UNITED STATES PATENT AND TRADEMARK OFFICE
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`MICROSOFT CORPORATION
`Petitioner
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`v.
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`PROXYCONN, INC.
`Patent Owner
`____________
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`Case IPR2017-00261
`Patent 6,757,717
`____________
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`PATENT OWNER’S SUR-REPLY IN SUPPORT
`OF ITS PRELIMINARY RESPONSE TO
`PETITION FOR INTER PARTES REVIEW1
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`1 Authorized by Board email dated April 6, 2017.
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`Proxyconn and Microsoft executed their Tolling Agreement and filed their
`Joint Stipulation to dismiss on the same day, January 22, 2013. (Ex. 1012, Ex.
`2005.) Microsoft does not dispute that the provisions of the Agreement are
`binding or that they have the effects set forth in the Preliminary Response. (See
`Paper 7 at 5-6.) Microsoft also does not dispute that the Agreement was made to
`effectively stay the litigation, consistent with the previous agreement of the parties.
`Indeed, that was the purpose of the Agreement provisions maintaining the court
`orders from the previous litigation, from which Microsoft continues to benefit in
`the instant litigation. Nonetheless, Microsoft urges the Board to ignore these
`effects of the Agreement in determining the effect of the Joint Stipulation.
`First, Microsoft argues that the Agreement is inadmissible. But, Proxyconn
`cites the Agreement to ensure that its legal effects are enforced in this proceeding,
`a use permitted by the Agreement. (Ex. 2005, ¶ 15.) See In re Outboard Marine
`Corp., 299 B.R. 488, 501 (Bankr. N.D. Ill. 2003) (narrowly interpreting tolling
`agreement inadmissibility provision “to avoid an absurd result”).
`Second, Microsoft argues that the prior suit should be treated as “a nullity”
`because the Agreement “is not reflected in the stipulated dismissal or any court
`order.” (Reply at 4.) However, Microsoft does not cite to any authority that a
`tolling agreement must be referenced in a dismissal or a court order to have effect.
`Under Federal Rule of Civil Procedure 41(a)(1)(A)(ii), there was no requirement
`that the court “endorse” the agreement to dismiss or enter any order to give it
`effect. The Agreement is not a nullity; for example, it controlled the scope of the
`claims brought by Proxyconn in the currently pending litigation. Indeed, if the
`district court had signed off on the agreed stipulation by the parties, obviating the
`need for the Agreement, there would be no question that Microsoft's Petition is
`time barred. Proxyconn is merely asking that the Board honor the intentions of the
`parties at the time the Agreement was entered.
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`Microsoft argues that “near-identical” arguments were considered in
`Microsoft Corp. v. Parallel Networks Lic., LLC, but Microsoft does not cite to any
`evidence that the contractual provisions in that case were intended to achieve a stay
`or were otherwise at all similar to those in the Agreement. The Board’s institution
`decision in Parallel Networks simply refers to provisions that gave “on-going legal
`effect” to the dismissed actions, without providing any details of what those
`provisions were (IPR2015-00483, Paper 10 at 12-13), and Microsoft has offered no
`evidence of what those provisions were in the present proceeding, either.
`To the extent Parallel Networks suggests that courts apply a rigid rule that a
`dismissal of an action “without prejudice” always renders the action a nullity, it is
`incorrect. While that may be the default effect of a dismissal “without prejudice,”
`courts recognize that parties making voluntary dismissals without prejudice can
`make them subject to conditions or stipulations that cause the dismissed action to
`have continuing effect. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375,
`381-82 (1994) (parties may agree that court retains jurisdiction to enforce
`settlement agreement, as a condition of a Rule 41(a)(1)(ii) voluntary dismissal);
`In re Piper Aircraft Distrib. System Antitrust Litig., 551 F.2d 213, 221 (8th Cir.
