`
`_________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`_________________
`
`TWITTER, INC.,
`Petitioner,
`
`v.
`
`YOUTOO TECHNOLOGIES, LLC,
`Patent Owner.
`
`_________________
`
`Case IPR2017-01131
`Patent 8,464,304
`
`_________________
`
`TWITTER, INC.’S OPPOSITION
`TO PATENT OWNER’S MOTION FOR STAY
`
`
`
`
`
`
`TABLE OF CONTENTS
`
`IPR2017-01131
`Patent 8,464,304
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`Page(s)
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`I.
`
`II.
`
`INTRODUCTION ................................................................................. 1
`
`THE BOARD SHOULD DENY THE MOTION FOR STAY ............ 1
`
`A.
`
`Inter Partes Review Proceedings Are Excluded
`From The Automatic Stay Under 11 U.S.C. § 362(b)(4) ...................... 1
`
`1.
`
`2.
`
`IPRs Are Proceedings By A Governmental Unit ....................... 2
`
`The Primary Purpose Of An Inter Partes Review Is To
`Protect The Public Welfare, Not Adjudicate Private Rights ...... 4
`
`B.
`
`If The Board Intends To Stay The
`Proceeding, Youtoo Should Not Be Permitted To
`File A Patent Owner Response After January 3, 2018 ......................... 9
`
`III.
`
`CONCLUSION ...................................................................................12
`
`
`
`
`
`
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`Page i
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`IPR2017-01131
`Patent 8,464,304
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`LIST OF PREVIOUSLY FILED EXHIBITS
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`Exhibits 1001-1019: Filed and served March 24, 2017 with Twitter’s Petition for
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`Inter Partes Review of U.S. Patent No. 8,464,304.
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`Exhibit 1020: Filed and served October 18, 2017 with Twitter’s Unopposed
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`Motion for Pro Hac Vice of Robert T. Cruzen.
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`
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`Page ii
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`
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`IPR2017-01131
`Patent 8,464,304
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`I.
`
`INTRODUCTION
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`Petitioner Twitter, Inc. (“Petitioner”) hereby submits the following opposition
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`to Youtoo Technologies, LLC’s Motion for Stay (Paper 20). This proceeding should
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`not be stayed, because the stay provisions of 11 U.S.C. § 362(a) do not apply to this
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`proceeding. This instituted inter partes review is a continuation of an action by the
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`government to enforce the government’s regulatory power, and thus, this proceeding
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`is exempt from stay under the explicit exception of 11 U.S.C. § 362(b)(4). Even if
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`the Board believes a stay is appropriate, Youtoo’s strategic use of its bankruptcy
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`filing as a pretext to seeking yet further delays and modification of the Scheduling
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`Order should not be condoned, and the PTAB should deem Youtoo to have waived
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`its opportunity to file a patent owner response if not filed by the current deadline.
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`As explained more fully below, the Board should not stay this proceeding.
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`II. THE BOARD SHOULD DENY THE MOTION FOR STAY
`
`A.
`
`Inter Partes Review Proceedings Are Excluded
`From The Automatic Stay Under 11 U.S.C. § 362(b)(4)
`
`Bankruptcy Code § 362(b)(4) provides in pertinent part that the filing of a
`
`petition under the Bankruptcy Code does not operate as a stay of:
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`[T]he commencement or continuation of an action or
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`proceeding by a governmental unit . . . to enforce such
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`governmental unit’s . . . regulatory power, including the
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`enforcement of a judgment other than a money judgment
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`TWITTER’S OPPOSITION TO
`PATENT OWNER’S MOTION FOR STAY
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`Page 1
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`IPR2017-01131
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`obtained in an action or proceeding by the governmental
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`unit to enforce such governmental unit’s . . . regulatory
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`power.”
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`11 U.S.C. § 362(b)(4).
