You will recall that Apple filed a Motion to Intervene in the Lodsys v. Combay case and Lodsys responded by opposing the Apple motion. The Lodsys opposition was premised along two major lines: (a) the Apple license to the Lodsys patents does not extend to the defendants in the case; and (b) Apple did not satisfy the requirements for intervention.
Apple has now filed its response [PDF] to the Lodsys opposition. And Apple's response? Lodsys is mischaracterizing the Apple license, which, in any case, is irrelevant to the right to intervene, and Apple has met the requirements to intervene. Specifically, Apple argues it filed on time, it has a property interest in the form of the license (not merely an economic interest), the impairment to Apple's interests is real and immediate, and the other defendants lack the knowledge, expertise and incentives to protect Apple's interests. Moreover, Apple argues that the issue of the applicability of the Apple license can only be decided after Apple has been allowed to intervene, not before.
I would be surprised if Apple is not allowed to intervene, but we will see. Of course, we still do not know what is in that Apple license since the references to the license have been redacted from the response.
*************
Lodsys v. Combay:
35 - Filed and Entered: 08/08/2011
Reply to Response to Motion
Docket Text: REPLY to Response to Motion re 4 MOTION to Intervene - Apple Inc.'s Redacted Reply In Support of Motion to Intervene - filed by Apple, Inc. (Smith, Melissa)
36 - Filed and Entered: 08/08/2011
Sealed Reply to Response to Motion
Docket Text: SEALED REPLY to Response to Motion re 4 MOTION to Intervene filed by Apple, Inc.. (Smith, Melissa)
37 - Filed and Entered: 08/09/2011
Statement in Support of Apple's Motion to Intervene
Docket Text: NOTICE by Atari Interactive, Inc., Electronic Arts Inc., Quickoffice, Inc., Square Enix Ltd. re 4 MOTION to Intervene (Statement in Support of Apple's Motion to Intervene) (Barsky, Wayne)
*************
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
______________________
LODSYS, LLC,
Plaintiff,
v.
ATARI INTERACTIVE, INC.; COMBAY,
INC.; ELECTRONIC ARTS, INC.;
ICONFACTORY, INC.; ILLUSION LABS
AB; MICHAEL G. KARR D/B/A
SHOVELMATE; QUICK OFFICE, INC.;
ROVIO MOBILE LTD.; RICHARD
SHINDERMAN; SQUARE-ENIX LTD.;
TAKE-TWO INTERACTIVE SOFTWARE,
INC.
Defendants.
______________________
CIVIL ACTION NO. 2:11-cv-272-TJW
_____________________
HEARING REQUESTED
APPLE INC.’S REDACTED REPLY IN SUPPORT OF MOTION
TO INTERVENE
Lodsys’s opposition fails to rebut the appropriateness of Apple’s
intervention. Lodsys does not contest that Apple’s technology and
Apple’s interest in protecting the value of its License lie at the heart
of this case, that the present defendants lack the technical information
and expertise regarding that technology and the License to fully and
fairly develop the exhaustion defense, and that Apple’s proposed defense
and counterclaim share numerous common issues of law and fact with the
existing suit. Thus, Apple’s motion to intervene should be granted.
1
ARGUMENT
I. Lodsys’s License Argument Is Both Baseless and Irrelevant at This
Stage
[REDACTED]
1
[REDACTED]2
Third, [REDACTED] , disputed issues of contractual interpretation or
intent cannot be resolved on a motion to intervene. See, e.g.,
Mendenhall v. M/V Toyota Maru No. 11 v. Panama Canal Co., 551 F.2d
55, 56 n.2 (5th Cir. 1977) (all non-conclusory allegations must be
accepted as true when considering intervention). The motion cannot be
stayed pending discovery, as Lodsys argues, Opp. at 4-5, because “the
factual allegations of the complaint are assumed to be true,” and as a
result, “discovery on [the] claims before ruling on the motion to
intervene is as irrelevant as it would be if made in the context of a
motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6).” Pin v.
Texaco, Inc., 793 F.2d 1448, 1450 (5th Cir. 1986).3 Factual issues concerning the
construction of this provision must be resolved on the merits, not at
the pleading stage on a motion to intervene.
II. Apple Has Met the Requirements for Intervention of Right
A. Lodsys Concedes That Apple’s Motion Was Not Filed Too Late
Lodsys’s argument that the Motion is premature is similarly flawed.
First, Apple’s interest in the litigation is far from speculative.
