UNITED STATES PATENT AND TRADEMARK OFFICE
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` BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`1
`
`------------------------------x IPR2015-01264
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`BUNGIE, INC., : IPR2015-01268
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` Petitioner, : IPR2015-01269
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` v. : IPR2015-01319
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`WORLDS INC. : IPR2015-01321
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` Patent Owner. : IPR2015-01325
`
`------------------------------x
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` TELEPHONIC CONFERENCE
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` Thursday, July 23, 2015
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` 1:00 p.m.
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`Job No. 88424
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`Pages: 1 - 40
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`Reported by: Carrie LaMontagne, CSR
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`Ex. 2001
`Page 1 of 40
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`
`
` BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`1
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`------------------------------x IPR2015-01264
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`BUNGIE, INC., : IPR2015-01268
`
` Petitioner, : IPR2015-01269
`
` v. : IPR2015-01319
`
`WORLDS INC. : IPR2015-01321
`
` Patent Owner. : IPR2015-01325
`
`------------------------------x
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` TELEPHONIC CONFERENCE
`
` Thursday, July 23, 2015
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` 1:00 p.m.
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`Job No. 88424
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`Pages: 1 - 40
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`Reported by: Carrie LaMontagne, CSR
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`Ex. 2001
`Page 1 of 40
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`Conference Call
`Conducted on July 23, 2015
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`2
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` A P P E A R A N C E S
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` ON BEHALF OF THE PATENT OWNER, WORLDS INC:
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` WAYNE HELGE, ESQ.
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` DAVIDSON, BERQUIST, JACKSON & GOWDEY, LLP
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` 8300 Greensboro Drive, Suite 500
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` McLean, Virginia 22102
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` (571) 765-7700
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` ON BEHALF OF THE Petitioner, BUNGIE, INC.:
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` MICHAEL ROSATO, ESQ.
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` MATTHEW ARGENTI, ESQ.
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` ANDREW BROWN, ESQ.
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` WILSON SONSINI GOODRICH & ROSATI PC
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` 701 Fifth Avenue, Suite 5100
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` Seattle, Washington 98104
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` (206) 883-2529
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`Ex. 2001
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`Conference Call
`Conducted on July 23, 2015
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` A P P E A R A N C E S C O N T I N U E D
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` ADMINISTRATIVE PATENT JUDGES:
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`3
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` KERRY BEGLEY
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` KARL D. EASTHOM
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` JASON CHUNG
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` UNITED STATES PATENT AND TRADEMARK OFFICE
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` 600 Dulany Street
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` Alexandria, Virginia 22314
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` (571) 272-1000
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`Ex. 2001
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`Conference Call
`Conducted on July 23, 2015
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` PATENT OWNER'S INDEX OF EXHIBITS
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`EXHIBIT NO. PAGE
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`Exhibit 1 Activision Software Publishing 12
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` and Development Agreement
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`Ex. 2001
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` P R O C E E D I N G S
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` JUDGE BEGLEY: Good afternoon. This is a
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`conference call for IPR 2015-1264, 1286, 1269, 1319,
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`1321, and 1325 Bungie, Inc. versus Worlds, Inc. This
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`is Judge Kerry Begley. With me on the line are Judges
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`Karl Easthom and Jason Chung.
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` Who do we have on the line for petitioner?
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` MR. ROSATO: Good afternoon, your Honor,
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`this is Mike Rosato for the petitioner. I have with
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`me -- I should have co-counsel on the line,
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`Matt Argenti.
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` MR. ARGENTI: Confirming that I'm here.
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` MR. ROSATO: And Andy Brown, as well, an
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`associate who works with us.
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` JUDGE BEGLEY: Who is Mr. Brown?
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` MR. ROSATO: Andy Brown is an associate at
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`my law firm.
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` JUDGE BEGLEY: Okay. Thank you.
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` Who is on the line for patent owner Worlds Inc.?
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` MR. HELGE: Good afternoon, your Honor,
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`Wayne Helge here for patent owner, Worlds Inc., and we
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`do have a court reporter on the call as well, your
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`PLANET DEPOS
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`Honor. Perhaps, for the court reporter's information,
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`I might ask if I could clarify the spelling of each
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`judge's name.
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` JUDGE BEGLEY: Sure. It's Kerry, K-E-R-R-Y,
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`Begley, B-E-G-L-E-Y, Karl Easthom, K-A-R-L,
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`E-A-S-T-H-O-M, and Jason Chung, J-A-S-O-N, C-H-U-N-G.
