Eolas Technologies Incorporated v. Adobe Systems Incorporated et al

Filing 712

MOTION to Compel DISCOVERY FROM ADOBE SYSTEMS, INC. REGARDING INVESTMENT/LICENSING AGREEMENTS WITH INTELLECTUAL VENTURES' ENTITIES by Eolas Technologies Incorporated. (Attachments: # 1 Declaration of Rosemary Snider, # 2 Exhibit A, # 3 Exhibit B, # 4 Exhibit C, # 5 Exhibit D, # 6 Exhibit E, # 7 Exhibit F, # 8 Exhibit G, # 9 Exhibit H, # 10 Exhibit I, # 11 Exhibit J, # 12 Exhibit K, # 13 Exhibit L, # 14 Text of Proposed Order)(McKool, Mike)

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF TEXAS

TYLER DIVISION

Eolas Technologies Incorporated,
Plaintiff,
vs.
Adobe Systems Inc., Amazon.com, Inc.,
Apple Inc., Argosy Publishing, Inc.,
Blockbuster Inc., CDW Corp.,
Citigroup Inc., eBay Inc., Frito-Lay, Inc.,
The Go Daddy Group, Inc., Google Inc.,
J.C. Penney Company, Inc., JPMorgan
Chase & Co., New Frontier Media, Inc.,
Office Depot, Inc., Perot Systems Corp.,
Playboy Enterprises International, Inc.,
Rent-A-Center, Inc., Staples, Inc., Sun
Microsystems Inc., Texas Instruments Inc.,
Yahoo! Inc., and YouTube, LLC
Defendants.

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§ Civil Action No. 6:09-CV-00446-LED
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JURY TRIAL
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EOLAS' MOTION TO COMPEL DISCOVERY FROM

ADOBE SYSTEMS INC. REGARDING INVESTMENTILICENSING

AGREEMENTS WITH INTELLECTUAL VENTURES' ENTITIES

Pursuant to Federal Rule of Civil Procedure 37 and Local Rule CV -7, Plaintiff Eolas
Technologies Incorporated ("Eo las") files this Motion to Compel Discovery from Defendant
Adobe Systems Inc. ("Adobe").

Specifically, Eolas seeks to compel discovery related to

Adobe's investment interest in and licensing relationship with Intellectual Ventures LLC and
related entities, including Invention Investment Fund II, LLC.

I.

INTRODUCTION AND FACTUAL BACKGROUND
Intellectual Ventures ("IV") is a company that calls itself "the global leader in the

business of invention." Ex. A. IV touts a portfolio consisting of more than 30,000 U.S. and
international patents and applications. Id. IV "creates sustainable value" for its customers by

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licensing its patent portfolio. Ex. B. IV offers patent licenses to a broad range of technologies.
Ex. C. IV further advertises itself as significantly reducing its customers' risk of liability for
infringement by providing access to valuable invention rights through licensing. Ex. D.
In 2008, Invention Investment Fund II, LLC, an entity related to IV, indicated in a filing
with the Commissioner of Corporations in California that it intended to raise $2.5 billion by
privately selling security interests in the limited liability company. Ex. E. On May 16,2011, in
a document filed in Xilinx, Inc. v. Invention Investment Fund I LP et al., Case No. 11-CV -0671
in the United States District Court for the Northern District of California, IV revealed publicly
for the first time that Adobe is an investor in IV's Invention Investment Fund II, LLC. Ex. F.
This same filing indicated that other defendants in this case-including Google, Apple, Amazon,
eBay and Yahoo--are also investors in IV's Invention Investment Funds. Id.
On May 20, 2011, Eolas wrote to Adobe and the other Defendants who are investors in
IV seeking the production of documents related to their relationships with IV and Inventions
Investment Fund II, LLC. Ex. G. In a series of emails between Eolas' counsel and Adobe's
counsel, Adobe asserted that the requested documents were not relevant, and Eolas in turn
explained that the documents were highly relevant because they appear to pertain to comparable
licenses or covenants not to sue between IV and Adobe. Ex. H. An informal meet and confer
among Defendants and Eolas took place on June 10, 2011. Id. Adobe refused to produce the
requested documents. Ex. I. The formal meet and confer with lead and local counsel took place
on June 16, 2011, at which time Adobe confirmed its refusal to produce the documents. Ex. J.
At the formal meet and confer Eolas offered to narrow its request to the IV investment
documents and the list of licensed patents relevant to Adobe, but Adobe rejected this proposed
solution.

The narrow scope of requested documents that Eolas seeks would include the

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Subscription Agreement and all amendments, the Limited Partnership Agreement and all
amendments, the Patent License Agreement, the Acquisition Notices (which would describe the
patents acquired and provide information concerning the cost of the acquired patents), the Group
Acquisitions in which Adobe elected to participate, showing to which patents Adobe became a
licensee, and documents which would indicate that Adobe has participated in distributions as a
partner in a fund ofIV.

II.

ARGUMENT
Federal Rule of Civil Procedure 26(b)(l) allows Eolas to obtain "discovery regarding any

nonprivileged matter that is relevant to any party's claim or defense" and provides that "[[Jor
good cause, the court may order discovery of any matter relevant to the subject matter involved
in the action." The Local Rules state that "relevant to the claim or defense" includes information
"that would not support the disclosing parties' contentions[,J" "information that deserves to be
considered in the preparation, evaluation or trial of a claim or defense[,J" and "information that
reasonable and competent counsel would consider reasonably necessary to prepare, evaluate or
try a claim or defense." L.R. CV-26(d). Relevant information need not be admissible at trial if
the discovery appears to be reasonably calculated to lead to the discovery of admissible
evidence. FED. R. CIY. P. 26(b).
Eolas has the burden of proof regarding both infringement and damages. This Court has
stated unequivocally that "non-litigation license agreements relating to arms-length commercial
transactions are admissible in patent cases as they are probative on the issue of damages."