Indeed, Lodsys does not even dispute Apple’s statements that its
technology lies at the heart of this case. See Opp. at 5-7. The
circumstances here are, therefore, far different from those described in
the cases cited by Lodsys,
2
where the intervenor did not even know whether its interests would
ultimately be implicated;4
there is no dispute here that Apple’s license and exhaustion defense
will be central to this case.
Second, no authority cited by Lodsys holds that a motion to intervene
can be “untimely” because it is too early. On the contrary, Lodsys fails
to distinguish or rebut Sierra Club v. Glickman, 82 F.3d 106, 109
n.1 (5th Cir. 1996), cited in Apple’s opening brief at page 9, where the
court held, “[t]he timeliness requirement only bars intervention
applications made too late.” Finally, even if a motion to intervene
could ever be filed too early, Lodsys’s argument would still fail
because it has not articulated any prejudice resulting from Apple’s
Motion.
B. Apple’s Interest Is More Than Economic
Lodsys’s argument that Apple has identified nothing more than an
“economic” interest in the case, Opp. at 8-10, simply ignores the
authorities cited by Apple in its opening brief, which hold
unambiguously that a license is itself a sufficient
property interest as a matter of law. See Motion at 10-11 and
cases cited therein. Instead, Lodsys relies on cases that are unrelated
to license rights and thus irrelevant here. See, e.g., Saldano v.
Roach, 363 F.3d 545, 551 (5th Cir. 2004) (prosecutor had
insufficient interest in habeas case). Moreover, even if Apple
were not licensed, courts have held expressly that intervention to
protect a supplier’s customers from infringement claims is itself
“necessary for the protection of its interest.” Chandler & Price Co.
v. Brandtjen & Kluge, Inc., 296 U.S. 53, 55 (1935).
Lodsys also argues that Apple’s interest is insufficient because there
is no indemnification obligation here, and because Apple is formally
referred to as the “agent” of the
3
developers in the context of a separate Developer Agreement. Opp. at 9.
But Lodsys cites not a single authority for the proposition that an
indemnification clause is required for a sufficient property interest,
and, as set out in Apple’s opening brief and uncontested here, none of
the cases in this area have found any such requirement. See
Motion at 10-11. Similarly, the fact that Apple refers to itself as an
“agent” of developer “principals” in other contexts is irrelevant to
this motion; Apple provides products and services to the App Makers in
exchange for payment, precisely the type of supplier-customer
relationship courts have found sufficient to permit intervention. See
id. Finally, even if Lodsys’s argument had any merit, the Court
cannot at this stage make a factual determination regarding disputed
terms of a different contract outside the pleadings. Mendenhall,
551 F.2d at 56 n.2. Those issues must be resolved through discovery.
C. Apple’s Interest Will Inevitably Be Impaired Absent
Intervention
Lodsys’ contention that Apple’s interest is too speculative to justify
intervention at this stage ignores the pleadings. Opp. at 11. Apple has
sufficiently alleged impairment of its interests: Apple’s License lies
at the heart of this case, Lodsys has already sued numerous significant
Apple customers and threatened dozens of others, and a boycott of some
of Apple’s core products by App developers has been proposed. See
Supp. Sanders Decl. ¶ 3, Ex. A, ¶ 9; Mendenhall, 551 F.2d at
56 n.2 (allegations must be accepted as true).
D. None of the Defendants Possess Sufficient Knowledge, Expertise, or
Incentive
To Adequately Protect Apple’s Interests
Lodsys also argues that the present defendants can now adequately
represent Apple’s interests, because Lodsys added several larger
defendants—after Apple filed its motion—who will argue exhaustion. Opp.
at 11-14. On any motion to intervene, the parties will assert common
defenses; it is the difference in expertise, objectives, and resources,
all of which are present here, that renders intervention proper.
Although some of the new defendants may
4
have greater resources than the original defendants, Lodsys does not
contest the fact that none of the defendants have the technical
information, expertise, and knowledge regarding how Apple’s
technology works or the negotiation and intent of the License
itself to fully articulate and develop Apple’s exhaustion defense.
Motion at 12-14 and cases cited therein. This distinction alone is
sufficient. Honeywell Int’l v. Audiovox Commc’ns Corp., 2005 WL
2465898, at *4 (D. Del. May 18, 2005) (“[B]ecause [intervenor] is
uniquely situated to understand and defend its own product, its
interests are not adequately represented by existing parties to the
litigation.”).