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`This exception to the bankruptcy automatic stay applies where a proceeding
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`(i) is brought or continued by a governmental unit and (ii) seeks to vindicate the
`
`public interest, as opposed to the private rights of a third-party. See, e.g., I.T.C. v.
`
`Jaffe, 433 B.R. 538, 543 (E.D. Va. 2010). Here, the instant inter partes review
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`satisfies both of the requirements of 11 U.S.C. § 362(b)(4) and is therefore exempt
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`from the automatic stay.
`
`1.
`
`IPRs Are Proceedings By A Governmental Unit
`
`First, an instituted IPR is a “continuation of an action…by a governmental
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`unit.” 11 U.S.C. § 362(b)(4). The United States Patent and Trademark Office
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`(“USPTO”) and the Patent Trial and Appeal Board are unquestionably governmental
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`units created by Congress. See 35 U.S.C. §§ 1, 6.1 An IPR involves two distinct
`
`
`1 The Bankruptcy Code defines a “governmental unit” as:
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`United States; State; Commonwealth; District; Territory; municipality;
`foreign state; department, agency, or instrumentality of the United
`States (but not a United States trustee while serving as a trustee in a
`case under this title), a State, a Commonwealth, a District, a Territory,
`a municipality, or a foreign state; or other foreign or domestic
`government.
`
`11 U.S.C. § 101(27) (emphasis added).
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`TWITTER’S OPPOSITION TO
`PATENT OWNER’S MOTION FOR STAY
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`Page 2
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`phases: (i) “the institution phase,” beginning with the filing of an IPR petition and
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`concluding in the Board’s decision on whether to “institute” an IPR, and, if
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`instituted, (2) “the merits phase,” beginning after the Board’s decision to institute
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`the IPR and concluding in the Board’s determination of patentability in light of the
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`instituted grounds. See Harmonic Inc. v. Avid Tech., Inc., 815 F.3d 1356, 1364-65
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`(Fed. Cir. 2016); 35 U.S.C. § 314(a). During the institution phase, the Board
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`establishes the parameters that will confine the proceeding during the merits phase.
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`Harmonic Inc., 815 F.3d at 1367. The Board has the discretion to institute an IPR,
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`but is never compelled to do so. Id. While private parties can submit an IPR petition
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`to the Board, those private parties do not require constitutional standing and may not
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`even remain in the IPR. See Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2144
`
`(2016); 11 U.S.C. § 317(a). Rather, the Board may continue to conduct an IPR even
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`after the petitioning parties have decided to cease participation. Id. (citing 35 U.S.C.
`
`§ 317(a)).
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`The United States District Court for the Eastern District of Virginia
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`considered substantially similar proceedings in front of the International Trade
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`Commission (the “ITC”) in United States International Trade Commission v. Jaffe,
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`and held that those proceedings are not subject to the bankruptcy automatic stay
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`pursuant to 11 U.S.C. § 362(b)(4). 433 B.R. at 543. In Jaffe, a private party filed a
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`complaint initiating a proceeding before the ITC. Id. at 541. However, the filing of
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`TWITTER’S OPPOSITION TO
`PATENT OWNER’S MOTION FOR STAY
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`the complaint with the ITC resulted only in a “pre-institution proceeding,” where the
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`ITC examined the complaint for sufficiency and performed a preliminary
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`investigation. Id. After the ITC’s preliminary investigation, the ITC decided to
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`“institute” the proceeding based on the merits of the complaint. Id. The court
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`explained that although the proceeding would continue through an adversarial
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`process after it was instituted, the ITC was the party with the power to continue the
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`proceeding, not the private parties. Id. Accordingly, the proceeding was a proceeding
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`“by the ITC” that met the requirements of 11 U.S.C. § 364(b)(4). Id. at 543.
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`Here, the Board, like the ITC, had the power to institute the IPRs, and the
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`Board is the party with the power to continue the proceedings. The Board itself has
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`held that “IPR is an adjudicatory proceeding of a federal agency…” Ericsson Inc.
