Free Reply Brief - District Court of Delaware - Delaware

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

HEIDELBERG USA, INC., Plaintiff, v. SCREENTONE SYSTEMS CORPORATION, ACACIA PATENT ACQUISITION CORPORATION, ACACIA RESEARCH CORPORATION, and PAUL S. SNYPP, Defendants. KONICA MINOLTA BUSINESS SOLUTIONS U.S.A., INC., Plaintiff, v. SCREENTONE SYSTEMS CORPORATION, ACACIA PATENT ACQUISITION CORPORATION, ACACIA RESEARCH CORPORATION, and PAUL S. SNYPP, Defendants.

Civ. No. 07-601-GMS

Civ. No. 07-602-GMS

DEFENDANTS' REPLY BRIEF IN SUPPORT OF THEIR MOTION TO STAY OR TRANSFER PENDING RESOLUTION OF ISSUES BY THE EASTERN DISTRICT OF TEXAS, THE FIRST-FILED COURT, OR, IN THE ALTERNATIVE, MOTION TO DISMISS Karen V. Sullivan (No. 3872) OBERLY, JENNINGS & RHODUNDA, P.A. 1220 Market Street, Suite 710 P.O. Box 2054 Wilmington, DE 19899 (302) 576-2000 ­ Telephone (302) 576-2004 ­ Facsimile [email protected]

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Edward R. Nelson III Texas State Bar No. 00797142 David Skeels Texas State Bar No. 24041925 FRIEDMAN, SUDER & COOKE 604 East 4th Street, Suite 200 Fort Worth, TX 76102 (817) 334-0400 (817) 334-0401 fax Attorneys for Defendants Screentone Systems Corporation, Acacia Patent Acquisition Corporation, Acacia Research Corporation and Paul S. Snypp Dated: December 20, 2007

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TABLE OF CONTENTS Table of Contents ...........................................................................................................................iii Table of Citations............................................................................................................................iv Introduction......................................................................................................................................1 Argument .........................................................................................................................................2 I. Screentone had standing to file the Texas Action................................................................2 A. The 2003 Repossession and Disposition Agreement transferred the `809 patent from SeeColor to Snypp...........................................................................................3 1. 2. 3. The assignment language must be read in context .......................................4 The Recital Section established the parties' intent .....................................5 Section 2 must be interpreted in light of, and harmonized with, other Agreement provisions ..................................................................................7 Use of the Washington strict foreclosure statute demonstrates the parties did not contemplate any further action ........................................................9

4.

B.

Snypp's assignment to APAC (who later assigned to Screentone) was fully effective to vest APAC with legal title ..................................................................10

II. III.

Konica Minolta distorts the law of misnomer through its overly restrictive analysis ......11 Transfer to the Texas Court is justified by the first-to- file rule and under the § 1404(a) convenience factors............................................................................................................13 A. B. Transfer to Texas is proper under the first-to- file rule, as applied by this Court ..13 The Section 1404(a) convenience factors favor transfer to Texas.........................16

IV.

Conclusion .........................................................................................................................17

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TABLE OF CITATIONS Cases

Bank of Am., N.A. v. Every Penny Counts, Inc., No. 07-159-GMS, 2007 U.S. Dist. LEXIS 67107 (D. Del. Sept. 11, 2007) ................ 13-16 Dippold-Harmon Enters., Inc. v Lowe's Companies, Inc., No. 01-532-GMS, 2001 U.S. Dist. LEXIS 18547 (D. Del. Nov. 13, 2001) ......................13 Electronics for Imaging, Inc. v. Coyle, 394 F.3d 1341 (Fed. Cir. 2005)..........................................................................................15 Findley v. City of Baton Rouge, 570 So. 2d 1168 (La. 1990) ...............................................................................................13 Grant County Constructors v. E.V. Lane Corp., 459 P.2d 947 (Wash. 1969)..................................................................................................5 Infotronics Corp. v. Varian Assoc. Corp., 45 F.R.D. 91 (S.D. Tex. 1968) ..................................................................................... 11-12 IpVenture, Inc. v. Prostar Computer, Inc., No. 2006-1012, 2007 U.S. App. LEXIS 22893 (Fed. Cir. Sept. 28, 2007) .........................4 Jumara v. State Farm Ins. Co., 55 F.3d 873 (3d Cir. 1995).................................................................................................14 Network -1 Sec. Solutions, Inc. v. D-Link Corp., 433 F. Supp. 2d 795 (E.D. Tex. 2006)...............................................................................16 Young v. Armstrong World Indus., Inc., 601 F. Supp. 399 (N.D. Tex. 1984) ...................................................................................16 Statutes 28 U.S.C. § 1404(a) ....................................................................................................... 2, 13, 16-17 WASH. REV. CODE § 62A.9A-619 (2002) ........................................................................................8 WASH. REV. CODE § 62A.9A-620 (2007) ........................................................................................9 Rule Fed. R. Civ. P. 15 .................................................................................................................... 11-13 iv