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` MR. HELGE: Thank you.
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` JUDGE BEGLEY: Patent owner, did you provide
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`the court reporter?
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` MR. HELGE: I did, your Honor, yes.
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` JUDGE BEGLEY: Okay. Can you provide a copy
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`of the transcript on purpose as an exhibit.
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` MR. HELGE: Yeah, I certainly can, your
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`Honor. I presume it would be as part of a notice?
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` JUDGE BEGLEY: Well, you can file it as an
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`exhibit, and you can include a notice explaining that
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`it's a transcript of the call.
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` MR. HELGE: Okay. Thank you, your Honor.
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` JUDGE BEGLEY: We scheduled a call to
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`discuss patent owner's request for authorization to
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`file motions for a routine or additional discovery.
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`So -- because patent owner is seeking authorization to
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`file the motion, we'll start by hearing from patent
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`7
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`owner.
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` Can you start by explaining specifically what
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`the discovery you're seeking.
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` MR. HELGE: Certainly, your Honor. I can --
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`at some point it may make sense to go through a bit of
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`the facts to indicate why this discovery is
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`appropriate and what we already have to show that this
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`discovery would be focused, useful, and in the
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`interest of justice.
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` Specifically, the discovery that we are looking
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`for in terms of routine discovery in the petitions,
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`the petitioner identified only Bungie, Inc., as a
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`real party in interest; and we have a document, a
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`publicly available document, which is a contract
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`between Bungie and Activision, Activision Publishing,
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`showing that actually Bungie is not the sole real
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`party in interest, and under routine discovery we
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`would be entitled to documents showing -- or
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`documents that reflect the position contrary to what
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`petitioner has stated in the petition.
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` And so we would be seeking documents related to
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`Ex. 2001
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`the use of Activision's development advances, the use
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`of funding provided by Activision to Bungie for the
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`purpose of developing the Destiny game products that
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`was intended for all development of those products,
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`including legal reviews related to IP analysis and IP
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`reviews.
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` We would also be looking for documents related
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`to Activision's review or opportunity to review and
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`approve Bungie's legal reviews related to IP issues.
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`And both of these funding issues and control issues
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`come directly from the terms of that contract between
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`Bungie and Activision.
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` Thirdly, we would be looking for a copy of a
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`change of control agreement which was identified in
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`this contract between Bungie and Activision. The
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`contract that exists between these two entities that
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`we have in our possession from 2010 generally lays
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`out very tight restrictions on Bungie's ability to
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`change its control, but the parties also agreed to
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`enter into a future change of control agreement, and
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`that document is identified in our contract that we
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`have in our possession. We think it would be easily
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`PLANET DEPOS
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`identifiable, a very low burden to the parties, and
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`should be provided to give us the terms on which
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`Bungie is subject to Activision's control and
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`management perspective.
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` Fourth, we would be looking for any claims for
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`indemnification of the Worlds' patents from
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`Activision to Bungie. We have a notice dated
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`November 13, 2014, in which litigation counsel for
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`Worlds identified to Activision that the Destiny game
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`would be added to the litigation. And so we're
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`looking for documents either before that date or
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`after that date where there's actually a claim for
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`indemnification between these two parties, Activision
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`and Bungie, pursuant to their agreement.
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` We also believe that the documents that we're
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`asking for should include communications such as
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`e-mails, you know, if that's how the communications
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`were performed. And to the extent that petitioner
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`believes that these documents would be privileged, we
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`are certainly happy to receive a privilege log, and
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`we believe a privilege log would be the appropriate
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`way to claim that privilege and not simply to say
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`we're withholding all documents based on privilege.
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`So we would like, specifically, a privilege log
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`showing dates, sender, receiver, and a very brief
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`description of the document being withheld.
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` JUDGE BEGLEY: Okay. You are listing more
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`categories of documents than you've included in your
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`e-mail to the board from yesterday. So can you
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`explain the third and fourth categories of documents
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`that you're looking for, the change of control
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`agreement and the notice of indemnification, in a
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`little bit more detail because those don't seem to be
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`reflected in your e-mail.
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` MR. HELGE: Absolutely, your Honor.
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` The change of control agreements, I can tell
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`you, the way that this agreement between Activision
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`and Bungie is laid out, there was a restriction on
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`change of control in this agreement. Section 18 of
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`this agreement says that Activision shall have a
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`right of approval which can be withheld in
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`Activision's sole discretion over any change in
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`control of licensor, who is Bungie.