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`v. Regents of the Univ. of Minn., Case No. IPR2017-01186, slip op. at 4 (Paper No.
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`14) (PTAB Dec. 19, 2017) (emphasis added). The adversarial nature of the IPRs is
`
`intended to assist the Board’s exercise of its regulatory responsibilities, but does not
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`change the fact that the IPRs are proceedings by the Board as a governmental unit.
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`2.
`
`The Primary Purpose Of An Inter Partes Review Is To
`Protect The Public Welfare, Not Adjudicate Private Rights
`
`IPRs also meet the second requirement of 11 U.S.C. § 362(b)(4) – they seek
`
`to protect the public interest, not adjudicate private disputes. To determine whether
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`proceedings satisfy this requirement for exclusion from the automatic stay under §
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`TWITTER’S OPPOSITION TO
`PATENT OWNER’S MOTION FOR STAY
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`Page 4
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`362(b)(4), courts have applied two overlapping and related tests: the pecuniary
`
`purpose test and the public policy test. See, e.g., Halo Wireless, Inc. v. Alenco
`
`Commc’ns, Inc. (In re Halo Wireless, Inc.), 684 F.3d 581, 588 (5th Cir. 2012);
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`N.L.R.B. v. Edward Cooper Painting, Inc., 804 F.2d 934, 942 (6th Cir. 1986).
`
`The pecuniary purpose test asks whether the government primarily seeks to
`
`protect a pecuniary governmental interest in the debtor’s property, as opposed to
`
`protecting the public welfare. In re Halo Wireless, Inc., 684 F.3d at 588; Edward
`
`Cooper Painting, 804 F.2d at 942. The primary question in the public policy test is
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`whether the government is effectuating public policy rather than adjudicating private
`
`rights. In re Halo Wireless, Inc., 684 F.3d at 588; Edward Cooper Painting, 804 F.2d
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`at 942. If the purpose of the law is to effectuate public policy, then the exception to
`
`the automatic stay applies. In re Halo Wireless, Inc., 684 F.3d at 588. Alternatively,
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`if the purpose of the law is to protect a pecuniary interest in the debtor’s property or
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`primarily to adjudicate private rights, then the exception is inapplicable. Id.
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`The application of these tests does not depend upon whether a private party is
`
`involved in the prosecution of the action or proceeding. See In re Halo Wireless, 684
`
`F.3d at 589; see also McMullen v. Sevigny (In re McMullen), 386 F.3d 320, 328 (1st
`
`Cir. 2004) (“[T]he same sound public policy reasons which undergird the [§]
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`362(b)(4) exception counsel against any rule which might dissuade private parties
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`from providing governmental regulators with information which might require
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`TWITTER’S OPPOSITION TO
`PATENT OWNER’S MOTION FOR STAY
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`Page 5
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`enforcement measures to protect the public from imminent harm.”); Jaffe, 433 B.R.
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`at 541-43. While regulatory proceedings commenced by private parties may have
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`similarities to private litigation, they also promote the public interest by enforcing
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`laws and regulations. See, e.g., In re Halo Wireless, 684 F.3d at 589-90. See also
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`D.M. Barber, Inc. v. Valverde (In re D.M. Barber, Inc.), 13 B.R. 962, 963 (Bankr.
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`N.D. Tex. 1981) (“Proceedings before the National Labor Relations Board are
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`commenced by the initiative of aggrieved individual persons and thus have some
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`characteristics of private litigation. However the case law reflects that the
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`proceedings by the Board are not to adjudicate private rights but to effectuate public
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`policy.”); Edward Cooper Painting, 804 F.2d at 941 (“[T]he NLRB determines
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`which complaints it will act upon in its own name in furthering the policies of the
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`federal labor laws.”).