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Other The American Heritage Dictionary (2d ed. 1985) ...........................................................................5 Webster's Revised Unabridged Dictionary (1913) ..........................................................................5

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INTRODUCTION On the basis of the first-to-file rule, Defendants Screentone Systems Corporation ("Screentone"), Acacia Patent Acquisition Corporation ("APAC"), Acacia Research Corporation and Paul Snypp ("Snypp") (collectively, "Screentone") moved to stay the instant proceedings (the "Delaware Action") until the identical issues are resolved by the Eastern District of Texas (the "Texas Court"). Alternatively, Screentone moved this Court to transfer this action to the Texas Court, or to dismiss it entirely. Heidelberg USA, Inc. ("Heidelberg") and Konica Minolta Business Solutions U.S.A., Inc. ("KM Business") responded by regurgitating arguments made previously in their respective motions to dismiss the first-filed Texas Action. Heidelberg and KM Business (sometimes referred to herein as the "Delaware Plaintiffs" or the "Texas Defendants") 1 have failed to demonstrate how judicial economy would be served by proceeding with parallel litigation in three different courts. 2 In fact, parties on both sides of the docket agree that this Court should "stay . . . the present Delaware Action until the Texas Court resolves the standing issue."3 Despite this concession, Heidelberg proceeds to spend almost the entirety of its Response arguing that Screentone lacked standing to file its Texas Action. 4 Heidelberg also argues that it would be more convenient (at least for Heidelberg) to litigate these matters in Delaware. KM Business makes the same arguments. KM Business also argues that a curable misnomer --
1

The Delaware lawsuit filed by Heidelberg is docketed as Case 1:07-cv-00601-GMS-LPS, and the Delaware lawsuit filed by KM Business is docketed as Case 1:07-cv-00602-GMS-LPS. Screentone will refer to "Case 601" and "Case 602," as appropriate, when referring to certain exhibits on file with the Court.
2

Screentone is fighting an identical battle on a third front ? in the Western District of Washington ? where the remainder of the Texas defendants filed a declaratory judgment action based on the same arguments raised here.
3

See, e.g., Plaintiff Heidelberg's Response to Defendant's Motion to Stay or Transfer Pending Resolution of Issues by the Eastern District of Texas, or, in the Alternative, Motion to Dismiss (Case 601, D.I. 19) (hereinafter "Heidelberg's Response") at 2.
4

See Heidelberg's Response (Case 601, D.I. 19) at 1-10.

1

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whereby Screentone named KM Printing in the Texas Action instead of its successor, KM Business -- tilts the first-to- file analysis in its favor. Screentone now files this Reply. 5 ARGUMENT Despite their coordinated efforts to escape the first- filed Texas Action, the Delaware Plaintiffs cannot persuasively explain why this Court should disregard the well- settled first-tofile rule, which favors Screentone's choice of the Texas forum and counsels against the secondfiled Court ruling on issues that are already pending in the first- filed court. Plaintiffs' arguments will be addressed in tur n. First, Screentone had standing to file the Texas Action. Second, Screentone's first- filed status is not altered by a curable misnomer. Third, to the extent this Court determines that a stay is inappropriate, transfer of this action to the Texas Court is justified by the first-to- file rule and, similarly, under the Section 1404(a) convenience factors. I. Screentone had standing to file the Texas Action. If this Court declines Screentone's and Heidelberg's requests for an immediate stay and, instead, chooses to evaluate and rule on the standing issue, it will see that Screentone had standing to bring the Texas Action. The Delaware Plaintiffs argue that "if [Screentone] lacked initial standing, the [Texas] suit must be dismissed."6 Conversely, if Screentone properly

5

KM Business has now revealed that its declaratory judgment action in Delaware was a ruse designed to manufacture the appearance of "multi-district litigation." Shortly before this Reply Brief was to be filed, Screentone's counsel received word that six of the Texas Defendants, including KM Business, have filed a Motion to Transfer with the Judicial Panel on Multidistrict Litigation, pursuant to 28 U.S.C. § 1407, in an action styled In re `809 Patent Litigation. The motion seeks transfer of this case, as well as transfer of the Texas Action and transfer of yet another declaratory judgment action now pending against Screentone in the Central District of California, to the Western District of Washington or, alternatively, to the Central District of California. This is remarkable in light of Konica Minolta's representations to this Court that "the convenience of the parties and the interests of justice clearly favor the instant action proceeding in Delaware." Plaintiff's Brief in Opposition to Defendants' Motion to Stay or Transfer Pending Resolution of Issues by the Eastern District of Texas, or, in the Alternative, Motion to Dismiss (Case 602, D.I. 18) at 18 (hereinafter "KM Business Response"). Such gamesmanship, whereby KM Business creates multi-district litigation and then complains about the inefficiencies of multi-district litigation, must be rejected.
6

See, e.g., Heidelberg's Response (Case 601, D.I. 19) at 1, 2.

