14-02-10 samsung motion to dismiss rockstar patent lawsuit

8/13/2019 14-02-10 Samsung Motion to Dismiss Rockstar Patent Lawsuit

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF TEXAS

MARSHALL DIVISION

ROCKSTAR CONSORTIUM US LP, INC. ANDMOBILESTAR TECHNOLOGIES, LLC

Plaintiffs,

v.

SAMSUNG ELECTRONICS CO., LTD.,SAMSUNG ELECTRONICS AMERICA, INC.,SAMSUNG TELECOMMUNICATIONSAMERICA, LLC, GOOGLE INC.,

Defendants.

Civil Action No. 13-cv-0900-JRG

JURY TRIAL DEMANDED

SAMSUNG DEFENDANTS MOTION TO DISMISS PLAINTIFFS FIRST AMENDED

COMPLAINT PURSUANT TO THE FEDERAL RULES OF CIVIL PROCEDURE

12(b)(6) AND 12(b)(1)

Case 2:13-cv-00900-JRG Document 26 Filed 02/10/14 Page 1 of 22 PageID #: 163


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TABLE OF CONTENTS

Page

INTRODUCTION ...........................................................................................................................1STATEMENT OF FACTS ..............................................................................................................3

A. Plaintiff Rockstar Arises From the Nortel Bankruptcy Auction ..............................3B. Rockstar Forms MobileStar in Delaware, But Fails to Register it in Texas ............3C. Plaintiffs Assert Claim 5 of the 131 Patent Against Defendants ............................4

LEGAL STANDARD ......................................................................................................................4A. Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) .........................................4B. Invalidity under 101 is Routinely Decided at the Pleading Stage and

Prior to Claim Construction .....................................................................................5ARGUMENT ...................................................................................................................................7I. The Court Should Dismiss Claim 5 of the 131 Patent For Failure to State a Claim ..........7

A. Claim 5 of the 131 Patent Does Not Claim Patent-Eligible Subject Matter ...........7B. Claim 5 of the 131 Patent Claims a Method for the Abstract Idea of

Notifying a User of an Incoming Communication ..................................................7

C. The Claim Language Does Not Meaningfully Limit the Abstract Idea to aConcrete Application ...............................................................................................9

D. Claim 5 of the 131 Patent Also Fails the Machine-or-Transformation Test ........11II. The Court Should Dismiss This Action for Lack of Subject-Matter Jurisdiction .............12

A. MobileStar Had No Standing To File This Action ................................................12B. Without MobileStar, this Action Should Be Dismissed ........................................14 C. MobileStars Post-Litigation Registration Cannot Confer Standing, And

Its Amended Complaint Cannot Cure Jurisdictional Defects ................................15CONCLUSION ..............................................................................................................................16



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TABLE OF AUTHORITIES

Page

Cases

Abraxis Bioscience, Inc. v. Navinta LLC,625 F.3d 1359 (Fed. Cir. 2010)......................................................................................4, 15, 16

Accenture Global Servs., GmbH v. Guidewire Software, Inc.,728 F.3d 1336 (Fed. Cir. 2013)..................................................................................................9

Alice Corp. Pty. Ltd. v. CLS Bank Int'l,134 S. Ct. 73 (2013) ...................................................................................................................9

Alice Corp. Pty. Ltd. v. CLS Bank Int'l,2013 WL 4768483 (U.S. Sept. 4, 2013) ....................................................................................9

Arachnid, Inc. v. Merit Indus., Inc.,939 F.2d 1574 (Fed. Cir. 1991)................................................................................................15

Ashcroft v. Iqbal,556 U.S. 662 (2009) ...................................................................................................................5

Aspex Eyewear, Inc. v. Miracle Optics, Inc.,434 F.3d 1336 (Fed. Cir. 2006)................................................................................................15

Atrium Companies, Inc. v. ESR Associates, Inc.,No. 11 Civ. 1288, 2012 WL 4215103 (S.D. Tex. Sept. 18, 2012)...........................................13

Bancorp Services, LLC v. Sun Life Assur. Co. of Canada (U.S.),

687 F.3d 1266 (Fed. Cir. 2012)............................................................................................6, 11Bilski v. Kappos,

130 S. Ct. 3218 (2010) ...............................................................................................6, 8, 10, 11

CLS Bank Intern. v. Alice Corp. Pty. Ltd.,717 F.3d 1269 (Fed. Cir. 2013)..................................................................................................9

Cardpool, Inc. v. Plastic Jungle, Inc.,No. C 12-04182 WHA, 2013 WL 245026 (N.D. Cal. Jan. 22, 2013)........................................6

Clear With Computers v. Dick's Sporting Goods,No. 12-cv-00674-LED, Dkt. No. 116 (E.D. Tex., Jan. 21, 2014)T ...........................................2

CyberFone Sys., LLC v. Cellco P'ship,885 F. Supp. 2d 710 (D. Del. 2012) ...........................................................................................6

CyberSource Corp. v. Retail Decisions, Inc.,654 F.3d 1366 (Fed. Cir. 2011)..........................................................................................11, 12

Dealertrack, Inc. v. Huber,674 F.3d 1315 (Fed. Cir. 2012)..............................................................................................5, 8



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Diamond v. Diehr450 U.S. 175 (1981) .................................................................................................................11

Diversacon Indus. v. National Bank of Commerce,629 F.2d 1030 (5th Cir. 1980) .................................................................................................13

E.E.O.C. v. Peabody Western Coal Co.,400 F.3d 774 (9th Cir. 2005) ...................................................................................................15

Eli Lilly & Co. v. Sav-On-Drugs, Inc.,366 U.S. 276 (1961) ...........................................................................................................13, 14

Gottschalk v. Benson,409 U.S. 63 (1972) ...............................................................................................................7, 10

Guidry v. Am. Pub. Life Ins. Co.,512 F.3d 177 (5th Cir. 2007) .....................................................................................................2

Guidry v. Bank of LaPlace,

954 F.2d 278 (5th Cir. 1992) .....................................................................................................5

buySAFE, Inc. v. Google Inc.,No. 11-1282-LPS, 2013 WL 3936906 (D. Del. July 29, 2013) .................................................5

Independent Wireless Tel. Co. v. Radio Corp.,269 U.S. 459 (1926) .................................................................................................................15

Keene Corp. v. United States,508 U.S. 200 (1993) .................................................................................................................15

Lujan v. Defenders of Wildlife,504 U.S. 555 (1992) ...................................................................................................................5

Mayo Collaborative Servs. v. Prometheus Labs., Inc.,132 S. Ct. 1289 (2012) ...............................................................................................................8

OIP Techs., Inc. v. Amazon.com, Inc.,No. C-12-1233-EMC, 2012 WL 3985118 (N.D. Cal. Sept. 11, 2012) ..................................5, 6

Parker v. Flook437 U.S. 584 (1978) .................................................................................................................10

Radio WHKW, Inc. v. Yarber,838 F.2d 1439 (5th Cir. 1988) .................................................................................................13

Schreiber Foods, Inc. v. Beatrice Cheese, Inc.,402 F.3d 1198 (Fed. Cir. 2005)................................................................................................16

Terroco Indus. Ltd. v. Am. Home Assur. Co.,No. 07 Civ. 437, 2009 WL 901488 (E.D. Tex. Mar. 30, 2009) ...............................................13

Tuchman v. DSC Communications Corp.,14 F.3d 1061 (5th Cir. 1994) .....................................................................................................5



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UbiComm, LLC v. Zappos IP, Inc.,No. 13-cv-1029-RGA, 2013 WL 6019203 (D. Del. Nov. 13, 2013) .............................2, 5, 8, 9

Ultramerical, Inc. v. Hulu, LLC,722 F.3d 1335 (Fed. Cir. 2013)............................................................................2, 6, 7, 8, 9, 10

Statutes

35 U.S.C. 101 ................................................................................................................................1

35 U.S.C. 281 (1994) ..................................................................................................................15

Fed. R. Civ. P. 12(b)(1)....................................................................................................................4

Fed. R. Civ. P. 12(b)(6)....................................................................................................................2



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INTRODUCTION

Defendants Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., and Samsung

Telecommunications America, LLC (collectively, Samsung) respectfully move this Court to

dismiss Plaintiffs First Amended Complaint on the following two grounds: (1) Plaintiffs fail to

state a claim under Rule 12(b)(6) with respect to claim 5 of the 131 patent, because the claim is

directed to patent-ineligible subject matter under 35 U.S.C. 101; and (2) Plaintiff MobileStar

lacked standing at the time Plaintiffs filed their original complaint, thereby depriving this Court of

subject matter jurisdiction over this action under Rule 12(b)(1).

