UNITED STATES PATENT AND TRADEMARK OFFICE
`
`______________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`______________________
`
`RUBICON COMMUNICATIONS, LP
`
`Petitioner,
`
`
`
`v.
`
`
`
`LEGO A/S
`
`Patent Owner.
`
`________________________
`
`Case IPR2016-01187
`
`Patent 8,894,066
`
`
`
`PETITIONER’S MOTION TO LIST ADDITIONAL PARTIES AS REAL
`PARTIES-IN-INTEREST
`
`
`
`1
`
`
`
`______________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`______________________
`
`RUBICON COMMUNICATIONS, LP
`
`Petitioner,
`
`
`
`v.
`
`
`
`LEGO A/S
`
`Patent Owner.
`
`________________________
`
`Case IPR2016-01187
`
`Patent 8,894,066
`
`
`
`PETITIONER’S MOTION TO LIST ADDITIONAL PARTIES AS REAL
`PARTIES-IN-INTEREST
`
`
`
`1
`
`
`
`
`
`
`
`Petitioner Rubicon Communications, LP (“Petitioner”) moves to list
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`additional real parties-in-interest (“RPIs”). The Board authorized this motion in an
`
`order issued February 24, 2017.
`
`I.
`
`
`
`Introduction
`
`Petitioner had a good faith belief, grounded in fact and supported by prior
`
`Board decisions, that its RPI listing was correct upon the addition of SmallWorks,
`
`LLC. As demonstrated below, Petitioner disputes that Rubicon Communications,
`
`LLC or James and Jamie Thompson are RPIs, although they are related by privity
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`to the named RPIs (and thus subject to the same estoppel). Nevertheless, because
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`Patent Owner continues to press the issue in an attempt to terminate this
`
`proceeding on procedural grounds, Petitioner is willing to concede that these
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`parties be identified as RPIs in order to conclusively resolve any questions of
`
`estoppel that might arise from this proceeding.
`
`Petitioner’s requested relief finds support in prior Board decisions.
`
`Petitioner did not act in bad faith, attempt to circumvent estoppel rules, or engage
`
`in “gamesmanship.” Moreover, Patent Owner is not harmed by—and in fact
`
`benefits from—the listing of additional RPIs. Under these facts, Board decisions
`
`hold that permitting additional RPIs to be added, even when their status as RPIs is
`
`2
`
`
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`disputed, promotes the core functions of RPI practice and the “just, speedy, and
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`inexpensive resolution” of Board proceedings.
`
`II. Statement of Material Facts
`
`1. James W. and Jamie L. Thompson, husband and wife, are entrepreneurs
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`and small business owners who have organized a number of distinct business
`
`ventures under different legal entities. The currently active entities owned by the
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`Thompsons are SmallWorks, LLC; Rubicon Communications, LLC; Pono Paani,
`
`LLC; and Electric Sheep Fencing, LLC.
`
`2.
`
`Patent Owner was aware of the existence of each of the above-named
`
`entities at least as of the date of James Thompson’s deposition on December 5,
`
`2016 (the “Thompson Deposition”). Indeed, over a year prior to the Thompson
`
`Deposition, Patent Owner sent a set of interrogatories to Petitioner in the related
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`litigation that inquired as to each of these entities except for Electric Sheep
`
`Fencing, LLC (Exhibit 1034 at 7).
`
`3.
`
`Pono Paani, LLC is a holding company for intellectual property assets
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`owned by the Thompsons that does not have any employees or sell any products or
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`services, and thus conducts no business related to this proceeding (Exhibit 2016 at
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`74-75). Electric Sheep Fencing, LLC is principally a holding company for
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`intellectual property assets related to the Thompsons’ pfSense® network security
`
`products, which are entirely unrelated to this proceeding (Exhibit 1030 at 2).
`
`3
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`
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`4. Petitioner previously provided Patent Owner a “Certificate of
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`Conversion of a Limited Partnership Converting to a Limited Liability Company”
`
`evidencing
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`conversion of Rubicon Communications LP
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`to Rubicon
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`Communications LLC on June 26, 2014. Patent Owner referred to this document
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`as Exhibit 4 in the Thompson Deposition (Exhibit 1031).
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`5.
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`As shown in Exhibit 1031, the conversion was effected by Rubicon
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`Communications Management Group LLC, the management company of the
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`converted LP. Subsequent to the conversion, this LLC no longer actively
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`conducted business, and was terminated on December 1, 2016 (Exhibit 1032).
