Motorola Mobility, Inc. v. Apple, Inc.

Filing 110

AFFIDAVIT signed by : Samuel F. Ernst. re 109 MOTION to Stay by Apple, Inc. (Attachments: # 1 Exhibit Exhibit 1 (part 1), # 2 Exhibit Exhibit 1 (part 2), # 3 Exhibit Exhibit 1 (part 3), # 4 Exhibit Exhibit 1 (part 4), # 5 Exhibit Exhibit 1 (part 5), # 6 Exhibit Exhibit 1 (part 6), # 7 Exhibit Exhibit 1 (part 7), # 8 Exhibit Exhibit 1 (part 8), # 9 Exhibit Exhibit 1 (part 9), # 10 Exhibit Exhibit 2, # 11 Exhibit Exhibit 3, # 12 Exhibit Exhibit 4)(Pace, Christopher)

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EXHIBIT 4 Case5:08-cv-03172-RMW Document227 1 2 3 4 5 6 7 8 9 10 11 Filed10/29/10 Page1 of 16 DONALD F. ZIMMER (SBN 112279) fzimmer@kslaw.com CHERYL A. SABNIS (SBN) 224323) csabnis@kslaw.com KING & SPALDING LLP 101 Second Street - Suite 2300 San Francisco, CA 94105 Telephone: (415) 318-1200 Facsimile: (415) 318-1300 SCOTT T. WEINGAERTNER (Admitted pro hac vice) sweingaertner@kslaw.com ROBERT F. PERRY rperry@kslaw.com KING & SPALDING LLP 1185 Avenue of the Americas New York, NY 10036-4003 Telephone: (212) 556-2100 Facsimile: (212) 556-2222 Attorneys for Defendants GOOGLE INC. and AOL LLC 12 UNITED STATES DISTRICT COURT 13 NORTHERN DISTRICT OF CALIFORNIA 14 SAN JOSE DIVISION 15 16 SOFTWARE RIGHTS ARCHIVE, LLC, 17 Plaintiff, 18 19 v. DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING GOOGLE INC., AOL LLC, YAHOO! INC., IAC SEARCH & MEDIA, INC., and LYCOS, INC., 20 Defendants. 21 22 23 24 25 26 27 Case No. CV 08-03172 RMW (PVT) GOOGLE INC., AOL LLC, YAHOO! INC., IAC SEARCH & MEDIA, INC., and LYCOS, INC., HEARING ON MOTION DATE: December 3, 2010 TIME: 9:00 a.m. Judge: Ronald M. Whyte Case No. CV 10-03723 RMW (PVT) Counter-Claimants, v. L. DANIEL EGGER, SOFTWARE RIGHTS ARCHIVE LLC, AND SITE TECHNOLOGIES INC., Counter-Defendants. 28 DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT); Case No. CV 10-03723 RMW (PVT) Case5:08-cv-03172-RMW Document227 1 Filed10/29/10 Page2 of 16 TABLE OF CONTENTS 2 3 I. NOTICE OF MOTION AND BRIEF STATEMENT OF RELIEF REQUESTED ................................................................................................................... 1 II. INTRODUCTION AND SUMMARY OF ARGUMENT ............................................... 1 III. BACKGROUND .............................................................................................................. 2 IV. LEGAL STANDARD....................................................................................................... 3 V. PLAINTIFF LACKS SUBSTANTIAL RIGHTS TO THE ASSERTED PATENTS AND THEREFORE DOES NOT HAVE CONSTITUTIONAL STANDING................................................................................... 5 4 5 6 7 8 9 A. Plaintiff Ceded All Substantial Rights In The Patents-In-Suit To Altitude.................................................................................................................. 5 B. Because Plaintiff Has Only Bare Legal Title, It Lacks Article III Standing. ............................................................................................................... 6 10 11 12 VI. CONCLUSION ............................................................................................................... 11 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT); Case No. CV 10-03723 RMW (PVT) Case5:08-cv-03172-RMW Document227 Filed10/29/10 Page3 of 16 1 TABLE OF AUTHORITIES 2 Cases 3 Abbott Labs. v. Diamedix Corp. 47 F.3d 1128 (Fed. Cir. 1995)...........................................................................................4, 6 4 5 Arachnid, Inc. v. Merit Indus., Inc. 939 F.2d 1574 (Fed. Cir. 1991)..............................................................................................7 6 AsymmetRx, Inc. v. Biocare Medical, LLC 582 F.3d 1314 (Fed. Cir. 2009)..............................................................................................6 7 8 Enhanced Sec. Research, LLC v. Juniper Networks, Inc. No. 09-871-JJF, 2010 U.S. Dist. LEXIS 72745 (D. Del. July 20, 2010)....................8, 9, 10 9 H.R. Techs., Inc. v. Astechnologies, Inc. 275 F.3d 1378 (Fed. Cir. 2002)............................................................................................11 10 11 Intellectual Property Development, Inc. v. TCI Cablevision of Calif., Inc. 248 F.3d 1333 (Fed. Cir. 2001)..........................................................................................4, 6 12 Morrow v. Microsoft Corp. 499 F.3d 1332 (Fed. Cir. 2007)......................................................................................4, 6, 9 13 14 Ortho Pharm. Corp. v. Genetics Inst., Inc. 52 F.3d 1026 (Fed.Cir.1995)..................................................................................................7 15 Prima Tek II, L.L.C. v. A-Roo Co. 222 F.3d 1372 (Fed. Cir. 2000)..........................................................................................4, 5 16 17 Propat Int’l