`
`Worlds also criticizes (at 10) the Board’s denial of its discovery motions,
`
`alleging this places the “quality, extensiveness, and fairness” of the Board’s RPI
`
`determination in doubt. But Worlds did not appeal denial of its discovery motion,
`
`nor did it seek to reopen the record on remand. Worlds cannot use denial of its
`
`motion, and accompanying speculation about what it hoped to discover, as a basis
`
`-4-
`
`

`

`
`
`to revisit an issue resolved with finality in FWDs it chose not to appeal.
`
`Worlds’s argument (at 9-10) that differences between Board procedures and
`
`district court procedures render IPR decisions invalid for issue preclusion also
`
`fails. No procedural differences exist between the final IPRs and the appealed IPRs
`
`because the forum at issue is exactly the same. See B&B Hardware, 135 S. Ct.
`
`1293, 1303 (2015) (Rest. 2d Judgments § 28 exception warranted by “differences
`
`in the quality or extensiveness of the procedures followed” in the two courts).
`
`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
`
`(at 11) that the IPRs had common schedules, depositions, and hearings, but does
`
`not argue that the cases themselves were consolidated. The Board never
`
`consolidated them and Worlds never asked it to, instead permitting the final IPRs
`
`to become preclusive. Whether the cases are consolidated into a single action is
`
`necessary to the exception to issue preclusion applied in Cygnus. Otherwise,
`
`Worlds’s proposed exception would swallow the rule that the failure to appeal a
`
`judgment cannot destroy the judgment’s preclusive effect. FPP §4433 ([P]reclusion
`
`cannot be defeated by electing to forgo an available opportunity to appeal.”).
`
`Worlds’s argument (at 12) that appealing the RPI issue in the final IPRs
`
`would have wasted resources is belied by its failure to identify any factual
`
`distinction between the RPI facts in the final and appealed IPRs. On appeal, the
`
`-5-
`
`

`

`
`
`parties submitted consolidated briefing to address RPI. Worlds easily could have
`
`appealed the identical issue in all six cases without requiring any further judicial or
`
`litigant resources. Worlds finds itself precluded due to its own litigation decision to
`
`selectively appeal some IPR decisions while letting others proceed to finality.
`
`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
`
`construction of the DevPub agreement. The Federal Circuit found no fault with the
`
`Board’s previous findings that Worlds misconstrued the DevPub agreement. Yet,
`
`Worlds continues to misconstrue that agreement on remand, arguing (at 17-18, 25)
`
`that it gives Activision control of Bungie’s IPRs unless “indemnification was
`
`actually demanded by Activision or accepted by Bungie.” As explained in
`
`Bungie’s opening brief, however, the DevPub agreement does not provide
`
`Activision with control over Bungie’s IPRs regardless of whether an
`
`indemnification request was “made or accepted.” Nor could Bungie have
`
`controlled the Activision litigation because it is undisputed Bungie’s products were
`
`never accused in that litigation. SMF Nos. 1-4.
`
`Because the DevPub agreement gives Activision no control over Bungie’s
`
`IPRs and gives Bungie no control over the Activision litigation, Worlds now
`
`backtracks and argues (at 16-17) that the DevPub agreement cannot prove whether
`
`-6-
`
`

`

`
`
`Activision was an RPI. Abandoning the actual evidence of record, Worlds now
`
`recklessly speculates that Activision and Bungie might have later decided to treat
`
`Bungie’s IPRs as product reviews under Section 7A.15(j) of the DevPub
`
`Agreement. Worlds further speculates (at 18) that Activision and Bungie may have
`
`agreed subsequent to the DevPub agreement to reverse the indemnification
`
`provision and give Activision control over Bungie’s IPRs. There is no truth to
`
`Worlds’s speculation. Bungie offered to submit a declaration subject to cross-
`
`examination establishing that Activision did not fund or control any of the IPRs.
`
`Worlds opposed because it knows the facts do not support its wild speculation.
`
`Worlds argues (at 22) that the DevPub agreement makes Activision an RPI
`
`in Bungie’s IPRs because of the ability to have a non-voting observer attend board
`
`meetings. The Board correctly rejected this argument already. Merely observing
`
`board meetings does not translate into controlling Bungie’s IPRs. See, e.g., Google
`
`LLC v. Seven Networks, LLC, IPR2018-01052, Paper 28, at 12-19 (finding voting
`
`board member, ability to authorize and approve petitioner’s budgets, and other
`
`relationship ties insufficient to establish RPI status when a subsidiary-petitioner
`
`“operate[s] independently and separately” from its parent). Here, Bungie does not
`
`even have a parent-subsidiary relationship with Activision, much less one where
`
`Bungie’s IPR decisions are subject to Activision’s control.
`
`-7-
`
`