2

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acquired title to the `809 patent, then it had standing to file the Texas Action, and Plaintiffs' arguments fail. Title to the `809 patent passed from its original assignee, SeeColor Corp., to its current owner, Screentone, as shown below: SeeColor Corp. à Snypp à APAC à Screentone Heidelberg and KM Business attempt to poke holes in the chain of title, specifically attacking the links from SeeColor to Snypp, and from Snypp to APAC. But the record shows: (1) that a 2003 Repossession and Disposition Agreement effectuated an immediate transfer of the `809 patent from SeeColor to Snypp; and (2) Snypp made a valid assignment of the patent to APAC.7 A. The 2003 Repossession and Disposition Agreement transferred the `809 patent from SeeColor to Snypp. Plaintiffs' flawed standing analysis is rooted in its failure to properly consider non-public documents that affect the chain of title. Instead, Plaintiffs point repeatedly to the public record: · · "Public records show a broken or incomplete chain of title from the inventor of the `809 patent to Screentone."8 "The U.S.P.T.O.'s assignment records have no record of any assignment of the `809 patent from the original assignee of record, SeeColor, to Mr. Snypp, APAC, or Screentone."9 "Based on the public record, Mr. Snypp was without right, authorization, title, license or permission from SeeColor to assign the `809 patent to APAC in August 2005."10

·

But the chain of title includes a key document that was not part of the public record prior to these proceedings ? the Repossession and Disposition Agreement (the "Repossession Agreement")
7

Plaintiffs do not challenge the assignment fromAPAC to Screentone. Heidelberg's Response (Case 601, D.I. 19) at 2; Heidelberg's Response (Case 601, D.I. 19) at 4. Heidelberg's Response (Case 601, D.I. 19) at 5.

8

9

10

3

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executed in 2003 between SeeColor Corp. and Snypp. The simple, three-page Repossession Agreement transferred to Snypp all of SeeColor's assets, including the `809 patent and other intellectual property, in satisfaction of a debt owed Snypp (and for which Snypp maintained a perfected security interest). 11 The Repossession Agreement has not been filed of record with the USPTO, nor is it required to be. The impact and legal effect of the Agreement is described more fully below. 1. The assignment language must be read in context.

Plaintiffs argue that the Repossession Agreement did not transfer ownership of the `809 patent because, when executed, it merely obligated SeeColor to execute additional papers to effect the transfer. To support this position, Plaintiffs improperly isolate a single provision, to wit: All transfers/assignments shall be endorsed by Debtor upon execution of this agreement. 12 Plaintiffs then cite IpVenture, Inc. v. Prostar Computer, Inc. for the proposition that "an agreement to assign does not convey an interest in the patent; transfer of the interest must be implemented by written assignment." No. 2006-1012, 2007 U.S. App. LEXIS 22893 (Fed. Cir. Sept. 28, 2007). IpVenture is inapposite because it involved an employment contract which required the employee to assign future inventions to his employer. Id. at *4-5. Hence, at the time the employee executed the contract, there was no invention to convey. This stands in stark contrast to the circumstances here, where the Repossession Agreement conveyed existing inventions and patent rights.
11

See generally Repossession Agreement, attached as Exh. 7 to the Declaration of Steven F. Meyer in Support of Plaintiff Heidelberg's Response to Defendants' Motion to Stay (Case 601, D.I. 20-2) (hereinafter "Repossession Agreement").
12

Repossession Agreement (Case 601, D.I. 20-2, Exh. 7) at 1, Recital No. 6.

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Moreover, Plaintiffs' construction of the aforementioned provision is but one plausible reading. A better interpretation of the phrase "All transfers/assignments shall be endorsed by Debtor upon execution of this agreement" is that the various "transfers/assignments" of the secured collateral were consummated and acknowledged by SeeColor's signature to the contract. 13 In other words, the act of SeeColor's signature implemented the transfers/assignments it was obligated to make. This meaning of the Repossession Agreement is supported by considering other operative provisions in the document. Under Washington law: 14 [C]ourts are in nearly universal agreement in construing written contracts that the primary purpose of a judicial interpretation is to ascertain the parties' intentions, give effect to them and make the parties' intentions controlling. The intentions of the parties should be ascertained from the entire writings, and, if at all possible, all parts of the writings shall be construed so as to harmonize with one another. Grant County Constructors v. E.V. Lane Corp., 459 P.2d 947, 953 (Wash. 1969) (internal citations omitted). To harmonize all relevant parts of the Repossession Agreement is to find that Snypp owned the `809 patent from the moment SeeColor signed the contract. 2. The recital section established the parties' intent.