III. Apple Has Met The Requirements For Permissive Intervention
Finally, the Court should allow permissive intervention because Lodsys
disputes none of the facts or law set out in Apple’s opening brief
establishing that permissive intervention is appropriate. To the
contrary, Lodsys concedes that Apple’s Motion raises many common issues
of law and fact to those likely to be raised by the parties to this
action. Opp. at. 14-15. Lodsys does not distinguish any of the cases in
this district that have allowed intervention under these precise
circumstances, and does not offer a single authority to the contrary.
See id.5
In addition, Lodsys offers no legal, factual, or logical explanation for
why it would be more efficient to resolve the complex issues surrounding
Apple’s License without Apple in this case. The Court should follow the
case law of this district and circuit and exercise
its discretion to allow intervention under Rule 24(b).
5
Dated: August 8, 2011
Respectfully submitted,
By /s/Melissa Richards Smith
Melissa Richards Smith Texas State Bar No. 24001351
GILLAM & SMITH, L.L.P
[address, phone, fax, email]
George M. Newcombe (admitted pro hac vice)
Jonathan C. Sanders (admitted pro hac vice)
SIMPSON THACHER & BARTLETT, LLP
[address, phone, fax, email]
Counsel for Intervenor Defendant and Counterclaim Plaintiff Apple
Inc.
CERTIFICATE OF SERVICE
I hereby certify that all counsel of record who have consented to
electronic service are being served with a copy of this document via the
Court’s CM/ECF system per Local Rule CV-5(a)(3) on this the 8th of
August, 2011.
/s/ Melissa Richards
Smith Melissa Richards Smith
___________
1
All defined terms in Apple’s opening brief will have the same meaning
when used herein.
2Lodsys’s reliance on case
law regarding non-exclusive licensees’ standing to assert the patents is
irrelevant. Cf., e.g., Frazier v. Map Oil Tools, 2010 WL 2352056,
at *4 (S.D. Tex. June 10, 2010) (finding movant seeking to intervene as
plaintiff in infringement action lacked standing due to non-exclusive
licensee status). Apple seeks to intervene to protect its rights under
the License, not to assert the patents against any third party.
3 Lodsys also contends that
Apple has “repeatedly refused to provide information relevant to its
request for intervention.” Opp. at 5. But Apple provided a complete copy
of the License as Exhibit A to its supporting declaration. See
generally Sanders Decl., Ex. A.
4 E.g., U.S. v. Microsoft
Corp., 2002 WL 319784, at *2 (D.D.C. Jan. 28, 2002) (motion to
intervene related to potential motions in the main action that had not
yet even been filed). Lodsys also attempts to rely on cases that do not
even relate to intervention and thus have no bearing here. See, e.g.,
Ramirez v. Tex. Low-Level Radioactive Waste Disposal Auth., 28 F.
Supp. 2d 1019, 1020-21 (W.D. Tex. 1998) (on standing generally, not
motions to intervene).
5 Lodsys quibbles with
Apple’s citations to TiVo Inc. v. AT&T Inc., Negotiated Data
Solutions, LLC v. Dell, Inc., and U.S. Ethernet Innovations, LLC
v. Acer, Inc. et al. on the grounds that certain aspects of the
motions were unopposed, one of the orders was not long enough for
Lodsys’s liking, and in one case some—but not all or even most—of the
defendants had potential indemnification claims. Opp. at 10, 15. But not
one of those cases depended on an indemnification obligation, and Lodsys
distinguishes none of them on the merits. Lodsys also misleadingly
suggests that the underlying briefing in Negotiated Data was
unopposed and under seal, when Intel’s reply is publicly available and
clearly sets out the disputed issues. See Negotiated Data Solutions
v. Dell, Inc., Civ. A. No. 2:06-CV-528 (CE) (Docket No. 124) (Sept.
17, 2008).
****************************************************
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
______________________
LODSYS, LLC,
Plaintiff,
v.
ATARI INTERACTIVE, INC.; COMBAY,
INC.; ELECTRONIC ARTS, INC.;
ICONFACTORY, INC.; ILLUSION LABS
AB; MICHAEL G. KARR D/B/A
SHOVELMATE; QUICK OFFICE, INC.;
ROVIO MOBILE LTD.; RICHARD
SHINDERMAN; SQUARE-ENIX LTD.;
TAKE-TWO INTERACTIVE SOFTWARE,
INC.
Defendants.
______________________
CIVIL ACTION NO. 2:11-cv-272-TJW
_____________________
STATEMENT IN SUPPORT OF APPLE’S MOTION TO
INTERVENE
Defendants Atari Interactive, Inc., Electronic Arts Inc., Quickoffice,
Inc., and Square- Enix Ltd. (collectively, the “Supporting Defendants”)
respectfully submit this statement in support of the motion to intervene
filed by Apple Inc. (“Apple”) in this matter.
