UNITED STATES PATENT AND TRADEMARK OFFICE
`___________________
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`___________________
`PAYPAL, INC.
`UPWORK GLOBAL INC.
`SHOPIFY, INC.
`SHOPIFY (USA), INC.
`STRAVA, INC.
`VALASSIS COMMUNICATIONS, INC.
`RETAILMENOT, INC.
`DOLLAR SHAVE CLUB, INC.
`
`Petitioners,
`v.
`PERSONALWEB TECHNOLOGIES LLC
`LEVEL 3 COMMUNICATIONS, LLC,
`
`Patent Owners.
`___________________
`IPR2019-01111
`Patent 7,802,310
`___________________
`PETITIONERS UPWORK GLOBAL INC., SHOPIFY, INC., SHOPIFY
`(USA), INC., STRAVA, INC., VALASSIS COMMUNICATIONS, INC.,
`RETAILMENOT, INC., AND DOLLAR SHAVE CLUB, INC. REQUEST
`FOR RECONSIDERATION OF BOARD DECISION
`
`Mail Stop PATENT BOARD
`Patent Trial and Appeal Board
`U.S. Patent & Trademark Office
`P.O. Box 1450
`Alexandria, VA 22313–1450
`
`
`
`
`___________________
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`___________________
`PAYPAL, INC.
`UPWORK GLOBAL INC.
`SHOPIFY, INC.
`SHOPIFY (USA), INC.
`STRAVA, INC.
`VALASSIS COMMUNICATIONS, INC.
`RETAILMENOT, INC.
`DOLLAR SHAVE CLUB, INC.
`
`Petitioners,
`v.
`PERSONALWEB TECHNOLOGIES LLC
`LEVEL 3 COMMUNICATIONS, LLC,
`
`Patent Owners.
`___________________
`IPR2019-01111
`Patent 7,802,310
`___________________
`PETITIONERS UPWORK GLOBAL INC., SHOPIFY, INC., SHOPIFY
`(USA), INC., STRAVA, INC., VALASSIS COMMUNICATIONS, INC.,
`RETAILMENOT, INC., AND DOLLAR SHAVE CLUB, INC. REQUEST
`FOR RECONSIDERATION OF BOARD DECISION
`
`Mail Stop PATENT BOARD
`Patent Trial and Appeal Board
`U.S. Patent & Trademark Office
`P.O. Box 1450
`Alexandria, VA 22313–1450
`
`
`
`
`
`
`I.
`
`INTRODUCTION
`
`
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`IPR2019-01111
`Patent No. 7,802,310
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`The Board’s dispositive finding of privity in this matter should be reheard and
`
`reversed for two primary reasons.
`
`First, the Board’s holding unjustifiably deprives Petitioners of their
`
`constitutional right to challenge the ‘310 patent. A proper privity analysis is
`
`grounded in due process. WesternGeco LLC v ION Geophysical Corp., 889 F.3d
`
`1308, 1317 (Fed. Cir. 2018). Section 315(b)’s time-bar can only apply to a privy
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`who previously had a full and fair opportunity to challenge the validity of the patent.
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`The Board’s decision violates this maxim.
`
`Second, the Board’s holding overlooks instructive cases limiting the reach of
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`privity. The Board correctly acknowledges that its examination of privity under
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`Section 315(b) is guided by common law notions of the same, including an
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`application of the factors set forth in Taylor v. Sturgell, 553 U.S. 880 (2008). Yet,
`
`the Board unjustifiably ignored holdings from appellate courts recognizing the
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`limited reach of privity to specific facts and circumstances.
`
`The Board’s erroneous consideration of the privity issue resulted in a
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`misapplication of the Taylor factors to deny institution of the instant Petition. The
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`Board’s decision also sets a dangerous precedent that encourages patent holders to
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`serially litigate against manufacturers first and then customers second, while cutting
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`off the rights of the latter to challenge the validity of commonly asserted patents.
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`1
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`Patent No. 7,802,310
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`The Board should undertake rehearing of the Petition in consideration of these
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`errors under 37 CFR § 42.71(d)(2). Petitioners are concurrently requesting
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`Precedential Opinion Panel review of the issues herein.
`
`This request is made by Petitioners Upwork Global Inc., Shopify, Inc.,
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`Shopify (USA), Inc., Strava, Inc., Valassis Communications, Inc., RetailMeNot,
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`Inc., and Dollar Shave Club, Inc. Petitioner PayPal, Inc. does not join this group
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`seeking rehearing of the Board’s Decision.
