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Edward Kmett (CA Bar No. 204374) ekmett@fchs.com FITZPATRICK, CELLA, HARPER & SCINTO 650 Town Center Drive Suite 1600 Costa Mesa, CA 92626 Telephone: (714) 540-8700 Facsimile: (714) 540-9823 Anthony M. Zupcic (Pro Hac Vice) azupcic@fchs.com Robert H. Fischer (Pro Hac Vice) rfischer@fchs.com Douglas Sharrott (Pro Hac Vice) dsharrott@fchs.com FITZPATRICK, CELLA, HARPER & SCINTO 1290 Avenue of the Americas New York, New York 10112 Telephone: (212) 218-2100 Facsimile: (212) 218-2200 Kenneth R. Adamo (Pro Hac Vice) kradamo@kirkland.com KIRKLAND & ELLIS LLP 300 North LaSalle Chicago, IL 60654 Telephone: (312) 862-2000 Facsimile: (312) 579-2200 Attorneys For Plaintiff International Business Machines Corporation UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA ) ) ) ) ) ) ) ) ) ) )

INTERNATIONAL BUSINESS MACHINES CORPORATION, Plaintiff, v. RAMBUS INC, Defendant.

Case No. C 10-04017 JSW PLAINTIFF IBMS REPLY IN SUPPORT OF IBMS CROSS MOTION FOR SUMMARY JUDGMENT Date: December 2, 2011 Place & Time: Courtroom 11, 9:00 a.m. Judge: Hon. Jeffrey S. White

CV 10-04017 PLAINTIFF IBMS REPLY IN SUPPORT OF IBMS CROSS MOTION FOR SUMMARY JUDGMENT

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TABLE OF CONTENTS TABLE OF AUTHORITIES .......................................................................................................... ii SUMMARY OF ARGUMENT ..................................................................................................... iv PRELIMINARY STATEMENT..................................................................................................... 1 STATEMENT OF FACTS ............................................................................................................. 2 ARGUMENT .................................................................................................................................. 3 A. B. Rambus Wrongly Contends that the Boards Refusal is Essentially Immune from Review ............................................................................................. 3 Contrary to Rambus, The Boards Refusal Is Unsupported by Substantial Evidence ............................................................................................... 4 The Board Did Not Rely Upon the Enormous Effort To Decide IBMs Motions in Refusing To Hear Them................................................ 4 It Would Not Have Required Enormous Effort to Have Heard IBMs Motions ....................................................................................................... 4 The Level of Effort Needed To Decide IBMs Motions Is Irrelevant To Determining Whether to Hear Them .......................................................... 6 The Question of Whether or Not Rambuss 500 Claims Interfere Is Not at Issue Here................................................................................................ 8 Contrary to Rambus, The Board Refusal was an Abuse of Discretion................... 9 1. 2. 3. The Decision Failed to Follow the Controlling Federal Regulation. .................................................................................................. 9 The Decision Was Arbitrary. ...................................................................... 9 The Board Was Required to Consider the Harms..................................... 11

Contrary to Rambus, IBMs Proposed Order is Appropriate................................ 12

CONCLUSION ............................................................................................................................. 13