Corp. v. RPost, Inc. 473 F.3d 1187 (Fed. Cir. 2007)..............................................................................3, 4, 6, 7, 9 18 Sicom Sys. Ltd. v. Agilent Techs., Inc. 427 F.3d 971 (Fed. Cir. 2005)..................................................................................3, 4, 5, 10 19 20 Software Rights Archive, LLC v. Google Inc. et al. Case No. 2:07-cv-00511 (E.D. Tex.) .....................................................................................2 21 Speedplay, Inc. v. Bebop, Inc. 211 F.3d 1245 (Fed. Cir. 2000)......................................................................................4, 6, 9 22 23 Textile Productions, Inc. v. Mead Corp. 134 F.3d 1481 (Fed. Cir. 1998)..............................................................................6, 7, 10, 11 24 Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A. 944 F.2d 870 (Fed. Cir. 1991)................................................................................................4 25 26 Warth v. Seldin 422 U.S. 490 (1975) ...............................................................................................................7 27 Statutes 28 35 U.S.C. § 281 ..........................................................................................................................3, 5, 6 ii DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT); Case No. CV 10-03723 RMW (PVT) Case5:08-cv-03172-RMW Document227 1 Filed10/29/10 Page4 of 16 Fed. R. Civ. P. 12(b)(1)......................................................................................................................3 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 iii DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT); Case No. CV 10-03723 RMW (PVT) Case5:08-cv-03172-RMW Document227 1 I. Filed10/29/10 Page5 of 16 NOTICE OF MOTION AND BRIEF STATEMENT OF RELIEF REQUESTED 2 PLEASE TAKE NOTICE that on December 3, 2010 at 9:00 a.m., or as soon thereafter as 3 counsel may be heard, Defendants Google Inc., Yahoo! Inc., AOL LLC, and Lycos, Inc. 4 (“Defendants”) will, and hereby do, respectfully move to dismiss this action with prejudice 5 pursuant to Federal Rule of Civil Procedure 12(b)(1).1 This Motion is based on the following 6 memorandum of points and authorities in support, the Declaration of Robert F. Perry and 7 accompanying exhibits, the entire record in this matter, and on such evidence as may be presented 8 at the hearing of this Motion. 9 Plaintiff Software Rights Archive, LLC lacks substantial rights in the asserted patents and 10 has no Article III standing to pursue this action. Altitude Capital Partners L.P., not Plaintiff, 11 “control[s]” this litigation, stands to reap the lion’s share of any recovery, and “make[s] all 12 decisions as to venue, settlement, litigation strategy, etc.” Ex.2 A, ACP00000171. Altitude is “a 13 litigation finance / investment firm” that forms shell subsidiaries for the purpose of bringing 14 litigation that Altitude directs and controls, while shielding itself, the true stakeholder, from 15 exposure as a party. A federal court in Delaware recently dismissed two actions brought by 16 Altitude shell companies for lack of standing in precisely these circumstances—i.e., where 17 Altitude, not the plaintiff, controlled litigation and settlement strategy, depriving the plaintiff of 18 substantial rights to the patents. This action, too, must be dismissed. 19 II. INTRODUCTION AND SUMMARY OF ARGUMENT 20 In 2007, just prior to filing this action, Plaintiff secured funding from Altitude for a 21 litigation campaign to enforce United States Patent Nos. 5,544,352; 5,832,494; and 6,233,571 22 (“patents-in-suit”). But that funding came with a catch: in return, Plaintiff had to cede to Altitude 23 absolute authority over all decisions regarding enforcing and licensing the patents-in-suit. 24 Plaintiff retained the nominal right to sue, but Plaintiff can bring suit only at Altitude’s direction, 25 and Altitude can force Plaintiff at any time to indulge infringement or to grant a license. The net 26 effect is that, when Plaintiff brings a lawsuit, such as this one, it has no rights of its own to 27 1 28 Defendants apprised the Court of their intent to file this motion in their October 6, 2010 Rebuttal Statement to SRA’s Proposal For Narrowing Claims And Defenses, And In Support Of Stay Pending Reexamination of Patents-in-Suit. (D.I. 201 at 3 n.2.) 2 All references to “Ex. _” refer to the Declaration of Robert F. Perry filed concurrently herewith. 