UNITED STATES PATENT AND TRADEMARK OFFICE
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`———————————
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`———————————
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`TWITTER, INC.,
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`Petitioner
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`v.
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`YOUTOO TECHNOLOGIES, LLC,
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`Patent Owner
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`———————————
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`Case IPR2017-01131
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`U.S. Patent No. 8,464,304
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`PATENT OWNER’S REPLY IN SUPPORT OF MOTION FOR STAY
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`
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`———————————
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`———————————
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`TWITTER, INC.,
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`Petitioner
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`v.
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`YOUTOO TECHNOLOGIES, LLC,
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`Patent Owner
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`———————————
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`Case IPR2017-01131
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`U.S. Patent No. 8,464,304
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`———————————
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`PATENT OWNER’S REPLY IN SUPPORT OF MOTION FOR STAY
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`
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`Case IPR2017-01131
`Patent Owner’s Reply in Support of Motion for Stay
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`TABLE OF CONTENTS
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`I.
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`II.
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`Introduction.…………………………………………………………………1
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`The Board Should Allow the Automatic Stay to Remain in Place…………..1
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`A.
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`B.
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`C.
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`The Exception Under 11 U.S.C. § 362(b)(4) to the Automatic Stay
`Provision Does Not Apply Here………………………………………1
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`This Proceeding Is Primarily a Dispute Between Private Parties…….3
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`The Policies Behind the Bankruptcy Laws Weigh in Favor of a
`Stay……………………………………………………………………4
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`III. Conclusion………………………………………………………………….. 5
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`Certificate of Service……………………………………………………………….7
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`
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`!ii
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`
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`Case IPR2017-01131
`Patent Owner’s Reply in Support of Motion for Stay
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`I.
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`Introduction
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`Patent Owner Youtoo Technologies, LLC (“Patent Owner”) hereby submits
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`this Reply in support of Patent Owner’s Motion for Stay (Paper 20) and in reply to
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`Petitioner’s Opposition to the Motion for Stay (Paper 22). This proceeding should
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`be stayed at least pending a decision by the Bankruptcy Court as to whether to an
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`automatic stay applies and whether to lift the stay.
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`The exception under 11 U.S.C. §362(b)(4) to the automatic stay provisions
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`of 11 U.S.C. §362(a) does not apply to this proceeding because, at its current stage,
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`this proceeding is primarily an adjudication of a dispute between adverse private
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`parties rather than an enforcement of a governmental unit’s regulatory power.
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`Moreover, there is a public policy interest in allowing Patent Owner’s assets to be
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`defended in the current proceeding for the benefit of its creditors. This interest
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`outweighs Petitioner’s desire to eviscerate Patent Owner’s patent assets while
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`crippled by bankruptcy and before Patent Owner’s creditors have had adequate
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`time to determine how to proceed.
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`II. The Board Should Allow the Automatic Stay to Remain in Place.
`
`A.
`
`The Exception Under 11 U.S.C. § 362(b)(4) to the Automatic Stay
`Provision Does Not Apply Here.
`
`Section 362(b)(4) of the Bankruptcy Code provides that the filing of a
`
`petition does not operate as a stay: !1
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`
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`Case IPR2017-01131
`Patent Owner’s Reply in Support of Motion for Stay
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`of the commencement or continuation of an action or proceeding by
`a governmental unit … to enforce such governmental unit’s …
`police and regulatory power, including the enforcement of a
`judgment other than a money judgment, obtained in an action or
`proceeding by the governmental unit to enforce such governmental
`unit’s police or regulatory power.
`
`11 U.S.C. § 362(b)(4). “This exception requires both that: 1) the proceeding be
`
`brought by a governmental unit and (2) the proceeding be brought to enforce ...
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`police or regulatory power of the governmental unit.” In re Edison Mission
`
`Energy, 502 B.R. 830, 835 (Bankr. N.D.Ill. 2013). Here, neither the United States
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`Patent and Trademark Office (“USPTO”) nor the Patent Trial and Appeal Board
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`(“PTAB”) brought the proceeding within the meaning of the law. The proceeding
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`was brought, instead, by Petitioner.