First,the Court should dismissPlaintiffsasserted claim 5 of the 131 patent for failure to

state a claim. The only plausible reading of claim 5 is that it claims nothing more than an abstract

idea, without meaningful limitation, which is not patentable subject matter under 35 U.S.C. 101.

Under well-settled law, therefore, this Court can and should dismiss claim 5 with prejudice for

failure to state a claim. Notably, as other courts have done, this Court should do so at this pleading

stage, without awaiting claim construction proceedings. Claim 5 reads as follows:

5. A method of notifying a user of an incoming communication event, comprising:

determining a characteristic of the communication event;

selecting a notification based on the characteristic;

sending the user the selected notification;

receiving a selection from the user indicating a format for delivery offurther notification information regarding the communication event;andallowing the further notification information regarding the communicationevent to be sent to the user in the selected format.

At best, this claim attempts to patent an abstract conditional action. Claim 5 simply

describes an action (notifying a user of a communication event through a series of steps) in

response to a condition (an incoming communication event). Recent case law has found claims



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directed to such conditional actions to be unpatentable under 101. UbiComm, LLC v. Zappos IP,

Inc., No. 13-cv-1029-RGA, 2013 WL 6019203, at *2, 3, 6 (D. Del. Nov. 13, 2013).

Further, there is no limitation in the claim language tying the claim to a concrete application

of the abstract conditional action. The claim fails to describe the use of any system, machine,

transformation, programming, or hardware used to actually implement the method. In fact, the claim

is completely untethered to an application in even the most generally-described realm of art or

technology. This lack of a meaningful limitation renders the claim unpatentable. Ultramerical, Inc.

v. Hulu,LLC, 722 F.3d 1335, 1349 n.2 (Fed. Cir. 2013) (requiring that a claim to an abstract idea

contain meaningful limitations in the claim [that] make it clear that the claim is not to the abstract

idea itself, but to anon-routineandspecificapplicationof that idea.) (emphasis added).

The only plausible reading of claim 5 is that it recites an abstract, conditional action

thereby rendering the claim ineligible. This deficiency is dispositive, and it cannot be cured by

simply amending the pleadings. Dismissal of the claims is proper under Federal Rule of Civil

Procedure 12(b)(6). See UbiComm, LLC v. Zappos IP, Inc., No. 13-cv-1029-RGA, 2013 WL

6019203, at *2, 3, 6 (D. Del. Nov. 13, 2013) (dismissing complaint based on Fed. R. Civ. P. 12(b)(6)

for failure to meet requirements of 35 U.S.C. 101); see alsoClear With Computers v. Dicks

Sporting Goods, No. 12-cv-00674-LED, Dkt. No. 116 (E.D. Tex., Jan. 21, 2014) (J. Davis) (granting

Fed. R. Civ. P. 12(c)1motion for judgment on the pleadings for failure to meet the requirements of

35 U.S.C. 101).

Second, the Court should dismiss this action for a simple but stark reason: one of the two

plaintiffs had no standing to file the complaint. One day before filing this action, Plaintiff Rockstar

1The standard for deciding a Rule 12(c) motion for judgment on the pleadings is the same as thatfor deciding a Rule 12(b)(6) motion to dismiss. Guidry v. Am. Pub. Life Ins. Co., 512 F.3d 177,180 (5th Cir. 2007).



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Consortium US LP (Rockstar) alleges that it formed plaintiff MobileStar LLC (MobileStar), and

transferred to MobileStar ownership of five of the seven patents asserted in this action, and an

exclusive license to the remaining two patents. Rockstar and MobileStar admit indeed, they

affirmatively argue that no action on these patents can proceed without both Rockstar and

MobileStar. Critically, however, Rockstar chose to organize MobileStar as a Delaware corporation,

not a Texas corporation, and neglected to obtain MobileStars authorization to conduct business in

Texas until a monthafter Rockstar and MobileStar filed their complaint. Texas law requires foreign

corporations such as MobileStar to obtain this authorization before filing suit in Texas courts.

MobileStar failed to do so, and it therefore lacked standing to bring this action in Texas.

STATEMENT OF FACTS

A. Plaintiff Rockstar Arises From the Nortel Bankruptcy AuctionFive of the worlds largest technology companies including Apple, Research In Motion, and

Microsoft created Plaintiff Rockstar in 2011. These companies pooled together under the name

Rockstar Bidco to place the winning $4.5 billion bid on a portfolio of patents auctioned during the

bankruptcy of Nortel Networks. Ex. 1.2 Following the acquisition of Nortels portfolio, Rockstar

Bidco transferred ownership of thousands of patents to its owners, whom it calls the founding

licensees. Ex. 2. Over 1,000 patents were transferred to Apple alone. Ex. 3. Rockstar Bidco was

then reorganized into Rockstar Consortium. Ex. 1. Rockstar Consortium US LP, a plaintiff in this

action, was formed in 2013, under the laws of the state of Delaware. Ex. 4.

B. Rockstar Forms MobileStar in Delaware, But Fails to Register it in TexasOn October 30, 2013, Rockstar formed its wholly owned subsidiary, MobileStar, as

Delaware limited liability corporation. Ex. 5. The next day, October 31, 2013, Rockstar and

2 All exhibits referenced herein are attached and submitted with the Declaration of JosephMilowic III, filed concurrently herewith.



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MobileStar filed this and six other actions in this Court, accusing twenty-two defendants of

infringing some or all of the seven patents at issue here. Rockstar v. ASUS, No. 13-00894;Rockstar

v. HTC, No. 13-00895;Rockstar v. Huawei, No. 13-00896;Rockstar v. LG, No. 13-00898;Rockstar

v. Pantech, No. 13-00899; andRockstar v. ZTE, No 13-00901.

MobileStar failed, however, to register as required with the Texas Secretary of State. Before

a foreign entity such as MobileStar can transact business in this state, Texas law requires

registration under Chapter Nine of the Texas Business and Organizations Code. Tex. Bus. & Orgs.

Code 9.001. The Code exempts certain types of foreign entities from this registration, but

MobileStar is not among them. Tex. Bus. & Orgs. Code 9.002. Although MobileStar asserted in

its Complaint that it maintains its principal place of business at Legacy Town Center 1, 7160 North

Dallas Parkway Suite No. 250, Plano, TX 75024 (D.N. 19 2), and has confirmed in other court

papers that it is a Texas enterprise (Ex. 6 at 7), MobileStar did not comply with the registration

requirement of Chapter Nine of the Texas Business and Organizations Code until December 2, 2013,

more than a month after filing this action, when it finally registered as required with the Texas

Secretary of State. Ex. 7.

C. Plaintiffs Assert Claim 5 of the 131 Patent Against DefendantsThe First Amended Complaint asserts that Samsung Mobile Communication Devices

infringes at least method claim 5 of the 131 Patent. D.N. 19 94.

LEGAL STANDARD

A. Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6)If the court determines at any time that it lacks subject-matter jurisdiction, the court must

dismiss the action. Fed. R. Civ. P. 12(b)(1); (h)(3). Standing is a constitutional requirement

pursuant to Article III and it is a threshold jurisdictional issue. Abraxis Bioscience, Inc. v. Navinta



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LLC, 625 F.3d 1359, 1363-64 (Fed. Cir. 2010) (citingLujan v. Defenders of Wildlife,504 U.S. 555,

560-61 (1992)).

In considering a motion under Rule 12(b)(6) to dismiss a complaint, the Court must accept as

true the well-pleaded factual allegations and any reasonable inferences to be drawn from them. See

Tuchman v. DSC Communications Corp.,14 F.3d 1061, 1067 (5th Cir. 1994). To avoid dismissal

for failure to state a claim, however, a plaintiff must plead specific facts, not mere conclusory

allegations. Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir. 1992) (citation omitted). A

complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is

plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotations and citations

omitted). [W]here the well-pleaded facts do not permit the court to infer more than the mere

possibility of misconduct, the complaint has alleged but it has not shown that the pleader is

entitled to relief. Id.at 679 (quoting Fed. R. Civ. P. 8(a)(2)).