`
`6.
`
`Petitioner previously provided Patent Owner a “Bill of Sale and
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`Assignment and Assumption Agreement” that, on its face, transfers all assets and
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`liabilities of Rubicon Communications, LLC to SmallWorks, LLC on June 5, 2015.
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`Patent Owner referred to this document as Exhibit 7 in the Thompson Deposition
`
`(Exhibit 1033).
`
`7.
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`Patent Owner’s initial lawsuit named Rubicon Communications, LP
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`as a defendant, and was subsequently amended to add SmallWorks, LLC as a
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`defendant (Exhibit 1023, para. 4).
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`8.
`
`Petitioner filed its initial petition on June 10, 2016 naming only
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`Rubicon Communications, LP as an RPI. On November 28, 2016, Petitioner filed
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`a motion seeking leave to add SmallWorks, LLC as an RPI.
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`4
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`
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`9.
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`On December 16, 2016, the Board issued a Decision Granting Motion
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`to Correct RPI (“Decision”), permitting Petitioner to list SmallWorks, LLC as an
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`RPI while retaining Petitioner’s original filing date. Decision at 6. The Board
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`further stated that “[t]o the extent that further correction of the real parties-in-
`
`interest may be required, Petitioner is encouraged to pursue such correction
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`promptly.” Decision at 5.
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`10. On December 21, 2016, Petitioner filed a corrected petition listing
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`SmallWorks, LLC as an additional RPI.
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`11. On January 30, 2017, Patent Owner indicated that it would file a
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`motion to add Rubicon Communications, LLC, James Thompson, and Jamie
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`Thompson as defendants in the related litigation, and would further seek
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`authorization to file a motion to terminate for Petitioner’s failure to list all RPIs,
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`specifically referencing these same parties. Patent Owner did not indicate that it
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`intended to add Pono Paani, LLC or Electric Sheep Fencing, LLC as defendants.
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`III. Precise Relief Requested
`
`Although Petitioner submits that no RPIs have been omitted in its corrected
`
`petition, Petitioner requests leave to submit—without altering the filing date of the
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`petition—updated mandatory disclosures listing Rubicon Communications, LLC,
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`and James W. and Jamie L. Thompson (in their executive capacities as
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`owners/managers of the named entities) as real parties-in-interest, in order to
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`5
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`
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`resolve this procedural hurdle and make the record unambiguously clear as to who
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`may be estopped by this proceeding.
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`IV. Discussion
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`Under the facts of this case, Petitioner’s request for relief is squarely
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`supported by prior Board decisions. In its precedential Lumentum decision, the
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`Board ruled that failure of a petitioner to identify all RPIs did not deprive the
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`Board of jurisdiction over a proceeding. Lumentum Holdings, Inc. v. Capella
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`Photonics, Inc., Case IPR2015-00739, slip op. at 5 (PTAB Mar. 4, 2016) (Paper
`
`38) (citing Elekta, Inc. v. Varian Medical Systems, Inc., IPR2015-01401, slip op.
`
`6–7, (December 31, 2015) (Paper 19) for the proposition that absent a clear
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`statement from Congress that the RPI limitation was jurisdictional, it should be
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`treated as nonjurisdictional). In a subsequent decision, the Board noted that
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`“Lumentum and Elekta collectively cite 37 C.F.R. § 42.5(b) and (c)(3) for the
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`Board’s discretionary authority to permit a petitioner to amend challenged RPI
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`disclosures while maintaining the original filing date. Aerospace Communications
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`Holdings Co., Ltd. v. The Armor All/Step Products Co., IPR2016-00411, slip op. 3
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`(June 28, 2016) (Paper 12).
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`The Aerospace panel further cited Elekta for the following proposition:
`
`Absent any indication of an attempt to circumvent estoppel rules, a
`petitioner’s bad faith, or prejudice to a patent owner caused by the
`delay, permitting a petitioner to amend challenged RPI disclosures
`
`6
`
`
`
`while maintaining the original filing date promotes the core functions
`described in the Trial Practice Guide[, 77 Fed. Reg. 48,756, 48,759
`(Aug. 14, 2012)], while promoting also “the just, speedy, and
`inexpensive resolution of our proceedings.” 37 C.F.R. § 42.1.