The Recitals section of the Repossession Agreement uses unequivocal, present tense language to make clear that its purpose was to fully and forever discharge the SeeColor

13

In this context, "endorsed" is best interpreted as "acknowledged." See, e.g., The American Heritage Dictionary 452-53 (2d ed. 1985) (defining "endorse" as "to acknowledge (receipt of payment) by signing a bill, draft, or other instrument...to give approval or support to; sanction"). Here, the payment or consideration contemplated by the Repossession Agreement included the patent assignment. The phrase, "upon execution of this agreement" is best interpreted as "by means of execution of this agreement." See, e.g., Webster's Revised Unabridged Dictionary (1913), available online at www.machaut.uchicago.edu (showing, in usage note, that "upon" is used to mean "in consequence of" or "by means of").
14

Washington substantive law governs construction of the Repossession Agreement.

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indebtedness to Snypp by consenting to Snypp's foreclosure on SeeColor assets pursuant to his perfected security interest: Creditor has proposed to Debtor that Creditor retain the Collateral in satisfaction of the debt owing to Creditor. Debtor desires to consent to such retention of Collateral. . . . [I]t is the intention of Debtor and Creditor that the acceptance of the secured collateral fully satisfies any debts and obligations otherwise owing to Creditor. Creditor accepts the secured collateral . . . 15 The Agreement explains further that the SeeColor Board of Directors had previously "determined that it was in the best interest of the Seecolor Corporation to surrender the assets to Creditor . . . ."16 The referenced "Collateral" and "assets" included "equipment, supplies, tangible and intangible products,...chattels, patents, trade secrets and accounts."17 Plaintiffs argue, without support, that the Repossession Agreement is fatally flawed because it does not specifically identify the `809 patent. But it lists specific types of assets, including patents, and SeeColor disposed of all assets as a consequence of the repossession. In any event, the record makes it clear that SeeColor owned the patent. 18 And, as Plaintiffs have detailed, there is no evidence (public record or otherwise) that SeeColor transferred the `809 patent to anyone other than Snypp. The parties' intent being to liquidate immediately an entire debt, execution of the Repossession Agreement can only be deemed to have made an immediate and present transfer of

15

Repossession Agreement (Case 601, D.I. 20-2, Exh. 7) at 1, Recital No. 6 (emphasis added).

16

Repossession Agreement (Case 601, D.I. 20-2, Exh. 7) at 1, Recital No. 5 (emphasis added). Note that the Agreement uses the past tense to indicate that it "was" in the Corporation's best interest to surrender the assets, suggesting that the assets had already been surrendered and that this Agreement was simply a memorialization or implementation of that transfer.
17

Repossession Agreement (Case 601, D.I. 20-2, Exh. 7) at 1, Recital No. 2.

18

See Patent Assignment Abstract of Title, attached as Exh. 1 to Declaration of Steven F. Meyer in Support of Plaintiff Heidelberg's Response to Defendants' Motion to Stay (Case 601, D.I. 20-2).

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the collateral given. Holding otherwise would abrogate the parties' intent and be inconsistent with the parties' post-agreement conduct, whereby no one but Snypp sought to exercise rights as the `809 patent owner. 19 3. Section 2 must be interpreted in light of, and harmonized with, other agreement provisions.

Plaintiffs cherry picked one section of the Repossession Agreement to sustain an argument that Snypp never took ownership of the `809 patent. The reason for this is evident: When the language upon which Plaintiffs rely is considered in proper context, a different result obtains. For instance, Section 4 of the Repossession Agreement states: Creditor accepts the Collateral in full satisfaction of Debtor's debt, pursuant to RCW 63A.9A.620 [Washington's strict foreclosure statute]... a. [and Debtor] Transfers to Creditor all of the Debtor's right in and to the Collateral. 20 This provision demonstrates a present and effective transfer of the Collateral, including the `809 patent. Plaintiffs fail to address Section 4 in their briefs, focusing instead on Section 7 whic h, like Section 4, contains present transfer language such as: (i) "Debtor hereby transfers legal title to Creditor..."; and (ii) "Creditor has acquired the rights of the Debtors in the collateral."21 Indeed, the Agreement specifically "acknowledge[s]" the "receipt and sufficiency" of "the

19

See Declaration of Paul Snypp (attached hereto as Exhibit A), which was previously filed by Screentone in the Texas Action under the title "Declaration of Paul Snuypp in Support of Plaintiff's Sur Reply in Opposition to Defendants' Motions to Dismiss or Transfer" (hereinafter "Snypp Decl.") at ¶ 6 and Exh. 3 thereto (maintenance fees documentation).
20 21

Repossession Agreement (Case 601, D.I. 20-2, Exh. 7) at 2 (emphasis added). Repossession Agreement (Case 601, D.I. 20-2, Exh. 7) at 3.