Commonwealth Sci. & Indus. Research Organization v. Toshiba Am. Information Systems, Inc.,
2008 U.S. Dist. 109254, * 10 (E.D. Tex. Oct. 24,2008). The rates paid by a defendant for the use
of other patents comparable to a patent in suit is a well-established factor in detemtining a
reasonable royalty as damages for infringement. Georgia Pacific Corp. v.

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u.s. Plywood Corp.,

318 F. Supp. 1116, 1120 (S.D.N.Y. 1970). Licensing agreements also show customary rates in
the industry for the use of analogous inventions and rates upon which a licensor and licensee
would have reasonably and voluntarily agreed. Id.
The requested IV docwnentation is relevant to several of the Georgia-Pacific factors. Id.
For example, under Georgia-Pacific No.2, the nature of the patents acquired by IV and licensed
to Adobe may provide evidence of rates paid by Adobe for the use of other patents comparable
to Eolas' patents-in-suit. Id. Similarly, the requested IV documentation is also relevant under

Georgia-Pacific No. 12, "[t]he portion of the profit or of the selling price that may be customary
in the particular business or in comparable businesses to allow for the use of the invention or
analogous inventions." Id. In particular, the docwnents requested may be used to demonstrate
that such a customary rate does or does not exist. Finally, the IV docwnentation is relevant
under Georgia-Pacific No. IS- the hypothetical negotiation is premised on the assumption that
the parties have access to all relevant information. Id. Adobe's partnership with IV, including
the nature of the patents acquired and the terms under which Adobe has been granted licenses is
relevant information; a hypothetical licensor such as Eolas might fmd this information pertinent
because it would reflect the royalty structure of other agreements Adobe has entered as well as
the amount that Adobe has agreed to pay for patent licenses.

In addition to being relevant to the calculation of a proper reasonable royalty, the IV
materials sought by Eolas will demonstrate that Adobe is a partner in an entity that acquires
patents for the purpose of licensing and that Adobe finds value in patents owned and asserted by
a non-practicing entity. Eolas expects Adobe and the other Defendants to (inaccurately) criticize
Eolas as a non-practicing entity at trial. In addition to being relevant to the proper calculation of
a reasonable royalty, the IV discovery will also help forestall such an attack.

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This Court has frequently noted that it adheres to a policy of liberal, open and forthright
discovery and will not tolerate gamesmanship. See Commonwealth Sci., 2008 U.S. Dist. 109254
at *8. Documents disclosing the tenns of Adobe's relationship with Intellectual Ventures, the
self-declared "global leader" in the "business of invention," who is actually in the business of
licensing thousands of patents, are highly relevant and should be produced. Other defendants
who invest in IV, including at least Google and Apple have indicated that they will provide at
least some of the IV discovery that Eolas requested. Exs. K and L. This is testament to its
relevance. Eolas requests that the Court order Adobe to produce the documents and other
discovery relating to IV and Invention Investment Fund II, LLC, as requested above, so that
Eolas may detennine the nature of Adobe's interest in IV, the extent of Adobe's interest and the
value placed on comparable patents through Adobe's interest in IV.

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DATED: June 20, 2011

Respectfully submitted,
McKOOL SMITH P.e.

By:

/s/ Mike McKool

Mike McKool
Lead Attorney
Texas State BarNo. 13732100
[e-mail]
Douglas Cawley
Texas State Bar No. 04035500
[e-mail]
McKoOL SMITH, P.e.
300 Crescent Court, Suite 1500
Dallas, Texas 75201
Telephone: [phone]
Telecopier: [phone]
Kevin L. Burgess
Texas State Bar No. 24006927
[e-mail]
John B. Campbell
Texas State BarNo. 24036314
[e-mail]
Josh W. Budwin
Texas State Bar No. 24050347
[e-mail]
Gretchen K. Harting
Texas State Bar No. 24055979
[e-mail]
Matthew B. Rappaport
Texas State Bar No. 24070472
[e-mail]
McKoOL SMITH, P.e.
300 West Sixth Street, Suite 1700
Austin, Texas 78701
Telephone: [phone]
Telecopier: [phone]
ATTORNEYS FOR PLAINTIFF
EOLAS TECHNOLOGIES INC.

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CERTIFICATE OF CONFERENCE

The undersigned certifies that the parties have complied with Local Rule CV -7(h)'s meet­
and-confer requirement. On June 16, 2011, lead counsel for Eolas, Mike McKool, along with
Josh Budwin, Jolm Campbell and Rosemary Snider, conducted a personal conference by
telephone with David Healey, counsel for Adobe. The discussions ended conclusively in an
impasse, leaving an open issue for the Court to resolve.

lsi Rosemary Snider
Rosemary Snider

CERTIFICATE OF SERVICE

The undersigned certifies that the foregoing document was filed electronically in
compliance with Local Rule CV -Sea). As such, this document was served on all counsel who
have consented to electronic services on June 20, 2011. Local Rule CV -S(a)(3)(A).

lsi Rosemary Snider
Rosemary Snider

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