`Aerospace at 3. Within this framework, Aerospace held that it was appropriate to
`
`grant a motion to add parties as RPIs, even when a legitimate dispute exists as to
`
`whether the added parties are actually RPIs, when (1) the petitioner has not
`
`attempted to circumvent estoppel rules or act in bad faith; (2) the patent owner has
`
`not suffered demonstrable harm and is in fact benefited by the concession of
`
`estoppel; and (3) there has been no “gamesmanship” on the part of the petitioner
`
`during the IPR proceeding. Id. at 5-10.
`
`A.
`
`Petitioner did not attempt to circumvent estoppel rules or act in bad faith
`
`when it omitted Rubicon Communications, LLC and the Thompsons from its
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`corrected petition.
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`As an initial matter, Petitioner represents that it has not attempted to conceal
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`the identities of or otherwise circumvent estoppel rules with respect to any of the
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`currently-active entities owned by the Thompsons, and that Patent Owner was
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`aware of all of these entities prior to its deposition of James Thompson—more than
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`a year prior, with respect to all entities except for Electric Sheep Fencing, LLC,
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`which is not relevant to this proceeding.
`
`7
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`
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`Petitioner further represents that it had a good faith basis for adding only
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`SmallWorks, LLC as an RPI when instructed by the Board to promptly raise any
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`further RPI
`
`issues
`
`requiring correction.
`
` On June 5, 2015 Rubicon
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`Communications, LLC assigned all assets and liabilities to SmallWorks, LLC.
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`Since SmallWorks, LLC stood alone as the successor in interest to Rubicon
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`Communications, LLC with respect to the issues raised in this proceeding,
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`Petitioner believed in good faith that SmallWorks, LLC was the sole RPI. In other
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`words, Rubicon Communications, LLC should not be an RPI where it divested
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`itself of any interest in the matters at issue here.
`
`As to the Thompsons individually, several Board cases hold that merely
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`being an owner of an entity (even a single member LLC) is not sufficient to confer
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`RPI status. “Owning a percentage of a party (or even all of it) . . . does not render
`
`the owner a real party-in-interest. If it did, every parent corporation of a 100%
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`wholly-owned subsidiary party would be a real party-in-interest, and that is not the
`
`law.” Enovate Medical, LLC v. Intermetro Industries Corp., IPR2015-00301, slip
`
`op. 9 (May 11, 2016) (Paper 50). The Board has also declined to hold individual
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`executives or board members of a petitioner to be RPIs, even if those individuals
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`are named as co-defendants in a related proceeding. Zero Gravity Inside, Inc. v.
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`Footbalance System Oy, IPR2015-01769, slip op. 26 (Feb. 12, 2016) (Paper 17).
`
`Finally, the Board has held that the owner of a single-member LLC that was
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`8
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`
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`treated as a disregarded entity for tax purposes, who paid for the petition out of
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`personal expenses, and conducted communications with the patent owner from a
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`personal email address, was nevertheless not an RPI. 1964 Ears, LLC v. Jerry
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`Harvey Audio Holding, LLC, IPR2016-00494, Slip. op. 6-7 (July 20, 2016) (Paper
`
`21).
`
`Moreover, Petitioner submits that both Rubicon Communications, LLC and
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`the Thompsons are related to named RPIs through privity. By statute, privies of
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`RPIs are also estopped. 35 U.S.C. § 315(e). Thus, one cannot be said to
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`“circumvent estoppel rules” when a party is estopped through privity, particularly
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`when the facts of privity are clear and known to Patent Owner, as they were here.
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`Specifically, Rubicon Communications, LLC is related by privity with
`
`originally named RPI Rubicon Communications, LP, because it arose directly from
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`the conversion of the latter. Under controlling Texas law,
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`(3) all liabilities and obligations of the converting entity continue to
`be liabilities and obligations of the converted entity in the new
`organizational form without impairment or diminution because of the
`conversion;
`
`* * *
`(5) a proceeding pending by or against the converting entity or by or
`against any of the converting entity's owners or members in their
`capacities as owners or members may be continued by or against the
`
`9
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`
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`converted entity in the new organizational form and by or against the
`previous owners or members without a need for substituting a party.
`Texas Business Organizations Code § 10.106(3), (5). Petitioner submits that these
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`statutory provisions necessarily result in privity, because otherwise a company
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`could avoid estoppel simply by converting its corporate form, which would be
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`against public policy.
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`The Thompsons are also related by privity to named RPI SmallWorks, LLC.