1 DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT) Case5:08-cv-03172-RMW Document227 1 2 3 4 5 6 vindicate. Its allegations of infringement are really claims that Altitude’s exclusionary interests have been violated. In other words, Plaintiff has no independent right to exclude others from making, selling, or using the patented invention, and it therefore has no legally recognized interest that entitles it to bring or join an infringement action. As a consequence, Plaintiff lacks Article III standing, and dismissal of the action is appropriate. III. 7 8 9 10 11 14 15 16 17 18 is not disputed that Daniel Egger, a named inventor of the patents-in-suit, acquired rights to the ’352 patent and the applications that matured into the remaining patents-in-suit in 1998.3 See Ex. B, SRA_0003801-4. Egger then created Software Rights Archive, Inc. (“SRA, Inc.”) and assigned the patents-in-suit to that entity. As early as March 2006, Egger and SRA, Inc. consulted with Altitude representative Joby Hughes about obtaining funding to support a campaign to enforce the patents-in-suit. See Ex. C, SRA_0031250. By February 2007, that relationship blossomed, and SRA, Inc. and Altitude signed a binding letter of intent. See Ex. D, SRA_0030393-97. The letter of intent set forth terms for an investment by Altitude in SRA, Inc., under which Altitude would “have control of all settlement, litigation, enforcement and licensing decisions.” See Ex. E, SRA_0030408; see also Ex. D, SRA_0030394. 19 20 21 22 23 24 BACKGROUND Tracing the ownership of the patents-in-suit is no easy feat. For purposes of this motion, it 12 13 Filed10/29/10 Page6 of 16 The eventual implementation of Altitude’s investment included converting SRA, Inc. into Software Rights Archive, LLC—the plaintiff in this lawsuit. See Ex. F, SRA_0031596-627 (Membership Interest Purchase Agreement). Altitude also interposed a series of shell companies between itself and Plaintiff. Altitude joined with several passive investors to fund Patent River LLC, which in turn owns SRA LLC, the direct parent of Plaintiff. Ex. G, Barron Dep. Tr. at 137:25-139:2. Robert Kramer, an Altitude principal, signed the agreement through which SRA 25 3 26 27 28 Egger and the other named inventors initially assigned the patents-in-suit in the mid-1990s to Libertech, Inc. After a name change, Libertech was purchased by Deltapoint, Inc., which filed for bankruptcy in 1999. Egger ultimately purported to re-acquire the patents from Deltapoint. Defendants have argued previously that Egger did not actually obtain title to the patents because Deltapoint was not the record title owner at the time of the assignment. Software Rights Archive, LLC v. Google Inc. et al., Case No. 2:07-cv-00511 (E.D. Tex.) D.I. 66. The District Court for the Eastern District of Texas denied Defendants’ motion to dismiss, however. Id. D.I. 138. 2 DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT); Case No. CV 10-03723 RMW (PVT) Case5:08-cv-03172-RMW Document227 1 2 3 4 5 6 7 LLC purchased Plaintiff. See Ex. F at SRA_0031622 (Membership Interest Purchase Agreement). That transaction purported to grant to SRA LLC “the sole and exclusive right, power and authority to manage and control all licensing, enforcement, settlement and other commercialization efforts with respect to [Plaintiff] and the Patents without prior consent or approval of” Egger. See Ex. F at SRA_0031609 (section 5.4(a)). 10 11 12 13 14 15 settlement, litigation strategy, etc.” See Ex. A, ACP00000171. At Altitude’s direction, Plaintiff filed an infringement lawsuit in Texas on November 21, 2007. To guide the day-to-day operations of the lawsuit, Altitude installed Russell Barron as Plaintiff’s vice president and general counsel on March 10, 2008. See Ex. G, Barron Dep. Tr. at 19:10-13; 25:18-20. Mr. Barron confirmed that Altitude controlled all litigation, enforcement, and licensing decisions in this lawsuit. See Ex. G, Barron Dep. Tr. at 110:2-18. Altitude also controls and conducts settlement negotiations through its representative, William Marino, whose signature appears on the settlement agreement between Plaintiff and former defendant, IAC Search & Media, Inc. See Ex. H, SRA_00051246. 16 17 18 19 20 21 22 23 24 25 26 27 28 On August 13, 2007, however, Altitude represented to prospective investors that it retained the ultimate authority “to make all decisions as to venue, 8 9 Filed10/29/10 Page7 of 16 There can be no legitimate dispute that Altitude carefully orchestrated the structure to provide SRA as the face of the lawsuit, while it pulled all of the strings behind the scene. The arrangement was deliberate, calculated, and designed to keep Altitude out of the fray while allowing it to control the case, the settlement efforts, and eventually the flow of money resulting from the assertions of these patents. IV. LEGAL STANDARD Standing is a threshold requirement in a patent infringement action, just as it is in all civil suits. See Sicom Sys. Ltd. v. Agilent Techs., Inc., 427 F.3d 971, 975-76 (Fed. Cir. 2005). The party bringing suit has the burden to establish that it has standing. See id. at 976. If the plaintiff fails to establish constitutional standing, dismissal is the appropriate remedy. See Propat Int’l Corp. v. RPost, Inc., 473 F.3d 1187, 1189 (Fed. Cir. 2007); see also Fed. R. Civ. P. 12(b)(1). The Patent Act confers the right to bring a civil action for infringement only on “a patentee.” 