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

Filing 942

Declaration re 938 Memorandum in Opposition, by AOL Inc., Gannett Company, Inc., Google Inc., IAC Search & Media, Inc., Target Corporation. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2 (Public Version), # 3 Exhibit 3 (Public Version), # 4 Exhibit 4 (Public Version), # 5 Exhibit 5 (Public Version), # 6 Exhibit 6 (Public Version), # 7 Exhibit 7 (Public Version), # 8 Exhibit 8 (Public Version), # 9 Exhibit 9 (Public Version), # 10 Exhibit 10 (Public Version), # 11 Exhibit 11 (Public Version), # 12 Exhibit 12 (Public Version), # 13 Exhibit 13 (Public Version), # 14 Exhibit 14 (Public Version), # 15 Exhibit 15 (Public Version), # 16 Exhibit 16 (Public Version), # 17 Exhibit 17 (Public Version), # 18 Exhibit 18 (Public Version), # 19 Exhibit 19 (Public Version), # 20 Exhibit 20 (Public Version), # 21 Exhibit 21 (Public Version), # 22 Exhibit 22, # 23 Exhibit 23, # 24 Exhibit 24, # 25 Exhibit 25, # 26 Exhibit 26, # 27 Exhibit 27, # 28 Exhibit 28, # 29 Exhibit 29, # 30 Exhibit 30)(Noona, Stephen)

EXHIBIT 23

Page 1
Volume I

Pages 1 - 157
Exhibits 1 - 20
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA
NORFOLK DIVISION

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I/P ENGINE, INC.,

*

Plaintiff,

*

Civil Action No.

Vs.

*

2:11-cv-512

AOL, INC., et al.,

*

Defendants.

*

********************

AUDIO/VISUAL DEPOSITION of LYCOS, INC.,
by and through its designee MARK BLAIS
Tuesday, July 31, 2012 at 9:00 a.m.
Goulston & Storrs
50 Rowes Wharf, 7th Floor
Boston, Massachusetts

------ Jacqueline P. Shields, RPR, CSR ------

Job No. CS409539

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A. I do not know.
Q. When did Lycos first consider selling the
'420 and '664 patents?
A. We first considered selling our patent
portfolio as a whole in 2009, and so there was never
any specific discussion about the '420 patent or
that other patent in suit, but it would have been
included within the portfolio, so, therefore,
indirectly it would have been included within the
sale. It was just a straight sale of the whole
portfolio.
Q. And when Lycos first considered selling its
patent portfolio, was that a situation where Lycos
was contacted by someone who was interested in
selling the patents?
MS. ALBERT: Objection. Vague.
Q. Or purchasing. Sorry.
A. We were contacted by a number of parties
about buying specific patents, or the whole
portfolio or brokering licenses for the portfolio
over time.
Q. Was Lycos ever contacted by a license about
-- strike that.
Was Lycos ever contacted about selling the

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they do, I don't really know. Some patents had to
do with back-end load balancing of networks.
I think they all come within that general
sphere. There might be a couple outliers, I'm not
sure. Oh, and the game patent.
Q. Did Lycos ever conduct in the 2009 time
frame an evaluation of the value of its portfolio as
a whole?
A. No, it did not.
Q. Is Lycos aware of anyone else who did?
A. No.
Q. When did Altitude Capital first contact
Lycos?
A. I believe we were contacted in late 2008
maybe. And then -- I don't think we were initially
interested, but then 2009 hit and we had an adverse
ruling in the ongoing patent litigation that we then
wanted to get rid of. We had basically a demand to
become profitable. So we were looking at all ways
to cut costs.
Maintaining patents is an expense. Every
single year both with outside law firm and for the
maintenance fees.
So as part of that I was told to go ahead

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'420 and '664 patents?
A. Not specifically.
MS. ALBERT: Objection. Vague.
Q. What patent was Lycos contacted about?
A. I believe we were contacted at one point
about the '799 patent, and we may have been
contacted on another specific patent, that I just
don't remember right now, but we never engaged in
any talks to sell an individual patent. The only
talks we engaged in came in 2009 as related to the
entire portfolio.
Q. And who did Lycos engage in discussions
with in 2009 regarding sale of the entire portfolio?
A. Altitude Capital Partners.
Q. When you say "the entire portfolio," how
many patents are you referring to?
A. At the time I believe we had around 28
patents. As well as patent applications that were
pending. That was a guess.
Q. Just generally, what fields were those
patents in?
A. Variety of fields. Search, advertising,
online advertising, obviously. Some patents I would
need to mention here to explain to you exactly what

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and have discussions about selling the patents, if I
wanted. They really weren't -- our parent company
at the time from Korea wasn't very experienced with
patents and didn't have a lot of appreciation for
them.
So it just wanted to reduce costs
basically, and expense. So I think that's what made
me perhaps contact Altitude again.
I'm just trying to remember what happened
after that point.
Q. Just stepping back, who is Altitude or what
is Altitude Capital?
A. It's a company based out of New York that
they do invest in intellectual property portfolios,
and I assume try to monetize those portfolios
through licensing or however they do it.
Q. Was there a particular person that you were
in contact with at Altitude Capital?
A. Yes.
Q. Who was that?
A. Howard -- no, sorry. Warren Hurwitz,
H-U-R-W-I-T-Z.
Q. What was the result of your contacting
Altitude Capital again?