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`When tested against these criteria, IPRs are clearly excluded from the reach
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`of the bankruptcy stay under 11 U.S.C. § 362(b)(4). The Supreme Court explained
`
`that IPRs are “less like judicial proceedings and more like a specialized agency
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`proceeding.” Cuozzo Speed Techs., 136 S. Ct. at 2144. The Supreme Court explained
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`that the features of an IPR “indicate that the purpose of the proceeding is not quite
`
`the same as the purpose of district court litigation.” Id. An IPR is not a proceeding
`
`to judicially determine private rights to monetary or equitable relief. Rather, the
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`primary purpose of an IPR is to allow the Board to re-examine the agency’s own
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`TWITTER’S OPPOSITION TO
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`Page 6
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`actions in issuing a patent. Id. IPRs protect the public’s “paramount interest in seeing
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`that patent monopolies are kept within their legitimate scope.” Id. (internal citations
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`omitted). The purpose of permitting the Patent Office to correct its errors is to
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`“remedy defective governmental (not private) action, and if need be to remove
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`patents that should never have been granted.” Patlex Corp. v. Mossinghoff, 758 F.2d
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`594, 604 (Fed. Cir. 1985); cf. Ericsson, Case No. IPR2017-01186, slip op. at 3-4
`
`(Bisk, J., concurring) (“inter partes review represents no more than the Patent
`
`Office’s reconsideration of its initial decision…in the form of a patent grant… inter
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`partes review is a circumscribed in rem proceeding, in which the Patent Office
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`exercises jurisdiction over the patent challenged, rather than the parties named.”).
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`“A defectively examined and therefore erroneously granted patent must yield to the
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`reasonable Congressional purpose of facilitating the correction of governmental
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`mistakes.” Patlex, 758 F.2d at 604. Accordingly, IPRs meet the second requirement
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`of 11 U.S.C. § 362(b)(4) and are not subject to the bankruptcy automatic stay.
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`This conclusion is supported by other court decisions in connection with
`
`similar regulatory proceedings. For example, in In re Halo Wireless, various
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`telephone companies filed suits against Halo Wireless, Inc. (“Halo”) with ten state
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`public utility commissions (the “PUCs”). Id. at 583. As a result, Halo filed a
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`bankruptcy proceeding. Id. The telephone companies sought and received an order
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`from the bankruptcy court that the PUC proceedings were excluded from the
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`TWITTER’S OPPOSITION TO
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`Page 7
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`bankruptcy automatic stay under 11 U.S.C § 362(b)(4). Id. The Fifth Circuit affirmed
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`the bankruptcy court, rejecting Halo’s argument that the actions in the PUCs were
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`private party actions. Id. The Fifth Circuit determined that although proceedings in
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`front of the PUCs are commenced by private parties, the continuation of those
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`proceedings by the PUCs is in furtherance of the public policy to make adequate and
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`efficient telecommunications services available to all at just, fair and reasonable
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`rates. Id. at 592-94. Accordingly, the Fifth Circuit concluded that both the pecuniary
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`purpose and public policy tests supported the application of § 362(b)(4). Id. at 593-
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`94.
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`Also, in In re McMullen, the First Circuit held that a party did not violate the
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`bankruptcy automatic stay by submitting a complaint against the debtor to the
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`Massachusetts Division of Registration for Real Estate Agents based on the debtor’s
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`alleged fraudulent retention of a real estate deposit. In re McMullen, 386 F.3d at 322-
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`23. The First Circuit found that applicable law empowered the real estate board to
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`suspend, revoke, or refuse to renew a real estate broker license where the broker had
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`improperly refused to account for or remit money in the broker’s possession. Id. at
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`325. This power was intended to safeguard the public from the wrongful future
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`conduct of corrupt or incompetent professionals, which fell squarely within the
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`public policy exception of 11 U.S.C. § 362(b)(4). Id. The First Circuit recognized
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`that while the creditor filing the complaint with the real estate board might have a
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`TWITTER’S OPPOSITION TO
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`Page 8
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`pecuniary interest in the recovery of the creditor’s claim against the debtor, the real
`
`estate board’s power was limited to revocation of the debtor’s real estate license, and
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`did not adjudicate that private claim. Id. at 326-27.