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TABLE OF AUTHORITIES

American Canoe Ass'n v. EPA, 30 F. Supp. 2d 908 (E.D. Va. 1998)................................................................................ 6, 9 Bunyard v. Hodel, 702 F. Supp. 820 (D. Nev. 1988) .................................................................................... 6, 9 Christ v. Blake, Interference 103,434 (B.P.A.I. 1995)................................................................................ 10 FCC v. Fox Television Stations, Inc., 556 U.S. 502 (2009) ........................................................................................................ 1, 9 FTC v. Atlantic Richfield Co., 567 F.2d 96 (D.C. Cir. 1977) .............................................................................................. 6 In re Stepan Co., 2011 WL 4582488 (Fed. Cir. Oct. 5, 2011) ........................................................................ 9 JD v. SH, Intf. No. 104,044 (B.P.A.I. 1999) ..................................................................................... 10 Louis v. Okada, 57 U.S.P.Q.2d 1430 (B.P.A.I. 2000)................................................................................. 10 Motor Vehicle Mfrs. Ass'n v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (1983) ........................................................................................................ 1, 11 Pauley v. Bethenergy Mines, Inc., 501 U.S. 680 (1991) ............................................................................................................ 7 Quad Environmental Techs. v. Union Sanitary District, 946 F.2d 870 (Fed. Cir. 1991)............................................................................................. 5 SEC v. Chenery Corp., 318 U.S. 80 (1943) .......................................................................................................... 4, 8 Rules & Statutes 35 U.S.C. 101 ........................................................................................................................... 1, 6 35 U.S.C. 135(a) ........................................................................................................ 1, 2, 6, 7, 11 35 U.S.C. 135(b)(1)...................................................................................................................... 3 35 U.S.C. 146 .............................................................................................................................. iv CV 10-04017 PLAINTIFF IBMS REPLY IN SUPPORT OF IBMS CROSS MOTION FOR SUMMARY JUDGMENT ii

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37 C.F.R. 1.11(b) ......................................................................................................................... 3 37 C.F.R. 1.642 .......................................................................................................................... 10 37 C.F.R. 41.1(b) ......................................................................................................................... 8 37 C.F.R. 41.202(a).............................................................................................................. 6, 7, 9 37 C.F.R. 41.203(d) ................................................................................ iv, 1, 2, 6, 7, 8, 9, 10, 11 5 U.S.C. 706 ................................................................................................................................ iv 5 U.S.C. 706(2)(A)....................................................................................................... 4, 9, 11, 12 5 U.S.C. 706(2)(E) ................................................................................................................... 4, 8 Fed. R. Civ. P. 1 .............................................................................................................................. 8 Fed. R. Evid. 102 ............................................................................................................................ 8

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SUMMARY OF ARGUMENT In the interference below between plaintiff, IBM Corporation (IBM), and defendant, Rambus Inc. (Rambus), IBM sought to file motions before the Board of Patent Appeals and Interferences (Board) to add to the interference all of Rambuss related patent applications and patents. But the Board refused even to hear those motions. After prevailing in the interference, IBM brought this action under 35 U.S.C. 146 to review that refusal. Defendant Rambus Inc.s Reply in Support of Motion for Summary Judgment and Opposition to Plaintiff IBMs Cross Motion for Summary Judgment (document no. 57; Reply) fails to provide any legitimate bases for upholding the Boards refusal. In particular: Rambuss Reply points to no substantial evidence that can support the Board refusing to permit IBM to bring its motions, because there is none. Rambuss Reply fails to explain why the Board, in refusing to permit IBM to bring its motions, ignored the governing federal regulation, 37 C.F.R. 41.203(d), which expressly and unconditionally permits IBM to suggest the addition of patents and applications to an interference. Rambuss Reply fails to explain how the Board, in refusing to permit IBM to bring its motions, did not cause harm to IBM, the public and the adjudicative process. As previously indicated, the propriety of the Boards action is determined by the Administrative Procedure Act (APA), 5 U.S.C. 706. IBMs Reply herein is submitted in further support of IBMs Cross Motion for Summary Judgment (Cross Motion), previously filed. As a matter of law, the action of the Board failed to comply with the requirements of the APA. The Board action is unsupported by substantial evidence, and in any event constituted an abuse of discretion.

