Google Inc. v. Rockstar Consortium US LP et al

Filing 51

NOTICE by Google Inc. Notice of Filing of Motion to Stay or, Alternatively, to Transfer to the Northern District of California (Attachments: # 1 Exhibit A, # 2 Exhibit B - Part 1, # 3 Exhibit B - Part 2, # 4 Exhibit B - Part 3, # 5 Exhibit B - Part 4, # 6 Exhibit B - Part 5, # 7 Exhibit B - Part 6, # 8 Exhibit B - Part 7, # 9 Exhibit B - Part 8, # 10 Exhibit B - Part 9, # 11 Exhibit B - Part 10, # 12 Exhibit C)(Warren, Matthew) (Filed on 3/28/2014)

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Case 2:13-cv-00901-JRG Document 44-10 Filed 03/28/14 Page 1 of 3 PageID #: 660 EXHIBIT 9 DMSLIBRARY01:22763593.1 Case 2:13-cv-00901-JRG Document 44-10 Filed 03/28/14 Page 2 of 3 PageID #: 661 Case 2:13-cv-00901-JRG Document 44-10 Filed 03/28/14 Page 3 of 3 PageID #: 662 Case 2:13-cv-00901-JRG Document 44-11 Filed 03/28/14 Page 1 of 2 PageID #: 663 EXHIBIT 10 DMSLIBRARY01:22763593.1 Case 2:13-cv-00901-JRG Document 44-11 Filed 03/28/14 Page 2 of 2 PageID #: 664 Case 2:13-cv-00901-JRG Document 44-12 Filed 03/28/14 Page 1 of 9 PageID #: 665 EXHIBIT 11 DMSLIBRARY01:22763593.1 Case 2:13-cv-00901-JRG Document 44-12 Filed 03/28/14 Page 2 of 9 PageID #: 666 Case 2:13-cv-00901-JRG Document 44-12 Filed 03/28/14 Page 3 of 9 PageID #: 667 The rock star R&D operations, and with a smaller office in Plano, Texas, Rockstar is home to a mix of IP attorneys, technologists and engineers, and transactions specialists. The job of Veschi and his 40-strong team of largely ex-Nortel employees is to generate a return for the NPE’s owners from the 4,000 or so patents that remain under their control (approximately 2,000 other rights in the original portfolio having been transferred to one or other of the original consortium members). Over the course of two detailed telephone interviews, Veschi explained how they arrived at their current position, the challenges that Rockstar faces and how he views the NPE’s future, as well as the wider environment within which it is operating. He is excited by what lies ahead, but is conscious that a changing regulatory world could make his task harder – although far from impossible. Further down the line, do not be surprised to see Rockstar getting into acquisitions, or even undertaking privateering-style work for others. Veschi is a man with a lot of plans. And having achieved what he has so far, it would be a brave person to bet against him bringing them to fruition. The technology team What is remarkable about Rockstar, and what distinguishes it from almost every other NPE out there, is that it essentially remains the IP function of what was a fully fledged operating company. Indeed, Veschi refers to the firm as a “former practising entity” This gives some context, . he explains: “Our patents are derived from a product-driven company that was a technology pioneer and invested significantly in R&D.” Of immense help since the dark days of the Nortel bankruptcy has been the presence of a team of engineers and technologists led by 25-year Nortel veteran Gillian McColgan, Rockstar’s CTO. That they are still a part of the operation, however, is more the result of fortune than design. “Where we got lucky was that when Nortel was trying to avoid bankruptcy, the company decided it had to be reorganised in order to prepare for the sell-off of one or more business units. This meant that people had to be reallocated,” says Veschi. Nortel’s CTO understood what Veschi was trying to build – an operation capable of extracting the maximum value from the patents that Nortel owned – and shared his view that this required people who knew the technologies underpinning those patents backwards. “That’s how I met Gillian and 64 Intellectual Asset Management July/August 2013 the diverse set of folks who are now on her team,” Veschi says. That he can call on their expertise is something that sets Rockstar apart from many other licensing-based businesses. “We are staffed by technology lifers: people who dedicated their careers to Nortel. As a result, we really know our IP and the backstory behind each patent. I have yet to come across a patent in our portfolio where someone on our team did not know or work with the original inventor.” But that is not only a powerful tool today – it was also vital during the bankruptcy process itself, as parts of Nortel were sold off. “Gillian and her team were critical in the patent discussions,” explains Veschi. “Usually you find technology expertise in different business units, but we had it in the IP team: a group of some of the most respected and well-regarded technologists in Nortel. That meant we