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`II. REHEARING IS WARRANTED
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`As the Board recognized in its Decision, “the standards for the privity inquiry
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`must be grounded in due process.” Decision at 14 (citing WesternGeco, 889 F.3d at
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`1317). To ensure due process is not unjustifiably taken, the Board must resolve
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`“whether the petitioner and the prior litigant’s relationship—as it relates to the
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`lawsuit—is sufficiently close that it can be fairly said that the petitioner had a full
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`and fair opportunity to litigate the validity of the patent in that lawsuit.” Id. (citing
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`WesternGeco, 889 F.3d at 1317).
`
`In other words, do the Petitioners and Amazon, by virtue of the 2011 Amazon
`
`lawsuit, have a sufficiently close relationship such that Petitioners had a “full and
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`fair opportunity” to litigate the validity of the ‘310 patent in that 2011 lawsuit? The
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`question is not whether the Petitioners and Amazon have a sufficiently close
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`2
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`IPR2019-01111
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`relationship in a present lawsuit. The inquiry instead focuses on whether in the prior
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`lawsuit a sufficiently close relationship exists to foreclose present review.
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`This distinction makes sense. To deprive a party of an argument without
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`violating its due process rights requires a finding that such a full and fair opportunity
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`existed in the past. See Synopsys v. Mentor Graphics Corp., IPR2012-00042, Paper
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`60 at 12-14 (citing Taylor, referring to “the nature of the relationship between the
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`parties at the time that the statutorily-referenced complaint was served” and holding
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`no privity because “there is no contention that Synopsys had any control of this
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`previous suit or even had notice of it, along with an opportunity to participate while
`
`it was still pending”).
`
`This is consistent with the policy behind Section 315(b)—specifically, to
`
`install safeguards to prevent parties from using IPRs as “tools for harassment” or to
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`make “repeated … administrative attacks on the validity of a patent.” WesternGeco,
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`889 F.3d at 1317 (citing H. Rep. No. 112-98 at 40 (2011)). The record before the
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`Board, however, does not invoke any such policy concerns. Instead, the Board’s
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`decision deprives Petitioners’ of the right to challenge the ‘310 patent by relying
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`upon an unrelated litigation filed over eight years ago.
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`To wit, these facts are undisputed: (i) the 2011 Amazon case involved only
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`Amazon products (see Ex. 2008), (ii) at the time the instant petition was filed, only
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`non-Amazon products remained in Petitioners’ cases (see Ex. 2013), (iii) Amazon
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`3
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`never challenged the ‘310 patent in an IPR, (iv) Amazon’s present indemnity of the
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`Petitioners extends only to Amazon products (see Ex. 1021 at 7), and (v) therefore,
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`would not cover PersonalWeb’s remaining, non-Amazon allegations against
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`Petitioners in the pending lawsuits (see id.).
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`The Board was unmoved. It held that because Amazon S3 products were at
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`issue (i) in the 2011 Amazon lawsuit, and (ii) in one or more later-filed complaints
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`against Petitioners, that privity attached then, and continues to attach today.
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`Decision at 28. It did not matter to the Board that S3 dropped out of the lawsuits
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`against Petitioners by the time the instant Petition was filed. Id. at 20. In other
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`words, so long as privity of some type existed between Amazon and the Petitioners
`
`at some point in time under different facts and circumstances, it was enough for the
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`Board to time-bar the Petition.
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`This holding is contrary to due process and prevailing case law.
`
`A. The Board’s Decision Violates Due Process.
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`As a general rule, nonparty preclusion is disfavored. Taylor, 553 U.S. at 892-
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`93. Only in certain exceptions can a tribunal find otherwise. Id. Why? Because
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`the application of privity necessarily “risks binding those who have not had a full
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`and fair opportunity to litigate.” Id.
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`But nowhere in the Board’s decision is there a discussion of whether the
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`Petitioners actually had a “full and fair opportunity” to contest the validity of the
`
`4
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`‘310 patent in the 2011 Amazon lawsuit. There is a good reason for this—nothing
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`in the record suggests that the Petitioners had such an opportunity. There was no
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`mention of any Petitioner in the 2011 Amazon lawsuit. No Petitioner was a party to
`
`that lawsuit or participated in discovery. There is no allegation that any indemnity
`
`by Amazon extends back to 2011, nor is there any allegation that any Petitioner used
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`S3 in 2011. In fact, some Petitioners did not even exist in 2011.
`
`How can it be said then that the current Petitioners had their chance back in
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`2011 and wasted it? According to the Board, because Amazon had the chance for
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`them. More specifically, because Amazon S3 was at issue in 2011, and similarly
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`was at issue in some of PersonalWeb’s original complaints filed against Petitioners
`
`in 2018, this was enough.
`
`This holding is violative of fundamental tenets of due process. It is undisputed
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`that Amazon cannot win Petitioners’ cases against PersonalWeb. See Ex. 1017.
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`Before this Petition was filed, Amazon’s S3 product was dismissed from the cases
`
`against Petitioners. See Ex. 2013. What remains are allegations relating to non-
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`Amazon products. Why then should Petitioners’ rights be extinguished by
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`allegations no longer at issue?