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PRELIMINARY STATEMENT The Patent and Trademark Office (PTO) is authorized to issue a patent only if, inter alia, its claimed invention is new. 35 U.S.C. 101. When one or more other patents and applications claim the same invention as a pending application, the PTO must declare an interference, under the authority granted it pursuant to 35 U.S.C. 135(a), to determine if the applicant was the first to invent the interfering subject matter. Once the pending application is otherwise allowable, the interference procedure is the only way for the PTO to comply with the statutory requirement in 35 U.S.C. 101, that it issue a patent only to the first inventor. Rambuss Reply ignores that the discretion accorded the Board in conducting its actions, like any other federal administrative agency, is not unbounded, but under the APA and governing case law, must be rationally based and cogently explained.1 Here, the Boards action did not comply with these standards. Rambus in its Reply points to no substantial evidence that legitimately supports the Boards action. That is because there is none, and for that reason alone the Boards action does not comply with the APA as a matter of law. Rambuss Reply fails to explain how the Board, in refusing to permit IBM to bring its motions to add Rambuss related patents and applications to the interference, was acting in compliance with the governing federal regulation, 37 C.F.R. 41.203(d), which expressly and unconditionally permits IBM to suggest the addition of patents and applications to an interference. The Board ignored this regulation in refusing to hear IBMs motions, contrary to the APA and the governing case law. Rambuss repeated (and incorrect) assertions that IBM has other recourse are
1

An agency must have examined the relevant data and articulated a satisfactory explanation for its action, including a rational connection between the facts found and the choices made. See FCC v. Fox Television Stations, Inc., 556 U.S. 502, __, 129 S. Ct. 1800, 1810 (2009); Motor Vehicle Mfrs. Assn v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 43 (1983). The agency must cogently explain why it has exercised its discretion in a given manner. Motor Vehicle Mfrs., 463 U.S. at 48-49. CV 10-04017 PLAINTIFF IBMS REPLY IN SUPPORT OF IBMS CROSS MOTION FOR SUMMARY JUDGMENT 1

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beside the point IBM had an absolute right, under 37 C.F.R. 41.203(d), to be heard on whether to add Rambuss related patents and applications to the interference conducted below, pursuant to 35 U.S.C. 135(a). Rambuss Reply also fails to explain how the Boards decision takes into account the harms to IBM, the public and the adjudicative process. (See IBM Cross Motion at 19-22). Instead, Rambus asserts that the Board can ignore those harms. (Reply at 12). But that contention is contrary to the APA and the governing case law. An interference is not intended to be an abstract inquiry into who first invented certain subject matter, without practical consequence. In IBMs view, cancelling the claims of just the Rambus patent involved in the interference, U.S. Patent No. 6,502,161 (161 patent), while allowing Rambus to retain claims to the same patentable invention in perhaps sixteen other patents (with the potential for more), reduces the interference proceeding to just that. IBM sought to bring its motions in order that the Board would be fully apprised of the facts. The Board could then make reasoned, principled decisions on whether IBMs assertions were sound, and whether its proposed relief of adding the Rambus claims to the interference was appropriate. The Boards refusal even to hear IBM was arbitrary, was not supported by substantial evidence, and must be set aside under the APA as a matter of law. IBMs Cross Motion should therefore be granted. STATEMENT OF FACTS The facts are adequately set forth in the prior briefing, except as stated below. The additional facts sets forth herein are supported by t he Declaration of Andrew Metz (Metz Decl.), previously filed, and the Second Declaration of Jonathan Berschadsky (2d Berschadsky Decl.), filed herewith. In its Reply, Rambus strongly asserts that it was not seeking to preserve for itself the subject matter in interference by filing related applications, because it had filed fifteen (out of CV 10-04017 PLAINTIFF IBMS REPLY IN SUPPORT OF IBMS CROSS MOTION FOR SUMMARY JUDGMENT 2