`

`
`
`Adding to its speculation, Worlds repeatedly accuses Bungie (at 15, 22, 28-
`
`29) of “refusing” to produce evidence and impeding the Board’s ability to prove
`
`Bungie’s relationship with Activision. This irresponsible rhetoric is simply false.
`
`Bungie never refused to provide evidence. Worlds previously attempted to engage
`
`in a burdensome and unfounded fishing expedition based on wild speculation. The
`
`Board properly denied Worlds’s motions. Because there is no merit to Worlds’s
`
`shrill accusations, it is axiomatic that there is no evidence to support them.
`
`B. Worlds’s settlement discussions contradict Worlds’s speculation
`to the Board.
`Worlds argues (at 19) that the Board should ignore the various settlement
`
`discussions between the parties because, it argues, they are mere attorney
`
`argument. But those discussions underscore the gamesmanship at play, and raise
`
`serious concerns regarding the impropriety of Worlds’s conduct. No party should
`
`candidly acknowledge one position in discussions between the parties, yet
`
`perpetuate a known fiction before the Board and the Court. Indeed, Worlds does
`
`not and cannot dispute the accuracy of Bungie’s SMF Nos. 7-11. 37 C.F.R.
`
`§42.23(a) (undisputed facts are deemed admitted).
`
`Worlds argues (at 19-20) that settlement discussions only “occurred in late
`
`2018,” and “after the Federal Circuit’s decision.” This is false and contradicted by
`
`the parties’ settlement correspondence. SMF No. 7 (referring to previous
`
`-8-
`
`

`

`
`
`settlement discussion). Worlds knows full well that discussions to settle
`
`independent of Activision predate the Federal Circuit’s decision.
`
`C. Worlds misconstrues AIT.
`Worlds argues (at 24) that a bare determination that “Activision and Bungie
`
`have a preexisting relationship and if Activision would benefit from Bungie’s
`
`IPRs” necessarily and “conclusively establishes Activision to be an RPI.” But
`
`Worlds’s reading of AIT is not correct. “Patent Owner’s contention that [the non-
`
`party] is a RPI solely because [the non-party] has a preexisting, established
`
`relationship with Petitioner and is a clear beneficiary of the Petition, is an
`
`incomplete reading of AIT and is unavailing.” Merck Sharp & Dohme Corp. v.
`
`GlaxoSmithKline Biologicals SA, IPR2018-01229, Paper 13, at 6-8, 11-13; Google
`
`LLC v. Seven Networks, LLC, IPR2018-01052, Paper 28, at 13-14 (“The Court held
`
`in Taylor that a broader doctrine of nonparty preclusion, termed ‘virtual
`
`representation,’ was inconsistent with common law and risked violating due
`
`process.”).
`
`Worlds relies heavily (at 18-23, 25, 29) on “circumstantial evidence” that
`
`Activision conveyed Worlds’s letter threatening Destiny to Bungie, Worlds never
`
`added Destiny to the litigation, and Bungie thus challenged claims Worlds had
`
`formally asserted against Activision, not Bungie. Those assertions underscore the
`
`inequity of applying estoppel based on a case in which Bungie was never involved.
`
`-9-
`
`

`

`
`
`And even conveyance of that letter would not establish that Activision funded or
`
`controlled the IPRs or that Bungie brought the IPRs for Activision’s benefit or to
`
`represent Activision’s interests. Bungie was not required to wait until Worlds
`
`formally sued Bungie to file its IPRs. That Bungie was never involved in the
`
`Activision litigation and brought the IPRs to serve its own interests favors finding
`
`Activision is not an RPI in Bungie’s IPRs.
`
`Worlds relies (at 21-22) on the statement in AIT that the petitioner’s “own
`
`interest in initiating an IPR” was not dispositive of whether another party could be
`
`an RPI. But in that case, the petitioner had no independent interest in challenging
`
`the patents and bragged that its interests were 100% aligned with its clients. In
`
`contrast, Bungie’s interests are not 100% aligned with Activision’s, as seen in the
`
`undisputed fact that Bungie has repeatedly offered to settle with Worlds
`
`independently of Activision. SMF Nos. 7-11. Unlike in AIT, Bungie cannot be said
`
`to represent Activision’s interests. Bungie’s commercial relationship with
`
`Activision does not warrant depriving Bungie of its right to pursue its IPRs.
`
`D. The equities favor finding Activision is not an RPI.
`Worlds argues (at 30) that Activision chose to pursue its invalidity
`
`challenges in district court in 2012 rather than at the Board. But Bungie was not
`
`afforded that opportunity. It would fundamentally violate due process and equity to
`
`retroactively deprive Bungie of its opportunity to challenge World’s patents.
`
`-10-
`
`