could make sure we were not going to get beaten up by the various business units trying to do a land grab on the patent portfolio as they moved on; we knew everything there was to know about the patents.” McColgan & Co were also keen to point out that some people were looking in the wrong places for the real treasure that Nortel possessed. “The world thought that our most valuable assets were LTE and wireless patents; Gillian and her team were offended by that,” Veschi continues. They believed that wireless was not the heart and soul of the company; instead, it was areas such as data communications. “We made sure that everyone knew what was there and that we were not going to squander it.” This attachment to Nortel’s intellectual property speaks to a wider affection John Veschi, Rockstar’s CEO “There are a lot of people out there using former Nortel IP who aren’t licensed yet. In terms of our progress in getting to them, we are probably in the third inning of a nineinning game; but we are already generating returns for our investors” Establishing the appropriate reporting lines – business or law? Before anyone takes a high-profile senior position which involves potentially company-transforming responsibilities, it is a good idea to negotiate carefully. When talking to Nortel about building its proposed IP licensing business, that’s exactly what John Veschi did; and one of the areas that came up for discussion was reporting lines. “Nortel’s original plan was that I would be the VP of IP reporting to the general counsel,” Veschi explains. It was something to which he could not agree: “I felt that would mean IP would be viewed as a cost centre. To do what I wanted to do, we could not be subordinate to other business units. We were going to need a free rein to assert patents against whoever it was necessary to take on – we could not have people telling us that we could not because it might damage such and such a relationship.” His plan, Veschi continues, was to make intellectual property less of a legal function. “In the end, it was agreed that I would be appointed as chief IP officer (CIPO), initially reporting to both the general counsel and the chief technology officer, and then reporting directly to the CEO once the licensing business was established.” To have been reporting direct to the CEO in a company the size of Nortel would have made Veschi one of the world’s highest-profile CIPOs. Whichever way the Nortel story was to have unfolded, it seems, Veschi was always destined to make a significant impression. Case 2:13-cv-00901-JRG Document 44-12 Filed 03/28/14 Page 4 of 9 PageID #: 668 The rock star Figure 1. Senior Rockstar management Gillian McColgan CTO David Smith patent sales & acquisition John Garland VP patent licensing John Veschi CEO Afzal Dean VP patent licensing Shival Virmani VP corporate development Chad Hilyard chief IP counsel Hinta Chambers CFO Mark Wilson licensing executive that these seasoned employees had for the company itself. “Once you were at a company like Nortel, you did not tend to move around, so we have a team of people who had spent 20 or 30 years there. They wanted to do the right thing by it,” Veschi claims. And it soon became apparent to all those involved in the bankruptcy process that such loyalty and expertise made the team itself a significant asset in its own right. “The buying community got pretty comfortable with the fact that the portfolio would have substantially more value if the team came with it,” he says. Thus, even before the final deal was sealed, it was clear that whoever ended up buying the patents would take the Nortel IP team too. And that even applies to Google. “I can’t imagine that they would not have wanted to keep everyone together,” Veschi states. “They may not have been actively licensing the patents, but they would still have needed to know them, so it is likely that the team would have been moved to Mountain View. That could have been something of a culture clash, given the average ages of our team and Google employees.” Commitments to the DoJ The sale of the Nortel patents closed on 29th July 2011, which also happens to be Veschi’s birthday. But it took another few months – until Spring 2012 – for the acquisition to receive clearance from the US Department of Justice (DoJ). Although this approval may have taken some time to obtain, the only commitment that Rockstar itself gave to the DoJ (and the Federal Trade Commission) was that it would operate autonomously. This, explains Veschi, was so that the shareholders “as operating companies cannot pick and choose who we will target”. Rockstar made no undertakings as to how