I/P Engine, Inc. v. AOL, Inc. et al

Filing 771

NOTICE by I/P Engine, Inc. Proffer of Evidence Related to Laches (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F, # 7 Exhibit G, # 8 Exhibit H, # 9 PX 176, # 10 PX 408, # 11 PX 409, # 12 PX 410, # 13 PX 411, # 14 PX 412, # 15 PX 413, # 16 PX 414, # 17 PX 415, # 18 PX 416, # 19 PX 417 I, # 20 PX 417 II, # 21 PX 418, # 22 PX 419 I, # 23 PX 419 II, # 24 PX 421, # 25 DX 21, # 26 DX28, # 27 DX 255)(Sherwood, Jeffrey)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA
NORFOLK DIVISION
__________________________________________
)
I/P ENGINE, INC.,
)
)
Plaintiff,
)
v.
)
Civ. Action No. 2:11-cv-512
)
AOL, INC. et al.,
)
)
Defendants.
)
__________________________________________)

PLAINTIFF I/P ENGINE, INC.’S PROFFER OF EVIDENCE RELATED TO LACHES
Plaintiff I/P Engine, Inc. (“I/P Engine) respectfully submits this proffer of evidence in
rebuttal to Defendants’ affirmative defense of laches.
Prior to the October 9, 2012 pretrial conference the parties were not in agreement with
regard to the presentation of laches evidence. As reflected by the parties’ proposed pretrial order
that was submitted to the Court on October 5, I/P Engine understood that laches evidence should
be received outside of the presence of the jury. (Proposed Pretrial Order, at V.A.7). Defendants
argued that the jury should render an advisory verdict on laches. Id. at V.B.5.; see D.I. 693 at
58-60 (Defendant’s Proposed Laches Jury Instructions); D.I. 694 at 11 (Defendants Proposed
Verdict Form with Laches Question). At the October 9 pretrial conference, the Court indicated
that it would not submit the issue of laches to the jury, but that the Court would instead decide
the issue after all evidence had been received. The Court noted that it might be possible to elicit
laches-related evidence from some witnesses in front of the jury, but that other laches-related
evidence would be received outside of the presence of the jury. At no point did the Court
indicate that it would rule on laches before all evidence had been submitted. As a result of the

Court’s instructions, in the final Pretrial Order, Defendants withdrew their request that the jury
provide an advisory verdict on laches. (D.I. 719 at V.B.5).
On October 30, 2012, Defendants rested their case. Plaintiff moved for judgment as a
matter of law on Defendants’ affirmative defenses, including laches. (Trial Tr. at 1771-78).
Defendants opposed the laches motion. (Trial Tr. at 1778-92). In their response, Defendants
referred the Court to a proffer that they had just provided. (Trial Tr. at 1789, 1770). Defendants
also renewed their Rule 50(a) motion which the Court had already denied, and the Court stated
that no further briefing was required. (Trial Tr. at 1792). That Rule 50(a) motion did not include
a laches motion. (Trial Tr. at 985-1029). Thus, when I/P Engine made its JMOL motion on
laches, and Defendants submitted their response and proffer, there was no pending JMOL motion
by Defendants with regard to laches.1
On the morning of October 31, 2012, the Court purported to grant Defendants’ renewed
laches motion, even though no such motion ever had been made. In its October 31, 2012 laches
ruling, the Court stated that the presumption of laches applied, thus shifting the burden to
Plaintiff. Under Federal Circuit law, “[o]nce the presumption is established, the patentee may
introduce evidence sufficient to support a finding of nonexistence of the presumed facts.”
Wanlass v. Fedders Corp., 145 F.3d 1462, 1464 (Fed. Cir. 1998) (en banc) (citing A.C.
Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1037 (Fed. Cir. 1992)).
The Court stated that it would not consider any of I/P Engine’s proffered rebuttal
evidence, but that it would permit I/P Engine to submit a proffer. This proffer is intended to
1

Defendants filed their first and only Motion for Judgment as a Matter of Law Regarding Laches
the morning of October 31, 2012. Counsel for I/P Engine did not see that motion until after their
return from Court that day. In its ruling on the morning of October 31, the Court could not have
been granting that motion, because it had been filed only hours before the Court made its ruling;
I/P Engine had no opportunity to respond or be heard, and the Court stated that its laches ruling
was based upon Defendants’ proffer of October 30 in opposition of I/P Engine’s JMOL.