`
`The Federal Circuit recently addressed the issue of privity in the context of
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`changing circumstances. Specifically, in Power Integrations, Inc. v. Semiconductor
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`Components Industries, LLC the Court held that the examination of privity is not a
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`5
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`fixed analysis. 926 F.3d 1306 (Fed. Cir. 2019). Instead, privity under Section 315(b)
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`can rise and fall depending upon a continuum of events, including events occurring
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`after filing but before institution. Id. at 1314. In other words, it is erroneous for the
`
`Board to conclude that privity existed in the past, but yet not consider events
`
`occurring thereafter.
`
`The Board did not address Power Integrations in its Decision. Instead, the
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`Board rationalized that privity is alive and well because the MDL court’s dismissal
`
`of Amazon’s S3 product is on appeal, and “depending on the result of that appeal,
`
`Amazon may be called to defend its customers further concerning S3 products.”
`
`Decision at 21-22. This is little more than a strawman argument. The MDL court’s
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`dismissal of PersonalWeb’s S3 claims is a final judgment. See Ex. 2012. If the
`
`Petitioners would have waited to see how the appeal resolved, then Petitioners
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`themselves would assuredly be time-barred, as the appeal remains pending today.
`
`As the Board knows, Petitioners cannot toll their time to file IPRs while they wait
`
`for the Federal Circuit to decide this issue.
`
`At bottom, the Board’s ruling undermines the purposes of Section 315(b), i.e.,
`
`to avoid using IPRs as “tools for harassment” or to make “repeated … administrative
`
`attacks on the validity of a patent.” WesternGeco, 889 F.3d at 1317. Amazon never
`
`filed any IPRs against PersonalWeb’s patents. Before the instant Petitions,
`
`Petitioners never filed any IPRs against PersonalWeb’s patents. Instead, it is
`
`6
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`IPR2019-01111
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`PersonalWeb that is using the court system as a “tool for harassment” to serially
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`litigate against Amazon and its customers.
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`The end result is unequitable: PersonalWeb may continue litigating against
`
`the Petitioners in court while the Petitioners cannot defend themselves with an IPR
`
`petition. Petitioners’ due process rights before PTAB should not be trampled in
`
`circumstances such as these.
`
`B.
`
`The Board’s Decision Ignores Prevailing Caselaw on Privity.
`
`The Board recognized, as it must, that the MDL court’s finding of “privity”
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`was limited to Amazon’s allegations of S3. Decision at 20-21. The Board further
`
`recognized that Petitioners cited cases demonstrating that findings of privity are
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`necessarily limited to the circumstances upon which the holding is based. Id. (citing
`
`Chase Manhattan Bank, N.A. v. Celotex Corp., 56 F.3d 343, 346 (2d Cir. 1995);
`
`Manning v. S.C. Dept. of Highway & Public Transportation, 914 F.2d 44, 48 (4th
`
`Cir. 1990)). Undeterred, the Board still held that none of the foregoing cannot
`
`“negate a finding of privity based on the shared interests of Petitioner entities and
`
`Amazon in potential infringement liability due to S3 use.” Decision at 20.
`
`The Board’s error lies in its failure to apply the holdings of Chase and
`
`Manning to situation at hand. As discussed above in Section II.A, the metes and
`
`bounds the privity relationship are critical because they can result in a nonparty
`
`surrendering its right to be heard on an issue that it had a “full and fair opportunity”
`
`7
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`IPR2019-01111
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`to argue previously. As further explained by the Second Circuit: “Privity may exist
`
`for the purpose of determining one legal question but not another depending on the
`
`circumstances and legal doctrines at issue. Whether there is privity between a party
`
`against whom claim preclusion is asserted and a party to prior litigation is a
`
`functional inquiry in which the formalities of legal relationships provide clues but
`
`not solutions.” Chase, 56 F.3d at 346.
`
`In other words, the fact that Amazon and a Petitioner may be in “privity” for
`
`purposes of PersonalWeb’s S3 allegations in the MDL court is not dispositive of
`
`whether Amazon is a “privy” of Petitioners under Section 315(b) regarding the
`
`instant Petition. See id. (“In the instant matter, Chase and NYPBC, as buyer and
`
`seller, are no doubt in privity for many purposes. However, the precise issue is
`
`whether NYPBC's incentives to pursue its lawsuit were substantially similar to
`
`Chase’s. The answer is that clearly they were not.”).1
`
`The Board’s interpretation of Section 315(b) violates these common law
`
`limitations on the reach of privity. When confronted with the distinction between
`
`the S3 and non-S3 allegations, the Board observed that Section 315(b) “does not
`
`carve out an exception for those privies who are served with a complaint alleging
`
`
`1 The Board notes that Chase and Manning are “not binding here.” Decision at 20.
