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`______________________
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`______________________
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`RUBICON COMMUNICATIONS, LP
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`Petitioner,
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`v.
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`LEGO A/S
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`Patent Owner.
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`________________________
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`Case IPR2016-01187
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`Patent 8,894,066
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`PETITIONER’S OPPOSITION TO PATENT OWNER’S MOTION TO
`VACATE INSTITUTION DECISION AND TERMINATE PROCEEDING
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`Petitioner Rubicon Communications, LP (“Petitioner”) opposes Patent
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`Owner’s Motion to Vacate Institution Decision and Terminate Proceeding
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`(“Motion”), which asserts that Petitioner fails to list all real parties-in-interest
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`(“RPIs”). The Board authorized this opposition on February 24, 2017 (Paper 48).
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`I.
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`Introduction
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`Patent Owner’s Motion represents a manufactured controversy. Wishing to
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`avoid the merits of this case, Patent Owner repeatedly alleges “misdirection,” “bad
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`faith,” and “concealment” by Petitioner. Patent Owner does not, however, support
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`its allegations of malfeasance with record evidence that is relevant to the RPI issue
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`(as opposed to a different issue in a different proceeding). Moreover, Patent
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`Owner ignores Board precedent, declining even to cite to the case (Lumentum) that
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`overrules the “jurisdictional” RPI assumption grounding the cases Patent Owner
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`relies on. Most notably, Patent Owner requests the extraordinary equitable relief
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`of termination without any showing whatsoever of harm—rendering its request for
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`relief untenable. Given its unsubstantiated allegations, misstatements of law, and
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`complete absence of alleged harm, this Motion should be denied.
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`II. Discussion
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`Contrary to Patent Owner’s unfounded allegations, Petitioner did not engage
`A.
`in “misdirection in this proceeding,” “bad faith,” or “concealment.”
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`The Motion is replete with conclusory assertions that Petitioner has engaged
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`in “misdirection in this proceeding” in violation of its duty of candor before the
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`1
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`Office, and has attempted to “conceal” the RPI status of various parties from the
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`Board while acting in “bad faith.” See, e.g., Motion at 3, n.1, 6, 11. Petitioner
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`vigorously and categorically denies these assertions. Before addressing them,
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`however, Petitioner summarizes the salient facts that have led the parties to this
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`point, and Petitioner’s reliance on them.
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`Petitioner had a good faith basis, grounded in facts and prior Board
`1.
`decisions, for naming only SmallWorks, LLC as an RPI in its corrected petition.
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`Petitioner filed its initial petition on June 10, 2016 erroneously naming only
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`Rubicon Communications, LP as an RPI. Subsequently, the Board permitted
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`Petitioner to list SmallWorks, LLC as an RPI while preserving Petitioner’s original
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`filing date. Decision Granting Motion to Correct RPI (“Decision”) at 6. Decision
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`at 6. The Board further stated that “[t]o the extent that further correction of the real
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`parties-in-interest may be required, Petitioner is encouraged to pursue such
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`correction promptly.” Decision at 5.
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`Petitioner then amended its petition to add only SmallWorks, LLC as an
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`RPI, and represents that it had a good faith basis for not adding either Rubicon
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`Communications, LLC or the Thompsons as RPIs. On June 5, 2015, Rubicon
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`Communications, LLC assigned all assets and liabilities to SmallWorks, LLC (Ex.
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`1033) (the “Assignment”). Since SmallWorks, LLC stood alone as the successor
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`in interest to Rubicon Communications, LLC for the issues raised in this
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`proceeding, Petitioner believed in good faith that SmallWorks, LLC was the sole
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`2
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`RPI. That is, before this proceeding began, Rubicon Communications, LLC had
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`no interest in this matter, owing to the Assignment.
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`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
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`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
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`law.” Enovate Medical, LLC v. Intermetro Industries Corp., IPR2015-00301, slip
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`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).
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`Finally, the Board has held that the owner of a single-member LLC that was
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`treated as a disregarded entity for tax purposes, and who paid for the petition out of
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`personal expenses, was nevertheless not an RPI. 1964 Ears, LLC v. Jerry Harvey
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`Audio Holding, LLC, IPR2016-00494, Slip. op. 6-7 (July 20, 2016) (Paper 21).