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show the “evidence sufficient to support a finding of nonexistence of the presumed facts” that I/P
Engine would submit, if permitted to do so by the Court.
Google first introduced the accused AdWords system in 2004. (Trial Tr. at 593). Since
then, Google has protected the inner workings of its AdWords system as a trade secret. Mr.
Alferness has testified that AdWords is “important technology, our trade secrets” and thus
Google does not tell its customers about the way AdSense for Search works. (Trial Tr. at 1047).
Lycos did not know how Google AdSense for Search (or AdWords) worked in 2005.
(Blais Decl. ¶¶ 3-5 (Ex. A); Blais Dep. at 49:12-50:12 (Ex. B)). Prior to 2006, Lycos was only
an AdSense for Content customer of Google’s – which is not an accused product or system in the
present litigation. (Blais Decl. ¶ 6; DX 21; DX 28, DX 255). During that same period, Lycos
had its own search advertising product called AdBuyer that it was using. (Blais Dep. at 40:4-14).
It was not until 2006 that Lycos became an AdSense for Search customer. (Blais Decl. ¶ 6; Blais
Dep. at 33:6-34:16). Lycos had no reason to know about, including how it works, AdSense for
Search. (Blais Decl. ¶¶ 3-5).
Mr. Blais, Lycos’ current General Counsel, confirmed these facts during his deposition in
this case. Mr. Blais testified that Lycos had used its own AdBuyer Internet advertising system
since at least as early as 2004 and stopped using the AdBuyer product sometime in 2006. (Blais
Dep. at 40:4-14). He further testified that Lycos used Google AdSense for Search in 2006 before
eventually switching to other providers. (Blais Dep. at 8:10-20). A true and correct copy of Mr.
Blais’ deposition transcript is attached hereto as Exhibit.
Mr. Kosak, Lycos’ Chief Technology Officer at the time, testified in his deposition that
neither he – nor anyone else at Lycos to his knowledge – was not aware of how the AdWords
system works. (Kosak Dep. 16-17:14 (Ex. C)).

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At trial, Mr. Kosak testified that, on two different occasions, he reached out to Google to
ask them specifically how AdSense or AdWords was operating:
Q.

And throughout the time that you were at Lycos, did you
ever point out to anybody any thought that Google was
infringing your patents?

A.

I didn’t understand how AdSense or AdWords functioned at
the time, so it didn’t occur to me they were infringing. I
had, at least two different occasions, poked at Google asking
them specifically how AdSense or AdWords was operating when
we had some problems with the systems.

(Trial Tr. at 352).
PX176, the sole document on which Defendants rely, is not a technically accurate
description of the AdWords system. Mr. Alferness testified that this document was not a true
statement, and that it was a document aimed at external customers or advertisers that was
“prescribing in technical detail how the system works.” (Trial Tr. at 1081-1082). In fact, he
testified that – even though the document says that it is Google’s official blog with respect to
how AdWords works – this document was not an official “prescription for how the product
works.” Id. Mr. Alferness testified:
Q.

How much do you tell your customers about the way
AdSense for Search works?

A.

We don’t go into much detail at all. We talk about
it generally at a fairly high level.

Q.
A.

And why is that?
The details really aren’t that important to our
customers. Additionally, they are -- you know, it’s our
important technology, our trade secrets, I’d say.

Q.

How much are the AdSense customers involved in
creating the product, the AdSense for Search customers?

A.

Oh, they really aren’t involved at all in the actual
creation of the products.

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Q.

Can we put up on the screen PX-176?
Do you know what this document is?

A.

Give me a second while they increase the size.
Yes. This is our Google Inside AdWords blog.
This is one of the mechanisms that we use to communicate
to external folks, customers and the like, about changes
that we are making to AdWords.

(Trial Tr. at 1047).
Q.

Okay. So during your direct testimony, you talked about
PX-176. That's in your binder. Can you pull that up?

A.

I have that here.

Q.

Great. In the -- let me direct your attention about a
third of the way down the page, you’ll see that there is a
heading that says, “Question number 2.”

A.

I see that, yes.

Q.

And the question is, “What is the quality score?”

A.

I see that, as well.

Q.

Right. And the answer is, “Quality score is simply a new
name for the predicted CTR, which is determined based on
the CTR of your keyword, the relevance of your ad text, the
historical keyword performance and other relevancy
factors.” Do you see that?

A.

I see that.

Q.

And to the best of your understanding, that is a true
statement, isn’t it?

A.

No.

Q.

It is not a true statement?

A.

No.

Q.

Let me direct your attention to the date that appears up
towards the top of the page, Monday, July 18, 2005. Do you
see that?
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A.

I do.

Q.

And your testimony is that this statement that I just
read to you, as of July 18, 2005, was an incorrect
statement?

A.

This is a document, a blog aimed at our external
customers or advertisers. We are trying to explain things to
our advertisers in a way such that they understand how to
operate within the system. We are talking about tens if not
hundreds of thousands of advertisers, lay people here. We
are not prescribing in technical detail how the system
works.