35 U.S.C. § 281. The Federal Circuit looks to the Patent Act to “define the nature and 3 DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT); Case No. CV 10-03723 RMW (PVT) Case5:08-cv-03172-RMW Document227 1 2 3 4 5 6 7 8 9 10 11 source of the infringement claim and determine the party that is entitled to judicial relief.” Morrow v. Microsoft Corp., 499 F.3d 1332, 1339 (Fed. Cir. 2007). Holders of all substantial rights deriving from a patent plainly qualify as patentees, have constitutional standing, and may bring suit. See Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 875 (Fed. Cir. 1991). Plaintiffs who hold some, but not all, substantial rights may have constitutional standing but lack prudential standing. That category of plaintiffs does not have an “independent right to sue for infringement as a ‘patentee’ under the patent statute” and must join the true patent owner in any infringement action. Abbott Labs. v. Diamedix Corp., 47 F.3d 1128, 1132 (Fed. Cir. 1995). A person with no substantial rights, however, has no legally recognized interest and therefore has no Article III or prudential standing. Such a person cannot bring suit even if the patent owner is joined as a party. See Propat, 473 F.3d at 1189; Morrow, 499 F.3d at 1341. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Filed10/29/10 Page8 of 16 The key consideration in determining whether a party has some or all substantial rights is “whether the agreement conveys in full the right to exclude others from making, using and selling the patented invention in the exclusive territory.” Prima Tek II, L.L.C. v. A-Roo Co., 222 F.3d 1372, 1379 (Fed. Cir. 2000) (emphasis in original). Accordingly, the Federal Circuit has identified several primary indications of substantial rights, such as the “right to permit infringement,” Sicom, 427 F.3d at 980; Intellectual Property Development, Inc. v. TCI Cablevision of Calif., Inc., 248 F.3d 1333, 1345 (Fed. Cir. 2001); the right to enforce a patent and settle without another party’s consent, see Sicom, 427 F.3d at 979; Intellectual Property Development, 248 F.3d at 1345; and the right to license the patent rights to third parties, see Morrow, 499 F.3d at 1343. A party’s standing to sue turns on the substance of its rights rather than mere labels. “A party that has been granted all substantial rights under the patent is considered the owner regardless of how the parties characterize the transaction that conveyed those rights.” Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1250 (Fed. Cir. 2000). Thus, a party with bare legal title to a patent does not hold the substantial rights necessary to confer standing. See Morrow, 499 F.3d at 1343; Propat, 473 F.3d at 1189 (“Even if the patentee does not transfer formal legal title, the 28 4 DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT); Case No. CV 10-03723 RMW (PVT) Case5:08-cv-03172-RMW Document227 1 2 Filed10/29/10 Page9 of 16 patentee may effect a transfer of ownership for standing purposes if it conveys all substantial rights in the patent to the transferee. In that event the transferee is treated as the patentee . . . .”). 3 4 V. PLAINTIFF LACKS SUBSTANTIAL RIGHTS TO THE ASSERTED PATENTS AND THEREFORE DOES NOT HAVE CONSTITUTIONAL STANDING 5 Plaintiff has ceded to Altitude absolute and ultimate control over every decision regarding 6 assignment, licensing, enforcement, and settlement of the patents-in-suit. That means Altitude 7 holds all substantial, exclusionary rights—“the right to exclude others from making, using and 8 selling the patented invention.” Prima Tek II, 222 F.3d at 1379. To the extent Plaintiff retained 9 any rights, it holds only a bare title. Under clear Federal Circuit precedent, and as in recent 10 Delaware actions dismissed in similar circumstances, Plaintiff lacks Article III standing, and the 11 suit must be dismissed. 12 A. 13 Plaintiff is a mere cat’s paw, not a “patentee” entitled to bring a civil action for patent 14 infringement. 35 U.S.C. § 281. Altitude agreed to fund Plaintiff’s patent enforcement campaign 15 only in return for “control of all settlement, litigation, enforcement and licensing decisions.” See 16 Ex. E, SRA_0030408 (emphasis added); see also Ex. D, SRA_0030394; Ex. A, ACP00000171 17 (noting Altitude’s authority “to make all decisions as to venue, settlement, litigation strategy, 18 etc.”). 19 Indeed, in deposition testimony, Plaintiff’s corporate representative4 conceded without hesitation 20 that Altitude controls all litigation, enforcement, and licensing decisions in this litigation. See Ex. 21 G, Barron Dep. Tr. at 110:11-18. Accordingly, Plaintiff has no substantial rights to the patents-in- 22 suit. Plaintiff Ceded All Substantial Rights In The Patents-In-Suit To Altitude That unqualified language means all decisions must be channeled through Altitude. 