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`Upon amending its petition, Petitioner considered the RPI matter closed.
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`When Patent Owner indicated on January 30, 2017 that it intended to seek
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`termination via its Motion, newly added counsel of record reviewed the matter in
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`light of the Board’s post-Lumentum decisions. From this review, Petitioner
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`3
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`concluded that while Rubicon Communications, LLC and the Thompsons were not
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`RPIs under the relevant facts and law, Petitioner would consent to listing these
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`parties as RPIs for estoppel purposes, in order to conclusively resolve the RPI
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`question and proceed to the merits of this case. This decision matured into
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`Petitioner’s Motion to List Additional Parties as Real Parties-in-Interest (Paper 53).
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`Patent Owner’s allegations of “misdirection in this proceeding” are
`2.
`incorrect and unsubstantiated.
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`Patent Owner
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`repeatedly and
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`incorrectly accuses Petitioner of
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`“misdirection,” beginning with Patent Owner’s inaccurate representation of the
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`conference call that led to the Motion. Motion, n.1. Contrary to Patent Owner’s
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`characterization, Petitioner did not offer to add Rubicon Communications, LLC as
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`an RPI “only after being asked directly by Judge Powell.” Id. Rather, Petitioner
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`represented that it did not believe that Rubicon Communications, LLC was an RPI,
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`but proposed that Petitioner be permitted to add this party to conclusively resolve
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`the issue. Judge Powell specifically commented on the fact that nothing prevents a
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`petitioner from identifying a party as an RPI when it is not in fact an RPI,
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`indicating that he understood Petitioner’s proposal.
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`As noted in the previous section, Petitioner had a reasoned, good-faith belief
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`that the RPIs in its corrected petition were accurate in light of the facts and relevant
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`law. Patent Owner, in contrast, repeatedly alleges that Petitioner “continue[s] to
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`argue” that Rubicon Communications, LLC and the Thompsons are not RPIs
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`4
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`without having a basis for maintaining this position. Motion at 2, 6, 11, 13. Patent
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`Owner makes this “bad faith” argument, however, without citing to any evidence
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`that is (a) relevant to the RPI question and (b) developed in this proceeding rather
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`than in the district court litigation (and even then, Patent Owner is incorrect as to
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`bad faith actions in the litigation). A disagreement over the RPI question is not
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`itself evidence of “bad faith.” Reasonable minds may differ as to the issue.
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`Petitioner submits that a position grounded in facts and law cannot amount to “bad
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`faith” merely because the other party finds the argument unappealing.
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`Patent Owner repeatedly characterizes the Assignment as a “sham,” on the
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`basis of James Thompson’s deposition testimony indicating that the Assignment as
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`drafted conveyed more to SmallWorks, LLC than the Thompsons intended.
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`Motion at 5. That is, when asked what assets the Assignment transferred, Mr.
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`Thompson answered “all the assets specific to SmallWorks,” revealing an
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`inconsistency between what the Thompsons intended to convey and what the
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`Assignment actually conveyed. Exhibit 2024 at 73.
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`But this inconsistency is irrelevant to the RPI issue. Either the Assignment
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`conveyed all assets and liabilities of Rubicon Communications, LLC to
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`SmallWorks, LLC, as it appears to, or it only conveyed the assets and liabilities
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`“specific to SmallWorks” and subject to the copending litigation, as Mr. Thompson
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`intended. In either event, SmallWorks, LLC stood as the successor-in-interest to
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`5
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`Rubicon Communications, LLC for the issues in dispute with Patent Owner
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`regarding SmallWorks products; the only question is whether it stands as the
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`successor-in-interest with respect to every asset and liability of Rubicon
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`Communications, LLC. If SmallWorks, LLC received additional assets and
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`liabilities unrelated to SmallWorks products via the Assignment, this does not
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`negate the fact that the Assignment vested in SmallWorks, LLC all the assets and
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`liabilities related to the SmallWorks products, thereby divesting Rubicon
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`Communications, LLC as an RPI.