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`Although there are cases where proceedings initiated by private parties were
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`allowed to proceed under the “police power exception,” those cases involved a
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`governmental unit joining in or commencing its own proceeding. For example, in
`
`In re Halo Wireless Inc., 684 F.3d 581 (5th Cir.2012), the court determined that the
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`exception applied based on evidence that the governmental unit becomes a party to
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`the proceeding. Id. at 592; Edison Mission Energy, 502 B.R. at 836 (distinguishing
`
`the situation in Halo Wireless where the exception applied from a situation where a
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`governmental unit did not become a party to the proceeding). “Similarly, in U.S.
`
`Int'l Trade Commission v. Jaffe, 433 B.R. 538 (E.D.Va. 2010), the court held that
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`the automatic stay was not applicable to an action where a private party files a
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`
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`!2
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`Case IPR2017-01131
`Patent Owner’s Reply in Support of Motion for Stay
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`complaint but the government agency independently chooses to commence an
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`investigation. Jaffe, 433 B.R. at 544.” Edison Mission Energy, 502 B.R. at 836.
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`Here, neither the USPTO nor the PTAB have become a party to the proceeding or
`
`commenced their own proceeding. Accordingly, the “police power exception”
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`does not apply and the automatic stay should remain in place.
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`B.
`
`This Proceeding Is Primarily a Dispute Between Private Parties.
`
`Even in cases where the proceeding is brought by a governmental unit, the
`
`bankruptcy court must determine whether the proceeding is “brought to enforce ...
`
`police or regulatory power of the governmental unit.” Edison Mission Energy, 502
`
`B.R. at 835. Although proceedings that are authorized by Congress “necessarily
`
`effectuate the public policy of the United States,” Chao v. Hospital Staffing
`
`Services, Inc., 270 F.3d 374, 389 (6th Cir. 2001), the court must determine whether,
`
`on balance, the proceeding is in furtherance of public policies or private interests.
`
`Id. “These inquiries contemplate that the bankruptcy court, after assessing the
`
`totality of the circumstances, determine whether the particular regulatory
`
`proceeding at issue is designed primarily to protect the public safety and welfare,
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`or represents a governmental attempt to recover from property of the debtor estate,
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`whether on its own claim, or on the nongovernmental debts of private parties.
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`McMullen v. Sevigny (In re McMullen), 386 F.3d 320, 325 (1st Cir. 2004).
`
`“[W]hen the action incidentally serves public interests but more substantially
`
`
`
`!3
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`Case IPR2017-01131
`Patent Owner’s Reply in Support of Motion for Stay
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`adjudicates private rights, courts should regard the suit as outside the police power
`
`exception, particularly when a successful suit would result in a pecuniary
`
`advantage to certain private parties vis-a-vis other creditors of the estate, contrary
`
`to the Bankruptcy Code's priorities.” Id. at 390.
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`In this case, the present proceeding is primarily an adjudication between
`
`private parties, at least at the current stage of the proceedings. The very name of
`
`the proceeding, “Inter Partes Review,” reveals that the proceeding is inter partes,
`
`or “between the parties.” Moreover, the statute specifically contemplates that the
`
`proceedings are frequently related to, and intertwined with, ongoing litigation
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`between the parties. 35 U.S.C. § 315 (setting forth restrictions relating to Inter
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`Partes Reviews and litigation involving related patents). Here, due to the ongoing
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`litigation between the parties on the patents at issue here, the primary impact of the
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`current proceeding, if allowed to proceed, would potentially result in a substantial
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`pecuniary benefit to Petitioner at the expense of Patent Owner’s creditors,
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`particularly because a stay of the current proceedings simply maintains the status
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`quo. As such, the proceeding is not primarily to enforce the police or regulatory
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`power of the USPTO or PTAB, and the “police power exception” does not apply.
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`C.