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`Much like the proceedings in both Halo Wireless and McMullen, IPRs serve
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`an important public policy function to ensure the proper regulation of patent
`
`monopolies. The Board should not be, and is not, prevented from performing this
`
`important function simply because the Patent Owner has filed bankruptcy.
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`Thus, because 11 U.S.C. § 362(b)(4) exempts an instituted inter partes review
`
`from being subject to the stay provisions of § 362(a), the Board should not stay this
`
`proceeding.
`
`B.
`
`If The Board Intends To Stay The
`Proceeding, Youtoo Should Not Be Permitted To
`File A Patent Owner Response After January 3, 2018
`
`The Board has sua sponte granted Youtoo an extension for filing its Patent
`
`Owner Response to January 3, 2018. Paper No. 19. Because the automatic stay
`
`provisions of the bankruptcy code do not apply here (see II.A, infra), there is no
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`showing of good cause, and Youtoo should not be granted any further indefinite,
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`extension of time in this case. Youtoo’s bankruptcy filing, like its previous attempts
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`to change counsel, seems to be a calculated move to delay this proceeding.
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`But if the Board still finds it proper to stay this proceeding, Youtoo should
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`nonetheless have to file its Response to the Petition by the currently scheduled
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`TWITTER’S OPPOSITION TO
`PATENT OWNER’S MOTION FOR STAY
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`Page 9
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`January 3, 2018 due date. As Twitter has previously mentioned, since May 16, 2017,
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`three attorneys with different firms have represented Youtoo. Paper 7 at 2. A few
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`weeks before the original Patent Owner Response deadline of December 14,
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`Youtoo’s lead counsel (Scott McKeown) and one of two backup counsel (Stephen
`
`L. Levine) sought to withdraw. The Board denied Youtoo counsel’s motions to
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`withdraw were since denied by the Board, but sua sponte afforded Youtoo an
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`extension of time for filing its Response.
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`As Youtoo has not sought an extension in this case, Youtoo’s counsel has
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`ostensibly been in the process of preparing its Response, or is otherwise intending
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`to waive its right to file a Response. Youtoo should not be allowed an opportunity
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`to manipulate the schedule of this proceeding by strategically filing for bankruptcy
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`shortly after its counsel’s motions were denied.
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`As Twitter also previously noted, Youtoo’s own actions created this situation.
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`Mr. Levine was not withdrawing because of any infirmity or conflict, rather, only
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`because Youtoo wanted “to be represented by different counsel.” Paper 12 at 2.
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`Further, Youtoo’s lead counsel Mr. McKeown stated in his October 30 email to the
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`Board that he was “unable to proceed” because he joined a new firm “in August,”
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`over two months before notifying the Board or Twitter. But Twitter is unaware of
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`any reason that Mr. McKeown cannot proceed to continue to represent Youtoo: as
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`far as Twitter is aware, Mr. McKeown, and his firm, Ropes and Gray, have no
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`TWITTER’S OPPOSITION TO
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`conflict with being adverse to Twitter. Lest there be any doubt, Mr. McKeown was
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`counsel of record since the institution of these proceedings. He chose to move firms
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`in August 2017, and from that point on, either he alone or in combination with his
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`client chose to make no preparations for a Patent Owner Response and likewise
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`chose to only inform the Board of the alleged inability to represent Youtoo days
`
`before the Patent Owner Response was due, but months after the alleged conflict had
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`occurred.
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`Youtoo and all of its counsels have known since the Board issued its October
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`2, 2017 Scheduling Order that the Response was originally due December 14 (now
`
`due January 3). All three firms representing Youtoo have been afforded more than
`
`enough time to prepare the Response. If those firms have not prepared a Response
`
`by January 3, they should not be granted further opportunity to do so by way of an
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`indefinite extension of time.