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` JUDGE BEGLEY: Sorry to interrupt you.
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` MR. HELGE: Certainly.
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` JUDGE BEGLEY: You said that the contract is
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`publicly available and you're referring to specific
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`terms of contract. I think it would be helpful for
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`the panel to have it in front of us. Is there
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`somewhere that we can access it?
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` MR. HELGE: There absolutely is, your Honor.
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`I can pull it up. It's a website from the L.A. Times.
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`I just need to get to that website here. This website
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`is -- this website is documents.LAtimes.com, forward
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`slash, Bungie, B-U-N-G-I-E, hyphen, Activision,
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`hyphen, contract, forward slash.
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` JUDGE BEGLEY: Okay.
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` MR. HELGE: And this is -- the title is L.A.
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`Times Data Desk on the website. It shows a document,
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`Bungie Activision contract. This was a contract --
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`according to the L.A. Times and according to the
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`document, it was a contract produced during
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`litigation, during -- with Activision and some of its
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`former employees. And as I understand it, the
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`Los Angeles Superior Court -- or the superior court in
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`California ordered the document to be unsealed and so
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`it was published on the L.A. Times website.
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` The page that I'm specifically looking at is
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`page 24. So within the viewer of this website, we
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`can scroll down to page 24 and see what I'm referring
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`to specifically.
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` JUDGE BEGLEY: Okay. Just -- I think we can
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`use the website for purpose of the call, but is there
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`a PDF available that you could put in the record.
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`Since it seems like this contract is going to be the
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`main basis of the call, I think it would be helpful if
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`the panel was able to refer to it in any order that it
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`issues from the call.
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` MR. HELGE: Certainly, your Honor. I have a
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`PDF that we created based on this website. We've
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`taken these pages from this website and created a
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`27-page PDF that we believe accurately reflects what's
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`shown in this website. I'm happy to provide that as
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`an exhibit.
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` (Patent Owner's Exhibit Number 1 marked for
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`identification purposes and made part of the record.)
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` JUDGE BEGLEY: Thank you.
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` You can continue with explaining the change of
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`control.
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` MR. HELGE: Thank you, your Honor.
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` So looking at section 18 which is entitled
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`"Approval of Change of Control, slash, Board Observer
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`Right," section 18.1 discusses -- the first sentence
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`generally discusses the time period that they're
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`talking about with the change of control
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`restrictions.
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` And beginning on the third line in the section
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`18.1 after the comma, I will read:
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` "Activision shall have a right of
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` approval, which such approval may be
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` withheld in Activision's sole discretion
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` over any change in control of licensor."
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` Then it proceeds to define "change of control"
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`for the purpose of this agreement.
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` Skipping a few lines down then, after that
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`definition, the following sentence states, and I'll
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`read it here again, "The parties shall enter into a
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`change of control agreement by no later than March,
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`31, 2011," in which case we have additional terms
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`that are going to restrict Bungie's ability to change
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`its management or change its control subject to
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`Activision's discretion or review.
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` So we're seeking that change of control
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`agreement that was entered into between these two
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`parties.
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` JUDGE BEGLEY: Okay.
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` MR. HELGE: Section 18.2 also discusses --
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` MR. ROSATO: Your Honor --
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` MR. HELGE: -- Activision's right to put a
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`nonvoting person on the board of directors of Bungie.
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`So what we see here through the scheme of this
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`agreement in the section 18 is that Activision has
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`potentially tight control over Bungie and an
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`opportunity to influence its management decisions.
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` JUDGE BEGLEY: Okay. Do you have any
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`evidence other than this contract that you believe
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`shows that Activision is an RPI in this case?
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` MR. HELGE: Your Honor, I think the
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`contract, in terms of the various clauses in here,
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`show very clearly that Activision has an opportunity
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`to control Bungie and Bungie's efforts in filing --
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`preparation and filing of the IPR petitions. What
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`we're seeking here is evidence of actual control --
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` JUDGE BEGLEY: I'm sorry to interrupt.
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` (Simultaneous speaking.)
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` MR. HELGE: -- we put before the board, I
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`don't have any more right now.
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` JUDGE BEGLEY: That was the question. So
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`you don't have any evidence other than that contract
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`right now?
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` MR. HELGE: That is right, your Honor.