B. Invalidity under 101 is Routinely Decided at the Pleading Stage and Prior toClaim Construction

The Federal Circuit has ruled that it is a question of law whether a patent claims patent-

eligible subject matter under 101. Dealertrack, Inc. v. Huber, 674 F.3d 1315, 1333 (Fed. Cir.

2012). Thus, courts routinely dismiss, at the pleading stage, patent infringement complaints on

101 grounds in situations where the patent claims can only be read plausibly to recite ineligible

subject matter. Clear With Computers, No. 12-cv-00674-LED, Dkt. No. 116, at 6-7 (E.D. Tex., Jan.

21, 2014) (granting motion for judgment on the pleadings on patent ineligibility under 101);

UbiComm, 2013 WL 6019203, at *6 ([d]ismissal under 12(b)(6) is appropriate in this case); see

also buySAFE, Inc. v. Google Inc., No. 11-1282-LPS, 2013 WL 3936906, at *1 n.1 (D. Del. July 29,

2013); OIP Techs., Inc. v. Amazon.com, Inc., No. C-12-1233-EMC, 2012 WL 3985118, at *20

(N.D. Cal. Sept. 11, 2012); Cardpool, Inc. v. Plastic Jungle, Inc., No. C 12-04182 WHA, 2013 WL



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245026, at *3 (N.D. Cal. Jan. 22, 2013) (finding no authority for the proposition that a patent may

not be deemed ineligible subject matter on a motion to dismiss.).3

Courts also consistently rule on issues of patent-eligible subject matter under 101 prior to

claim construction. SeeBilski v. Kappos, 130 S. Ct. 3218, 3231 (2010); see also Bancorp Services,

LLC v. Sun Life Assur. Co. of Canada (U.S.), 687 F.3d 1266, 1273 (Fed. Cir. 2012) (claim

construction is not an inviolable prerequisite to a validity determination under 101); OIP Techs.,

2012 WL 3985118, at *5 (concluding that claim construction is unnecessary to decide motion to

dismiss based on 101); CyberFone Sys., LLC v. Cellco Pship, 885 F.Supp.2d 710, 715 (D. Del.

2012) (conducting 101 analysis without claim construction); Cardpool, 2013 WL 245026, at *4

(dismissing the case on 101 grounds because the basic character of the claimed subject matter is

readily ascertainable from the face of the patent.).

Indeed, Judge Davis of this Court recently affirmed that aMarkmanhearing is not necessary

at this stage. Clear With Computers, No. 12-cv-00674-LED, Dkt. No. 116, at 6-7 (E.D. Tex., Jan.

21, 2014). The Court thus rejected Plaintiffs argument that a motion for judgment on the pleadings

was premature prior to formal claim construction and ultimately granted Defendants motion without

a claim construction hearing. Id.

3In certain situations, fact development may be necessary to determine whether a patentembraces an abstract idea, including whether there exist sufficient limitations that narrow or tiethe claims to specific applications of an otherwise abstract concept. Ultramercial,Inc. v Hulu,LLC, 722 F.3d 1335, 1339 (Fed. Cir. 2013). This is not one of those situations. No factdevelopment will change the fact that claim 5 of the 131 Patent claims an abstract idea and thatthe claim language provides no meaningful limitation on the claim.



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ARGUMENT

I. The Court Should Dismiss Claim 5 of the 131 Patent For Failure to State a ClaimA. Claim 5 of the 131 Patent Does Not Claim Patent-Eligible Subject MatterClaim 5 covers an abstract idea and thus falls outside of the bounds of patentable subject

matter under 101. Claim 5 also does not claim any meaningful limitations that restrict the

abstractness of the claimed method to an actual concrete application. Finally, claim 5 fails the

machine-or-transformation test because it is not tied to a particular machine or apparatus and it

does not transform a particular article into a different state or thing.

B. Claim 5 of the 131 Patent Claims a Method for the Abstract Idea of Notifying aUser of an Incoming Communication

The Supreme Court has long recognized that abstract ideas are unpatentable under 101.

Gottschalk v. Benson, 409 U.S. 63, 67 (1972). In determining whether a patent claim covers only an

abstract idea as opposed to an application of that idea, the relevant inquiry is whether the claim, as a

whole, includes meaningful limitations. Ultramercial, 722 F.3d at 1344.

Claim 5 attempts to patent a method on the abstract idea of notifying a user of an incoming

communication event, claiming:

5. A method of notifying a user of an incoming communication event, comprising:

determining a characteristic of the communication event;

selecting a notification based on the characteristic;

sending the user the selected notification;

receiving a selection from the user indicating a format for delivery offurther notification information regarding the communication event;

andallowing the further notification information regarding thecommunication event to be sent to the user in the selected format.

Ex. 8 at 10:4-14.



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Claim 5 is, in essence, a claim on the abstract idea of a conditional action i.e., notifying a

user of a communication event if and when such a communication event occurs. The recent

UbiCommcase is instructive. There, the court considered a claim that described the following steps

of a conditional action: (1) select an action to occur; (2) select a machine-based triggering

parameter; (3) select a user-based triggering parameter; (4) monitor the two parameters; (5)

determine if the parameters are triggered; and (6) if so, take the action selected in step (1). Id.at

2013 WL 6019203 *3. The UbiComm court concluded that the claim itself is simply an

embodiment of a conditional action. Id.

The elements of the claim 5 are also, at core, the steps for the abstract idea of a conditional

action. The actionis notifying the user of a communication event through a series of steps that

involve, (a) determining a characteristic; (b) selecting a notification; (c) sending the selected

notification; (d) receiving a selection from the user; and (e) allowing further notification information

to be sent. This actionis triggered by a condition, namely, an incoming communication event.

Like the claim at issue in UbiComm, claim 5 describes, at best, an action that is triggered by receipt

of a conditional incoming communication event and is unpatentable.

Moreover, this generically-described4 method for notifying a user of an incoming

communication event is even more abstract than other ideas that the Supreme Court and the Federal

Circuit have held to be unpatentable, including hedging risk (Bilski, 130 S. Ct. at 3231), and

processing information through a clearinghouse (Dealertrack, 674 F.3d at 1334).

4Although the language purports to be a patentable process and is adorned with languagetraditionally indicative of a patentable process, (e.g., determining, selecting, etc.) theseformalities are not enough to transform the highly-generalized claim language into a patentableprocess. SeeMayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1300 (2012)(simply appending conventional steps, specified at a high level of generality, to . . . abstractideas cannot make those . . . [abstract] ideas patentable.).



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C. The Claim Language Does Not Meaningfully Limit the Abstract Idea to aConcrete Application

Once an abstract idea is identified the court must then determine whether the patent claim

includes limitations that narrow the scope of the claim so that it does not cover the full abstract idea.

Ubicomm, 2013 WL 6019203 at *4. A claim is not meaningfully limited if it contains only

insignificant or token pre- or post-solution activity such as identifying a relevant audience, a

category of use, field of use, or technological environment. Ultramercial, 722 F.3d at 1346. Nor is

a claim meaningfully limited if the steps of the claim must be taken in order to apply the [abstract

idea] in question or are a routine and conventional aspect of the abstract idea. Id. at 1348.

Indeed, the Ubicomm court concluded that limitations simply requiring two general purpose

computers do[] nothing to transform a nonpatentable abstract idea into a patentable invention.

Ubicomm, 2013 WL 6019203 at *5.

Here, claim 5 is not limited at all. The claim fails to describe the use of any system, machine,

transformation, programming, or hardware used to actually implement the claimed method. In fact,

the claim is completely untethered to an application in even the most generally-described realm of

art or technology. This complete lack of limitation falls far short of cases that have found even

greater limitations to be insufficient.5 See Accenture Global Servs., GmbH v. Guidewire Software,

Inc., 728 F.3d 1336, 1345 (Fed. Cir. 2013) (finding that the claim language did not meaningfully

5On December 6, 2013, the Supreme Court granted certiorari of the Federal Circuits decision in

CLS Bank Intern. v. Alice Corp. Pty. Ltd., 717 F.3d 1269 (Fed. Cir. 2013), to consider thequestion of [w]hether claims to computer-implemented inventions including claims to

systems and machines, processes, and items of manufacture are directed to patent-eligiblesubject matter within the meaning of 35 U.S.C. 101 as interpreted by this Court. Alice Corp.Pty. Ltd. v. CLS Bank Intl, 134 S.Ct. 73 (2013);Petition for a Writ of Certiorari at i,Alice Corp.Pty. Ltd. v. CLS Bank Intl, 2013 WL 4768483 (U.S. Sept. 4, 2013). The Federal Circuit heldthat the claims at issue, which recite computer-implemented systems and methods for conductingfinancial transactions where a third party settles obligations between a first and a second partyso as to eliminate counterparty or settlement risk, are invalid under 35 U.S.C. 101. CLS Bank,717 F.3d at 1273.