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eighteen in total; see 2d Berschadsky Decl. 3, Exh. B) prior to IBM filing its formal April 13, 2006 Request for Declaration of Interference (see Rambuss Reply at 11). But Rambus knew that IBM sought an interference long before that April 13, 2006 date. IBMs original reissue application, filed on December 30, 2003, was accompanied by a Letter advising that its new claims corresponded to those in Rambuss 161 patent (2d Berschadsky Decl. 2 & Exh. A), which plainly signaled IBMs intention to provoke an interference. See 35 U.S.C. 135(b)(1). That reissue application was available to Rambus for inspection and copying. 37 C.F.R. 1.11(b). Further, the PTO sent Rambus a notice on November 30, 2004, advising that IBM had filed a reissue application for the purpose of provoking an interference with Rambuss 161 patent. (Metz. Decl. 41 & Exh. F). It is revealing to compare these dates with the dates when Rambus filed its related patent applications. Only two of Rambuss related patent applications were filed before the date IBM filed its reissue patent application. Rambus filed another prior to the April 6, 2004 Official Gazette publication. But following that publication, when Rambus clearly had reason to know of IBMs reissue filing and its intentions, Rambus filed twelve applications between May 18, 2004 and the April 13, 2006 date that Rambus cites. (See 2d Berschadsky Decl. 3 & Exh. B). Rambus therefore cannot legitimately profess that the vast bulk of its filings occurred prior to Rambus having reason to know of the impending interference. ARGUMENT A. Rambus Wrongly Contends that the Boards Refusal is Essentially Immune from Review Rambuss Reply wrongly contends that any discretionary act of the Board is essentially immune from judicial review. See for example Reply at 1-3, and specifically at 2 (the rules and the case law permit the APJs [Administrative Patent Judges] to exercise their discretion and manage interferences as they see fit)(emphasis added). To the contrary, the APA expressly requires CV 10-04017 PLAINTIFF IBMS REPLY IN SUPPORT OF IBMS CROSS MOTION FOR SUMMARY JUDGMENT 3

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that any action of the Board including those committed to its discretion must be set aside if arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. See 5 U.S.C. 706(2)(A). B. Contrary to Rambus, The Boards Refusal Is Unsupported by Substantial Evidence Under the APA, a court must set aside agency findings and conclusions which are unsupported by substantial evidence. 5 U.S.C. 706(2)(E). Rambuss Reply presents no legally relevant evidence upon which the Board could base its refusal to hear IBMs motions. The Board Did Not Rely Upon the Enormous Effort To Decide IBMs Motions in Refusing To Hear Them Contrary to Rambuss arguments, the Board said nothing about any enormous effort to hear IBMs motions, and did not provide any of the justifications Rambus now advances in its Reply at 5-6. Rather, the Board justified its refusal solely by recitation of conclusory generalities; e.g., [a]dding over five hundred claims to the interference would be unreasonable and unnecessary for a determination of priority of invention, (Metz Decl. 73 & Exh. L); adding so many extra claims really bogs down the proceeding (Hulse Decl. Exh. A, p. 32); see also Rambuss Reply at 4. It is improper to manufacture post hoc rationalizations to support an administrative decision. See SEC v. Chenery Corp., 318 U.S. 80, 88 (1943). Since the Board did not rely upon any enormous effort to decide IBMs motions as a reason to refuse to hear them, as Rambus now contends, that cannot provide any legally cognizable basis for the Boards refusals at issue here. It Would Not Have Required Enormous Effort to Have Heard IBMs Motions Rambus is factually wrong in asserting that it would require enormous effort for the Board to consider IBMs proposed motions. (Reply at 5). IBMs motions would be decided but once, and then the proceeding would proceed in the same manner, regardless of whether one, or 500, Rambus claims were designated to correspond to the count. (Metz Decl. 66). CV 10-04017 PLAINTIFF IBMS REPLY IN SUPPORT OF IBMS CROSS MOTION FOR SUMMARY JUDGMENT 4

