Filed on behalf of: Askeladden LLC
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________
`
`Askeladden LLC
`Petitioner
`v.
`Sean McGhie and Brian Buchheit
`Patent Owner
`_____________
`
`Case IPR2015-00124
`U.S. Patent No. 8,540,152
`
`_____________
`
`PETITIONER’S AUTHORIZED REPLY BRIEF
`TO
`PATENT OWNER’S PRELIMINARY RESPONSE
`
`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________
`
`Askeladden LLC
`Petitioner
`v.
`Sean McGhie and Brian Buchheit
`Patent Owner
`_____________
`
`Case IPR2015-00124
`U.S. Patent No. 8,540,152
`
`_____________
`
`PETITIONER’S AUTHORIZED REPLY BRIEF
`TO
`PATENT OWNER’S PRELIMINARY RESPONSE
`
`
`
`TABLE OF CONTENTS
`
`I.
`
`II.
`
`Introduction......................................................................................................1
`
`Petitioner is the sole real party-in-interest.......................................................3
`
`A.
`
`B.
`
`PayCo and its member banks do not control or directly
`fund this IPR..........................................................................................3
`
`Patent Owners’ arguments that The Clearing House is a
`real party-in-interest have been rejected by the Board and
`Supreme Court.......................................................................................6
`
`1.
`
`2.
`
`3.
`
`4.
`
`Corporate ownership does not make the nonparty
`parent a real party-in-interest......................................................6
`
`Common legal representation does not make the
`nonparty a real party-in-interest..................................................7
`
`Joint press releases do not make the nonparty a
`real party-in-interest....................................................................7
`
`Overlapping personnel does not make the nonparty
`a real party-in-interest.................................................................9
`
`III.
`
`The Petition is not time-barred regardless of the Board’s
`determination on the real party-in-interest, and Patent Owners
`improperly seek an advisory opinion. ...........................................................12
`
`IV. Conclusion .....................................................................................................13
`
`
`
`I.
`
`Introduction
`
`Pursuant to the Board’s February 17, 2015 Order (Paper 16), Petitioner
`
`Askeladden LLC (“Askeladden”) hereby replies to the Patent Owners’ Preliminary
`
`Response and, in particular, to allegations therein that The Clearing House
`
`Payments Company LLC (“PayCo”) is a real party-in-interest. Askeladden is the
`
`only real party-in-interest because no other entity funds or controls this inter partes
`
`review (“IPR”) proceeding. Therefore, Patent Owners’ allegations are incorrect.
`
`In 2014, PayCo formed Askeladden as an independent subsidiary for the
`
`purposes of, among others, implementing an initiative intended to improve the
`
`understanding, use and reliability of patents in financial services and elsewhere
`
`(“the Patent Quality Initiative”), including by (i) educating patent examiners and
`
`others about technology and systems employed by the financial services industry;
`
`(ii) developing a repository of prior art to patents in the field; (iii) filing amicus
`
`briefs in cases and proceedings; and (iv) challenging the validity of low-quality
`
`patents relating to the financial services sector, including in Inter Partes Review
`
`(“IPR”) proceedings. Ex. 1531 ¶¶ 6-7.
`
`Askeladden, independently and in its sole discretion, identifies and selects
`
`those patents that Askeladden challenges in IPR proceedings, and directs all
`
`aspects of those proceedings. Ex. 1531 ¶¶ 11, 18. PayCo does not provide
`
`direction or exert control in connection with Askeladden’s IPR petitions. Ex. 1531
`
`1
`
`
`
`¶¶ 11-12. Nor has PayCo funded Askeladden’s specific IPR proceedings,
`
`including those at issue here. Ex. 1531 ¶ 16. For these reasons, PayCo is not a real
`
`party-in-interest in this proceeding. For the same reasons, PayCo’s member banks
`
`are not real parties-in-interest in this proceeding.
`
`Moreover, Patent Owners’ purported evidence to the contrary - (1) that
`
`Askeladden is a subsidiary of PayCo; (2) that Askeladden and PayCo use the same
`
`law firm; (3) that certain press releases mention both PayCo and Askeladden; and
`
`(4) that Directors of Payco and Askeladden allegedly overlap - have all been held
`
`insufficient to overcome the presumption that distinct legal entities operate
`
`independently. As such, Patent Owners’ argument that PayCo controls
`
`Askeladden’s IPR proceedings, and this proceeding specifically, fails.