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` JUDGE BEGLEY: Okay.
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` MR. HELGE: Your Honor, may I clarify one
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`thing?
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` JUDGE BEGLEY: Yes.
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` MR. HELGE: When you say "evidence," I also
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`have a document. I mentioned earlier, the document
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`from Worlds' litigation counsel to Activision
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`indicating that the game Destiny, which is the subject
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`of this contract, would be added to the litigation,
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`and I believe that would be other evidence.
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` It's not evidence that we expect to be in
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`Bungie's possession, but it is evidence to show that
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`the Destiny game was at least provided as notice to
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`Activision that Destiny would be subject to the
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`litigation.
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` JUDGE BEGLEY: This is -- what kind of
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`document is this?
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` MR. HELGE: This is a letter Worlds'
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`litigation counsel to Activision's litigation counsel.
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` JUDGE BEGLEY: Okay. Was Destiny actually
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`added to the litigation?
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` MR. HELGE: Your Honor, my understanding is
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`that it has not been added to the litigation; however,
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`that letter provides notice that triggers the
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`obligations of this contract. And so what that letter
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`serves purpose of is tying Activision, which is the
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`nonparty to these petitions, to the petitions.
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` It ties their -- it triggers Bungie's
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`obligations, but it ties Activision's litigation and
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`Activision's interest in challenging the patents as
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`to Destiny and triggers the various clauses that we
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`can point to from this contract.
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` JUDGE BEGLEY: Okay. And when was that
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`letter dated?
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` MR. HELGE: That letter is dated
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`November 13, 2014. Just for frame of reference,
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`Activision was served with the complaint in that
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`litigation back in 2012.
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` JUDGE BEGLEY: I understand that you want to
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`establish that Activision is an RPI in these cases,
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`but what is your theory as to how that would impact
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`this case?
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` MR. HELGE: Well, your Honor, I think it's
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`very important. Certainly under 35 U.S.C. 312(a)2, an
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`institution would be barred if not all the real
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`parties of interest were named with Activision named
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`as a real party in interest, as it should have been.
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`Activision, as I mentioned, was served with the
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`complaint back in April of 2012, and we would be
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`outside of the one-year period to institute this IPR,
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`any of these IPRs.
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` JUDGE BEGLEY: And so are you referring to
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`section 313 or section 315?
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` MR. HELGE: Well, your Honor, I believe that
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`313 requires the real parties in interest to be named
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`and 1315 would bar institution under the proper
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`naming.
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` JUDGE BEGLEY: Okay. And what is your
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`theory as to how a 315 bar would apply if the letter
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`that you are referring to is dated in November of
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`2014?
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` MR. HELGE: Well, your Honor, the Destiny
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`game was released in 2014. So this letter was sent to
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`Activision after that game was released. But this is
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`more than two years after Activision was served with
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`the complaint.
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` So the letter provides a notice function to both
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`Activision and Bungie that Destiny could be subject
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`to the litigation, but under 315(b), the measure is
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`not from the service of the letter indicating that a
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`new product would be added to an existing litigation.
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`The trigger under 315(b) is the service of the
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`complaint, which goes back to -- which goes back to
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`April 4th, 2012.
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` JUDGE BEGLEY: Okay. I understand that
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`that's your position, but it doesn't seem -- if Bungie
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`had no notice of these -- any allegations against the
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`Destiny products until November 2014 -- I guess I'm
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`not clear on how the 315 bar would apply.
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` MR. HELGE: Well, your Honor, the 315 bar
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`would apply because Activision is a real party in
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`interest to Bungie.
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` So, for example, if after receiving the letter
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`from Worlds' counsel, Activision itself had filed
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`these IPRs, these IPRs would be barred under 315(b)
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`because Activision was served with the complaint more
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`than one year before filing those IPRs.
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` Bungie is in no different position.
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`Effectively, Bungie and Activision are both real
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`parties in interest to these IPRs. So the date of
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`the letter triggers Bungie's obligations under this
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`contract to take action, but that action is subject
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`to the review and approval by Activision under the
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`strict contract terms, and there's very clear
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`language in this agreement stating that Activision's
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`development advances paid to Bungie will be used for
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`the full development, which includes this legal
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`review.
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` So, in effect, Bungie is acting -- I won't say
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`necessarily as a proxy for Activision because I think
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`Bungie and Activision both have an interest in the
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`Destiny product. But certainly Bungie is doing
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`something that Activision itself could not have done
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`on its own.