Q.

Mr. Cole, could you highlight the heading up at the very
top there where it says, “Official blog.”
Is this document PX-176 a document created at Google?

A.

I would assume so, yes.

Q.

Is it, in fact, Google’s official blog with respect to
how AdWords works?

A.

No.
This is our blog that talks to our advertisers, our
customers, so that they can understand at a high level in
some abstraction how the system works so that they can
perform well within that system.

Q.

Mr. Alferness, please look at the top of the document
PX-176. Does it say Google’s official blog or not?

A.

The document says Google’s official blog. It is not,
however, a technical prescription for how the product
works.

(Trial Tr. at 1080-82).
Mr. Blais testified that he was not aware of whether Google’s blog posts about AdWords
were ever seen by Lycos in 2005. (Blais Dep. at 46:14 – 50:12).
Mr. Fox, of Google, admitted that like statements as the single blog sentence are
technically inaccurate and that fact is confidential. (Fox. Dep. at 161:10-15 (Ex. D)).

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Mr. Blais declared that in 2005, no one in the Lycos legal department had any knowledge
of PX 176. (Blais Dec. at ¶ 3). In 2005, Lycos was focused on disputes between Daum
Communications and Telefonica related to the purchase of the company, or portion thereof.
Lycos was also focused on trying to avert bankruptcy, settling a large litigation involving
Yahoo!, Inc., and resolving a trademark dispute with Carnegie Mellon University. Id. At no
point in 2005, did Lycos discuss, analyze or otherwise review PX 176. Id.
According to Mr. Blais, PX 176 would not have caused Lycos to commence an
investigation into whether the AdWords system infringed the ‘420 or ‘664 patents. Id. The
relevant portion of PX 176 is a single sentence that does not reveal any technical details of the
operation of the AdWords system. Id. PX 176 does not describe any details as to whether the
AdWords system combines, filters, or otherwise performs any of the limitations recited in either
the ‘420 or ‘664 patents. Id.
I/P Engine’s predecessor in interest – Lycos – to the patents-in-suit was enforcing patents
that are related to the patents-in-suit through litigation against others from at least January 2007
to January 2011. Lycos enforced patents in the same family as the ‘420 and ‘664 patents against
other defendants from at least January 2007 to January 2011. (See Complaint, Lycos, Inc. v.
Tivo, Inc. et al., No. 2:07-cv-3 (E. D. Va. Jan. 10, 2007), D.I. 1). Exhibit E is a copy of an Order
Granting a Motion to Transfer Venue in the Lycos v. Tivo litigation. (ORDER Granting
MOTION to Transfer Venue, Lycos, Inc. v. Tivo, Inc. et al., No. 2:07-cv-3 (E. D. Va. Aug. 8,
2007), D.I. 37). Attached hereto Exhibit F is a copy of a Case Transferred In-District Transfer in
the Lycos v. Tivo litigation. (Case Transferred In-District Transfer, Lycos, Inc. v. Tivo, Inc. et al,
No. 1:07-cv-11469(MLW) (D. Mass. Aug. 9, 2007), D.I. 38). Exhibit G is a copy of an Order
Dismissing Case in the Lycos v. Tivo litigation. (Order Dismissing Case, Lycos, Inc. v. Tivo, Inc.

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et al No. 1:07-cv-11469(MLW) (D. Mass. Jan. 10, 2011), D.I. 224). I/P Engine filed the present
suit less than three months after it acquired the patents-in-suit from Lycos. Further, I/P Engine
filed its present suit against Defendants within ten months of the conclusion of Lycos’s litigation
involving the related patents. See (D.I. 1, Complaint).
In the present suit, Defendants deposed all of the relevant witnesses to the laches issue
including the inventors Ken Lang and Don Kosak, the prior owner of the patents-in-suit – Lycos,
by way of a 30(b)(6) deposition of Mr. Blais, and the current owners, or related parties, of the
patents-in-suit, I/P Engine, Inc., Innovate/Protect, Inc., and Vringo, Inc., by way of 30(b)(6)
depositions of Alex Berger. Mr. Lang and Mr. Kosak provided more than 550 pages of
deposition testimony in answer to Google’s specific questions, demonstrating their knowledge of
the topics related to the present case.
The patents-in-suit in this case relate to technology developed in the late 1990’s. For
example, the ‘420 patent was filed on December 3, 1998. (PX 1). The ‘664 patent was filed on
October 22, 2001. (PX 2). The ‘664 patent is a continuation of the ‘420 patent and claims
priority to the ‘420 patent. Id. The events with respect to the patents-in-suit occurred at least 7
years prior to 2005 and almost 15 years prior to present day – all events which have occurred
outside of the period of delay. There is no evidence that Mr. Lang and Mr. Kosak would have
been able to answer certain questions as Defendants may have desired even if they were deposed
in 2005.
Google was aware of the patents-in-suit prior to September 15, 2012. Google owns U.S.
Patent No. 7,647,242, and the ‘242 patent lists the ‘420 patent on its face. (PX 0416). In
particular, in an Office Action dated September 30, 2003, the ‘420 patent was cited as a
reference made of record in the prosecution history of the ‘242 patent. (PX 0417).