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limit the abstract idea even where the specification contained detailed software guidelines and even

where the claims themselves contained generalized software components). The failure to

meaningful limit the claim renders the claim unpatentable. Ultramercial, Inc. v. Hulu,LLC, 722

F.3d 1335, 1349 n.2 (Fed. Cir. 2013) (requiring that a claim to an abstract idea contain meaningful

limitations in the claim [that] make it clear that the claim is not to the abstract idea itself, but to a

non-routineandspecificapplicationof that idea.) (emphasis added).

Additionally, claim 5s lack of a meaningful limitation is similar to the lack of limitation in

Clear With Computers. CompareClear With Computers, No. 12-cv-00674-LED, Dkt. No. 116, at

13 (characterizing the claim at issue as: receive a product query, determine the customization

options and their availability inventory, prepare a list of the customization options, and present the

list), with Ex. 8 at 10:4-14 (receive a communication, determine a characteristic about the

communication, send a notification to a user about the communication, receive from the user a

selection of a format to send more notification information about the communication, send more

notification information about the communication in the selected format).

Further, performing a conditional action under the guise of exchanging information through

notifications and communication events provides no meaningful limit on the basic abstract

claim. Bilski, 130 S. Ct. at 3229. Ultimately, claim 5 is not limited to even a general field of

technology or art, and instead impermissibly implicates any possible apparatus used in any area of

communication, and for any communication purpose.6

6Supreme Court precedent is in accord. In Gottshalk v. Benson, the patent claimed a process for

using a computer algorithm to convert binary-coded numerals into pure binary numerals, whichcould otherwise be accomplished without a computer. 409 U. S. at 67. The claims were notlimited to any particular art or technology and instead purported to cover any use of theclaimed method in a general-purpose digital computer of any type. Id.at 64. The Court heldthe patent invalid, as the claim would wholly preempt the mathematical formula itself. Id. at71-72. In Parker v. Flook, the Court considered a computerized process for updating alarm



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Plaintiffs transformation argument because the invention receivedqueries, it did not transform

them). At most, the method merely manipulates or reorganizes one communication event into a

second communication (the notification) and a third communication (allowing for further

notification information to be sent in a selected format). The Federal Circuit has made clear that

such a process does not constitute transformation and cannot satisfy the second prong of the

machine-or-transformation test. Cybersource, 654 F.3d at 1375 (The mere manipulation or

reorganization of data . . . does not satisfy the transformation prong.).

II. The Court Should Dismiss This Action for Lack of Subject-Matter JurisdictionMobileStar had no standing to pursue its claims when Plaintiffs filed their Complaint, and the

Court must dismiss this action for lack of subject-matter jurisdiction.

A. MobileStar Had No Standing To File This ActionTexas law is simple and clear: as a foreign limited liability corporation, MobileStar must

register with Texas under Chapter Nine of the Texas Business and Organizations Code. Tx. Bus.

Org. 9.001; see supraat 4. Specifically, Texas required MobileStar to file an Application for

Registration of a Foreign Limited Liability Company (the Application) with the Office of the

Secretary of State of Texas. Tx. Bus. Org. 9.001. Until it filed an Application, MobileStar could

not bring suit within this state, including in this Court:

A foreign filing entity or the entitys legal representative may not maintain an action,suit, or proceeding in a court of this state, brought either directly by the entity or inthe form of a derivative action in the entitys name, on a cause of action that arisesout of the transaction of business in this state unless the foreign filing entity isregistered in accordance with this chapter.

Tx. Bus. Org. 9.051. Although Plaintiffs filed this suit on October 31, 2013, MobileStar did not

file its Application until December 2, 2013. See supraat 4. Thus, when it filed its Complaint,

MobileStar had no standing to appear before this Court and cannot pursue it.



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This rule applies not only to suits in Texas state courts, but to federal courts in Texas, which

follow the general rule that, where a foreign corporation has established a continuing presence in a

state for the purpose of doing business within that state, it is fair that [the foreign corporation] be

required to comply with qualification statutes. Radio WHKW, Inc. v. Yarber, 838 F.2d 1439, 1443

(5th Cir. 1988) (quotingDiversacon Indus. v. National Bank of Commerce, 629 F.2d 1030, 1034 (5th

Cir. 1980) (alteration in original)); see, e.g., Atrium Companies, Inc. v. ESR Associates, Inc., No. 11

Civ. 1288, 2012 WL 4215103 at *7 (S.D. Tex. Sept. 18, 2012). Failure to satisfy this rule deprives

plaintiffs of standing to sue. See, e.g., Terroco Indus. Ltd. v. Am. Home Assur. Co., No. 07 Civ. 437,

2009 WL 901488 at *3 (E.D. Tex. Mar. 30, 2009) (analyzing challenge to subject matter jurisdiction

based on compliance with Tx. Bus. Org. 9.051). Thus, MobileStar cannot proceed with this action

if, as its complaint alleges, certain of the transactions from which its suit arises are intrastate

transactions. Terroco, 2009 WL 901488 at *3 (finding that a certificate of filing was not required to

maintain suit in Texas, because the transactions at issue were not intrastate transactions under Tx.

Bus. Org. 9.251(9)).

InEli Lilly & Co. v. Sav-On-Drugs, Inc., 366 U.S. 276 (1961), the Supreme Court addressed

in detail how to separate interstate from intrastate commerce in this context. There, plaintiff Eli

Lilly appealed from dismissal for failure to register, stating that its business in New Jersey was

entirely in interstate commerce and arguing, upon that ground, that the attempt to require it to file the

necessary information and obtain a certificate for its New Jersey business was forbidden by the

Commerce Clause of the Federal Constitution. Id.at 277. The Supreme Court found that, although

Eli Lilly had extensive interstate business, it also had intrastate business sufficient to allow

application of the similar New Jersey statute:

The record shows that the New Jersey trade in Lillys pharmaceutical products iscarried on through both interstate and intrastate channels. Lilly manufactures these



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products and sells them in interstate commerce to certain selected New Jerseywholesalers. These wholesalers then sell the products in intrastate commerce to NewJersey hospitals, physicians and retail drug stores, and these retail stores in turn sellthem, again in intrastate commerce, to the general public.

366 U.S. at 278. Because Eli Lilly participated in the intrastate portions of this commerce, the Court

found, New Jersey law could bar its suit pending a corporate registration. Id.at 279-280.

Precisely the same logic applies here. Plaintiffs allege infringing sales throughout the

country, but specifically including intrastatecommerce within Texas:

Samsung, directly or through subsidiaries or intermediaries (including distributors,retailers, and others), ships, distributes, offers for sale, sells, and advertises(including the provision of an interactive web page) its products including itsinfringing products) and/or services in the United States, the State of Texas, and theEastern District of Texas. . . . These infringing products and/or services have beenand continue to be purchased and used by consumers in the Eastern District of Texas.Samsung has committed acts of patent infringement within the State of Texas and,more particularly, within the Eastern District of Texas.

D.N. 1 8. Precisely as in Eli Lilly, plaintiffs here allege a multi-level chain of distribution,

including distributors, retailers, and others, and culminating in sales to consumers in the Eastern

District of Texas. Id. To hold under the facts above recited that plaintiffs allegations do not

include doing business in [Texas] is to completely ignore reality. Eli Lilly, 366 U.S. at 280.

Plaintiffs agree: in opposing Google Inc.s declaratory judgment action in California, they state:

Nor did a substantial part of any act underlying the claim occur in California (id. 1391(b)(2)),

since the claim ispatent infringement and Rockstar and MobileStars effort to enforce[] these

patent claims is ongoing in Texas. Ex. 6 at 7 (alteration and emphasis in original).