`1977) (dismissal without prejudice can be made subject to stipulation that
`determinations made
`in first action “survive dismissal or be a binding
`determination” in a future action). As noted in the Preliminary Response, the
`Board also has recognized that a dismissal without prejudice does not always leave
`the case “as if it never existed.” (Paper 7 at 8-9 (quoting CQG, Inc.).)
`Likewise, if Parallel Networks suggests that courts will not consider
`agreements outside the four corners of a stipulation or order to determine the
`effects of a dismissal, it is also incorrect. Concha v. London, 62 F.3d 1493, 1508-
`09 (9th Cir. 1995) (treating Rule 41(a)(1) voluntary dismissal as an appealable
`dismissal with prejudice, to achieve intent of the parties expressed in a separate
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`agreement); see also Norfolk S. Corp. v. Chevron, U.S.A., Inc., 371 F.3d 1285,
`1289 (11th Cir. 2004) (looking to settlement agreement to determine res judicata
`effect of order of dismissal with prejudice, to effectuate the parties’ intent).
`Third, Microsoft invites the Board to apply a rule that there must be
`“uninterrupted continuation of the litigation” in order to prevent the dismissed case
`from being a nullity. (Reply at 4-5.) But, in Histologics, the first action was
`stayed for an extended period of time due to a bankruptcy proceeding, and the
`second action was filed before that stay was lift. IPR2014-00779, Paper 6 at 2-3.
`Just as the Histologics litigation was interrupted by the bankruptcy stay, the
`litigation between Proxyconn and Microsoft was interrupted by the agreed de facto
`stay pending resolution of their IPRs. Such an interruption does not mean that the
`first case becomes a nullity, so long as the second case serves as a continuation of
`the first. The somewhat lengthy duration of the de facto stay was a result of
`Microsoft’s decisions to file two IPRs, to appeal both IPRs to the Federal Circuit,
`and to insist on additional briefing on the IPRs on remand. Having dragged out its
`initial two IPRs for so long, Microsoft cannot now point to that lengthy delay as a
`reason that it should be permitted yet another IPR petition.
`In its Reply, Microsoft argues for rigid rules, which ignore the context and
`intent of the parties’ actions and automatically treat the filing of a complaint as a
`nullity if a voluntary dismissal uses the words “without prejudice” or if there is a
`gap between a dismissal and the filing of the successor action. As shown above,
`both the courts and the Board take a more pragmatic approach, considering the
`context of a dismissal and its actual, practical effect, not just whether the parties
`used particular words. Following that approach, the Joint Stipulation and the
`Agreement should be given the effect that the Parties intended: as a stay until the
`IPRs were resolved. Accordingly, Microsoft’s petition should be time-barred.
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`Respectfully submitted,
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`/s/ Neil A. Rubin
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`Amir Naini (Reg. No. 45,770)
`Neil A. Rubin (Reg. No. 67,030)
`Russ August & Kabat
`12424 Wilshire Blvd., 12th Fl.
`Los Angeles, CA 90025
`Phone: (310) 826-7474
`Fax: (310) 826-6991
`anaini@raklaw.com
`nrubin@raklaw.com
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`Dated: April 14, 2017
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`CERTIFICATE OF SERVICE (37 C.F.R. § 42.6(e)(1))
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`The undersigned hereby certifies that the above document was served on
`April 14, 2017, by filing this document through the Patent Review Processing
`System as well as delivering a copy via electronic mail upon the following
`attorneys of record for the Petitioner:
`
`
`John D. Vandenberg, Reg. No. 31,312
`Andrew M. Mason, Reg. No. 64,034
`Klarquist Sparkman, LLP
`john.vandenberg@klarquist.com
`andrew.mason@klarquist.com
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`/s/ Neil A. Rubin
`
`Amir Naini (Reg. No. 45,770)
`Neil A. Rubin (Reg. No. 67,030)
`Russ August & Kabat
`12424 Wilshire Blvd., 12th Fl.
`Los Angeles, CA 90025
`Phone: (310) 826-7474
`Fax: (310) 826-6991
`anaini@raklaw.com
`nrubin@raklaw.com
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`
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`Date: April 14, 2017
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