it would license FRANDencumbered patents, as the bankruptcy court had already dealt with this issue. Michael Dunleavy Corporate legal services In some quarters, much store has been set by Veschi’s comment in an earlier interview with another publication that Rockstar is not bound to promises made to the regulators by Apple and Microsoft. He is keen to clarify what he meant by this. “The commitments that they have given relate to the patents that they have taken ownership of from the Nortel portfolio. Our commitments relate to the patents we control – so there is absolutely no link and nothing that ties us to what they have agreed. We are a separate company,” he says. Some, Veschi continues, have taken his original remarks to mean that the NPE is being used in some way as a vehicle to wash away commitments made by a predecessor in title. That is not true, he insists: “I simply pointed out that the commitments those companies made about their future patents have no bearing on Rockstar. We are a separate company and were never asked to make any commitment. Interestingly, the folks who have written about this as if there was something unseemly going on – none of them has ever asked me about it. It’s as if they have the sound bite and the interpretation that supports their cause, so why confuse it with facts?” Rockstar has an ongoing dialogue with the DoJ, the last time they got together being in February this year. And Veschi says that the relationship is a good one: “They know we are not seeking to harm anyone else relative to their peers or competitors. They understand and are comfortable with what we are trying to do. I have been very impressed with the depth of their knowledge of the issues.” That said, the commitments that Rockstar has made do mean that Veschi must be careful about how he interacts with its owners. “We do not talk to the shareholders about potential licensing partners or any potential infringers that we may have targeted,” he explains. “I have to show them progress and that real work Intellectual Asset Management July/August 2013 65 Case 2:13-cv-00901-JRG Document 44-12 Filed 03/28/14 Page 5 of 9 PageID #: 669 The rock star Doing the deal Once a potential infringer of Rockstar intellectual property has been identified, it is a matter of sitting down with them in order to hammer out a licensing deal. In many instances, ‘fair, reasonable and non-discriminatory’ (FRAND) obligations loom large – even if, strictly speaking, that did not have to be the case. Although around 90% of Rockstar patents in areas such as wireless and data networking have some standard or other associated with them, under Canadian law any FRAND commitments given by Nortel to standards bodies could have been repudiated during the bankruptcy. But, says John Veschi, it was decided not to do this. Instead, the company chose to make sticking to previously made FRAND commitments a condition of sale. Even where FRAND is not involved, Veschi is keen to emphasise that Rockstar deal makers want to be seen to be treating licensees fairly. “We will ask the other party what it is they want to license and strive to negotiate a licence that is fair and reasonable for them,” he states. The offer gets a mixed response: “Some appreciate our approach; others would prefer to simply call us a troll!” The reaction often comes down to who is on the other side of the negotiating table. “Every company we engage with is different; some are more sophisticated than others, for example. In some cases we talk to the businesspeople; other times it might be the in-house IP team,” Veschi says. “Sometimes we end up with outside litigation counsel. They usually come with the wrong perspective because they are already thinking about juries. But we believe we should get credit for not initially suing the company in question, as we prefer to sort things out in the boardroom rather than in the courtroom.” is being done, but we tend not to go into details.” Veschi schedules periodic calls and meetings with the owners – mainly with their respective heads of intellectual property – and, he says, they work well together. “But all of these guys have day jobs; how Rockstar performs is probably largely irrelevant to how most of them are judged,” he acknowledges. The sensitivities of this relationship also affect the way that Veschi interacts with senior staff inside the NPE. “I rely on my leadership team more than the typical CEO might. There are things that I cannot share with the board in the way that other CEOs might, so I probably spend more time speaking with my colleagues at Rockstar to get the appropriate amount of diversity of