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Further, basically zero effort was needed to consider 105 of the 500 claims (contained in three particular related Rambus patents), since during their prosecution the examiner had already determined that they were claiming the same invention as claimed in the 161 patent involved in the interference2 (or at least an obvious variation). (See docket. no. 33, Berschadsky Decl. 17). Contrary to Rambus (Reply at 8), the question of whether to give preclusive effect to a terminal disclaimer in litigation is not at issue here.3 Given that the administrative agency, the PTO, had already determined that these Rambus patents were claiming essentially the same invention as in the interference, and given that Rambus did not contest within the agency or the courts those determinations, the Board undoubtedly would not have sought to needlessly increase its workload by giving Rambus another shot at the decided question. The Board also could have reduced its workload in a number of ways, such as by placing the burden on Rambus of proving the separate patentability of its issued claims as IBM suggested in its proposed motion 1 as well as by suspending prosecution of the pending Rambus applications (then nine in number) until Rambus established the separate patentability of those claims as IBM suggested in its proposed motion 2. (Metz Decl. 48-49). Yet the Board did not follow
2

If a party, having already been awarded a patent, tries to patent an obvious variation of the same invention, the PTO can reject the later patent application based upon the doctrine of obviousnesstype double patenting. The PTO will nonetheless allow the later filed application to issue if a terminal disclaimer is filed. A terminal disclaimer insures that the later filed patent will expire on the same date as the earlier filed patent, and contains a promise not to separately assign the patents. In the case of Rambus U.S. Patent Nos. 7,000,062; 7,003,618; and 7,062,597, which were the subject of IBM proposed motions 3, 4 and 8, the examiner had rejected each of them for double patenting in view of Rambuss 161 patent, which was involved in the interference. Rambus filed terminal disclaimers in order to obtain those three patents. (Metz Decl. 44-45; dkt. no. 33, Berschadsky Decl. 17).
3

Quad Environmental Techs. v. Union Sanitary District, 946 F.2d 870 (Fed. Cir. 1991), did not concern whether the mere filing of a terminal disclaimer does not constitute an admission that the claims are patentably distinct. (See Reply at 8). Rather, it concerned whether a terminal disclaimer was an admission that later filed claims were obvious in view of the earlier-filed patent disclosure (not the claims). See 946 F.2d at 874. CV 10-04017 PLAINTIFF IBMS REPLY IN SUPPORT OF IBMS CROSS MOTION FOR SUMMARY JUDGMENT 5

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any of these suggestions, and in point of fact refused to consider any of these proposed motions. Instead, the Board focused solely on proposed motions 3-17, and their alleged harm to the Boards desire for a simple interference. The Level of Effort Needed To Decide IBMs Motions Is Irrelevant To Determining Whether to Hear Them Rambus is also wrong to refer to the alleged level of effort required to resolve IBMs motions (Reply at 5-6), because, whether large or small, that effort is legally irrelevant and cannot support a refusal to hear those motions. See FTC v. Atlantic Richfield Co., 567 F.2d 96, 100 (D.C. Cir. 1977)(While . . . mentioning the administrative burdens which would attend Atlantics requested relief, this basis for decision does little to guide us in determining whether Atlantic has been afforded its rights under the rules as promulgated and interpreted by the Commission). A purpose of the interference statute in question here, 35 U.S.C. 135(a), is to give the PTO a tool to cancel the claims of patents (and applications) directed to essentially the same invention as claimed in an earlier-invented patent application under examination. Once those interfering claims are cancelled, the PTO can move forward and issue the application as a patent. Without this statutory mechanism for cancelling claims, the PTO could not comply with the statutory requirement of 35 U.S.C. 101 that it issue a patent only to the first inventor. It is for that reason that the rules promulgated under this statute, specifically 37 C.F.R. 41.203(d), accord IBM a right to suggest claims to be added to the interference.4 Further, 37 C.F.R. 41.203(d) does not stand alone, but directs the suggesting party to 37 C.F.R. 41.202(a), entitled Suggesting an Interference, for a description of what information
4

The motions list practice cannot be construed as empowering the Board to cut off IBMs right under 41.203(d) to suggest the addition of patents and applications, since such a construction would be contrary to the governing administrative regulation and would constitute an abuse of discretion. See American Canoe Assn v. EPA, 30 F. Supp. 2d 908, 919 (E.D. Va. 1998)(discretion does not permit agencies to disregard their own regulations). Accord, Bunyard v. Hodel, 702 F. Supp. 820, 822 (D. Nev. 1988). CV 10-04017 PLAINTIFF IBMS REPLY IN SUPPORT OF IBMS CROSS MOTION FOR SUMMARY JUDGMENT 6