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` JUDGE BEGLEY: Okay. Do you have case law
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`that supports your position -- your theory on when the
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`clock would start running for the 315(b) bar?
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` MR. HELGE: Your Honor, I mean, I have a
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`number of cases, and I would actually go back to the
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`Samsung v. Adaptix cases back in IPR 2014. And I can
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`pull up the case numbers for you. But that was an
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`instance where we had -- excuse me -- there were new
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`products being added in a second litigation. And even
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`though Samsung had been sued in a prior litigation on
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`previous products and Samsung was barred from bringing
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`the IPRs even though it was new products and an
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`entirely new litigation, because there was already a
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`prior litigation against Samsung, it couldn't file
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`IPRs on the patents that it had been sued on before.
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` So this was exactly the same situation here. We
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`have -- there may be better case law there. I don't
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`think so. I think this is a very strict application
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`of 315(b), which is to say service of the complaint,
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`which goes back to the original service of the
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`complaint in 2012. I can pull up those numbers for
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`you, if you would like.
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` JUDGE BEGLEY: That would be helpful. Thank
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`you.
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` I'd like to talk -- I've heard your position on
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`what the contract terms say that -- between what
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`Bungie and Activision agreed to, but can you be more
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`specific about specifically which contract provisions
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`you're referring to that show that Activision had an
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`opportunity to control -- that it has an opportunity
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`to control or fund these IPRs.
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` MR. HELGE: Certainly, your Honor.
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` And just clear up the last issue. For the case
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`numbers, these are -- well, IPR, 2014-00008, tag
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`00011, tag 00012, and tag 00013, and these are fairly
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`strict applications of 315(b) which says that if a
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`party is served with a complaint alleging
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`infringement of the patents, then the IPRs may not be
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`instituted.
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` So this is the same situation here where we're
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`looking at Activision could not have filed the IPRs
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`since it had been served. And, in fact, if
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`Activision is a real party in interest with Bungie,
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`then Bungie is similarly restricted.
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` In terms of your question on what are the other
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`provisions, I would point you to specifically section
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`7(a)15, and I'm missing the page number -- that's
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`page 10 of the contract.
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` JUDGE BEGLEY: Okay.
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` MR. HELGE: And on page 10 of the contract,
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`I would recommend that we look first at 7(a)15, which
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`states:
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` "The following items will be managed by
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` and be the responsibility of licensor,"
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` which is Bungie, "but shall be subject
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` to prior review and approval of
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` Activision. In addition, the following,
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` parentheses, indicates that the budget
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` for these topics is to be mutually
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` approved between Bungie and Activision."
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` If you scroll then down to element J, the
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`statement is conducting -- or the task is "conducting
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`legal reviews of the products to ensure that all
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`intellectual property and other rights are fully
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`23
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`cleared for use."
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` JUDGE BEGLEY: Okay.
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` MR. HELGE: Once again, if we go back to
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`November 13, 2014, where the Destiny game is being
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`identified as a target for the litigations, this
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`triggered an obligation for Bungie under 7(a).15 to
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`perform legal reviews of the products in view of the
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`Worlds' patents so ensure that the intellectual
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`property and rights were fully cleared for use.
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` In addition, we have in section 15 of this
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`agreement, we have --
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` JUDGE BEGLEY: I'd like to ask --
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` MR. HELGE: I'm sorry, your Honor.
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` JUDGE BEGLEY: I'd like to ask a question
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`and 7(a)15(j).
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` MR. HELGE: Certainly.
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` JUDGE BEGLEY: Can you explain how, if
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`Activision is overseeing a legal review of the
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`product, how does that show that they had the
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`opportunity to control these IPRs?
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` MR. HELGE: Well, your Honor, the legal
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`review includes the background work necessary for an
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`IPR. And what 7(a)15 says is that legal review is
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`subject to prior review and approval of Activision.
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` That means whatever Bungie is doing for these
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`IPRs, under the contract, it's subject to
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`Activision's prior review and approval. And even the
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`budget itself is subject to Activision's -- well,
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`subject to Activision's and Bungie's mutual approval.
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` That means that Activision has at least from the
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`very naked language of this agreement, at least has
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`the opportunity to review and to approve. Now,
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`approve implicitly means to not approve if there's
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`something they don't approve of.