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`To the extent that the Board seeks to impose a stay in this matter, to the
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`detriment of Twitter, Twitter at least asks for the equitable relief that Youtoo be
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`deemed to have waived its right to file a Patent Owner Response if none is filed by
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`January 3. The Board has done more than enough to comply with its statutory duty
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`to “provid[e] for the filing by the patent owner of a response to the petition.” 35
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`U.S.C. § 316(a)(8). Youtoo should not have been permitted to use its eleventh-hour
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`change of counsel as a ruse to obtain a delay in this proceeding, and likewise, Youtoo
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`TWITTER’S OPPOSITION TO
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`should not be allowed now to use its eleventh-hour change of counsel request and
`
`bankruptcy filing to maintain its right to file a Response beyond the current deadline.
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`Allowing Youtoo to game this proceeding to its own benefit, and to Twitter’s
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`detriment, would only incentivize other parties appearing before the Board to engage
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`in similar tactics. Permitting Youtoo’s gamesmanship will also only encourage
`
`Youtoo to further flout the rules and to disregard the Board’s expectations.
`
`As the Board knows, inter partes review proceedings are time-sensitive and
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`are intended to result in a “just, speedy, and inexpensive resolution.” 37 C.F.R. §
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`42.1(b). Youtoo’s request to stay this case one day before the original due date of its
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`Response is antithetical to those goals, as it prejudices Twitter, delays this
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`proceeding, increases the costs to Twitter, and is fundamentally unjust to Twitter.
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`III. CONCLUSION
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`Because the instant proceeding is continued by the government, and is exempt
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`from the bankruptcy stay provisions of 11 U.S.C. § 362, the Board should deny the
`
`Motion for Stay.
`
`Dated: December 20, 2017
`
`Respectfully submitted,
`
`By: /Todd M. Siegel/
`Todd M. Siegel (Registration No. 73,232)
`todd.siegel@klarquist.com
`KLARQUIST SPARKMAN, LLP
`One World Trade Center, Suite 1600
`121 S.W. Salmon Street
`Portland, Oregon 97204
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`TWITTER’S OPPOSITION TO
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`Tel: 503-595-5300
`Fax: 503-595-5301
`
`Counsel for Petitioner
`
`
`
`
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`TWITTER’S OPPOSITION TO
`PATENT OWNER’S MOTION FOR STAY
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`Page 13
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`CERTIFICATE OF SERVICE
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`The undersigned certifies that on December 20, 2017, a complete copy
`
`Twitter, Inc.’s Opposition to Patent Owner’s Motion for Stay was served on
`
`counsel for Youtoo Technologies, LLC via electronic mail as follows:
`
`Spencer C. Patterson
`Grable Martin Fulton PLLC
`1914 Skillman St., Ste. 110-144,
`Dallas, TX 75206
`Tel: 214- 396-8601
`Fax: 214- 988-0775
`Email: spatterson@gchub.com
`
`
`
`Scott McKeown
`Oblon, McClelland, Maier
` & Neustadt, LLP
`1940 Duke Street
`Alexandria, Virginia 22314
`Tel: 703-412-6297
`Fax: 703-413-2220
`Email: cpdocketmckeown@oblon.com
`
`Stephen L. Levine
`Carrington, Coleman, Sloman &
` Blumenthal, L.L.P.
`901 Main Street, Suite 5500
`Dallas, Texas 75202
`Tel: 214-855-3025
`Fax: 214-855-1333
`Email: slevine@ccsb.com
`
`
`By: /Todd M. Siegel/
`Todd M. Siegel (Registration No. 73,232)
`todd.siegel@klarquist.com
`KLARQUIST SPARKMAN, LLP
`One World Trade Center, Suite 1600
`121 S.W. Salmon Street
`Portland, Oregon 97204
`Tel: 503-595-5300
`Fax: 503-595-5301
`
`
`
`Counsel for Petitioner
`
`CERTIFICATE OF SERVICE
`
`Page 1
`
`