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`In discussing authority cited by the patent owner, the 1964 Ears panel noted that in
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`the cited case, a sole owner of a corporation “was precluded from re-litigating the
`
`same claims the corporation had previously litigated” “because he was in privity
`
`with his corporation, not because he was a real party-in-interest in the
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`corporation’s action.” 1964 Ears at 6 (emphasis original). Along similar lines,
`
`Petitioner submits that as sole owners of SmallWorks, LLC, the Thompsons are in
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`privity with this entity, and thus estopped for at least this reason.
`
` In summary, Petitioner submits that its RPI listing in its corrected petition
`
`was not motivated by bad faith, intentional concealment, or an attempt to
`
`circumvent estoppel rules. Rather, Petitioner acted on a good-faith belief that was
`
`grounded in evidence and supported by prior Board holdings.
`
`B.
`
`Patent Owner is not harmed by the proposed addition of RPIs—to the
`
`contrary, this benefits Patent Owner.
`
`10
`
`
`
`
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`As was the case in Aerospace, Petitioner’s offer to add RPIs despite
`
`disputing that added parties are in fact RPIs is a “meaningful consequence that
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`benefits Patent Owner” regarding any alleged attempt by Petitioner to shield these
`
`parties from estoppel. Aerospace at 6. Specifically, it removes any doubt as to
`
`whether these parties are estopped, and thus expands the scope of Patent Owner’s
`
`certainty regarding future challenges. Moreover, adding RPIs has no effect on the
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`prior art grounds on which trial was instituted. See id. Accordingly, adding IPRs
`
`will not affect Patent Owner’s strategy with respect to the merits.
`
`
`
`To the extent that Patent Owner chose to devote resources to the IPR issue in
`
`its preliminary response and in seeking to terminate these proceedings, this
`
`represents a “strategic decision that Patent Owner was free to make and, indeed,
`
`[would result] in actions by Petitioner that benefit Patent Owner materially” if the
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`Board grants this motion. Aerospace at 7. That is, Patent Owner chose to press the
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`RPI issue in the hopes of disposing of this proceeding on procedural grounds.
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`Winning less relief than one sought for one’s investment does not constitute harm;
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`Patent Owner is still better off for its efforts.
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`
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`Finally, to the extent Patent Owner asserts that it diverted resources from its
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`upcoming Patent Owner’s Response to address the instant motions, Petitioner notes
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`that this represents a further “strategic decision” of the sort just discussed.
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`Moreover, Petitioner notes that in the conference call with the Board that led to
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`11
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`
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`these motions, Petitioner agreed to adjust the due date for Patent Owner’s
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`Response to account for the delay.
`
`
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`Thus, Petitioner submits that the relief it requests does not in fact result in
`
`harm to Patent Owner; rather, as the Board has previously recognized, Petitioner’s
`
`naming of additional RPIs who may not in fact be RPIs redounds to Patent
`
`Owner’s benefit.
`
`C.
`
`Petitioner’s conduct does not amount to “gamesmanship.”
`
`The Aerospace panel took note of the dissent in Elekta regarding the
`
`“potential for gamesmanship” that late amendment of RPIs might foster.
`
`Aerospace at 9. Specifically, the Elekta dissent voiced concern that “[v]arious
`
`strategic considerations may encourage concealment by petitioners, or other forms
`
`of gamesmanship related to the timing of disclosing real parties-in-interest.”
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`Elekta, dissent at 1. Neither the Elekta dissent nor Aerospace specifically
`
`identified what other activities might amount to “gamesmanship,” although the
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`reference to “concealment” suggests an overlap with the “circumventing estoppel
`
`rules/bad faith” prong discussed above in subsection A.
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`Petitioner represents that at no time in this proceeding has it engaged in
`
`intentional concealment or other forms of “gamesmanship.” As is their
`
`prerogative, the Thompsons as entrepreneurs have chosen to engage in diverse
`
`business ventures, to organize these ventures into a variety of legal entities, and to
`
`12
`
`
`
`change the structure and the relationship of these entities from time to time to suit
`
`their business objectives under the tax code. These facts do not constitute
`
`“gamesmanship.” Moreover, Patent Owner has been aware of the relevant facts on
`
`these matters since well before it sought leave to petition on the RPI issue.
`
`Petitioner notes that ascertaining RPI status is hardly straightforward, being
`
`a “highly fact-dependent question” with no “bright-line test.” Trial Practice Guide,
`
`77 Fed. Reg. at 48,759. At the same time, while the statute requires a petitioner to
`
`list RPIs, it does not require identification of privies. 35 U.S.C. § 312(a)(2). As
`
`discussed above, Petitioner’s decision not to list Rubicon Communications, LLC
`
`and the Thompsons as RPIs is supported by good-faith reasoning from the facts at
`
`hand, and informed by the Board’s prior decisions. While Patent Owner may
`
`dispute Petitioner’s reasoning, the existence of a dispute does not establish that
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`Petitioner was engaging in “gamesmanship,” or otherwise acted in bad faith or
`
`contrary to rules.