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A. At a certain point we entered an LOI,
letter of intent to purchase that portfolio.
Q. When you say the patent portfolio, you mean
the entire portfolio?
A. The entire portfolio. Against my better
advice.
Q. Do you recall what the terms of the LOI
were?
A. Generally. They changed because we, at
first we entered an LOI subject to, I believe,
90 days of due diligence. We, I believe, initially
we were going to sell them the patent portfolio in
whole for around 4 or 4 and a half million.
Q. Do you know who conducted -- well, first,
do you know if any due diligence occurred subject to
that letter of intent?
A. Yes.
Q. Do you know who conducted the due
diligence?
A. Altitude itself did. They had an in-house
counsel.
Q. Do you know if they had any outside counsel
involved?
A. They did.

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didn't want to step into the litigation, so I had
more pressure on me to just reach settlement to get
done with it. And that dragged on for quite a bit
because the final settlement with Blockbuster took
so long, we reached an agreement and they changed,
we thought they changed the agreement, so we had to
file a motion about it. It took a while.
And Warren also came back, and a couple of
patents that we liked, we thought there were more
value, they pushed back on, they thought they found
some weaknesses in some other patent, namely the
game patent. They were worried about some of the
prior art on that game patent. And I don't remember
specifically, but they also made some comments about
the patents in that suit, but I don't remember what
their comments were. But it was a way, the whole
thing was a way to push down the price of the LOI,
which they ended up doing, and we entered a second
LOI.
Q. When did -- do you know when Lycos entered
that second LOI?
A. Sometime in 2009.
Q. Do you recall what the terms of that second
LOI were?

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Q. Who was that?
A. It was Dickstein Shapiro.
Q. At the time that it occurred was Dickstein
Shapiro still representing Lycos?
A. They had not started to represent Lycos
yet. I did not have any direct communications with
Dickstein at that time.
Q. Does Lycos have any knowledge as to the
results of that due diligence?
A. Only what I was told by Warren.
Q. And that is?
A. And that is -- well, one of the issues was
with the patents in suit at the time, we wanted out
of litigation, and so we either needed them to step
in after the fact. If we sold them and assigned
them, we no longer have standing to prosecute the
litigation, and we didn't want to remain in it in
name or any capacity. Or we had to finish up the
litigation, so we could do the deal. And to sell
them outright, it came to a point where they also
didn't like the jurisdiction. I don't know if they
liked the patents differently or not, they are
pretty careful of not sharing that type of
information with me. It came to a point where they

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A. They were -- I'm trying to remember what
the payment was going to be. It got dropped way
down to about 1.25 million perhaps, and I believe
one of the conditions was that we attempted to have
this summary judgment vacated in that litigation,
and that may -- I can't remember if there was one
price if we got it vacated, and one price if we
didn't. That seems to ring a bell, but I don't
remember.
MS. O'BRIEN: Shall we go ahead and take a
break to change the tape?
VIDEOGRAPHER: This will be the end of tape
3, going off record, the time is 2:05.
(Recess was taken at 2:05 p.m.)
(Reconvened at 2:09 p.m.)
VIDEOGRAPHER: We are back on record,
beginning of tape 4, the time is 2:09, you may
continue.
Q. Do you recall how long the second letter of
intent with Altitude was in effect?
A. I believe there was only supposed to be an
additional 30-day due diligence period, however,
again, things were really contingent upon our
settling with all matters with Blockbuster in the

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litigation. As long as that was pending we couldn't
complete a sale, and that kept on lingering. And it
was around that time frame that Dickstein took over
as counsel for us directly. Again, that would have
been, you know, June, July 2009.
Q. So Lycos's negotiations with Altitude
Capital continued after the settlement agreement
with ChoiceStream and Blockbuster?
A. No.
Q. Do you know why not?
A. Because by that time it was already spring
of 2010 and our parent company had just entered a
letter of intent with Ybrant to sell Lycos, so that
would have been a transaction out of the ordinary
course, which would have prohibited doing that at
that point.
Second, if we were going to have a new
parent, that parent may have a very different
opinion of the patent portfolio and the price. It
was not legal advice, I could disclose I had advised
from a business standpoint the company to not accept
1.25 million for the entire portfolio, because I
thought it was absurd. But in their cost- cutting
frenzy, they were just doing, they were just doing