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must be provided in order to make an appropriate showing. This latter rule, 41.202(a), is a counterpart to the 41.203(d) rule that applies during the patent examination process. By its terms, 41.202(a) accords a patent applicant with the right to suggest to the patent examiner, during the examination of his or her patent application, an interference with another patent or application. In contrast to the position that Rambus asserts applies during interference proceedings, the examiner when presented with a suggestion under 41.202(a) must examine that suggestion on the merits. There is no statutory, regulatory, or PTO informal rule or procedure that would allow the examiner to refuse to evaluate the suggestion because it would bog down the examination procedure, make it unmanageable, or complicate things far too much. The fact is that neither 41.203(d) nor 41.202(a) state that the Board need not consider the suggestion just because one party has over 500 claims. Rather, the regulations are plainly directed to providing the Board with sufficient information to determine fully the number of claims that interfere, so as to afford the Board an opportunity to completely resolve the matter. See e.g., 41.202(a)(2)(Identify all claims that applicant believe interfere . . .)(emphasis added). Rambuss assertion, that the alleged level of effort needed to decide IBMs motions is evidence to support a refusal to decide them at all, would frustrate the Congressional purpose of facilitating the grant to IBM of its patent. It therefore is not correct. See Pauley v. Bethenergy Mines, Inc., 501 U.S. 680, 700 (1991). Congresss intent in enacting 35 U.S.C. 135(a) was to cancel invalid claims, not to authorize theoretical excursions into who in the abstract invented some subject matter devoid of any practical effect, as a result of ignoring multiple claims to the same invention in other related patents. See id. (Any final decision, if adverse to the claim of an applicant, shall constitute the final refusal by the Patent and Trademark Office of the claims involved . . . . A final judgment adverse to a patentee . . . shall constitute cancellation of the claims involved in the patent)(emphasis added). CV 10-04017 PLAINTIFF IBMS REPLY IN SUPPORT OF IBMS CROSS MOTION FOR SUMMARY JUDGMENT 7

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5

There is no legal basis for considering the level of effort required to resolve IBMs motions, as a justification for the Boards refusal to decide them at all. 5 The Question of Whether or Not Rambuss 500 Claims Interfere Is Not at Issue Here Lastly, Rambus argues that the claims of its related patents do not really interfere with the IBM application, so the Board was right not to hear IBMs motions, which sought to show that they did interfere. (Reply at 8). However, the merits of the motions were in no way part of the Boards reasoning in refusing to hear them, and therefore are not a basis for supporting the refusal.6. SEC v. Chenery Corp., 318 U.S. 80, 88 (1943). In point of fact, the APJ implicitly assumed that IBMs position had merit that the claims did interfere (Adding over five hundred claims to the interference would be unreasonable and unnecessary for a determination of priority of invention; Metz Decl. 73 & Exh. L) and still refused arbitrarily to hear them. There was no substantial evidence to support the Boards refusal below. As a matter of law, the Boards refusal must be set aside under the APA, 5 U.S.C. 706(2)(E).

Asserting that even briefing the 17 IBM motions would have been an enormous task, Rambus again relies on 37 C.F.R. 41.1(b)(The provisions of Part 41 shall be construed to secure the just, speedy and inexpensive resolution of every proceeding) as support for the Boards refusal to hear them. (Reply at 5-6). But as pointed out in IBMs Cross Motion at 16, this rule of construction is not an independent source of Board discretion; it has no substantive force, any more than the comparable language in F.R.Civ.P. 1 and F.R.Evid. 102. It does not trump the clear language of 37 C.F.R. 41.203(d).
6