thought.” Likewise, he continues, some of the other activities that another CEO would typically undertake, such as cultivating potential investors, are not matters that he needs to spend time on: “As a result, I probably spend more time as both a COO and a CEO.” companies like Nortel, which did ‘find a better mousetrap’-type R&D, have been less successful over recent years than those companies whose R&D was much more consumer facing,” Veschi says. “But Nortel made mobile phones before many of the companies that make them now did; and it was similarly investing significantly early on into looking at what could be done on the Internet. It was grappling with problems and finding solutions a long time ago – what is natural today just wasn’t back then. The patents that we own are a representation of the investments that were made.” Although Veschi will not talk specifically about the technology areas he has chosen to prioritise, he does point to a diagram that has been distributed internally (see Figure 2), which provides certain clues. It is composed of a series of concentric circles. “The smallest circle contains the three classical scientific disciplines – biology, chemistry and physics – and the explosion out to the right is basically a description of the high-tech world,” he explains. “The further out you get, the closer you get to the consumer. Right now, we are very active in about a half dozen of the areas named in the chart, while we are doing serious preparatory work for six to 10 more. Though I am not comfortable saying which ones precisely, I can say that most of them are in the upper-right quadrant.” The monetisation game, he continues, is still in its early stages: “There are a lot of people out there using former Nortel Mining and money It may be an arm’s-length relationship, but Rockstar’s shareholders still want to see their investment realised to the maximum possible extent; and Veschi knows that he will be judged on the success or otherwise of his strategies to monetise the portfolio. First of all, though, he has to decide which parts of it to mine; and there are plenty of choices. “It turned out that those 66 Intellectual Asset Management July/August 2013 Rockstar CTO Gillian McColgan leads a meeting Starting with the man in the red shirt and working clockwise – David Smith, director, patent sales and acquisitions; Bruce Schofield, technical expert; Chris Briggs, senior programme manager; Hamid Ould-Brahim, internet technology expert, distinguished member of technical staff; Derek de Laat, senior financial analyst; Ron Steeves, patent licensing adviser; Gillian McColgan, CTO; Liam Casey, IP technology consultant Case 2:13-cv-00901-JRG Document 44-12 Filed 03/28/14 Page 6 of 9 PageID #: 670 Case 2:13-cv-00901-JRG Document 44-12 Filed 03/28/14 Page 7 of 9 PageID #: 671 The rock star assets and do not need them all.” What it all boils down to, he says, is for him to be put “in a place where I have to make a difficult decision about whether we should let something go or not” . Given its ownership, though, is there a possibility that while Rockstar may be willing to sell off parts of its portfolio, there may be certain parties that it is not willing to do business with – especially as sales are not covered by any commitments that have been made to regulators? Veschi says absolutely not: “We work the deals within our charter. Just like in the context of licensing, the shareholders do not influence the decisions on who we deal with.” The wider world Rockstar does not operate in a vacuum and it has not escaped Veschi’s notice that the environment in the United States has become more hostile towards NPEs recently. What he would like to see, he explains, is a little more contextualised thinking about the issues. “I don’t want to defend all NPEs. What some of them do is troublesome and very litigation-centric, but they are part of the evolution of the corporate world in general,” he says. The issue is by no means as clearcut as ‘operating company good, NPE bad’, he claims: “When you go back to the good old days, you find companies that did everything in North America – from R&D through to manufacturing. Now a lot of this activity has been moved offshore. Why is a company that moves its factories to Asia considered more of a good guy than one which does not manufacture at all, but does much of its R&D work locally?” And it’s not as if big operating companies have a faultless record when it comes to intellectual property: “The classic NPE is the little guy working in his garage who comes up with an idea and gets a patent. If he then discusses his idea with a product company, which