`
`The Policies Behind the Bankruptcy Laws Weigh in Favor
`of a Stay.
`
`As noted in Halo Wireless:
`
`
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`!4
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`Case IPR2017-01131
`Patent Owner’s Reply in Support of Motion for Stay
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`the automatic stay and its exception present two different, and at
`times competing, policies. On the one hand, the stay aims to protect
`debtors and creditors during the pendency of a bankruptcy
`proceeding to ensure that debtors get appropriate relief and that
`creditors receive payment in a fair and orderly manner…. On the
`other hand, the exception to the stay helps to ensure that debtors do
`not use a declaration of bankruptcy to avoid the consequences of
`their actions that threaten the public interest.
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`Halo Wireless, 684 F.3d at 588 (citations omitted). Here, the Patent Owner does
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`not have existing funds, as Petitioner is aware from attending the creditors’
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`meeting. Accordingly, the policies behind the automatic stay favor giving the
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`creditors time to get up to speed on the merits and background of the current
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`proceedings and to determine how to proceed to protect the remaining assets of
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`Patent Owner. A stay under these circumstances is entirely consistent with the
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`purpose of the automatic stay provisions under bankruptcy laws, which serves the
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`public interest of protecting assets for the benefit of creditors when an entity files
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`for bankruptcy. Moreover, due to the lack of funds, Patent Owner is not currently
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`in a position to assert the patents in a manner that would otherwise threaten the
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`public interest.
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`III. Conclusion
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`Because the exception to the automatic stay provision does not apply and
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`because the Bankruptcy Court is better-positioned to determine proper application
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`of the bankruptcy laws, Patent Owner respectfully requests that the Board grant a
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`!5
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`Case IPR2017-01131
`Patent Owner’s Reply in Support of Motion for Stay
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`stay pending closing or dismissal of the bankruptcy, or lifting of the stay by the
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`Bankruptcy Court.
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`Dated: February 5, 2018
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`Respectfully submitted,
`
`
`
` /Spencer C. Patterson/
`Spencer C. Patterson (Reg. No. 43,849)
`Grable Martin Fulton PLLC
`1914 Skillman St., Ste. 110-144
`Dallas, TX 75206 Tel.:
`(214) 396-8601
`Fax.: (214) 988-0775
`
`
`
`!6
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`
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`Case IPR2017-01131
`Patent Owner’s Reply in Support of Motion for Stay
`
`CERTIFICATE OF SERVICE
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`Pursuant to 37 C.F.R. § 42.6(e), I certify that I caused to be served on the
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`counsel for Petitioner a true and correct copy of the foregoing “Patent Owner’s
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`Reply in Support of Motion for Stay” by electronic means on February 5, 2018
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`at the following email addresses of record:
`
`Lead Counsel
`Todd M. Siegel
`KLARQUIST SPARKMAN, LLP
`121 SW Salmon Street, Suite 1600,
`Portland, Oregon, 97204
`Tel: 503-595-5300
`Fax: 503-595-5301
`todd.siegel@klarquist.com
`
`Backup Counsel
`Andrew M. Mason
`KLARQUIST SPARKMAN, LLP
`121 SW Salmon Street, Suite 1600,
`Portland, Oregon, 97204
`Tel: 503-595-5300
`Fax: 503-595-5301
`andrew.mason@klarquist.com
`
`Dated: February 5, 2018
`
`Robert T. Cruzen
`KLARQUIST SPARKMAN, LLP
`121 SW Salmon Street, Suite 1600,
`Portland, Oregon, 97204
`Tel: 503-595-5300
`Fax: 503-595-5301
`rob.cruzen@klarquist.com
`
`
`
` /Spencer C. Patterson/
`Spencer C. Patterson (Reg. No. 43,849)
`Grable Martin Fulton PLLC
`1914 Skillman St., Ste. 110-144
`Dallas, TX 75206 Tel.:
`(214) 396-8601
`Fax.: (214) 988-0775
`
`
`
`!7
`
`
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