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mutual benefits and forbearances" contemplated by the Repossession Agreement, including the transfer of all patent rights. 22 Plaintiffs argue that the Repossession Agreement, including the assignment language of paragraph 2, need not be read in context or as a whole, because "paragraph 2 . . . provides no indication this paragraph must be considered in conjunction with any other sections of the agreement . . . ."23 This argument suggests that every paragraph of every contract must include a disclaimer that reads: "This paragraph must be read in context." Neither Washington law nor the law of any other jurisdiction will countenance such an absurd proposition. Plaintiffs make a strained argument regarding Section 7 in an effort to persuade the Court to disregard its present transfer language. They say Section 7 "provides a mechanism to assist the transferee in obtaining amendment of official records regarding title to collateral." While true that the Section 7 "transfer statement" assists a transferee in having recorded title to collateral changed, 24 nothing limits the effect of the language. In fact, it follows that an actual change in ownership precedes any recorded change. Lastly, the final section (Section 8), entitled "Possession", provides that the "Creditor is entitled to immediate possession of the Collateral."25 This language is also consistent with a present transfer in ownership of the collateral without resort to further action (other than the execution of the Repossession Agreement itself).

22 23

Repossession Agreement (Case 601, D.I. 20-2, Exh. 7) at 1. See, e.g., Heidelberg's Response (Case 601, D.I. 19) at 8.

24

See Exh. B, Declaration of Edward R. Nelson, III, previously filed by Screentone in the Texas Action under the title "Declaration of Edward R. Nelson, III in Support of Plaintiff's Sur Reply in Opposition to Defendants' Motions to Dismiss or Transfer" (hereinafter Nelson Decl.) at Exh. 1 (W ASH . RE V. CODE § 62A.9A-619 (2002)).
25

Repossession Agreement (Case 601, D.I. 20-2, Exh. 7) at 3 (emphasis added).

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4.

Use of the Washington strict foreclosure statute demonstrates the parties did not contemplate any further action.

The Repossession Agreement specifically provides that Snypp took the SeeColor collateral pursuant to the Washington strict foreclosure statute. 26 Official Comment 2 to this statute states: This section and the two sections following deal with strict foreclosure, a procedure by which the secured party acquires the debtor's interest in the collateral without the need for a sale or other disposition .... WASH. REV. CODE § 62A.9A-620, cmt. 2 (emphasis added). 27 Further, Official Comment 3 explains that, under the strict foreclosure statute, "an acceptance of collateral" by the creditor occurs when the debtor consents "by agreeing to the acceptance in writing after default." And Official Comment 7 provides that intangible property, such as patents, is properly the subject of strict foreclosure: This section eliminates the requirement in former section 9-505 that the secured party be "in possession" of collateral. It clarifies that intangible collateral, which cannot be possessed, may be subject to a strict foreclosure under this section. By invoking the Washington strict foreclosure statute, it is apparent that SeeColor conveyed all rights in the Collateral, including the `809 patent, to Snypp without taking any further action, such as executing a pro forma assignment document. The Repossession Agreement is the assignment mechanism, transferring ownership when signed.

26

Repossession Agreement (Case 601, D.I. 20-2, Exh. 7) at 1; see also Exh. B, Nelson Decl. at Exh. 1 (W ASH . REV. CODE § 62A.9A-620 (2002)).
27

See Exh. B, Nelson Decl. at Exh. 1 (official comments to W ASH. REV. CODE § 62A.9A-620 (2007)). Note that the 2002 version of this statute in effect at the time of the execution of the Repossession Agreement is identical to the current version to which the official comments are attached.

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B. Snypp's Asignment to APAC (who later assigned to Screentone) was fully effective to vest APAC with legal title. Snypp sold, assigned, and transferred his complete ownership in the `809 patent to APAC by Agreement effective August 25, 2005 (the "Snypp/APAC Agreement"). 28 Specifically, Section 1 of the Agreement -- entitled, ASSIGNMENT -- achieves the complete transfer of `809 patent to APAC "[e]ffective upon the date hereof," including "the right to sue for past, present and future infringement" and "to collect and receive any damages, royalties, or settlements . . . ."29 Section 1 of the Snypp/APAC Agreement contemplates the execution of a pro forma assignment document (for attachment to the Agreement as Exhibit B). 30 Such an assignment document typically serves the purpose of record notice, or prima facie evidence, of the ownership change when filed with the USPTO. In this instance, the assignment document omits language concerning the right to seek past damages. But the principal Agreement contains the requisite stipulation. Even if the assignment was deficient with respect to past damages, the assignment was effective to transfer, at a minimum, any and all other rights associated with the patent, including the right to sue for infringement damages from the date of the assignment forward. Accordingly, APAC had every right to transfer the patent to Screentone, as it subsequently did. The Defendants make an issue of the fact that Snypp signed the Snypp/APAC Agreement on August 2, 2005, signed the pro forma assignment document on August 3, 2005, then granted a