`
`Furthermore, by asserting that the Board must address whether other parties
`
`would be estopped in a subsequent action, Patent Owners confuse the requirements
`
`of 35 U.S.C. § 312(a) (content of the petition) with estoppel of named parties and
`
`their privies under 35 U.S.C. § 315(e). See IPR2015-00124, Paper 15, at 55.
`
`While The Clearing House (and its member banks) do not meet either standard, a
`
`determination under § 315(e) is not ripe for adjudication.
`
`2
`
`
`
`II.
`
`Petitioner is the sole real party-in-interest.
`
`A.
`
`PayCo and its member banks do not control or directly fund this IPR.
`
`“[A] party does not become a ‘real party-in-interest’ . . . of the petitioner
`
`merely through association with another party in an unrelated endeavor.” Office
`
`Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,759-60 (August 14, 2012)
`
`(“OPTPG”). Indeed, naming a nonparty as a real party-in-interest requires
`
`circumventing the “common law rule that normally forbids nonparty preclusion.”
`
`RPX Corp. v. Virnetx Inc., No. IPR2014-00171, Paper 49, at 6 (citing Taylor v.
`
`Sturgell, 553 U.S. 880, 893-95 (2008)). A narrow exception to this common law
`
`rule is where “a [non]party . . . funds and directs and controls an IPR or PGR
`
`petition or proceeding [and thereby] constitutes a ‘real party-in-interest.’” OPTPG
`
`at 48,760. For the reasons set forth below, neither PayCo nor its member banks
`
`meet the standards for control and funding of this IPR.
`
`The Board’s analysis of control and funding in Unified Patents Inc. v.
`
`Dragon Intellectual Property, LLC is instructive. IPR2014-01252, Paper 37
`
`(B.P.A.I. 2015). Petitioner Unified Patents had been created “in view of ‘concerns
`
`with the increasing risk of nonpracticing entities (NPEs) asserting poor quality
`
`patents against strategic technologies and industries.’” Id. at 8. The patent owner
`
`emphasized that member companies created Unified shortly before the petition was
`
`filed, allegedly to circumvent IPR estoppel provisions. Id. at 10. The Board
`
`3
`
`
`
`accepted Unified’s representation that it received money from its members but
`
`“exercised its sole discretion and control in deciding to file [the subject] petition.”
`
`Id. at 9. Accordingly, the nonparty members lacked control over the proceeding.
`
`And, with respect to funding, the Board held:
`
`[E]ven if we accept Patent Owner’s allegations that Petitioner engages
`in no activity of practical significance other than filing IPR petitions
`with money received from its members, this does not demonstrate that
`any member paid, directed, or suggested to Petitioner to challenge the
`’444 patent, specifically. Nor do Patent Owner’s other circumstantial
`allegations, even if accurate, demonstrate as much.
`
`Id. at 12 (emphasis added). The Board in Unified Patents therefore declined to
`
`recognize Unified’s nonparty members as real parties-in-interest. Id. In so
`
`holding, the Board provided further clarity to its RPX decision, where the alleged
`
`real party-in-interest “suggested and compensated the entity for the filing of a
`
`request for inter partes re[view] of the [challenged] patent.” Id. at 12-13.
`
`Provision of funds for challenging a specific patent was central to the Board’s
`
`holding in RPX that the nonparty was a real party-in-interest. Id.
`
`Unified Patents compels rejection of Patent Owners’ position here that
`
`PayCo or its members are real parties-in-interest.
`
`With respect to control of this IPR, PayCo and its member banks did not
`
`exercise control over the selection of the challenged patent, contents of the
`
`4
`
`
`
`petition, or conduct of this proceeding. Ex. 1531 ¶¶ 11-12. Askeladden was
`
`formed in June 2014,
`
`The funding of the IPR at-issue also establishes that PayCo is not a real
`
`party-in-interest.
`
`But neither PayCo nor any member bank compensates
`
`Askeladden for filing IPRs against specific patents. Ex. 1531 ¶¶ 11-12, 16.
`
`For these reasons alone, neither The Clearing House nor its member banks
`
`constitute a real party-in-interest to this proceeding.
`
`5
`
`
`
`B.