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In a 2008 Google email, Google’s employees discuss Don Kosak, one of the inventors of
the patents-in-suit. (PX 0408, 0409). Google also produced articles from 1996, 1997 and 1998
that were obtained from its corporate archives describing Ken Lang and WiseWire, which was a
precursor to the technology described in the patents-in-suit. (PX 0410, 0411, 0412, 0413).
Google produced a patent used as a deposition exhibit in a prior Google litigation, as well as
another patent presumably produced as alleged prior art in this litigation. (PX 0414, 0415). The
‘799 patent is listed as a cited reference on the face of these patents.
Further, AOL was aware of the patents-in-suit. AOL owns the ‘119 patent, to which the
‘420 patent appears on its face as a cited reference. During prosecution, on March 19, 2004, the
‘420 patent was cited as a prior art reference. (PX 0421).
Additionally, the patents-in-suit were cited multiple times as prior art in the prosecution
of a patent related to the patent asserted against Google in a prior litigation. (PX 0418, 0419).
During the due diligence, a prospective licensee – especially one seeking to resolve a litigation –
would analyze the information that could affect their prospective rights under a proposed license
agreement including a review of any known prior art.
Co-Defendants AOL, IAC, Target, and Gannett cannot avail themselves of the laches
defense asserted by Google, because the doctrine of laches is a defense that is personal to each
party. See, e.g., Israel Bio-Engineering Project v. Amgen, 401 F.3d 1299, 1306 (Fed. Cir. 2005)
(“Because a laches defense is personal to the defendant raising it, Yeda cannot adequately
represent the Serono parties’ interest on this score.”); Sweetheart Plastics Inc. v. Detroit
Forming, Inc., 743 F.2d 1039, 1046 (4th Cir. 1984) (“laches or acquiescence is a personal
defense which merely results in the loss of rights against one defendant”), citing 2 J.T.McCarthy,
Trademarks and Unfair Competition § 31:14 at 587 (2d ed. 1984). The four non-Google

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defendants cannot use the doctrine to limit I/P Engine’s damage claims against them, because
there has been no evidence in the record to show that Lycos knew or should have known prior to
September 15, 2005, of the infringement of AOL, IAC, Target, or Gannett. Indeed, three of the
defendants – IAC, Target, and Gannett – did not begin using the accused AdSense for Search
until after September 15, 2005. (Kurtz Dep. at 28:20 (Ex. H); PX 242; PX 261). As for AOL, it
has submitted no evidence that I/P Engine knew or should have known that it was infringing
prior to September 15, 2005.
Dated: November 1, 2012

By: /s/ Jeffrey K. Sherwood
Donald C. Schultz (Virginia Bar No. 30531)
W. Ryan Snow (Virginia Bar No. 47423)
CRENSHAW, WARE & MARTIN PLC
150 West Main Street
Norfolk, VA 23510
Telephone:
[phone]
Facsimile:
[phone]
Jeffrey K. Sherwood (Virginia Bar No. 19222)
Frank C. Cimino, Jr.
Kenneth W. Brothers
Dawn Rudenko Albert
Charles J. Monterio, Jr.
DICKSTEIN SHAPIRO LLP
1825 Eye Street, NW
Washington, DC 20006
Telephone:
[phone]
Facsimile:
[phone]
Counsel for Plaintiff I/P Engine, Inc.

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CERTIFICATE OF SERVICE
I hereby certify that on this 1st day of November, 2012, the foregoing, , was served via
the Court’s CM/ECF system on the following:
Stephen Edward Noona
Kaufman & Canoles, P.C.
150 W Main St
Suite 2100
Norfolk, VA 23510
[e-mail]
David Bilsker
David Perlson
Quinn Emanuel Urquhart & Sullivan LLP
50 California Street, 22nd Floor
San Francisco, CA 94111
[e-mail]
[e-mail]
Robert L. Burns
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
Two Freedom Square
11955 Freedom Drive
Reston, VA 20190
[e-mail]
Cortney S. Alexander
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
3500 SunTrust Plaza
303 Peachtree Street, NE
Atlanta, GA 94111
[e-mail]
/s/ Jeffrey K. Sherwood

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