B. Without MobileStar, this Action Should Be DismissedRockstar cannot pursue this action alone. MobileStar is the owner of all rights, title, and

interest in asserted U.S. Patent Nos. 6,037,937; 6,333,973; 6,463,131; 6,765,591; and 6,937,572, and

the exclusive licensee of asserted U.S. Patent Nos. 5,838,551 and 6,128,298. D.N. 1 9-15. As a

result, Rockstar does not have standing to pursue its claims itself, without MobileStar also appearing.



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15

The Patent Act provides that a patentee shall have remedy by civil action for patent

infringement. 35 U.S.C. 281 (1994). Courts have interpreted Section 281 to require that a suit for

infringement be brought by a party holding legal title to the patent. See, e.g., Arachnid, Inc. v. Merit

Indus., Inc., 939 F.2d 1574, 1578-79 (Fed. Cir. 1991). For the same policy reasons that a patentee

must be joined in any lawsuit involving his or her patent, there must be joinder of any exclusive

licensee. Aspex Eyewear, Inc. v. Miracle Optics, Inc., 434 F.3d 1336, 1344 (Fed. Cir. 2006) (citing

Independent Wireless Tel. Co. v. Radio Corp., 269 U.S. 459, 466 (1926)) (remanding for the

dispositive factual determination of whether an absent party was an exclusive licensee and thus

necessary to the action).

This point is not in dispute. To the contrary, in opposing Googles declaratory judgment

action in the Northern District of California, Rockstar and MobileStar have vociferously argued that

MobileStar is critical to any litigation regarding these patents:

MobileStar is an indispensable party to this litigationit is the owner of five of theseven patents-in-suit and the exclusive licensee of the other two patents. In theabsence of jurisdiction as to MobileStar, this action must be dismissed. E.E.O.C. v.Peabody Western Coal Co., 400 F.3d 774, 779-80 (9th Cir. 2005) (If anindispensable party cannot be joined, the action must be dismissed).

Ex. 6 at 1.

C. MobileStars Post-Litigation Registration Cannot Confer Standing, And ItsAmended Complaint Cannot Cure Jurisdictional Defects

A court may exercise jurisdiction only if a plaintiff has standing to sue on the date it files

suit. Abraxis Bioscience, Inc. v. Navinta, LLC, 625 F.3d 1359, 1364 (Fed. Cir. 2010); see also

Keene Corp. v. United States, 508 U.S. 200, 207 (1993) (noting the longstanding principle that the

jurisdiction of the Court depends upon the state of things at the time of the action brought)

(citations omitted). Standing must exist when the original complaint is filed, as an amended

complaint cannot cure defects in standing: The initial standing of the original plaintiff is assessed



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16

at the time of the original complaint, even if the complaint is later amended. Schreiber Foods, Inc.

v. Beatrice Cheese, Inc., 402 F.3d 1198, 1203 n.3 (Fed. Cir. 2005) (emphasis added).

MobileStar cannot demonstrate that it had standing to sue when Plaintiffs commenced this

action. In cases such as this one, where the plaintiff lacked standing at the outset, the suit must be

dismissed, and the jurisdictional defect cannot be cured after the inception of the lawsuit. Abraxis,

625 F.3d at 1364 (quotation omitted). The Court should dismiss this action in its entirety.

CONCLUSION

For the reasons set forth above, Defendants respectfully request that the Court dismiss

Plaintiffs asserted claim 5 of the 131 patent with prejudice for failure to comply with 35 U.S.C.

101; and also dismiss Plaintiffs First Amended Complaint due to MobileStars lack of standing to

file Plaintiffs original complaint.

Dated: February 10, 2014 Respectfully submitted,

/s/ J. Mark Mann ______________________Attorneys for Defendants Samsung Electronics, Co.,

Ltd., Samsung Electronics America, Inc., and

Samsung Telecommunications America, LLC

J. Mark MannState Bar No. 12926150G. Blake ThompsonState Bar No. 24042033MANN | TINDEL | THOMPSON300 West Main Street

Henderson, Texas 75652Tel: (903) 657-8540Fax: (903) 657-6003Email: [email protected]



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17

CERTIFICATE OF SERVICE

I hereby certify that on February 10, 2014, I electronically filed the foregoing document with theclerk of the court for the U.S. District Court, Eastern District of Texas, Marshall Division, usingthe electronic case filing system of the court. The electronic case filing system sent a Notice of

Electronic Filing to the attorneys of record who have consented in writing to accept this Noticeas service of this document by electronic means.

/s/ J. Mark Mann

__________________________________________J. Mark Mann



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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF TEXAS

MARSHALL DIVISION

ROCKSTAR CONSORTIUM US LP, INC. ANDMOBILESTAR TECHNOLOGIES, LLC

Plaintiffs,

v.

SAMSUNG ELECTRONICS CO., LTD.,

SAMSUNG ELECTRONICS AMERICA, INC.,

SAMSUNG TELECOMMUNICATIONSAMERICA, LLC, GOOGLE INC.,

Defendants.

Civil Action No. 13-cv-0900-JRG

DECLARATION OF JOSEPH MILOWIC III IN SUPPORT OF SAMSUNG

DEFENDANTS MOTION TO DISMISS PLAINTIFFS FIRST AMENDED

COMPLAINT PURSUANT TO THE FEDERAL RULES OF CIVIL PROCEDURE

12(b)(6) AND 12(b)(1)

I, Joseph Milowic III, hereby declare as follows:

1. I am a partner with the law firm of Quinn Emanuel Urquhart & Sullivan, LLP. Ihave personal knowledge of the facts set forth in this declaration and, if called upon as a witness,

I could and would testify to such facts under oath.

2. I offer this declaration in support of Samsungs Motion to Dismiss Plaintiffs FirstAmended Complaint Pursuant to the Federal Rules of Civil Procedure 12(b)(6) and 12(b)(1).

3. Attached hereto as Exhibit 1 is a true and correct copy of Robert McMillan, HowApple and Microsoft Armed 4,000 Patent Warheads, Wired Enterprise, May 21, 2012.

4. Attached hereto as Exhibit 2 is a true and correct copy of an excerpt from the ip-rockstar.com website page titled About Rockstar.

Case 2:13-cv-00900-JRG Document 26-1 Filed 02/10/14 Page 1 of 3 PageID #: 185


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02198.00011/5756717.1 2

5. Attached hereto as Exhibit 3 is a true and correct copy of an excerpt from theUnited States Patent And Trademark Office website (www.uspto.gov/assignments) Patent

Assignment Assignor Details for Rockstar Bidco, LP.

6. Attached hereto as Exhibit 4 is a true and correct copy of the Certificate ofLimited Partnership of Rockstar Consortium US LP.

7. Attached hereto as Exhibit 5 is a true and correct copy of the Certificate ofFormation of MobileStar Technologies LLC.

8. Attached hereto as Exhibit 6 is a true and correct copy of the public redactedversion of Defendants [Rockstar Consortium U.S. LP and MobileStar Technologies LLC]

Motion to Dismiss Under Fed. R. Civ. P. 12(b)(2) and 12(b)(3) for Lack of Personal Jurisdiction

and Improper Venue and to Decline Exercising Jurisdiction Under the Declaratory Judgment

Act, Dkt. No. 19-3, Case 4:13-cv-05933-CW, dated January 23, 2014.

9. Attached hereto as Exhibit 7 is a true and correct copy of MobileStarTechnologies LLCs Application for Registration of a Foreign Limited Liability Company.

10. Attached hereto as Exhibit 8 is a true and correct copy of United States Patent No.6,463,131.

I declare under penalty of perjury that the foregoing are true and correct.

Dated: February 10, 2014 Respectfully submitted,

/s/ Joseph Milowic III ______________________

Joseph Milowic III

[email protected]

QUINN EMANUEL URQUHART &SULLIVAN,LLP

51 Madison Avenue, 22nd FloorNew York, New York 10010

Telephone: (212) 849-7000

Facsimile: (212) 849-7100



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02198.00011/5756717.1 3

CERTIFICATE OF SERVICE

I hereby certify that on February 10, 2014, I electronically filed the foregoing document with the

clerk of the court for the U.S. District Court, Eastern District of Texas, Marshall Division, using

the electronic case filing system of the court. The electronic case filing system sent a Notice of

Electronic Filing to the attorneys of record who have consented in writing to accept this Noticeas service of this document by electronic means.