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`Finally, at no point did Petitioner “conceal” RPIs from the Board or from
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`Patent Owner, as Patent Owner repeatedly asserts. Motion at 11, 13. By its own
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`admission, Patent Owner was aware of the existence of Rubicon Communications,
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`LLC and the Thompsons well prior to commencement of this proceeding. Motion
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`at 11 (quoting Patent Owner’s interrogatories of July, 2015). As to the Board,
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`Petitioner notes that the statute merely requires RPIs to be named, not privies of
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`RPIs. 35 U.S.C. § 312(a)(2). As discussed in greater detail below, Petitioner
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`submits that Rubicon Communications, LLC and the Thompsons are in fact related
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`to the named RPIs through privity, and therefore estopped on that basis. 35 U.S.C.
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`§ 315(e). Not listing parties as RPIs when (a) Petitioner holds a good-faith belief
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`that the parties are not RPIs in view of the facts and applicable law, and (b) those
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`parties are already estopped through privity, does not amount to “concealment.”
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`6
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`Patent Owner’s references to district court discovery are inapposite to the
`3.
`extent they do not address control over this proceeding; the relevant evidence
`shows that control is vested in SmallWorks, LLC via its agents, the Thompsons.
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`The majority of Patent Owner’s factual allegations concern discovery issues
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`in the related district court proceeding. Specifically, Patent Owner (a) complains
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`of Petitioner’s representations regarding whether Rubicon Communications, LLC
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`is a necessary party in the litigation, Motion at 3-4, (b) questions which entities
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`engaged in allegedly infringing activities, id. at 6, 11-13, and (c) further questions
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`the relationship of SmallWorks, LLC and Rubicon Communications, LLC with
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`respect to one another, id. at 5-6, 14.
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`Throughout its Motion, Patent Owner repeatedly refers to this proceeding
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`and the related litigation jointly, implicitly conflating the distinct issues of these
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`separate proceedings and the standards for evaluating them. The district court
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`proceeding is concerned with determining whether infringement occurred, and
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`which party is liable. Neither of these issues—nor, by extension, facts directed to
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`these issues—are relevant to this proceeding.
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`Rather, the Board has held that “RPI is the relationship between a party and
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`a proceeding; RPI does not describe the relationship between parties.” Aruze
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`Gaming Macau, Ltd. v. MGT Gaming, Inc., Case IPR2014-01288, slip op. at 11
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`(PTAB Feb. 20, 2015) (original emphasis). Consequently, the Board’s focus in
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`determining RPI status of a nonparty is “on the degree of control the nonparty
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`7
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`could exert over the inter partes review, not [over] the petitioner.” Id. Patent
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`Owner’s references to which entities allegedly committed infringement, or the
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`relationship of these entities to each other, do not inform the question of whether
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`an unnamed party could control this proceeding, and therefore is an RPI.
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`Patent Owner does attempt to address the control issue, but incorrectly and
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`without evidence. Patent Owner asserts, in relevant part, as follows:
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`Jamie and James Thompson have had exclusive ownership over
`Petitioners and Rubicon Communications, LLC. As sole directors and
`officers, they also have exercised complete control over Petitioners
`and Rubicon Communications, LLC. Most significantly, Jamie and
`James Thompson, perhaps through Rubicon Communications, LLC,
`are funding this proceeding and the related litigation. . . . Through
`blurred corporate boundaries, Rubicon Communications, LLC also
`has exercised control over this proceeding, and indisputably has
`engaged in infringing activities.
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`Motion at 14 (internal citations omitted).
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`While the Thompsons do in fact own the entities in question here, the Board
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`has unambiguously held in several decisions that ownership is not sufficient to
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`confer RPI status, as discussed above in subsection A.1. In particular, the Board
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`declined to hold the owner of a single-member LLC to be an RPI, even when he
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`had paid for the filing of a petition from personal expenses. 1964 Ears at 6-7. To
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`this point, the Board stated that “Petitioner is a limited liability company that lacks
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`8
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`a corporeal body, and can therefore only act through the actions of its agents and
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`managers.” Id. at 7. Accordingly, to the extent the Thompsons control this
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`proceeding, they do so as agents of SmallWorks, LLC, not as RPIs themselves.
