Apple, Inc. v. Motorola, Inc. et al

Filing 156

Declaration of Samuel F. Ernst filed by Plaintiffs Apple, Inc., Next Software, Inc. re: 154 Motion to Stay (Attachments: # 1 Ex. 1, Part 1 - Agreement and Plan of Merger, # 2 Ex. 1, Part 2 - Agreement and Plan of Merger, # 3 Ex. 1, Part 3 - Agreement and Plan of Merger, # 4 Ex. 1, Part 4 - Agreement and Plan of Merger, # 5 Ex. 1, Part 5 - Agreement and Plan of Merger, # 6 Ex. 2, Supercharging Article, # 7 Ex. 3, M&A Call transcript, # 8 Ex. 4, Letter to Counsel, # 9 Ex. 5, Letter to Counsel, # 10 Ex. 6, Google's Motion to Dismiss, # 11 Ex. 7, Email to Counsel, # 12 Ex. 8, Email to Counsel) (Ernst, Samuel)

EXHIBIT 6

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)
[e-mail]
CHERYL A. SABNIS (SBN) 224323)
[e-mail]
KING & SPALDING LLP
101 Second Street - Suite 2300
San Francisco, CA 94105
Telephone: [phone]
Facsimile: [phone]
SCOTT T. WEINGAERTNER (Admitted pro hac vice)
[e-mail]
ROBERT F. PERRY
[e-mail]
KING & SPALDING LLP
1185 Avenue of the Americas
New York, NY 10036-4003
Telephone: [phone]
Facsimile: [phone]
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: [e-mail]
KING & SPALDING LLP
101 Second Street - Suite 2300
San Francisco, CA 94105
Telephone: [phone]
Facsimile: [phone]
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: [e-mail]
Email: [e-mail]
MORRISON & FOERSTER
425 Market Street
San Francisco, CA 94105
Telephone: [phone]
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)