/s/ J. Mark Mann

J. Mark Mann



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EXHIBIT 1



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Scott Widdowson is a specialist, one of 10 reverse-engineers working full time for a stealthycompany funded by some of the biggest names in technology: Apple, Microsoft, Research In

Motion, Sony, and Ericsson. Called the Rockstar Consortium, the 32-person outfit has a single-minded mission: It

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How Apple and Microsoft Armed 4,000Patent WarheadsBy Robert McMillan05.21.12

6:30 AMFollow @bobmcmillan

Inside the reverse-engineering lab at Rockstar, Scott Widdowson is looking for products thatinfringe on the company's 4,000 patents.Photo: RockstarIn many ways, Scott Widdowson is your typical electrical engineer. Most days, when theweathers good, he bikes the 15 miles along the Ottawa River to his companys offices in thewest end of the Canadian capital. Once there, he settles in for a day of reading technical

195



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specifications, poring over computer textbooks, or prying apart consumer electronics logicprobe in one hand and a soldering iron in the other.But Widdowson is a specialist. Hes one of 10 reverse-engineers working full time for astealthy company funded by some of the biggest names in technology: Apple, Microsoft,Research In Motion, Sony, and Ericsson. Called the Rockstar Consortium, the 32-personoutfit has a single-minded mission: It examines successful products, like routersand smartphones, and it tries to find proof that these products infringe on a portfolio of over

4,000 technology patents once owned by one of the worlds largest telecommunicationscompanies.When a Rockstar engineer uncovers evidence of infringement, the company documents it,contacts the manufacturer, and demands licensing fees for the patents in question. Thedemand is backed by the implicit threat of a patent lawsuit in federal court. Eight of thecompanys staff are lawyers. In the last two months, Rockstar has started negotiations with asmany as 100 potential licensees. And with control of a patent portfolio covering core wirelesscommunications technologies such as LTE (Long Term Evolution) and 3G, there is literally noend in sight.Pretty much anybody out there is infringing, says John Veschi, Rockstars CEO. It would behard for me to envision that there are high-tech companies out there that dont use some of

the patents in our portfolio.Rockstar has its roots in last years high-profile auction of 6,000 patentsowned by thebankrupt Canadian telco giant Nortel. Google made headlines when it cast the first bid of$900 million for the portfolio, but the search giant was soon in a heated bidding war witha consortium of rivals led by Apple and Microsoft. The final sale price was $4.5 billion, andRockstar Bidco, as it was then called, was the winner.Pretty much anybody out there is infringing, I would think. It would be hard for me toenvision that there are high-tech companies out there that dont use some of the patents inour portfolio. John VeschiSince then, Rockstar Bidco has given way to a new entity, called Rockstar Consortium. Andfor the first time, the consortiums strategy for the Nortel patents is clear. Ownership of about

2,000 of the patents was shifted to the individual companies that won the auction: Apple,Microsoft, et al. But the remaining 4,000 have been transferred to Rockstar Consortium,which is now a pure patent exploitation operation funded by all of the winning bidders exceptEMC, which has dropped out of the picture, according to Veschi.Rockstar is a special kind of company. Because it doesnt actually make anything, it cant becountersued in patent cases. That wouldnt be the case with Apple or Microsoft if they hadkept the patents for themselves. And because its independent, it can antagonize its ownerspartners and customers in ways that its owner companies could not. The principals haveplausible deniability, says Thomas Ewing, an attorney and intellectual property consultant.They can say with a straight face: Theyre an independent company. We dont control them.And theres some truth to that.

When the Rockstar Bidco group purchased Nortels patents, the U.S. Department of Justicetook a look at the deal, as part of a broader investigation into several large technology patentsales. The DoJ was concerned that patent attacks might somehow be used to knock Rockstarscompetitors out of the smartphone or tablet market. But in February, the DoJ closed itsinvestigation, in part because Microsoft and Apple had promised to license many of their corewireless patents under reasonable terms to anyone who needed them.But the new company Rockstar Consortium isnt bound by the promises that its membercompanies made, according to Veschi. We are separate, he says. That does not apply to us.Rockstar owners could choose to simply recoup their investment by licensing the patents andthen reselling them much as Microsoft did recently when it bought patents from AOL and



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then turned around and sold them to Facebook. Or Rockstar could play into the strategicinterests of its owner companies by going after Google, and Android partners such as HTC,says Colleen Chien, a law professor at Santa Clara University who has made a study of themarket for technology patents. Microsoft, Ericsson and EMC declined to comment for thisstory. The other Rockstar owners didnt respond to messages.To say that technology patents have become more important over the past decade is to riskcomic understatement. A patent is essentially a government-sanctioned monopoly designed

to give the inventor a two-decade head start to commercialize any new technology. But inpractice, patents are weapons. Technology companies load up on patents like Cold Warnations stockpiling nuclear bombs, hoarding them for use when an important market is atstake. And few companies have been loading up on patents as aggressively as Apple andGoogle, two companies that had nothing to do with the smartphone market 10 or 15 years agowhen many of Nortels wireless patents were being developed.Many companies stockpile patents for defensive purposes, but others actively look for waysthey can make money from them big money. The kind of reverse-engineering practiced byWiddowson happens more often than most people realize. Its just not widely discussed.Big companies are doing this work with a combination of their own resources andoutsourcing, says Fas Mosleh, senior vice president of IP transactions with Kanzatec, a Los

Altos, California, company that sells the type of reverse-engineering services that Widdowsonpractices in Rockstars Ottawa lab.The companies that do this are big because the costs are big. When patent fights go to trial,the legal fees typically run into the millions of dollars. This is the sport of kings, says Ewing.Ordinary people cant play in this arena.But the rewards can be great too. In 2007, a U.S. jury hit Microsoft with$1.5 billion indamages after finding that it violated Lucents MP3 patents (that verdict was later appealed,and most of the case settled out of court). On Friday, the U.S. International TradeCommission threatened to halt the import of all Motorola Mobilitys Android phonesandtablets after finding that Motorola had violated a Microsoft patent on how to fire off meetingrequests from a mobile device.

Welcome to Ground ZeroRight now, ground zero for the patent wars is the smartphone market, where everyone fromGoogle, Oracle, Microsoft, and Apple to Motorola, HTC and Samsung are battling it out in thecourts. Some companies use patents as a competitive weapon, launching legal wars ofattrition against competitors. Others find that they can make big money in some areaswithout necessarily having to win in the marketplace. Qualcomm makes nearly $4 billionannually licensing its mobile patents. IBM, one of the top patent-holders on the planet, makesover $1 billion each year.The creation of these conglomeration of patents what this does is create a barrier to entryfor the little guy. Julie SamuelsVeschi says that he and not Rockstars board of directors is calling the shots when it

comes to licensing deals. The companys mission is to manage the patent portfolio to achievea return on investment, probably through a combination of licensing and sales, says Veschi.So, in some cases, we might be selling some patents, and in other cases, we might belicensing some patents. Rockstar hasnt sued anyone yet, but Veschi expects that to happentoo.Because it doesnt actually produce anything, some knock Rockstar as a straight-up patenttroll. This deal is indicative of a much larger fundamental problem that we see today, saysJulie Samuels, a staff attorney with the Electronic Frontier Foundation. She says she hearsfrom small companies regularly who get pressured out of the U.S. market because they simply



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cant defend themselves against massive patent claims, whether legitimate or not. None ofthem want to talk to the press, though, for fear of drawing attention and possibly morelegal troubles to themselves. Ultimately, Samuels worries that patents especiallysoftware patents will hurt innovators rather than help them. And thats exactly the oppositeof what patents are supposed to do.The creation of these conglomerations of patents what this does is create a barrier to entryfor the little guy, Samuels says. It makes it so much harder to break into the market if you

are a creator or an innovator.