28

Snypp/APAC Agreement, attached as Exh. 8 to the Declaration of Steven F. Meyer in Support of Plaintiff Heidelberg's Response to Defendants' Motion to Stay (Case 601, D.I. 20-2, Exh. 8) (hereinafter "Snypp/APAC Agreement") at 1.
29

Snypp/APAC Agreement (Case 601, D.I. 20-2, Exh. 8) at 1. Snypp/APAC Agreement (Case 601, D.I. 20-2, Exh. 8) at 1, and Exh. B thereto.

30

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non-exclusive license to Newscolor, LLC (a company that he co-owns) on August 22, 2005. But the Snypp/APAC Agreement was not formally consummated until August 25, 2005. 31 In sum, the assignment from SeeColor to Snypp was proper and effective. The assignment from Snypp to APAC (who later assigned its rights to Screentone) was likewise proper and effective. At a minimum, the Snypp/APAC Agreement was sufficient to transfer ownership of the `809 patent to APAC, including the right to seek present and future damages. Nevertheless, in an effort to maximize recoverable damages (and out of an abundance of caution), Screentone sought leave in the Texas Court to add Snypp and APAC as plaintiffs and expects that leave will be granted. II. Konica Minolta distorts the law of misnomer through its overly restrictive analysis. In the Texas Action, Screentone has sought to cure its misnomer by amending the Complaint to name KM Business instead of KM Printing. KM Business argues in its Response that the amendment should not be allowed to relate back to the original filing under the auspices of Rule 15 because Screentone "deliberately and purposefully identified and sued KM Printing [in the Texa s Action]." Screentone did not "intend" to sue KM Printing, per se. Rather, it intended to sue the entity liable for KM Printing's sales of infringing products, which, by virtue of a merger one month prior to Screentone's filing, turned out to be KM Business. To side with KM Business, however, is to elevate form over substance. A Southern District of Texas case with similar facts is instructive. In Infotronics Corp. v. Varian Assoc. Corp., 45 F.R.D. 91, 93-94 (S.D. Tex. 1968), the court granted plaintiff's request to change the name of the defendant in a patent infringement suit to the company into which the defendant was merged just prior to the institution of suit:

31

See Snypp/APAC Agreement (Case 601, D.I. 20-2, Exh. 8) at 1, 7.

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Plaintiff's claim has not been altered; plaintiff seeks merely to change the name of the defendant. The [parent corporation] received the same notice of the claim that it would have received had it been properly named. Finally, having expressly assumed all obligations of [the subsidiary], [the parent corporation] can hardly argue that it was unaware that the party sought to be sued was itself. On these facts, the court finds that since [the parent corporation] has suffered no prejudice from the misnomer in the complaint, plaintiff's leave to amend must be granted. Id. at 93-94 (emphasis added). The court noted that additional "circumstances bolster this conclusion." Id. at 94, n.6. For instance, prior to the subsidiary's answer date, the parent corporation filed a declaratory judgment action in a different jurisdiction seeking invalidity of the same patents. Id. 32 Moreover, the parent corporation did not deny that the "same persons who had been operating in the name of [the subsidiary] are performing the same functions at the same location in the name of [the parent]." Id. The same conclusion is warranted here where, among other things: (i) Screentone's Texas claim has not been altered; (ii) KM Business received the same notice of Screentone 's claim that it would have received had it been properly named; (iii) KM Business admits that it is the "successor in interest to KM Printing" 33 and has not alleged any operational changes; (iv) KM Business filed the instant declaratory judgment action seeking to invalidate the `809 patent, which suit was occasioned by Screentone 's Texas suit; and (v) KM Business has suffered no prejudice, nor has any prejudice been alleged. Lastly, KM Business improperly assumes that the only time a court may permit amendment of a pleading based on a misnomer is when the misnomer is deemed a "clerical or

32

Besides granting leave to amend the complaint, the Infotronics Corp. court denied the defendant's motion to transfer the case to the court where the declaratory judgment action was filed. Id. at 94.
33

Presumably, this includes KM Business's assumption of KM Printing's liability for infringements committed prior to the date of merger.

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typographical" error. Rule 15 is not so narrow. "Rule 15(c) was amended for the purpose of preventing unjust results when a plaintiff, confronted with a maze of closely related corporate or governmental entities, initially chooses the wrong one to sue, unless prejudice [to the added defendant] exists." Findley v. City of Baton Rouge, 570 So. 2d 1168, 1171-72 (La. 1990) (discussing purpose of federal rule and explaining that prejudice is the fundamental consideration). III. Transfer to the Texas Court is justified by the first-to-file rule and under the §1404(a) convenience factors . A. Transfer to Texas is proper under the first-to-file rule, as applied by this Court.