`
`Patent Owners’ arguments that The Clearing House is a real party-in-
`interest have been rejected by the Board and Supreme Court.
`
`Patent Owners speculate that The Clearing House controls Askeladden’s
`
`IPRs because (1) Askeladden is a subsidiary of The Clearing House; (2)
`
`Askeladden and PayCo use the same law firm; (3) certain press releases mention
`
`both PayCo and Askeladden; and (4) Directors of PayCo and Askeladden allegedly
`
`overlap. Each piece of circumstantial evidence has been rejected as a basis for
`
`establishing a real party-in-interest.
`
`1.
`
`Corporate ownership does not make the nonparty parent a real
`party-in-interest.
`
`First, Patent Owners emphasize that “Askeladden L.L.C. is a subsidiary of
`
`The Clearing House Payments Company, L.L.C.” IPR2015-00124, Paper 15, at
`
`58. The Board has consistently rejected the argument that status as a corporate
`
`parent or subsidiary suffices to establish a real party-in-interest. See, e.g., LG
`
`Display Co., Ltd. v. Innovative Display Tech. LLC, No. IPR2014-01096, Paper 11,
`
`at 17 (P.T.A.B. 2015); Alcon Research, Ltd. v. Neev, No. IPR2014-00217, Paper
`
`21, at 7 (P.T.A.B. 2014). Indeed, the Board’s approach is consistent with
`
`Delaware corporate law:1 “[i]t was and is the general rule that a corporation is
`
`treated as an independent legal entity . . . even where it is a wholly-owned
`
`1
`
`Both Askeladden and PayCo are organized under Delaware law.
`
`6
`
`
`
`subsidiary of another corporation . . . .” 1-8 Delaware Corporation Law and
`
`Practice § 8.02 (Ex. 1532). Accordingly, PayCo’s ownership of Askeladden does
`
`not suggest, let alone prove, that PayCo controls this IPR.
`
`2.
`
`Common legal representation does not make the nonparty a real
`party-in-interest.
`
`Second, Patent Owners assert that PayCo and Askeladden use the same law
`
`firm. IPR2015-00124, Paper 15, at 58. Again, the Board has consistently found
`
`this insufficient to convert a nonparty into a real party-in-interest. See, e.g., LG
`
`Display Co., Ltd. v. Innovative Display Tech. LLC, No. IPR2014-01096, Paper 11,
`
`at 17 (P.T.A.B. 2015); Denso Corp. v. Beacon Nav. BmbH, No. IPR2013-00026,
`
`Paper 34, at 10-11 (P.T.A.B. 2014). So use of the same law firm that represents
`
`Askeladden does not render PayCo a real party-in-interest.
`
`3.
`
`Joint press releases do not make the nonparty a real party-in-
`interest.
`
`Third, Patent Owners cite statements from press releases, e.g., “The Patent
`
`Quality Initiative is the product of thought leadership provided by The Clearing
`
`House Payments Company.” IPR2015-00124, Paper 15, at 57-58. Once again,
`
`under Board precedent, such statements do not prove that PayCo controls the IPR.
`
`For example, in Chi Mei Innolux Corp. v. Semiconductor Energy Lab. Co. Ltd.,
`
`alleged real party-in-interest co-defendants “refer[ed] to ‘their’ Petition which
`
`‘Defendants have moved expeditiously to prepare and file.’” Chi Mei Innolux
`
`7
`
`
`
`Corp. v. Semiconductor Energy Lab. Co. Ltd., No. IPR2013-00038, Paper 9, at 7
`
`(P.T.A.B. 2013). The Board found these statements insufficient to make co-
`
`defendants real parties-in-interest because the patent owner “ha[d] not shown, for
`
`example, that the co-defendants . . . necessarily coauthored the Petition or exerted
`
`control over its contents, or will exert any control over the remaining portions of
`
`this proceeding.” Id. at 8 (emphasis added). In particular, the Board stated:
`
`The statements that [the patent owner] refer[s] to are just that. [The
`patent owner] has not shown persuasively that the statements mean
`what [the patent owner] suggests they mean. For example, the
`statements made in connection with the joint motion to stay may have
`been a short-hand explanation or joint litigation approach (e.g.,
`speaking as one unified voice as opposed to explaining in great length
`who filed the Petition, etc.)