To support the Boards refusal to hear IBMs motions, the APJ did note, as Rambus does here (Reply at 6), that examination of some of the Rambus applications apparently was not complete. (Metz Decl. Exh. L). But that reasoning plainly failed to apply to the six related Rambus patents that had already issued. (Id. 79). It also did not apply to the Boards refusal to hear IBMs proposed motion 2, which sought the Board to order the suspension of prosecution in each related Rambus patent application, and which was intended to address the precise point that the APJ raised. (Id. 80). Indeed, the APJs disregard of that proposed motion resulting in an additional ten Rambus related applications issuing during the course of the interference. (See 2d Berschadsky Decl. Exh. B). CV 10-04017 PLAINTIFF IBMS REPLY IN SUPPORT OF IBMS CROSS MOTION FOR SUMMARY JUDGMENT 8

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C.

Contrary to Rambus, The Board Refusal was an Abuse of Discretion 1. The Decision Failed to Follow the Controlling Federal Regulation.

Rambus meritlessly implies that because the controlling federal regulation, 37 C.F.R. 41.203(d), recites that a party may suggest the addition of patents and applications to an interference, the Board is empowered to refuse to hear the partys suggestion in the manner the rule prescribes. (Reply at 9-10). The language at issue clearly was intended to permit the party here IBM to make the suggestion, not to accord the Board the right to refuse to hear the suggestion if it doesnt feel like it. Nor can the rule be read to permit short-cutting the mandated regulatory process by ignoring the showings called for by 37 C.F.R. 41.202(a), which the drafters of the regulation deemed were necessary to properly determine the suggestion. Rambuss argument that the APJ properly refused to permit IBM to bring its motions is rebutted by the plain text of the PTOs own regulation. See In re Stepan Co., 2011 WL 4582488, at *4 (Fed. Cir. Oct. 5, 2011). An agency action cannot be in disregard of its own rules. FCC v. Fox Television Stations, Inc., 556 U.S. at 502, __, 129 S. Ct. 1800, 1811 (2009)(agency cannot simply disregard rules that are on its books); American Canoe Assn v. EPA, 30 F. Supp. 2d 908, 919 (E.D. Va. 1998); see also Bunyard v. Hodel, 702 F. Supp. 820, 822 (D. Nev. 1988). Yet this is exactly what the Board did in this instance. The Boards action was an abuse of discretion and as a matter of law must be set aside under the APA, 5 U.S.C. 706(2)(A). 2. The Decision Was Arbitrary.

Contrary to Rambus (Reply at 11), the fact that the initial APJ knew of the relationship among the multiple Rambus applications and patents, but did nothing about it, further demonstrates the arbitrary nature of the APJs refusal. Not only did the APJ know the relationship among the Rambus filings, but she also knew that the PTO had already determined that a number of them CV 10-04017 PLAINTIFF IBMS REPLY IN SUPPORT OF IBMS CROSS MOTION FOR SUMMARY JUDGMENT 9

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claimed the same patentable subject matter as was already at issue in the interference. (Metz Decl. 48 & Exh. K at 2). Her failure to add these applications to the interference was inexplicable and unsupportable. The Board opinion, not written for publication which Rambus now relies heavily upon (Reply at 9, 10, 12), Christ v. Blake, Interference 103,434 (B.P.A.I. 1995), has nothing to do with the present case. In contrast to the Board refusal at issue here, the Board in Christ did consider on the merits the suggestion made under 37 C.F.R. 1.642 (the predecessor to 37 C.F.R. 41.203(d) involved here) to add a patent to an interference. The same was the case with the factually different Board opinion (see IBM Cross Motion at 22) of Louis v. Okada, 57 U.S.P.Q.2d 1430 (B.P.A.I. 2000), which Rambus continues to cite. Rambus provides no precedent supporting a board refusal even to hear a suggestion expressly authorized by 37 C.F.R. 41.203(d), as occurred here. Undoubtedly there is none. Nowhere does Rambus explain why, in some instances, the PTO permits interferences involving multiple patents,7 multiple applications and hundreds of claims (see Cross Motion at 8), but in this instance, would not even hear IBMs motions explaining why it was appropriate here. Nowhere does Rambus explain how it is that one APJ avers that the number of claims was never a basis for declining to add them (Metz Decl. 68), while the APJs involved in this interference plainly acted otherwise.