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A. Well, I was contacted by another -- at that
time we were not, we did not -- let me step back.
We had received an offer from a third party, another
party related to the patents in suit here.
Q. And who is that third party?
A. Stayko Staykov. And that is S-T-A-Y-K-O
S-T-A-Y-K-O-V.
Q. Who is Stayko Staykov?
A. He's from that Borat movie, I think. No,
he owns an intellectual property investment type of
company. I believe it was called Eidos, E-I-D-O-S,
if I remember correctly. And a smaller company.
And he's invested in intellectual portfolio s
before, and he contacted me.
Q. And when did he contact you?
A. Sometimes in the spring of 2011. And he
came up and met with me.
Q. When you said the patent at issue in this
case, which patents specifically did he indicate
that he was interested in?
A. The '664 patent and the '420 patent.
Q. Any others?
A. Well, I mean, I think the discussion
necessarily included the whole patent family. So if

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anything. So when it got to that point, our hands
were tied. And I think Ybrant wanted to look at
this after the fact if they were buying our company.
They wanted to buy it in place. So we stopped all
negotiations at that time.
Q. Did Lycos ever begin negotiations regarding
the sale of its patents after it entered -- after
its acquisition by Ybrant?
MS. ALBERT: Okay. Vague.
A. Say that one more time. Sorry.
Q. It's a terrible question. Let's try again.
A. I didn't say that.
Q. That's fair. I will, I will own that. Did
Lycos and Altitude Capital ever have any other
negotiations regarding the sale of patents after the
spring of 2010?
A. After the -MS. ALBERT: Objection. Vague.
A. After the fall of 2010, yes.
Q. And when was that?
A. That would have been sometime late spring
or summer 2011.
Q. What patents were involved in that
negotiation?

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I remember correctly, he -- I don't know if he
actually cited those two specifically, but he wanted
the family of patents.
Q. When did you first meet with him?
A. Spring of 2011, I believe.
Q. Did he make an offer to purchase the patent
of families at the time? The family of patents at
that time?
A. After our meeting he did some brief due
diligence and sent me some information about
himself, and then made an offer.
Q. And what was that offer?
A. It's hard for me to remember right now, but
it was in the 1 million range. And, again, at this
point we're only talking about this one patent
family, not the whole portfolio.
Q. Did he say why he was interested in this
patent family?
A. I think he just said so that he could
monetize it in some fashion.
Q. Did he tell you how he identified this
patent family?
A. I know that Dickstein had him contact me.
Q. How did you respond to the offer from Mr.

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Staykov?
A. I told him it was too low.
Q. Did you provide a counter offer?
A. It took a while for me to get any response
from Israel, which is where our parent company's
kind of business is operated. It's not where our
parent company is operated. Our parent company is
located in Indiana, but the business operations of
Ybrant is in Israel. It took me a while to get a
response back.
In the meantime I spoke with our CEO, who
told me to see if I could get other parties
involved, and that's when I reached out to Altitude
again and said, hey, you know, the previous LOI's
have no effect anymore, but I wanted to give you a
courtesy call, give you a heads-up that we're in
discussion to sell this one patent family, not our
portfolio anymore, and that we have an offer on the
table. And if you want to throw in your hat, let me
know. So they were a little perturbed by that whole
thing, but it's business. And then Dickstein also
put me in contact with another company, which was
Hudson Bay Capital, and Alex Burger.
Q. Is Dickstein representing Lycos at the

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200,000.
Q. So then the 3.2 is, the 3.2 million was the
highest offer that you received?
A. Yes, to date. Yeah, and Altitude basically
made his 3 million the final offer, so I never went
back to Altitude with the 3.2.
Q. So just stepping back, that first meeting
you had with Alex Burger of Hudson Bay, you said one
of his colleagues was there. Do you know who that
was?
A. I don't remember.
Q. Do you know what was discussed during that
initial meeting?
A. It was very background type of stuff. They
told me about them, the background, the company. I
told them about Lycos. And we just discussed the
possibility of selling these potential patents.
Q. Did they discuss any of their plans to
monetize the patents?
A. They did not. And, again, they never
specified any specific patents within the family per
se. It was all discussion on the family as a whole.
Q. So then your discussions with Hudson Bay,
did they ever specify an amount for specific