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`As to funding of this proceeding, Patent Owner specifically questioned Mr.
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`Thompson as follows:
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`Q. And that includes the inter partes review filed with the
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`patent office. Is anybody paying for the expenses in that?
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`A. We are.
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`Q. Who’s – who’s the “we”?
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`A. My wife and I.
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`Q. Anyone else?
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`A. No.
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`Exhibit 2024 at 101. That is, Patent Owner has proffered no evidence to support
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`its suggestion
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`that “perhaps” Rubicon Communications, LLC funds
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`this
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`proceeding; indeed, Patent Owner’s own evidence cuts against this suggestion.
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`As to whether Rubicon Communications, LLC “[t]hrough blurred corporate
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`boundaries . . . has exercised control over this proceeding,” Petitioner again notes
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`that no record evidence supports this contention. In fact, the Assignment
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`demonstrates the opposite: in addition to transferring liability for “all obligations of
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`Seller associated with [the Purchased Assets],” it operated to convey “all of
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`Seller’s right, title, and interest in the Purchased Assets; . . . all other rights of
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`Seller, relating to the business of the Seller; [and] such of Seller’s other rights and
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`9
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`remedies as may directly or indirectly relate to . . . the rights assigned.” Exhibit
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`1033 at 1 (emphasis added). That is, to the extent Rubicon Communications, LLC
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`had the authority to pursue this proceeding as one of its “rights [or] remedies”
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`directly or indirectly related to the SmallWorks products, it unambiguously
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`transferred that right to SmallWorks, LLC via the Assignment.
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`Patent Owner fatally ignores the Board’s precedential Lumentum decision
`B.
`and the Aerospace framework for permitting amendment of RPIs, and fails to
`identify any harm at all—much less harm that merits termination.
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`Patent Owner’s legal analysis is fatally defective in that it relies entirely on
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`cases decided before the Board’s precedential holding that RPI is not a
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`jurisdictional matter. Lumentum Holdings, Inc. v. Capella Photonics, Inc., Case
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`IPR2015-00739, slip op. at 5 (PTAB Mar. 4, 2016) (Paper 38).1 Prior to
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`Lumentum, the Board frequently terminated proceedings based on RPI issues when
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`an amended petition would be time-barred. The undersigned attorney personally
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`reviewed all post-Lumentum PTAB decisions identified by Docket Navigator as
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`1 In particular, the decision that Patent Owner specifically analogizes to this case is
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`grounded in the Board’s belief that it did not have the authority to permit
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`correction of RPI without changing a petition’s filing date—a position specifically
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`abrogated by Lumentum. GEA Process Engineering, Inc. v. Steuben Foods, Inc.,
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`Case IPR2014-00041, slip op. at 22 (PTAB. Dec. 23, 2014) (Paper 140)
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`10
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`raising an RPI issue, however, and could find no instance where a proceeding had
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`been terminated based on RPI issues following Lumentum.
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`The correct post-Lumentum legal framework for determining whether to
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`permit a petitioner to amend an RPI while preserving its original filing date was
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`articulated in Aerospace Communications Holdings Co., Ltd. v. The Armor All/Step
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`Products Co., IPR2016-00411, slip op. 3 (June 28, 2016) (Paper 12). Specifically:
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`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
`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
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`grant a motion to add parties as RPIs, even when a legitimate dispute exists as to
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`whether the added parties are actually RPIs, when (1) the petitioner has not
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`attempted to circumvent estoppel rules or act in bad faith; (2) the patent owner has
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`not suffered demonstrable harm and is in fact benefited by the concession of
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`estoppel; and (3) there has been no “gamesmanship” on the part of the petitioner
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`during the IPR proceeding. Id. at 5-10.
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`Under Aerospace, to justify termination, Patent Owner would have to
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`show—not merely allege—that Petitioner engaged in “bad faith,” attempted to
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`11
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`“circumvent estoppel rules,” or committed “gamesmanship.” Moreover, as an
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`equitable matter, Patent Owner would need to show that Petitioner’s conduct
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`harmed Patent Owner to a degree that justified termination—relief the Board has
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`recognized to be “extraordinary.” Lumentum at 7.