I.
INTRODUCTION
All but one of the undersigned Supporting Defendants were first named as
a defendant in this action in an Amended Complaint filed by plaintiff
Lodsys, LLC (“Lodsys”) on July 21,
2011, after the filing of Apple’s motion to intervene.1
And with only one exception, the Supporting Defendants have not yet
been served with process in this action. Given the long period of time
within which a complaint and summons may be served under the Federal
Rules of Civil Procedure, the Supporting Defendants are filing this
statement now to ensure that their voices are heard in connection with
the pending motion to intervene.2
The Amended Complaint alleges that certain mobile games made or
published by the Supporting Defendants for the Apple iPhone and iPad
platforms infringe U.S. Patent Nos. 7,222,078 and 7,620,565
(collectively, the “Asserted Patents”).
II.
APPLE’S INTERVENTION AS A PARTY IN THIS ACTION IS CRITICAL TO THE
SUPPORTING DEFENDANTS’ ABILITY TO DEFEND THEMSELVES AGAINST THE
CHARGES OF INFRINGEMENT
Apple’s motion to intervene states that Apple has a license to the
Asserted Patents, and that the terms of this license operate to immunize
application developers (such as the Supporting Defendants) from any
infringement of the Asserted Patents on account of iPhone or iPad games
such as those made or published by the Supporting Defendants.
If this were proven to be correct (the Supporting Defendants do not yet
have access to the confidential license at issue), the Supporting
Defendants would each have a complete defense to the claims of Lodsys in
this matter, regardless of whether the Asserted Patents are valid,
enforceable and infringed (all of which the Supporting Defendants dispute).
2
The Supporting Defendants strongly support Apple’s motion to intervene
because the participation of Apple as a party in this lawsuit is
critical to the development of the very evidence needed to establish
what may prove to be a complete defense to the infringement claims in
this action. Apple has the very best information available to
anyone on the subject of the nature and operation of its own
licensed technology. Similarly, as one of the two contracting parties,
Apple will have vital information regarding the negotiation, nature and
scope of its license.
Moreover, Apple is uniquely positioned to respond to any claim made by
Lodsys that the scope of its license does not operate to the benefit of
Apple’s application developers. To do so, however, Apple must be a party
to this action, not a third-party.
For example, as a party in this action, Apple and its counsel would have
access under this Court’s protective order to all written discovery and
testimony on the subject of the background and scope of its license, as
well as the nature and operation of its own, licensed technology. Were
Apple’s participation in this action limited to that of a third-party,
Lodsys would be able to insulate the testimony of Lodsys’s documents and
witnesses—as well as the reports of Lodsys’s experts—from review,
critique and response by Apple. This would give Lodsys an unfair
advantage, and substantially prejudice the Supporting Defendants’
ability to develop a full and fair record in this action because of
Apple’s unique knowledge regarding its license and its licensed
technology.
It is for this reason that Apple’s full participation as a party
in this action, rather than as a third-party, is vital to the Supporting
Defendants’ ability to defend themselves against the infringement claims
asserted by Lodsys.
In view of the Supporting Defendants’ critical need to rely upon Apple’s
assistance in developing the evidence in this matter, Apple’s
willingness to participate as a party in this action,
3
and the lack of any cognizable prejudice to Lodsys, the Supporting
Defendants respectfully urge this Court to grant the pending motion to
intervene.
Dated: August 9, 2011
Respectfully submitted,
/s/ Wayne M. Barsky
Wayne M. Barsky California Bar No. 116731 GIBSON, DUNN &
CRUTCHER LLP
[address, phone, fax, email]
Mark N. Reiter Texas Bar No. 16759900 GIBSON,
DUNN & CRUTCHER LLP
[address, phone, fax, email]
ATTORNEYS FOR DEFENDANTS ATARI
INTERACTIVE, INC., ELECTRONIC ARTS
INC., QUICKOFFICE, INC. AND SQUARE
ENIX LTD.
4
_________________
1Of the Supporting
Defendants, only Quickoffice was named as a defendant in the initial
complaint in this action.
2By filing this statement,
none of the Supporting Defendants is making a general appearance in this
action, nor are they waiving or compromising in any way any right,
claim, position, or defense they may have in response to the Amended
Complaint if and when it is served, including, but not limited, to any
defenses based on deficiencies in service, venue or jurisdiction.
|