`
`Id. at 7 (emphasis added). Here too, Patent Owners’ cited statements lack the
`
`requisite specificity to prove control. Like the statements in Chi Mei, the
`
`statements cited by Patent Owners merely offer a short-hand explanation of the
`
`origin and purpose of the Patent Quality Initiative rather than a detailed
`
`explanation of “who filed the Petition, etc.” For example, Patent Owners rely on
`
`PayCo’s statement that “The Patent Quality Initiative is the product of thought
`
`leadership provided by The Clearing House Payments Company” to allege that
`
`PayCo’s thought-leadership presumably includes leadership on IPRs. IPR2015-
`
`00124, Paper 15, at 57-58. But the Board in Chi Mei made clear that patent owners
`
`8
`
`
`
`cannot draw such inferences from general statements. And Patent Owners’
`
`inferences here are incorrect. Askeladden and the Patent Quality Initiative are the
`
`product of PayCo’s thought leadership. Ex. 1531 ¶ 18. In other words, PayCo
`
`formed Askeladden, but
`
`directs its business to
`
`achieve the general purposes identified above. And, of specific relevance here,
`
`neither PayCo nor any of its member banks gives direction or exercises control
`
`with respect to these IPR proceedings. Ex. 1531 ¶¶ 11-12.
`
`In fact, the press release statements here are much less specific than those
`
`held inadequate as evidence of control in Chi Mei. Unlike the statements in Chi
`
`Mei, Patent Owners’ cited statements do not aver that PayCo and Askeladden
`
`collectively “moved expeditiously to prepare and file” the petition. Indeed, the
`
`statements do not even mention the particular petitions or patents at-issue, much
`
`less attribute preparation of a specific petition to PayCo.
`
`4.
`
`Overlapping personnel does not make the nonparty a real party-
`in-interest.
`
`Fourth, Patent Owners argue that “the Board of Directors for ASK and TCH
`
`included identical sets of people – or at least significant overlap.” IPR2015-00124,
`
`Paper 15, at 58. As an initial matter, Patent Owners are incorrect.
`
`9
`
`
`
`Moreover, Patent Owners cite no Board precedent holding that personnel
`
`overlap overcomes the presumption of corporate separateness. Indeed, such a
`
`holding would be contrary to Delaware law: “[i]t was and is the general rule that a
`
`corporation is treated as an independent legal entity . . . even where its officers or
`
`directors are the same persons who hold those offices in the parent company.” 1-8
`
`Delaware Corporation Law and Practice § 8.02 (Ex. 1532). Here, PayCo is a
`
`discrete legal entity from Askeladden. Ex. 1531 ¶ 5-6, 10. Each observes
`
`corporate formalities associated with independent companies, including
`
`maintenance of separate books and financial records. Ex. 1531 ¶ 10.
`
`Accordingly, the presence of officers or directors of PayCo
`
`fails to make PayCo a real party-in-interest as a matter of
`
`law. “A well-established principle of corporation law recognizes ‘that directors
`
`and officers holding positions with a parent and its subsidiary can and do ‘change
`
`hats’ to represent the two corporations separately, despite their common
`
`ownership.’ . . . Courts ‘generally presume that the directors are wearing their
`
`‘subsidiary hats’ and not their ‘parent hats’ when acting for the subsidiary.’”
`
`Stilwell Value Partners I, L.P. v. Prudential Mut. Holding Co., No. 06-4432, 2008
`
`WL 1900945, at *9 (E.D. Pa. Apr. 24, 2008) (quoting United States v. Bestfoods,
`
`10
`
`
`
`524 U.S. 51, 69 (1998)) (emphasis added). The Supreme Court in Bestfoods
`
`recognized that the “presumption that an act is taken on behalf of the corporation
`
`for whom the officer claims to act is strongest when the act is perfectly consistent
`
`with the norms of corporate behavior,” and is overcome only when “action by a
`
`dual officer [is] plainly contrary to the interests of the subsidiary yet nonetheless
`
`advantageous to the parent.” Id. at 70 n.13. The Court explained that “the District
`
`Court wrongly assumed that the actions of the joint officers and directors are
`
`necessarily attributable to [the parent]” and that “automatic attribution of the
`
`actions of dual officers and directors to the corporate parent” was an error. Id. at
`
`68-70.