The so-called § 1404(a) "convenience factors" are not the only basis on which to transfer a case. To the contrary, Screentone relies on the first-to- file rule -- a rule of comity inherent in the 1404(a) analysis -- as its primary basis for transfer. 34 The various Texas defendants are now arguing in three different courts -- the Eastern District of Texas, the District of Delaware, and the Western District of Washington -- that their chosen forum is "clearly" the appropriate forum in which to proceed. 35 It is precisely this sort of "clarity" that the first-to-file rule was designed to address. Under 28 U.S.C. § 1404(a), the court may transfer a civil action "for the convenience of parties and witnesses, in the interest of justice . . . to any other district . . . where it might have been brought." 28 U.S.C. § 1404(a). But the federal courts have consistently emphasized that "a plaintiff's choice of venue should not be lightly disturbed." See, e.g., Bank of Am., N.A. v. Every
34

See generally Defendants' Opening Brief in Support of their Motion to Stay or Transfer Pending Resolution of Issues by the Eastern District of Texas, the First-Filed Court, or, in the Alternative, Motion to Dismiss (Case 601, D.I. 18; Case 602, D.I. 17) at 1-2, 5-9, quoting Dippold-Harmon Enters., Inc. v Lowe's Companies, Inc., No. 01532-GMS, 2001 U.S. Dist. LEXIS 18547 at *13-14 (D. Del. Nov. 13, 2001) ("[the] later-filed action should be stayed pending the resolution of an earlier filed action, or transferred to the court in which the earlier-filed action is pending").
35

See, e.g., Heidelberg's Response (Case 601, D.I. 19) at 10.

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Penny Counts, Inc., No. 07-159-GMS, 2007 U.S. Dist. LEXIS 67107, *4-6 (D. Del. Sept. 11, 2007) (quoting Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995)). When considering a motion to transfer, the court must determine "whether on balance the litigation would more conveniently proceed and the interest of justice be better served by transfer to a different forum." Id., quoting Jumara, 55 F.3d at 879. This inquiry requires "a multi- factor balancing test," embracing not only the statutory criteria of the interests of justice and the convenience of the parties and witnesses, but all relevant factors, including certain private and public interests. Id., quoting Jumara at 875. The factors are sometimes referred to collectively as the "convenience factors," or, in the Third Circuit, the "Jumara factors." These private interests include the plaintiff's choice of forum; the defendant's preference; whether the claim arose elsewhere; the convenience of the parties; the convenience of the expected witnesses; and the location of books and records, to the extent that they could not be produced in the alternative forum. Id. Among the relevant public interests are: "the enforceability of the judgment; practical considerations that could make the trial easy, expeditious, or inexpensive; the relative administrative difficulty in the two fora resulting from court congestion; the local interest in deciding local controversies at home; [and] the public policies of the fora." Id., quoting Jumara at 879-80. When the "interests of justice" weigh heavily in favor of transfer, an in-depth analysis of the private and public interest factors is not always necessary. The Bank of America case is a case in point. In that case, Every Penny Counts, Inc. ("EPC") filed a patent infringement suit against Bank of America Corporation ("BAC") and VISA in the Middle District of Florida. Bank of Am., N.A. v. Every Penny Counts, Inc., No. 07-159-GMS, 2007 U.S. Dist. LEXIS 67107, *1-2 (D. Del. Sept. 11, 2007). Less than two months later, Bank of America, N.A. ("BANA")

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filed a declaratory judgment action in the District of Delaware, seeking a declaration of invalidity and non- infringement . Id. at *1. The next day, EPC amended its complaint in the Florida Action to add BANA as a defendant. Id. at *2. Less than three weeks after that, BANA filed a motion in the Florida Action to transfer that case from the Middle District of Florida to the District of Delaware. EPC then moved to Dismiss, Stay, or Transfer the Delaware action. This Court agreed with EPC that BANA's second-filed declaratory judgment action was "an attempt to deprive EPC of its chosen forum in the Florida Action," and granted EPC's request for a transfer "based upon the rule of comity among federal courts, otherwise known as the `first-to-file rule.'" Id. at *2, 6. This Court emphasized that "[i]n patent cases, the Federal Circuit applies the general rule favoring the forum of the first- filed case, unless considerations of judicial and litigant economy, and the just and effective disposition of disputes, requires otherwise." Id. at *6-7, quoting Electronics for Imaging, Inc. v. Coyle, 394 F.3d 1341, 1347 (Fed. Cir. 2005) (internal quotations omitted). BANA defended its procedural games by arguing that the Florida Action lacked a "necessary party." Id. at *8. This Court rejected BANA's arguments: With the institution of a separate action in this court, BANA essentially asks this court to substitute its judgment for that of the first-filed Florida court on the scope of the Florida court's jurisdiction. It would be presumptuous for this court to make such a determination, particularly while BANA's motion to transfer is still pending in the Florida Action. Furthermore, given the similarities between the issues underlying the Florida Action and those underlying the present action, allowing both cases to proceed concurrently would be both inconvenient to the parties and an inefficient use of judicial resources. Id. at *7. Citing concerns about "the possibility of inconsistent rulings [and] duplication of judicial effort," the Court emphasized "the deference given to the first filed case," and explained that the first- filed court was the appropriate court to consider any questions about the propriety 15