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` Approve just doesn't mean they can say yes. It
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`means they have an opportunity to speak up and
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`provide input. And if Bungie doesn't change it,
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`Activision, can withhold that approval. And it says,
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`approval not to be unreasonably withheld.
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` But, for example, if there's going to be
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`something in these documents that Activision doesn't
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`agree with or is inconsistent with the litigation
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`positions, Activision has the right to withhold
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`approval until Bungie complies. For Bungie to file
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`without Activision's review and approval is a breach
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`of this contract.
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` JUDGE BEGLEY: It's specifically referring
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`to a product, not to any legal background work for an
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`IPR. So I'm not sure I understand your position.
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` MR. HELGE: Well, your Honor, the products
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`relate to the Destiny game, which -- again, with this
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`letter between counsel -- between counsel in the
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`litigation, Destiny was at issue in the litigation.
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` The conducting of legal reviews of the products,
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`i.e. the Destiny game, to ensure that all
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`intellectual property and other rights are fully
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`cleared for use means that if there is a claim of
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`infringement against the Destiny name under the
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`Worlds' patents, Bungie has the contractual
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`obligation to conduct a legal review to ensure that
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`the IP rights -- or the IP of the Destiny game is
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`fully cleared for use.
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` If it's not cleared for use, then they need to
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`do something under this agreement. They need to --
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`in other words, in order to comply with their
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`warranty of non-infringement, they need to take some
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`26
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`action.
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` So the legal review, evaluating the Destiny game
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`with respect to the Worlds' patents, there's a
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`contractual right to do that. You mentioned how that
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`doesn't tie into these IPRs, but certainly the
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`Worlds' patents that are at issue in the litigation
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`are the exact same Worlds' patents that are at issue
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`in these IPRs. So that letter triggers Bungie's
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`obligations here.
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` JUDGE BEGLEY: Okay. Do you have any
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`provisions that you want to point to?
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` MR. HELGE: Well, your Honor, would you like
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`me to discuss the funding aspect? And I'm also happy
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`to point to the warranty of non-infringement and the
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`obligation to secure rights to third-party
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`intellectual property.
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` JUDGE BEGLEY: Well, take your next best
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`evidence, whichever provision that is, and then we'll
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`hear from petitioner.
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` MR. HELGE: Certainly, your Honor.
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` On page 19 -- this is section 14.1.2. I'll
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`point you to the very last three lines on this page,
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`page 19. And I'll read:
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` "To the extent that licensor, Bungie
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` incorporates any third-party elements
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` into the products, it shall ensure that
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` it is secured on behalf of itself and
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` Activision the full rights and licenses
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` necessary to exploit such third-party
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` elements consistent in all respects with
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` this agreement."
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` What that means, again, it ties into the prior
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`section that we were just looking at, which is if
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`there is an allegation that Destiny infringes
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`third-party patents, i.e. the Worlds' patents, it has
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`the obligation to, under 7(a)15, to at least perform
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`a legal review and, if necessary, to secure the
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`rights, the full rights, and licenses necessary to
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`exploit those elements.
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` Now, if Bungie has decided to file IPRs instead
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`of securing the rights, that's still within their
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`obligation under this contract. There's different
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`ways to secure rights. You can secure rights by,
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`one, attempting to abolish those rights, which is the
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`path they've taken, or it can attempt to take a
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`license.
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` They've taken the path of an IPR -- or actually
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`six IPRs, which is fully consistent with 7(a)15 and
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`also this 14.1.2 read in concert. Once again, this
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`shows that Bungie had an obligation to take certain
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`actions and, again, those actions were subject to
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`Activision's review and approval.
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` JUDGE BEGLEY: Okay. We'll hear from
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`petitioner now.
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` Petitioner, can you state your position on
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`patent owner's request for this motion.
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` MR. ROSATO: Okay. So I guess I would point
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`out we have not received a copy of this document that
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`they're referring to from the L.A. Times. That wasn't
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`even particularly defined in the request. The request
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`that went out to the board is pretty vague and
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`ambiguous. So coming into this call, your Honor, we
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`knew about as much about Worlds' position as the board
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`did coming in.
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` I don't have that document in front of me. So I
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`can't comment on the various provisions that were
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`identified. I would, in fact, ask that the
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`transcript that patent owner has hired a court
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`reporter to produce be filed or served within the
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`week -- or at least within a week so we can go back
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`the reference all the various arguments that were
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`raised.
`
` As to their position, you know, I think the
`
`board has identified there is a threshold legal issue
`
`here, you know
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