23 The dependent nature of Plaintiff’s rights tells the whole story. See Sicom, 427 F.3d at 24 979. Plaintiff cannot bring an action for infringement unless Altitude directs it to do so. See id.; 25 Ex. A, ACP00000171. Yet a party with substantial rights “would never need consent . . . to file 26 4 27 28 Plaintiff’s “general counsel,” Russell Barron, was installed by Altitude and receives his paycheck from another Altitude affiliate. See Ex. G, Barron Dep. Tr. at 19:10-13; 53:15-54:7. Indeed, his involvement with Plaintiff boils down to a nominal title that he could not even remember during his deposition, See Ex. G, Barron Dep. Tr. at 22:1-3 (“Q. Okay. So you don’t know if you are, in fact, the vice president? A. That’s correct, yes.”)]. 5 DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT); Case No. CV 10-03723 RMW (PVT) Case5:08-cv-03172-RMW Document227 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Filed10/29/10 Page10 of 16 suit . . .” Intellectual Property Development, 248 F.3d at 1344. When Plaintiff does file suit, Altitude may require Plaintiff to drop the suit, to settle, or to grant a license at any time and for any reason. Plaintiff’s right to sue is therefore illusory at best. See Speedplay, 211 F.3d at 1251. On the flip side, if Altitude wishes to enforce the patents against a purported infringer, Plaintiff must bring that action. It has no “right to indulge infringements . . . .” Abbott Labs., 47 F.3d at 1132. The bottom line is that every effort by Plaintiff to enforce or license the patents-in-suit comes at the direction of Altitude, and anything Plaintiff does can be undone by Altitude—a state of affairs wholly inconsistent with Plaintiff’s assertion of its standing as a “patentee.” It is no answer for Plaintiff to say that it holds the “title” to the patents or that it has not formally assigned the patents to Altitude. “[W]hat matters is the substance of the arrangement.” Textile Productions, Inc. v. Mead Corp., 134 F.3d 1481, 1484 (Fed. Cir. 1998); see also Intellectual Property Development, 248 F.3d at 1344 (must give “actual consideration of the rights transferred”); Speedplay, 211 F.3d at 1250. In other words, the conveyance of rights—not mere title—is what matters. Here, even if Plaintiff did not “transfer formal legal title,” it “effect[ed] a transfer of ownership for standing purposes [by] convey[ing] all substantial rights” to Altitude. Propat, 473 F.3d at 1189. 17 18 B. Because Plaintiff Has Only Bare Legal Title, It Lacks Article III Standing The fact that Plaintiff transferred all substantial rights is fatal to its assertion of 19 constitutional standing. Because Altitude holds and exercises the right to exclude others from 20 making, using, or selling the patented invention (or to indulge that behavior), it is “as if title had 21 passed” from Plaintiff to Altitude. AsymmetRx, Inc. v. Biocare Medical, LLC, 582 F.3d 1314, 22 1320 (Fed. Cir. 2009). At most, Plaintiff holds the right to be a nominal plaintiff in lawsuits 23 brought at Altitude’s behest. The Federal Circuit has never found such a bare right to sue 24 sufficient to support constitutional standing. 25 The root of the problem for Plaintiff “is that the exclusionary rights have been separated 26 from the right to sue for infringement.” Morrow, 499 F.3d at 1342. When Plaintiff ceded control 27 over the patents-in-suit to Altitude, it gave up those exclusionary rights and thereby extinguished 28 6 DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT); Case No. CV 10-03723 RMW (PVT) Case5:08-cv-03172-RMW Document227 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Filed10/29/10 Page11 of 16 its ability to enforce the patents under 35 U.S.C. § 281. After all, Plaintiff cannot enforce rights it does not have. Abbot Labs., 47 F.3d at 1131 (holding that a party “who has no right to exclude others from making, using, or selling the licensed products, has no legally recognized interest that entitles it to bring or join an infringement action” (citing Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d 1574, 1579 & n.7 (Fed. Cir. 1991))). That means when Plaintiff brings a lawsuit, such as this one, “its grievance is that the exclusionary interests held by” Altitude are being violated. Morrow, 499 F.3d at 1342. As a result, Plaintiff “is not the party to which the statutes grant judicial relief” because it “suffers no legal injury in fact to the patent’s exclusionary rights.” Id. (citing Warth v. Seldin, 422 U.S. 490, 500 (1975)). Far from salvaging its standing claim, Plaintiff’s nominal “right to sue” confirms that it lacks Article III standing. See Textile Productions, 134 F.3d at 1485 (“A ‘right to sue’ provision within a license cannot, of its own force, confer standing on a bare licensee.” (citing Ortho Pharm. Corp. v. Genetics Inst., Inc., 52 F.3d 1026, 1034 (Fed.Cir.1995))). In Propat, for example, the Federal Circuit affirmed a dismissal for lack of constitutional standing where the named plaintiff could bring suit only upon obtaining another party’s “consent to its selection of targets for licensing and suit,” even though that consent could not be unreasonably withheld. 