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`D. Granting Petitioner’s requested relief promotes the “core functions” of RPI
`
`practice while also promoting this proceeding’s “just, speedy, and inexpensive
`
`resolution.”
`
`
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`As noted above, the Board has held that, absent a petitioner’s bad faith or
`
`evidence of an attempt to avoid estoppel, and absent harm to a patent owner,
`
`“permitting a petitioner to amend challenged RPI disclosures while maintaining the
`
`13
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`
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`original filing date promotes the core functions [of RPI practice], while promoting
`
`also the just, speedy, and inexpensive resolution of our proceedings.” Aerospace at
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`3 (quoting Elekta at 9; internal citations omitted).
`
`
`
`The core functions of RPI practice are to “assist members of the Board in
`
`identifying potential conflicts, and to assure proper application of the statutory
`
`estoppel rules.” Permitting Petitioner to add Rubicon Communications, LLC and
`
`the Thompsons in their executive capacities as RPIs clarifies the record, and
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`therefore enhances RPI practice. Specifically, as discussed above in subsection A,
`
`Rubicon Communications, LLC and the Thompsons are in privity with named
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`RPIs, and thus already subject to estoppel by virtue of this relationship. Privity
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`requires drawing a conclusion from the relationships between parties that is not
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`necessarily immediately evident, however. Explicitly adding these parties to this
`
`proceeding as RPIs conclusively resolves any ambiguity regarding estoppel as to
`
`these entities, resulting in a record that is more definitive (and more beneficial to
`
`Patent Owner) than the statute requires. See 35 U.S.C. § 312(a)(2) (a petitioner
`
`must list only RPIs, not privies).
`
`
`
`Granting Petitioner’s requested relief further promotes the “just, speedy, and
`
`inexpensive resolution” of this proceeding. As stated previously, Petitioner had a
`
`reasoned, good-faith belief that it had discharged its duty to identify RPIs when it
`
`submitted its corrected petition. Patent Owner, being interested in avoiding the
`
`14
`
`
`
`merits of Petitioner’s case and terminating the proceeding on procedural grounds,
`
`chose to continue pressing the RPI issue. Here, Petitioner has identified the
`
`universe of currently active entities owned by the Thompsons, two of which are
`
`not relevant to this proceeding. Petitioner has offered to add as RPIs those entities
`
`that Patent Owner seeks to add in the related litigation, thus effectively conceding
`
`the estoppel issue. Given Petitioner’s lack of bad faith, bad acts, or gamesmanship,
`
`and the actual benefit to Patent Owner, granting Petitioner’s requested relief
`
`resolves the RPI issue in a just fashion without the burden and expense of further
`
`litigating the issue in this forum.
`
`
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`For at least the foregoing reasons, Petitioner respectfully requests that the
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`Board grant the relief requested above.
`
`
`
`Respectfully submitted,
`
` / Anthony M. Petro /
`Anthony M. Petro
`Registration No. 59,391
`tpetro@intprop.com
`MEYERTONS, HOOD, KIVLIN,
`KOWERT & GOETZEL, P.C.
`1120 S. Capital of Texas Hwy.
`Building 2, Suite 300
`Austin, Texas 78746
`(512) 853-8883
`
`
`Date: March 3, 2017
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`15
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`Certificate of Service
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`
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`Pursuant to 37 C.F.R. § 42.6(e), the undersigned certifies that completed and
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`entire copies of Petitioner’s Motion to List Additional Parties as Real Parties-in-
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`Interest were served on the following counsel of record via Federal Express
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`Standard Overnight on March 3, 2017.
`
`/Anthony M. Petro /
`Anthony M. Petro
`Registration No. 59,391
`tpetro@intprop.com
`MEYERTONS, HOOD, KIVLIN,
`KOWERT & GOETZEL, P.C.
`1120 S. Capital of Texas Hwy.
`Building 2, Suite 300
`Austin, Texas 78746
`(512) 853-8883
`
`16
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`Andrew M. Riddles
`Elizabeth A. Alquist
`Howard Grossman
`7 Times Square
`New York, NY 10036
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