After surviving the Nortel meltdown, Rockstar CEO John Veschi now controls 4,000 patents.Photo: Dan Krauss/Wired

Building in the Nortel CraterWith just 32 employees, Veschis company is tiny, but it has a big legacy. Its the final restingplace of the patent portfolio of Canadas most storied technology company, Nortel Networks,a telecommunications giant whose origins date back to 1882 when it was the telephonemanufacture and repair department of the Bell Telephone Company of Canada. Three-

quarters of Rockstars employees, including Veschi and Widdowson worked at Nortel andkept their jobs by helping the creditors understand and then sell Nortels patent portfolio.Nortel flamed out spectacularly in 2009, in a complex international bankruptcy that costmore than 30,000 employees their jobs, left others without pension and life insurancecoverage, and saw several top executives face fraud charges in a trial thats still ongoing.How the hell did you guys go bankrupt? Why werent you Google? Why werent youFacebook? John VeschiEmployee pensions were slashed in half when the company could no longer meet paymentobligations. Some workers lost life insurance or medical benefits when the companys self-funded programs collapsed. And theyre still hurting three years later, waiting for courts in



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the United States, Canada, and the United Kingdom to hammer out final bankruptcysettlements, says Anne Clark-Stewart, a spokeswoman with Nortel Retirees and FormerEmployees Protection Canada, a group representing more than 20,000 former Nortelemployees.But what was a tragedy for the companys employees turned out to be an unprecedentedopportunity for Rockstars investors. Nortel had a massive patent portfolio nearly 9,000patents in all most of them related to computer networking. And according to Veschi, they

were high-quality patents the kind that youd normally find in a Bell Labs or an IBM; thekind that would be likely to stand up in a court case. Nortels patents covered broad areas ofwireless networking, telecom switching, internet routers, modems, personal computers, evensearch and social networking.A lot of people are still surprised to see the quality and the diversity of the IP that was inNortel, he says. And the fundamental question comes back: How the hell did you guys gobankrupt? Why werent you Google? Why werent you Facebook? Why werent you all thesethings, because you guys actually had the ideas for these business models before they did?They were within a Bell Labs-y kind of environment, and maybe the wherewithal of turningthem into businesses wasnt necessarily there.Nortel went bankrupt because it was mismanaged and, ultimately, fizzled out in the

marketplace. Best known as a maker of telephone-company hardware and corporate phonesystems, it once boasted more than 90,000 employees. But it lost out in the data center toCisco, and it was outmaneuvered in its traditional telecom business by Chinas Huawei.

No More Friendly CanadiansWhen Veschi signed on in 2008, Nortel hadnt done much work to license its intellectualproperty. It was run by friendly Canadians who didnt want to antagonize partners andcustomers by suing them. But the company had been remarkably adept at filing patents. Wehad huge patent ceremonies in the CTO group that we made a big production of every year,says Gillian McColgan, a former Nortel technical manager who is now chief technology officerwith Rockstar.Nortels patents sold for $4.5 billion $1.3 billion more than the combined value of all of thecompanys business units.Employees were paid bonuses, and sometimes, theyd join up with senior management atfancy award ceremonies held at swank venues such as the five-star Adolphus Hotel in Dallas,home to Queen Elizabeth II whenever shes in Texas.Nortel had long patented its inventions, but encouraged by former CEO Mike Zafirovski, itstarted doing something called defensive patenting. Engineers were encouraged to filepatents that could be used to fire back in the event that someone brought a patent suit againstNortel. A large focus of our patenting efforts had been around in the pre-bankruptcy era, hadbeen trying to identify what our competitors might do, and laying down inventions in thosespaces to protect ourselves, McColgan says.We ended up with a large portfolio of patents that are directed toward products and areas of

technology that our competitors were working in, where we didnt necessarily have productsourselves, she adds.When Nortel went belly up, patents representing tens of billions of dollars in research anddevelopment were suddenly made available on the open market. It was an unprecedentedopportunity for patent buyers. There had never been anything like it up to this point, noteven close, says David Descoteaux, a banker with Lazard, an investment firm that advisedNortel through the bankruptcy.



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It wasnt just the quality of the patents that attracted serious investors. It was the sheervolume. Having thousands of high-quality patents to aim at a competitor is a uniquely usefulweapon in this new sport of kings.Patent attorneys love large patent portfolios because they make negotiations easier, saysThomas Ewing, the IP consultant. When you get to these big numbers youre not talkingabout merits anymore. The merit discussion just goes out the window, he says. The reason?Whey youre paying lawyers between $10,000 to $15,000 per patent to drill down and

research each patent, its usually less expensive to cut a licensing deal. Anything over 200,nobodys talking about merits, he says.But Google, Apple, and Microsoft saw the same promise as Veschi, and soon, they marshaledforces for a bidding war over Nortels patent portfolio. When the dust settled, Nortels patentssold for $4.5 billion $1.3 billion more than the combined value of all of the companysbusiness units.

The $4.5 Billion Sales JobJohn Veschi and his small team of former Nortel employees had front-row seats to thebidding war. In fact, they deserve a lot of the credit for driving the patent portfolio sale ashigh as it went.

Veschi is serious and intense. A half-marathon runner who likes to talk, but with a peripateticway of qualifying his thoughts in mid-sentence. His first job out of school was as an officer atFort Monmouth, New Jersey, the now-decommissioned Army signals facility that was oncethe workplace of Julius Rosenberg.Veschi signed on to run Nortels licensing business in the summer of 2008 just six monthsbefore the company declared bankruptcy. He had run licensing practices at Lucent andsemiconductor maker LSI before Nortel, and he saw a rare opportunity: a vast portfolio of top-quality patents that nobody had yet tried to license.I was getting my equity struck at a nice low point and the future was rosy and I could helpmake it that way. We could be less wimpy about our IP. John VeschiHe thought it was the perfect time to jump onboard and work on building a licensing businessthat rivaled Lucent or IBM. I was getting my equity struck at a nice low point and the futurewas rosy and I could help make it that way, he said, because we could be less wimpy aboutour IP.What he ended up with was a quick hiring freeze and then, after bankruptcy, the job ofanalyzing Nortels 8,500 patents, figuring out which ones should be sold with the companysbusiness units, and which ones could be sold separately at auction. When this job called thePatent Segmentation Exercise was done, Veschi had a portfolio of 6,000 patents to put upat auction.Its a remarkable story. Veschi and his small team ended up riding along with Nortel rightthrough the bankruptcy, and ultimately selling Nortel executives and creditors on the ideathat the patents should be split apart from the rest of companys assets and sold separately.That wasnt immediately obvious to some creditors and company executives who thought

they could bump up the sale prices of Nortels business units by rolling in more patents. Itwas at the time controversial, says Michael Lasinski, an early ally of Veschis who worked ona committee for unsecured Nortel creditors during the bankruptcy.Lasinski was quick to see the value of Nortels patents because, like Veschi, hed had someexperience in the patent marketplace. Hed worked at the Ocean Tomo Patent Brokerage, acompany that had pioneered the idea of Sothebys-style patent auctions.Veschi and his team started building financial models. From his time at Lucent, he knew howto show just how much Nortels patent portfolio could bring in. At first, some executivesthought it would be less than a billion dollars. But with Lasinskis support the models showed



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a lot more money. The team built a database of Nortels patents and mapped them out tocurrent and emerging networking standards to show where they might play.Then came the sales job of proving just how valuable these patents were to potential buyers.Google was first out of the gate, with a $900 million stalking horse bid a bid pre-approvedby Nortels management and creditors aimed at establishing the minimum amount that thepatents would sell for in bankruptcy auction.It didnt take long for others to jump in. At first, Apple, Intel, RIM, and others were

interested, as was a patent company called RPX, which buys up patents defensively, so theycannot be used against its investors. By the time the bidding got to $4.5 billion, there werejust two groups: Rockstar, and a group called Ranger. Ranger was Intel and Google.