473 F.3d at 1194. In this case, Plaintiff exercises its right to sue not with Altitude’s consent but at its direction. Reasonably or unreasonably, Altitude can require Plaintiff to indulge infringement, grant a license, file a lawsuit, dismiss an existing suit, or enter into a settlement, but Plaintiff cannot independently do any of these things. In other words, Plaintiff’s rights are “more consistent with the status of an agent than a co-owner.” Id. Thus, because the plaintiff in Propat lacked standing, then a fortiori Plaintiff has no standing here. Plaintiff’s agent status has real consequences for Defendants, which have been forced to litigate against a party that has no authority to settle the lawsuit. Representatives of Altitude, not SRA, conduct settlement negotiations. Indeed, it was William Marino, an Altitude partner, who concluded and signed a settlement agreement with a former defendant in this lawsuit. SRA_00051246. See Ex. H, As it stands, Altitude has the best of both worlds. It can select accused infringers, enforce the patents, and negotiate settlements—all without any risk that may flow from 7 DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT); Case No. CV 10-03723 RMW (PVT) Case5:08-cv-03172-RMW Document227 1 2 3 4 5 6 7 actually being a named party. Indeed, Defendants subpoenaed Altitude for documents relevant to this action and were forced to move to compel Altitude’s compliance. Only after being ordered to do so, Altitude finally produced some responsive documents many months after receiving the subpoena, and subject to a demand that Defendants share the costs associated with Altitude’s production of documents. Ex. I (June 24, 2009 e-mails from A. Hayes to counsel (“As a nonparty, Altitude is entitled to recover its reasonable costs in responding to the subpoena.”); Ex. J (Order Granting Motion to Compel, Case No. 1:09-mc-00017-JJF, D.I. 28, May 22, 2009). 8 9 10 11 12 13 14 15 16 17 18 19 20 Filed10/29/10 Page12 of 16 Of course, this is not Altitude’s first rodeo. Altitude has created and funded a number of patent holding companies for the purpose of bringing patent infringement suits. Just a few months ago—around the time transfer was granted in this case—a lawsuit brought by another Altitudecontrolled entity was dismissed for lack of standing on precisely the grounds raised by Defendants here.5 See, e.g., Enhanced Sec. Research, LLC v. Juniper Networks, Inc., No. 09-871-JJF, 2010 U.S. Dist. LEXIS 72745, at *3-4, 11 (D. Del. July 20, 2010), appeal docketed, No. 2010-1437 (Fed. Cir. Aug. 3, 2010); Enhanced Sec. Research, LLC v. Cisco Sys., No. 09-390-JJF, 2010 U.S. Dist. LEXIS 63831, at *14-15 (D. Del. June 25, 2010), appeal docketed, No. 2010-1436 (Fed. Cir. Aug. 2, 2010). In those cases, Altitude created sister shell corporations, depositing the nominal right to sue in one corporation (“ESR”) and all decision making authority in the other (“SRH”). Enhanced Sec. Research, LLC, 2010 U.S. Dist. LEXIS 72745, at *3, 11; Enhanced Sec. Research, LLC, 2010 U.S. Dist. LEXIS 63831, at *14-15. Under that arrangement, ESR “retained legal title to the patents-in-suit” but “transferred ‘all substantial rights’ to” SRH. Enhanced Sec. Research, 21 5 22 23 24 25 26 27 28 See Ex. H at SRA_00051255 (listing ESR as an Altitude-controlled entity). In two separate lawsuits, ESR initially sued a group of defendants, in May 2009, without naming the entity that controlled the decisions related to assertion and settlement of cases involving the patents-at-issue. (Enhanced Sec. Research, LLC v. Cisco Sys. (“Cisco Sys. I”), Case No. 09-390, D.I. 1; Enhanced Sec. Research, LLC v. Juniper Networks, Inc., No. 09-871, D.I. 1.) In July 2009, Juniper Networks filed a Motion to Dismiss for Lack of Standing. (Enhanced Sec. Research, LLC v. Juniper Networks, Inc., No. 09-871, D.I. 19.) Then ESR — fearing a declaratory judgment action in another forum against the entity that controlled assertion decisions and possibly fearing a loss of key dates related to damages in Cisco Sys. I — filed a second suit in August 2009, without dismissing the original suit, and added SRH, the entity that ultimately controlled the disposition of the lawsuits. (Enhanced Sec. Research, LLC v. Cisco Sys. (“Cisco Sys. II”), Case No. 09-571, D.I. 1.) The District Court Judge dismissed the cases against Juniper Networks and Cisco Sys. I for lack of standing and Cisco Sys. II was stayed pending the result of reexamination. (Case No. 09-871, D.I. 64; Case No. 09-390, D.I. 178; Case No. 09-571, D.I. 161.) ESR and SRH (and of course the controlling entity, Altitude) were thus aware of the grounds for a challenge to standing as far back as July 2009, over a year ago, and yet, Altitude did nothing to rectify the same standing problem in this case. 8 DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT); Case No. CV 10-03723 RMW (PVT) Case5:08-cv-03172-RMW Document227 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Filed10/29/10 Page13 of 16 LLC, 2010 U.S. Dist. LEXIS 72745, at *13; Enhanced Sec. Research, LLC, 2010 U.S. Dist. LEXIS 63831, at *15. That left ESR without “authority to make decisions concerning licensing and assignments, whether to initiate enforcement proceedings and/or settlement discussions, how to conduct litigation, and the approval of any settlements.” Enhanced Sec. Research, LLC, 2010 U.S. Dist. LEXIS 72745, at *13; Enhanced Sec. Research, LLC, 2010 U.S. Dist. LEXIS 63831, at *15. In a straightforward application of Federal Circuit precedent, Judge Farnan correctly held that ESR did “not have Article III standing” in either action. Id. There is no reason to depart from that reasoning here because Altitude and Plaintiff have the same division of rights. Like ESR, Plaintiff “lacks important indicia of a true ownership interest in the patent,” Propat, 473 F.3d at 1194, and has at best an illusory right to sue, see Speedplay, 211 F.3d at 1251. Altitude has sole “authority to make decisions concerning licensing and assignments, whether to initiate enforcement proceedings and/or settlement discussions, how to conduct litigation, and the approval of any settlements.” Enhanced Sec. Research, LLC, 2010 U.S. Dist. LEXIS 72745, at *13; Enhanced Sec. Research, LLC, 2010 U.S. Dist. LEXIS 63831, at *15. As a result, Judge Farnan’s cogent analysis shows not only that Plaintiff lacks standing here but also that Altitude’s favored model for enforcing patents is not permitted by the patent statutes. Finally, because Plaintiff transferred all substantial rights to Altitude and therefore lacks constitutional standing, it cannot cure that defect by joining Altitude as a plaintiff. See Morrow, 499 F.3d at 1344; accord Propat, 473 F.3d at 1193-94; Enhanced Sec. Research, LLC, 2010 U.S. Dist. LEXIS 63831, at *15 (“Joinder of Security Research Holdings as a party to the action cannot cure this defect.”). “Joining the legal title holder only satisfies prudential standing requirements. It cannot cure constitutional standing deficiencies. Since [Plaintiff] fails to meet constitutional standing requirements, it cannot be a party to this suit for patent infringement.” Morrow, 499 F.3d at 1344 (emphasis added). As a result, the case must be dismissed. Under the unusual facts of this case, dismissal with prejudice also is appropriate, fair, and just. Altitude did not merely err regarding its rights in the patents: dismissal with prejudice would not be a draconian result. Nor is Plaintiff a party that inadvertently turned out not to have all substantial rights despite its intention and best efforts to secure them. To the contrary, Altitude 9 DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT); Case No. CV 10-03723 RMW (PVT) Case5:08-cv-03172-RMW Document227 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Filed10/29/10 Page14 of 16 set out deliberately with a faux patentee apparently capable only of suing, while hiding all substantial rights in an entity it intended to keep out of the case altogether while that shielded entity calls all of the shots and reaps all of the rewards. Altitude knowingly steered this case, through SRA, to an inconvenient but plaintiff-friendly forum and resisted third party discovery on it (see Exs. I and J) all the while protectively using Plaintiff SRA as a decoy. This behavior is not an isolated occurrence but rather is illustrative of a concerted pattern of activity in a number of cases including the two Enhanced Sec. Research actions, making clear that Altitude’s modus operandi is to pull the strings from behind a screen. Far from being an error that Altitude should be given leave to correct, this pattern permits an inference that Altitude will simply try some modification of its existing approach if permitted to refile this lawsuit in some other guise. Altitude’s approach abuses the system put in place to permit redress by aggrieved holders of actual and full patent rights, consuming precious judicial and party resources in the process. It would be unjust to give Altitude leave to try its deceptive puppetry yet again, in another form. The Federal Circuit’s ruling in Sicom provides appropriate guidance here. In Sicom, after having a first suit dismissed without prejudice for lack of standing, the plaintiff obtained from the true patentee a bare “right to sue” and re-filed suit. See Sicom, 427 F.3d at 973-74. The district court dismissed the second suit with prejudice because the bare right to sue did not confer standing, and the Federal Circuit affirmed. Id. at 980. Similarly, dismissal with prejudice is appropriate. The dismissal of Altitude-backed plaintiffs in the Enhanced Sec. Holdings litigation put Altitude on notice that its litigation model gives rise to a lack of standing for the shell plaintiffs it funds and controls. Despite controlling this litigation, Altitude failed to cure or to alert the parties or the court of the jurisdictional defect. Plaintiff thus “had its chance to show standing and failed” warranting dismissal with prejudice. Textile Productions, 134 F.3d at 1485. In this case, there is no reason to subject defendants to a second suit or to waste this Court’s resources on what will undoubtedly be a Sicom-like scenario—a cosmetic change in rights that leaves Plaintiff without standing but subjects defendants to additional expense and hardship. 