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time?
A. No. Dickstein made the introductions, but
they were not involved in the discussions.
Q. After you reached out to Altitude Capital
did they respond?
A. In the meantime I met with Alex Burger's
company, then was Hudson Bay Capital, he came up and
met with me with one of his colleagues to discuss
this family of patents. He then went back and did
some very quick due diligence over a span of days,
and then made an offer, and I had not heard back
from Altitude yet, I conveyed the highest offer we
had to Altitude, and eventually Altitude came back
and made an offer. I conveyed all this to Staykov.
Staykov made more of an offer, and the three parties
basically negotiated off themselves until we finally
agreed at 3.2 million with Hudson Bay.
I believe, I believe Altitude had gone up
to 3 million, and I believe Staykov had gone up to
2.5 million before he dropped out. And Hudson's
last offer was more of take it or leave it at 3.2,
and I wanted to get it done. And we ended up
accepting that, although we threw a couple of
additional patents into the mix for the extra

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patents?
A. No.
Q. Do you know if Hudson Bay ever did an
evaluation of the value of the specific patents?
MS. ALBERT: Objection. Vague.
A. I have no idea.
Q. Similarly, do you know if Altitude Capital
ever did any evaluations of the value of the patents
in the '799 family?
MS. ALBERT: Same objection.
A. I don't know if it did a valuation. I know
it conducted due diligence. Extensive due
diligence.
Q. Were there any factors that influenced
Lycos's decision to sell the '799 patent family to
Hudson Bay other than the 3.2 million purchase
price?
MS. ALBERT: Objection. Vague.
A. No. It was just all based on the highest
price we could get. And the size of Lycos, it was a
good amount of cash.
Q. About how long did the negotiations with
Hudson Bay last?
A. It was short. It all happened very

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quickly. Within the span of an -- I was going back
and forth with people for a couple weeks, and it was
done. It was very fast.
MS. O'BRIEN: I will hand you what I will
mark as Exhibit 17, and I'll just note for the
record this, when it was produced, was marked
confidential, outside counsel only. Printer just
hates me today.
And this is a document that was produced
last night by I/P Engine.
(Exhibit No. 17, marked; Letter dated May
16, 2011.)
Q. And obviously take your time to look at the
document, I will just first ask if you recognize the
document.
A. Yes, I recognize it.
Q. What is it?
A. This would be the letter of intent that
Lycos entered with Hudson Bay. It's a little
earlier in 2011 than I had remembered. I thought it
was June or July, but that's close enough.
Q. I want to just look at the first page, the
section "form of acquisition."
A. Yes.

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seller $3,100,000 in exchange for the patent"; do
you see that?
A. Yes.
Q. Was that $3.1 million an amount that was
proposed by Hudson Bay or by Lycos?
A. Hudson Bay, because at that point Lycos
wasn't throwing any numbers out there. To be honest
with you, I was being honest with all parties saying
I have a third-party offer, I can't tell you who it
is, but this is the offer. If you want to beat it,
beat it. And they kept on increasing the amount,
and until we get to the 3 million, and that's when
Altitude said this is our final offer. I don't
think Altitude didn't believe me that we had all
these other offers. And so I took them at their
word and Hudson Bay offered 3.1, that was the
highest, Eidos dropped out, I had heard final offer
from Altitude, accepted this offer and didn't go
back to Altitude, and Altitude was mad at that. And
I said don't say final offer if you don't mean it.
Q. Okay. I think we can put that one aside.
MS. O'BRIEN: Mark as Exhibit 18 document
produced IPE 0022792 through 796.
(Exhibit No. 18, marked; Letter dated June

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Q. About maybe a third of the way down the
sentence that begins "The purchase agreement."
A. Yes.
Q. It refers to a royalty-free, worldwide
license back to the patents. Do you see that?
A. Yes.
Q. Do you know if Lycos placed any value on
the license back of the patents in this agreement?
A. Monetary value?
Q. Right.
A. No. It was more just cross our T's, dot
our I's and be protected going forward so nobody
could sue us on patents we sold, or I'd look like an
idiot.
Q. Do you know if at the time Lycos was
practicing any of the patents in Schedule A of this
agreement?
MS. ALBERT: Objection. No foundation.
A. I really don't know.
Q. And just looking at the section No. 2,
purchase price, do you see that on the bottom of the
first page?
A. Yes.
Q. It refers to "Purchasers shall pay to the

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15, 2011.)
Q. Obviously take your time to look at it, my
first question is do you recognize this document?
A. Yes.
Q. What is it?
A. This is an amendment to the letter of
intent that we just looked at.
Q. Do you know what the purpose of this
amendment was?
A. I think we extended the time by which we
could close, and we added an additional patent to
the sale, and increased the purchase price to
3.2 million. I believe that was the purpose. So
all of a sudden when we were negotiating final
agreement, they requested this additional patent
that we had never discussed with anybody
specifically. So it wasn't anything on our radar,
but they said it was a mistake not to include it in
the original, and I said, well, we already
negotiated the purchase price, you're going to have
to give something for it. And our parent company at
the time was fine with just getting an extra
100,000. They had -- 3.1 was already more than they
had expected, so we just threw another 100,000 in

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