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of joining additional parties. Id. at *8-9 (citations omitted). Finally, the Court agreed that the first-filed court should be the one to decide "whether an exception to the first- filed rule applies." Id. at *9 (citations omitted). B. The Section 1404(a) "convenience factors " favor transfer to Texas.

In light of the above, Screentone respectfully submits that this Court should defer to the Texas Court for any further analysis of the public and private interest factors, which have been briefed extensively in the Texas Action. Nevertheless, out of an abundance of caution, Screentone offers five factors in defense of Screentone's choice of a Texas forum. First, as reference above, Screentone chose the Eastern District of Texas and desires to litigate there. The plaintiff's choice of forum is "a paramount consideration in any determination of a transfer request," and "[u]nless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed." Young v. Armstrong World Indus., Inc., 601 F. Supp. 399, 401 (N.D. Tex. 1984) (citation omitted). Notably, "the patent venue statute is much more expansive than the general venue statute and gives a plaintiff broader discretion in where the plaintiff chooses to bring the suit." Network-1 Sec. Solutions, Inc. v. D-Link Corp., 433 F. Supp. 2d 795, 799 (E.D. Tex. 2006) (citations omitted). Second, Plaintiffs engage in infringing activity in the Eastern District of Texas -- a significant point that Plaintiffs do not dispute. 36 Third, Screentone's parent, APAC, maintains a constant presence in this Eastern District of Texas, having an office located in Frisco where it conducts a substantial amount of business. 37 Fourth, the Eastern District of Texas is the most

36

Heidelberg's Response (Case 601, D.I. 19) at 10 (admitting that it "conducts business in the State of Texas"); KM Business's Response (Case 602, D.I. 18) at 17 (same).
37

Exh. C, Declaration of Clayton J. Haynes, previously filed by Screentone in the Texas Action under the title "Declaration of Clayton J. Haynes in Support of Plaintiff's Sur Reply in Opposition to Defendants' Motions to Dismiss or Transfer" (hereinafter Haynes Decl.) at ¶ 2 . Note that Plaintiffs assert in their Motions that APAC is an

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centrally located forum of the three that are currently "in the running." Fifth, Screentone has undertaken extensive work to comply with the Texas Court's local rules regarding the preparation of its infringement disclosures involving multiple parties, each with multiple accused products. Given that the disclosures are due ten days after the Texas Court's Case Management Conference, such early effort has been necessary. On a final note, Plaintiffs argue that Delaware is the most appropriate forum because certain named defendants, including Acacia Research Corporation ("ARC"), are Delaware corporations. But ARC has absolutely nothing to do with this case, except that it is the ultimate parent of APAC. ARC does not own, nor has it ever owned, any interest in the `809 patent. The improper joinder of a Delaware corporation cannot be used to support a transfer to Delaware. CONCLUSION This Court should stay the instant proceedings, as requested by both Screentone and Heidelberg, or transfer the cases to the Eastern District of Texas for resolution. Transfer to the Texas Court is appropriate because: (1) Screentone had standing to file its Texas Action; (2) Screentone has taken remedial steps in the Texas Court to name the correct Konica Minolta entity; and (3) the first-to-file rule and the 1404(a) convenience factors favor transfer to Texas. Respectfully submitted,

Dated: December 20, 2007

/s/ Karen V. Sullivan Karen V. Sullivan (No. 3872) OBERLY, JENNINGS & RHODUNDA, P.A. 1220 Market Street, Suite 710 P.O. Box 2054 Wilmington, DE 19899 (302) 576-2000 ­ Telephone (302) 576-2004 ­ Facsimile [email protected]

indispensable party. Note also that Screentone has sought leave to add APAC as a party plaintiff to the Texas Action.

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Edward R. Nelson III Texas State Bar No. 00797142 David Skeels Texas State Bar No. 24041925 FRIEDMAN, SUDER & COOKE 604 East 4th Street, Suite 200 Fort Worth, TX 76102 (817) 334-0400 ­ Telephone (817) 334-0401 ­ Facsimile Attorneys for Defendants Screentone Systems Corporation, Acacia Patent Acquisition Corporation, Acacia Research Corporation and Paul S. Snypp

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