10 DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT); Case No. CV 10-03723 RMW (PVT) Case5:08-cv-03172-RMW Document227 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Filed10/29/10 Page15 of 16 After all, it was no accident that Plaintiff was set up as a sham “patentee” for this litigation. As the Enhanced Security Research case shows, Altitude routinely uses layers of shell corporations as puppet entities to litigate rights possessed by Altitude. In light of this history, the likelihood that Plaintiff will regain independent authority over the patents through an arms-length renegotiation with Altitude is nil. See H.R. Techs., Inc. v. Astechnologies, Inc., 275 F.3d 1378, 1385 (Fed. Cir. 2002) (stating that dismissal with prejudice is appropriate where plaintiff will not be “able to cure the standing problem”). Dismissal without prejudice here will simply invite Altitude to devise a different scheme for Plaintiff to bring suit while Altitude makes the important decisions, all the while shielding itself from the risks of being a party to litigation. Altitude and Plaintiff do not deserve that second bite at the apple. Rather, Plaintiff “had its chance to show standing and failed.” Textile Productions, 134 F.3d at 1485. Dismissal of this action with prejudice is thus appropriate. VI. CONCLUSION For all the foregoing reasons, Plaintiff lacks Article III standing. Accordingly, Defendants respectfully submit that the Court should grant the motion to dismiss. 16 DATED: October 29, 2010 17 18 19 20 21 By: /s/ Donald F. Zimmer /s/ Donald F. Zimmer E-mail: fzimmer@kslaw.com KING & SPALDING LLP 101 Second Street - Suite 2300 San Francisco, CA 94105 Telephone: (415) 318-1200 Facsimile: (415) 318-1300 Attorneys for Defendants GOOGLE INC. and AOL LLC 22 23 24 25 26 27 28 By: /s/ Richard S. J. Hung (by permission) Michael A. Jacobs (CA Bar No. 111664) Richard S. J. Hung (CA Bar No. 197425) Email: mjacobs@mofo.com Email: rhung@mofo.com MORRISON & FOERSTER 425 Market Street San Francisco, CA 94105 Telephone: 415-268-7000 Facsimile: 415-268-7522 Attorneys for Defendants YAHOO! INC. and LYCOS, INC. 11 DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT); Case No. CV 10-03723 RMW (PVT) Case5:08-cv-03172-RMW Document227 1 2 3 4 Filed10/29/10 Page16 of 16 DECLARATION OF CONSENT Pursuant to General Order No. 45, Section X(B) regarding signatures, I attest under penalty of perjury that concurrence in the filing of this document has been obtained from Richard S.J. Hung. 5 /s/ Donald F. Zimmer /s/ Donald F. Zimmer 6 7 Attorneys for Defendants GOOGLE INC. and AOL LLC 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12 DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING CASE NO. CV 08-03172 RMW (PVT); Case No. CV 10-03723 RMW (PVT) Case5:08-cv-03172-RMW Document227-1 Filed10/29/10 Page1 of 2 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 SAN JOSE DIVISION 11 SOFTWARE RIGHTS ARCHIVE, LLC, Case No. CV 08-03172 RMW (PVT) 12 Plaintiff, 13 v. 14 15 GOOGLE INC., AOL LLC, YAHOO! INC., IAC SEARCH & MEDIA, INC., and LYCOS, INC., [PROPOSED] ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING Defendants. 16 17 18 GOOGLE INC., AOL LLC, YAHOO! INC., IAC SEARCH & MEDIA, INC., and LYCOS, INC., Counter-Claimants, 19 20 21 22 23 Case No. CV 10-03723 RMW (PVT) v. L. DANIEL EGGER, SOFTWARE RIGHTS ARCHIVE LLC, AND SITE TECHNOLOGIES INC., Counter-Defendants. 24 25 26 27 28 [PROPOSED] ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING Case No. CV 08-03172 RMW (PVT) Case5:08-cv-03172-RMW Document227-1 1 Filed10/29/10 Page2 of 2 Before the Court is Defendants’ Motion to Dismiss for Lack of Standing. Based on the 2 arguments presented in the motion, the pleadings on file, and any other relevant matter, Plaintiff 3 Software Rights Archive, LLC lacks substantial rights in the asserted patents and has no Article 4 III standing to pursue this action. Because the Plaintiff cannot cure the constitutional standing 5 deficiencies, the Court hereby GRANTS the Motion to Dismiss with prejudice. 6 7 IT IS SO ORDERED. 8 9 Dated: ______________________ _____________________________ RONALD M. WHYTE UNITED STATES DISTRICT JUDGE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 [PROPOSED] ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS FOR LACK OF STANDING Case No. CV 08-03172 RMW (PVT)

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