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`Patent Owner has shown none of these. In particular, Patent Owner’s
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`Motion is itself extraordinary in that it does not even assert that Patent Owner was
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`harmed by the RPI issue in this proceeding. As a threshold matter of equity, the
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`“extraordinary” relief of termination with prejudice (because Petitioner would be
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`time-barred from refiling) cannot be granted in the absence of any identified harm.
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`Petitioner submits that this defect alone warrants denial of the Motion.
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`Regarding the remaining Aerospace factors, as demonstrated above,
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`Petitioner had a good faith basis for omitting the Thompsons and Rubicon
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`Communications, LLC as RPIs. Patent Owner’s conclusory assertions of “bad
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`faith” do not amount to a refutation, no matter how often they are repeated.
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`As to “circumventing estoppel rules,” Petitioner submits that for the reasons
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`given below, both Rubicon Communications, LLC and the Thompsons are related
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`to named RPIs through privity. By statute, privies of RPIs are also estopped. 35
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`U.S.C. § 315(e). Thus, one cannot be said to “circumvent estoppel rules” when a
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`party is estopped through privity, particularly when the facts of privity are clear
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`and known to Patent Owner, as they were here.
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`12
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`Specifically, Rubicon Communications, LLC is related by privity with
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`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;
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`* * *
`(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
`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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`The 1964 Ears panel, discussing authority cited by the movant, noted that in the
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`cited case, a sole owner of a corporation “was precluded from re-litigating the
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`same claims the corporation had previously litigated” “because he was in privity
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`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). Petitioner submits that
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`13
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`as sole owners of SmallWorks, LLC, the Thompsons are in privity with this entity,
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`and therefore estopped. Thus, because estoppel already applies to the disputed
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`entities via privity, there has been no “circumvent[ion of] estoppel rules.”
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`As to “gamesmanship,” this factor arose from the dissent in Elekta, Inc. v.
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`Varian Medical Systems, Inc., IPR2015-01401, (December 31, 2015) (Paper 19),
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`on which Lumentum relied. Specifically, the Elekta dissent voiced concern that
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`“[v]arious strategic considerations may encourage concealment by petitioners, or
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`other forms of gamesmanship related to the timing of disclosing real parties-in-
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`interest.” Elekta, dissent at 1. Neither Elekta nor Aerospace were more specific
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`regarding what might constitute “gamesmanship.”
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`Petitioner represents that at no time in this proceeding has it engaged in
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`intentional concealment or other forms of “gamesmanship.” The Thompsons’ use
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`of multiple entities to suit their business objectives under the tax code is their
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`prerogative. Moreover, Patent Owner was aware of these entities since well before
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`it sought leave to file its Motion. As discussed above, Petitioner’s decision not to
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`list Rubicon Communications, LLC and the Thompsons as RPIs is supported by
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`good-faith reasoning from the facts at hand, and informed by the Board’s prior
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`decisions. While Patent Owner may dispute Petitioner’s reasoning, the existence
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`of a dispute does not establish that Petitioner was engaging in “gamesmanship.”
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`14
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`Further, via its co-pending motion, Petitioner is offering to name Rubicon
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`Communications LLC and the Thompsons as RPIs in this proceeding, not because
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`Petitioner believes they are RPIs, but because doing so allows the parties to move
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`on from this controversy and get to the merits of this proceeding. This is a
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`valuable concession that Petitioner is willing to make to avoid further expenditure
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`of time, money, and effort on this procedural matter, despite having a good faith
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`belief that these parties are not in fact RPIs.
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`For at least the foregoing reasons, Petitioner respectfully requests that the
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`Board deny Patent Owner’s Motion.
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`Respectfully submitted,
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` / 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
`
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`Date: March 10, 2017
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`Certificate of Service
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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 Opposition To Patent Owner’s Motion To Vacate
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`Institution Decision And Terminate Proceeding were served on the following
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`counsel of record via Federal Express Standard Overnight on March 10, 2017.
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`/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
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`Andrew M. Riddles
`Elizabeth A. Alquist
`Howard Grossman
`7 Times Square
`New York, NY 10036
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