`

`
`
`Worlds argues (at 30) that it would be inequitable to require it to defend its
`
`patents in the Activision litigation and before the Board. However, Worlds chose
`
`whom to sue and threaten and when to do it. It chose to threaten to accuse Bungie’s
`
`product and also chose not to add Bungie to the Activision litigation so that Bungie
`
`would have no ability to participate. Worlds cannot credibly claim it is inequitable
`
`to allow Bungie its first and only opportunity to challenge Worlds’s patents.
`
`IV. Worlds’s privity arguments are improper and incorrect.
`Because its RPI arguments are not supported by the record, Worlds now tries
`
`to introduce a new argument on remand that Bungie and Activision are in privity.
`
`“The notion of ‘privity’ is more expansive” than the notion of real party-in-interest.
`
`Office Patent Trial Practice Guide, 77 Fed. Reg. 48756, 48759 (August 14, 2012).
`
`Bungie thus discussed due process limitations on privity because such constraints
`
`necessarily apply to the narrower RPI analysis at issue. It is inappropriate for
`
`Worlds to stray beyond the scope of remand. The Board should reject Worlds’s
`
`privity arguments as untimely and inconsistent with the Federal Circuit’s order.
`
`Worlds’s privity arguments also fail on the merits. Worlds cites (at 28) Intel
`
`Corp. v. ITC, 946 F.2d 821, 838 (Fed. Cir. 1991), for the proposition that, in two
`
`cases it cites, certain indemnification agreements were sufficient to find privity. In
`
`each of the cases cited in Intel, the court stayed a case against a customer-
`
`indemnitee in favor of any earlier-filed case against the manufacturer-indemnitor,
`
`-11-
`
`

`

`
`
`finding the case against the manufacturer-indemnitor would be dispositive
`
`regarding indemnitor’s products. Urbain v. Knapp Bros. Mfg. Co., 217 F.2d 810
`
`(2d Cir. 1954) (affirming injunctive stay where indemnitor had “acknowledge[d]
`
`that it is defending the [indemnitee’s] case and is responsible for any damages
`
`which may be awarded therein”); Weyerhaeuser Timber Co. v. Bostitch, Inc., 178
`
`F. Supp. 757, 759-762 (D.R.I. 1959) (granting stay of case against indemnitee
`
`because case against indemnitor could “be dispositive of the instant action”). Here,
`
`Worlds attempts to reverse the polarity to bind Bungie as indemnitor to an action
`
`in which Bungie did not participate and in which its products were never accused.
`
`Intel is also inapplicable here. In Intel, the Court concluded that assignor
`
`estoppel applied to a joint venture the inventor was involved in because the joint
`
`venture “unquestionably availed itself of the inventor’s and Atmel’s knowledge
`
`and assistance” for the infringing product and because the “indemnity agreement
`
`between [the inventor] and [the joint venturer] created a significant relationship
`
`between them.” 946 F.2d at 838. This case lacks the special circumstances present
`
`in Intel, where the inquiry focused on whether an entity with a relationship with the
`
`inventor availed itself of the inventor’s knowledge to avoid infringement liability.
`
`None of Worlds’s privity arguments are persuasive.
`
`V. Conclusion
`The Board should reject Worlds’s invitation to dismiss these IPRs.
`
`-12-
`
`

`

`
`
`
`
`
`
`Dated: February 19, 2019
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Respectfully submitted,
`
`/ Michael T. Rosato /
`Michael T. Rosato, Lead Counsel
`Reg. No. 52,182
`
`
`
`-13-
`
`

`

`
`
`CERTIFICATE OF SERVICE
`
`Pursuant to 37 C.F.R. § 42.6(e), this is to certify that I caused to be served
`
`true and correct copies of the foregoing Petitioner Bungie’s Reply Brief on
`
`Remand from CAFC, by electronic service, on this 19th day of February 2019, on
`
`the Patent Owner at the correspondence address of the Patent Owner as follows:
`
`Wayne Helge
`Alan A. Wright
`Aldo Noto
`DAVIDSON BERQUIST JACKSON & GOWDEY L.L.P.
`whelge@dbjg.com
`awright@dbjg.com
`anoto@dbjg.com
`
`
`
`Respectfully submitted,
`
`
`Dated: February 19, 2019
`
`
`
`
`
`
`
`/ Michael T. Rosato /
`Michael T. Rosato, Lead Counsel
`Reg. No. 52,182
`
`
`
`-14-
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`

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