`
`Recognizing that individuals wear different hats in connection with their
`
`roles for distinct corporate entities is “perfectly consistent with the norms of
`
`corporate behavior” such that the presumption of corporate separateness applies,
`
`and compels the result that PayCo is not a real party-in-interest whether or not
`
`certain of its officers
`
`2
`
`2
`
`Patent Owners focus on Sean Reilly’s positions with both PayCo and
`
`Askeladden. See IPR2015-00124, Paper 15, at 58. For the reasons discussed, this
`
`is irrelevant as a matter of law.
`
`11
`
`
`
`III. The Petition is not time-barred regardless of the Board’s determination
`on the real party-in-interest, and Patent Owners improperly seek an
`advisory opinion.
`
`Lastly, the real party-in-interest dispute is not dispositive of any issue in this
`
`proceeding. “An inter partes review may not be instituted” for petitions “filed
`
`more than 1 year after the date on which the . . . real party-in-interest . . . [wa]s
`
`served with a complaint alleging infringement of the patent.” RPX, Paper 49 at 3
`
`(quoting 35 U.S.C. § 315(b)). In RPX, for example, the patent owner had served
`
`alleged real party-in-interest Apple with a complaint for infringement more than
`
`one year prior to the filing of the petitions.3 Upon finding that Apple was a real
`
`party-in-interest, the Board denied the petitions for IPR. Id. at 11.
`
`3
`
`Apple initially tried to bring IPRs in its own name, but the petitions were
`
`denied as time-barred. Id. at 3. Apple, having been found liable to the patent
`
`owner for over $350 million in damages, then tried to institute IPRs against the
`
`same patents by paying RPX to file petitions in RPX’s name. Id. at 4, 9 (citing Ex.
`
`2009). The Board recognized that Apple was a real party-in-interest and therefore
`
`found that the RPX petitions were also time barred. Id. at 11. As discussed in
`
`Section II, above, here no such evidence exists showing that a nonparty funded and
`
`controlled the IPR filings.
`
`12
`
`
`
`Here, Patent Owners have not sued PayCo, Askeladden, or any other entity
`
`for infringement of the subject patent. Thus, unlike in RPX where it proved
`
`dispositive, addition of a real party-in-interest here would merely change the filing
`
`date of the Petition. 35 U.S.C. § 312(a); 37 C.F.R. § 42.106(b). As such, Patent
`
`Owners only seek to delay the Board’s decision on institution.
`
`Patent Owners assert that the Board should address the issue to determine
`
`which parties would be estopped in a subsequent action. IPR2015-00124, Paper
`
`15, at 59. But estoppel of named parties and their privies under 35 U.S.C. § 315(e)
`
`is a separate issue from the requirements of 35 U.S.C. § 312(a) (content of the
`
`petition), and only the latter is at-issue here. Patent Owners thus improperly seek
`
`an advisory opinion on the possible future application of 35 U.S.C. § 315(e).
`
`IV. Conclusion
`
`For the foregoing reasons, Petitioner respectfully requests that the Board
`
`find that Askeladden is the sole real party-in-interest here.
`
`Respectfully submitted,
`
`/Frank A. DeLucia, Jr./
`Frank A. DeLucia, Jr.
`Attorney for Petitioner
`Registration No. 42,476
`
`FITZPATRICK, CELLA, HARPER & SCINTO
`1290 Avenue of the Americas
`New York, New York 10104-3800
`Facsimile: (212) 218-2200
`
`13
`
`
`
`CERTIFICATE OF SERVICE
`
`Pursuant to 37 C.F.R. §§ 42.6(e)(4) and 42.105, the undersigned certifies
`
`that on this date, a redacted copy of this Petitioner's Authorized Reply Brief to
`
`Patent Owner's Preliminary Response, and accompanying exhibits (one of which
`
`also contains redactions) thereto was served via email on the Patent Owner’s
`
`counsel at the following address indicated in the Patent Owner’s Mandatory
`
`Notices.
`
`bbuchheit@gmail.com
`
`Upon receipt of an executed Protective Order by Patent Owner, Petitioner agrees to
`
`serve the original, un-redacted copies of the above-referenced papers.
`
`Dated: February 23, 2015
`
`/Frank A. DeLucia, Jr./
`Frank A. DeLucia, Jr.
`Attorney for Petitioner
`Registration No. 42,476
`
`FCHS_WS 11232927v1.doc
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