`This may be true, but these cases are hardly outliers on privity. Chase was cited
`with approval on issues of preclusion by the Federal Circuit. See, e.g., Pactiv
`Corp. v. Dow Chemical Co., 449 F.3d 1227, 1230 (Fed. Cir. 2006).
`
`8
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`IPR2019-01111
`Patent No. 7,802,310
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`infringement of a particular technology (e.g., S3), but do not allegedly infringe
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`another technology (e.g., non-S3).” Decision at 26. The Board cannot have it both
`
`ways. If it admits (as it must) that the boundaries of privity are informed by common
`
`law, it cannot hide behind an alleged failure in the statute to specify these
`
`boundaries.
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`The mere fact that Amazon and Petitioners generally share an interest in
`
`invalidating PersonalWeb’s patents cannot be enough to establish privity. See
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`Decision at 22 (“By the same token, Amazon still has a shared interest in the
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`outcome of this IPR proceeding.”). If this was probative, then Petitioners would be
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`in privity with every other defendant PersonalWeb sued over the last ten years,
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`including the plethora of cases still pending before the MDL court and elsewhere.
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`This cannot be the case, and certainly was not the intent of Section 315(b).
`
`Prevailing case law on privity required the Board to undertake an analysis on
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`the boundaries of any privity surrounding the 2011 Amazon litigation. Section
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`315(b) then requires the Board to apply that notion of privity to the instant Petition.
`
`The Board failed on both ends.
`
`C. The Board’s Erroneous Finding of Privity Led to an Incorrect
`Application of the Taylor Factors.
`
`The Board found evidence of privity between Amazon and Petitioners under
`
`three Taylor factors. Decision at 28. First, that a “pre-existing substantive legal
`
`relationship” existed between Amazon and Petitioners on Amazon’s indemnity in
`
`9
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`IPR2019-01111
`Patent No. 7,802,310
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`view of S3. Id. Second, that Petitioners have the “same interests as Amazon, which
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`adequately represented these interests in the 2011 Amazon case.” Id. Third, that
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`“Petitioner entities are acting as proxies for Amazon, and are representing Amazon’s
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`interests, at least as they pertain to the S3 services.” Id.
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`A critical finding underpinned each of the Board’s conclusions: the fact that
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`PersonalWeb alleged that both Amazon and at least one Petitioner infringed using
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`S3. As explained in detail above, privity does not flow to the current Petition
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`because of this past, and now irrelevant, circumstance. To hold otherwise violates
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`due process and is contrary to prevailing case law.
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`III. CONCLUSION
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`The Board should reconsider its Decision for at least the reasons presented
`
`herein, and institute the Petition.
`
`
`
`
`
`Respectfully submitted,
`
`
`
` KING & SPALDING LLP
`
`
`
`
`
`
`
`/ Brent P. Ray /
`
`
`
`Brent P. Ray
`Lead Counsel for Petitioners
`
`
`
`10
`
`
`
`Date: December 23, 2019
`
`KING & SPALDING LLP
` 353 N Clark Street, 12th Floor
`Chicago, IL 60654
`(312) 995-6333 (reception)
`
`
`
`
`CERTIFICATE OF SERVICE
`
`IPR2019-01111
`Patent No. 7,802,310
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`The undersigned hereby certifies that the foregoing PETITIONERS
`
`
`
`
`
`
`UPWORK GLOBAL INC., SHOPIFY, INC., SHOPIFY (USA), INC.,
`
`STRAVA, INC., VALASSIS COMMUNICATIONS, INC., RETAILMENOT,
`
`INC., AND DOLLAR SHAVE CLUB, INC. REQUEST FOR
`
`RECONSIDERATION OF BOARD DECISION, were served via electronic
`
`mail on December 23, 2019, in its entirety at the email addresses listed below:
`
`Joseph A. Rhoa
`Jonathan A. Roberts
`Mark H. Henderson III
`NIXON & VANDERHYE P.C.
`901 N. Glebe Road, 11th Floor
`Arlington, VA 22203-1808
`Email: jar@nixonvan.com
`Email: jr@nixonvan.com
`Email: mhenderson@nixonvan.com
`Email: lmm@nixonvan.com
`Tel.: (703) 816-4043
`Fax: (703) 816-4100
`
`
`
`
`
`
`
`
`
`
`
`
`
`December 23, 2019
`
`
`
`KING & SPALDING LLP
`
`
`
`/ Brent P. Ray /
`
`
`
`
`
`
`
`Brent P. Ray
`Reg. No. 54,390
`Attorney for Petitioner
`
`KING & SPALDING LLP
`353 N Clark Street, 12th Floor
`Chicago, IL 60654
`(312) 995-6333 (reception)
`
`
`
`
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