says, ‘Thank you very much, now go away,’ the only thing he has to protect himself is his patent.” Rockstar’s own experiences have made Veschi – who has never previously worked inside an NPE – sympathetic to what many NPEs are up against when trying to deal with operating companies. “When we are negotiating deals, we find that companies which look similar from the outside behave very differently when we sit down with them,” he states. “For the most part, we get respect, but some people get very emotional and quickly resort to name calling – that indicates to me they do not understand the situation they are in. You’d think that 68 Intellectual Asset Management July/August 2013 A US-centric organisation thanks to Nortel’s money men Although many US-based NPEs believe there may be significant potential in developing business abroad, for Rockstar the focus will have to remain the United States, John Veschi explains: “We are more of a US-centric organisation. We cannot fix the fact that in the past, Nortel decided not file abroad as much as it did in North America.” In general, Veschi says, a lot of the decision makers at the company saw the US market as the one to concentrate on. “It was like a Picasso painting in some ways – things were out of proportion,” he says. Although there was very strong R&D, there was not an equal commitment to protecting it: “The finance people and accountants seemed to have led the decision making.” Given the circumstances, he continues, the IP department can only be praised for creating what it did: “The IP people – battling against a lot of headwind – did a great job and we have got the benefit from that. When you look at the portfolio you see cases where the patent committee likely had, say, 25 really good inventions, but budget to only file 10 patents; even so, if you look at the way those patents were prepared and prosecuted they got a lot into them. In the end, though, there was only so much they could do.” people would realise they need to pay for the IP they use, but some are almost hysterical when we point out they cannot have our stuff for free. If that is the way they treat us, you can only wonder what it is like for a typical small NPE.” The truth is, he says, some potential licensees just do not want to be fair and reasonable: “It is important to know that just because a company is a practising entity, that fact does not make the company a good guy. There are some unscrupulous characters out there on all sides of these issues.” However, Veschi is not set against all reform. He opposes the proposed Saving High-tech Innovators from Egregious Legal Disputes (SHIELD) legislation in the United States, which would introduce a loser-pays regime specifically aimed at what its authors describe as “patent trolls”, but he is not opposed to loser pays per se. In fact, the opposite is true: “I have always been a fan of loser pays, but in a way that treats everybody the same. What you see with SHIELD is an attempt to discriminate against certain types of businesses. That is misguided. There are plenty of practising entities that are very comfortable with infringing and not paying royalties; loser pays across the board would encourage everyone to act a little more like a good guy.” Likewise, Veschi supports recent moves spearheaded by the US Patent and Trademark Office (USPTO), as well as certain companies such as Microsoft, to introduce greater transparency into patent ownership. “Those with good portfolios should be very comfortable with transparency and more of it makes a lot of sense,” he says. “We are not trying to play hide the ball with our portfolio, and if the law changed to make it a requirement to register every licensing deal I would be Reading the runes From left to right – Peter Lorenz, senior business analyst; John Veschi, CEO; and Ross Morgan, CFO Case 2:13-cv-00901-JRG Document 44-12 Filed 03/28/14 Page 8 of 9 PageID #: 672 Case 2:13-cv-00901-JRG Document 44-12 Filed 03/28/14 Page 9 of 9 PageID #: 673 Case 2:13-cv-00901-JRG Document 44-13 Filed 03/28/14 Page 1 of 7 PageID #: 674 EXHIBIT 12 DMSLIBRARY01:22763593.1 Case 2:13-cv-00901-JRG Document 44-13 Filed 03/28/14 Page 2 of 7 PageID #: 675 Case 2:13-cv-00901-JRG Document 44-13 Filed 03/28/14 Page 3 of 7 PageID #: 676 Case 2:13-cv-00901-JRG Document 44-13 Filed 03/28/14 Page 4 of 7 PageID #: 677 Case 2:13-cv-00901-JRG Document 44-13 Filed 03/28/14 Page 5 of 7 PageID #: 678 Case 2:13-cv-00901-JRG Document 44-13 Filed 03/28/14 Page 6 of 7 PageID #: 679 Case 2:13-cv-00901-JRG Document 44-13 Filed 03/28/14 Page 7 of 7 PageID #: 680

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