Does Rockstar Own 4G?After the Rockstar group acquired the 6,000 Nortel patents, about 2,000 were transferred tothe companies behind the consortium. But 4,000 remained with Rockstar the company,which is actively trying to make money from them.It turned out that Nortel had patents that covered parts of the up-and-coming mobile datatechnology called Long Term Evolution. Also known as 4G, this is the standard now bringingspeedier internet access to mobile phones. Many of those patents are nowowned by Rockstar

and could be enforced against mobile phone companies Google, for example in thecoming months.You knew you were making tens or hundreds of millions of dollars difference. ScottWiddowsonBut Nortels patents also covered core networking technologies used by routers and switchesand many other areas. The European Telecommunications Standards Institute, the standardsbody for the European telecommunications industry, has a database that lists whose patentsmay apply to emerging telecommunications standards, and it lists 43 standards areas, manyrelating to LTE, where Nortel patents some of them now transferred to Rockstar are inplay.Close to 25 of Rockstars employees are former Nortel workers, including lawyers, managersand engineers. Having longtime Nortel engineers like Widdowson and McColgan peoplewho know the business and the patent portfolio is going to help Veschi do a better job infiguring out where to go looking for licensing fees. Widdowson wont say what hes workingon, by the way, except that its related to consumer telecommunications technology.But thats not why Widdowson says he stuck it out through the bankruptcy. He was offeredanother job, and he turned it down.Former coworkers might have found this a little strange, but it turned out that Widdowsonliked the work he was doing. The mesh of the legal and technical work was a new challengefor him, but there was another reason he stuck with it. He felt like he was helping his formerNortel colleagues who were hurting because of the bankruptcy.McColgan reports a similar story. Even though she had colleagues telling her she was off herrocker, she stuck it out with the patent work because she thought she could make a

difference and increase the amount paid back to Nortels workers.You knew you were making tens or hundreds of millions of dollars difference, Widdowsonsays, which is not usual for someone who is an engineer.Pages:1 2 3View All



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Robert McMillan is a writer with Wired Enterprise. Got a tip? Send him an email at:robert_mcmillan [at] wired.com. PGP fingerprint 7658 D551 97F1 D65D 7695 279D DFBB392E 53F7 DC7CRead more by Robert McMillanFollow @bobmcmillan on Twitter.

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Jesse Petersen

This is exactly what's wrong with the patent system.

Scott Sterling

In a free enterprise system, if you legitimately own a patent, what is wrong with

asking another company that wants to use your patent to pay a small fee?

Is it complicated and messy? Of course. But what exactly is wrong with it?



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United States Patent and Trademark Office

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Assignments on the Web> Patent Query

Patent Assignment Assignor DetailsNOT E:Res u l t s d is p la y o n l y f o r is su e d p a t e n t s an d p ub lis h e d ap p l ic a t io n s . Fo r

p e n d i n g o r a b a n d o n e d a p p lic a t io n s p le a s e co n s u lt USPTO s t a f f .

Page 2 of 1312 345678910111213

Assignor Name : ROCKSTAR BIDCO, LP

Total Assignments: 1258

Assignment: 101

Reel/Frame: 029992/0115 Pages: 16

Recorded: 03/13/2013

Attorney Dkt #: 337051.01

Conveyance: ASSIGNMENT OF ASSIGNORS INTEREST (SEE DOCUMENT FOR DETAILS).

Assignor

1 ROCKSTAR BIDCO, LP Exec Dt: 05/10/2012

Assignee

1 MICROSOFT C ORPORATION

ONE MICROSOFT WAY

REDMOND, WASHINGTON 98052

Property

Pat # Pub # App #

8516349 US20120060069 12874696

Correspondence name and address

WOLFE-SBMC

601 W MAIN AVENUE

SUITE 1300

SPOKANE, WA 99201

Assignment: 102



Attorney Dkt #: ROCKSTAR PATENTS


Assignor


Assignee

1 MICROSOFT C ORPORATION

ONE MICROSOFT WAY

REDMOND, WASHINGTON 98052

Properties

Pat # Pub # App # Pat # Pub # App # Pat # Pub # App #

5602555 NONE 08441756 5576717 NONE 08441776 5714957 NONE 08441777

5570098 NONE 08441780 6438369 NONE 09461528 6363251 NONE 09538716

6931053 US20010000456 09729097 6549771 US20020028673 09836528 6687511 US20020012403 09849338

6842630 US20030195016 10448373 6774719 NONE 10661603 6961328 US20040176088 10800054



41/850

6963558 US20040176089 10800069 7196639 US20040209602 10847604 7081793 US20050062526 10858079

7672258 NONE 10948124 7463613 US20050078663 10968762 7304549 NONE 11248653

7091774 NONE 11248655 7424274 US20080020721 11333779 7250816 US20070052475 11483193

8040976 US20070116154 11545765 7436834 NONE 11552797 7864735 US20090103494 12343866

8619713 US20110096751 12983636 8472562 US20120063548 13230660 8537915 US20120224659 13476242


WOLFE-SBMC

601 W. MAIN AVE.

SPOKANE, WA 99201

Assignment: 103



Attorney Dkt #: 6888-65500


Assignor


Assignee

1 APPLE INC.

1 INFINITE LOOP

CUPERTINO, CALIFORNIA 95014

Property

Pat # Pub # App #

NONE US20110034206 12936409


MEYERTONS HOOD KIVLIN KOWERT & GOETZEL

PO BOX 398

AUSTIN, TX 78746-0398

Assignment: 104





Assignor


Assignee

1 APPLE INC.

1 INFINITE LOOP


Property

Pat # Pub # App #

NONE US20100046421 11967428



PO BOX 398

AUSTIN, TX 78746-0398

Assignment: 105





Assignor



42/850


Assignee

1 APPLE INC.

1 INFINITE LOOP


Property

Pat # Pub # App #

NONE US20090177735 12317714

Correspondence name and addressMEYERTONS HOOD KIVLIN KOWERT & GOETZEL

PO BOX 398

AUSTIN, TX 78746-0398

Assignment: 106





Assignor


Assignee1 APPLE INC.

1 INFINITE LOOP


Property

Pat # Pub # App #

8300591 NONE 11999919



PO BOX 398

AUSTIN, TX 78746-0398

Assignment: 107





Assignor


Assignee

1 APPLE INC.

1 INFINITE LOOP


Property

Pat # Pub # App #

8296558 NONE 10723335



PO BOX 398

AUSTIN, TX 78746-0398

Assignment: 108





43/850



Assignor


Assignee

1 APPLE INC.

1 INFINITE LOOP


Property

Pat # Pub # App #

8619637 US20130005316 13525673


MEYERTONS, HOOD, KIVLIN, KOWERT & G (APP

P.O. BOX 398

AUSTIN, TX 78767-0398

Assignment: 109





Assignor


Assignee

1 APPLE INC.

1 INFINITE LOOP


Property

Pat # Pub # App #

8363657 US20100128730 11954547



PO BOX 398

AUSTIN, TX 78746-0398

Assignment: 110





Assignor



1 INFINITE LOOP


Property

Pat # Pub # App #

8417214 US20120315869 13528138


MEYERTONS, HOOD, KIVLIN, KOWERT & G (APP

P.O. BOX 398

AUSTIN, TX 78767-0398



44/850

Assignment: 111





Assignor


Assignee

1 APPLE INC.1 INFINITE LOOP


Property

Pat # Pub # App #

8305897 US20090016259 12172899



PO BOX 398

AUSTIN, TX 78746-0398

Assignment: 112





Assignor


Assignee

1 APPLE INC.

1 INFINITE LOOP


Property

Pat # Pub # App #

8331466 US20090092195 12245047



P.O. BOX 398

AUSTIN, TX 78767-0398

Assignment: 113



Attorney Dkt #: 6888-66800Conveyance: ASSIGNMENT OF ASSIGNORS INTEREST (SEE DOCUMENT FOR DETAILS).

Assignor


Assignee

1 APPLE INC.

1 INFINITE LOOP


Property

Pat # Pub # App #

NONE US20100120415 12269236



45/850



PO BOX 398

AUSTIN, TX 78746-0398

Assignment: 114





Assignor


Assignee

1 APPLE INC.

1 INFINITE LOOP


Property

Pat # Pub # App #

8290078 US20100303171 12856982



PO BOX 398

AUSTIN, TX 78746-0398

Assignment: 115





Assignor



1 INFINITE LOOP


Property

Pat # Pub # App #

8331324 US20110310846 13221535



PO BOX 398

AUSTIN, TX 78746-0398

Assignment: 116





Assignor


Assignee

1 APPLE INC.

1 INFINITE LOOP




46/850

Property

Pat # Pub # App #

8229389 US20070066277 10575999



PO BOX 398

AUSTIN, TX 78746-0398

Assignment: 117





Assignor


Assignee

1 APPLE INC.

1 INFINITE LOOP


Property

Pat # Pub # App #

8228835 US20090067533 12199257



PO BOX 398

AUSTIN, TX 78746-0398

Assignment: 118





Assignor


Assignee

1 APPLE INC.

1 INFINITE LOOP


Property

Pat # Pub # App #

8522039 US20050278547 10863946



PO BOX 398

AUSTIN, TX 78746-0398

Assignment: 119





Assignor




47/850

Assignee

1 APPLE INC.

1 INFINITE LOOP


Prope

14-02-10 samsung motion to dismiss rockstar patent lawsuit

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