As the Board advised in the precedential opinion of JD v. SH, Intf. No. 104,044 (B.P.A.I. 1999)(2d Berschadsky Decl. 4 & Exh. C at 8), where additional patents claiming the same patentable invention as in interference stand in the way of issuance of an application as is the case with the IBM reissue application here their addition may well be justified. CV 10-04017 PLAINTIFF IBMS REPLY IN SUPPORT OF IBMS CROSS MOTION FOR SUMMARY JUDGMENT 10

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8

The facts of this interference demonstrate the arbitrary nature of the Boards refusal, which as a matter of law must be set aside8 under the APA, 5 U.S.C. 706(2)(A). 3. The Board Was Required to Consider the Harms.

Rambus remarkably asserts that the Board need not consider the harm to each of IBM, the public and the adjudicative process. (Reply at 12). Nothing could be further from the truth. An agency action is arbitrary and capricious if the agency, inter alia, fails to consider any important aspect of the problem. See Motor Vehicle Manufacturers Assn v. State Farm Mutual Automobile Insurance Co., 463 U.S. 27, 43 (1983). Here, as IBM described in its Cross Motion at 19-22, the Board failed to consider any of them. Rambus wrongly asserts that IBM has numerous avenues for alternative relief. (Reply at 12-13). Under 35 U.S.C. 135(a) and 37 C.F.R. 41.203(d), IBM has the right to make suggestions to add patents and applications to the interference, and the fact that there might be other ways to accomplish the same end which as a practical matter IBM strongly disputes does not permit an administrative agency to ignore the statutory and regulatory rights accorded IBM. And as was pointed out in IBMs Cross Motion at 19-20 and 22, Rambuss alternative relief consists of initiating a years-long process having no clear ending a matter which Rambus does not dispute. Rambus brazenly claims it would be burdened with the expense of preparing oppositions to IBMs motions, should they be heard, so, as a result, the Board was correct not to hear them. (Reply at 13). Rambus has no standing to rely upon its own alleged hardship, as any burden

21 22 23 24

Rambus calls absurd (Reply at 11) the notion that it filed its applications in large measure to preserve for itself the subject matter in interference, pointing to the fact that it has filed fifteen applications by the time IBM filed its formal April 13, 2006 Request for Declaration of Interference. (See Metz Decl. 42). Again, as noted earlier (pages 2-3 above), IBMs intention to provoke an interference was public knowledge well before that date, and it is evident based upon the pattern of filings that Rambus had reacted to IBMs reissue application by filing an avalanche of related patent applications. CV 10-04017 PLAINTIFF IBMS REPLY IN SUPPORT OF IBMS CROSS MOTION FOR SUMMARY JUDGMENT 11

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and expense to Rambus was occasioned entirely by its own actions. There is no substantive prejudice to Rambus if it elects to respond to such motions, and whether it does so or not is a matter entirely within its own discretion. Rambus also dismisses the harm to the public and to the adjudicative process resulting from the Board refusing to hear IBMs motions, because Rambus maintains that the related patents and applications do not interfere and therefore are not properly the subject of an interference action. (Reply at 13-14). IBM strongly disagrees. Accordingly, if the question remains unresolved, then the harm to the public and the process will continue, due to the uncertainty as to whether or not Rambuss related patents claim the same subject matter as in the interference as the PTO has already determined for five of them (three before the interference was declared; see Metz Decl. 44-45, 52) and the perception, which Rambus has created, that the system can be gamed. The refusal of the Board to hear IBMs motions failed to consider all important aspects of the problem, and therefore as a matter of law constituted an abuse of discretion under the APA, 5 U.S.C. 706(2)(A). D. Contrary to Rambus, IBMs Proposed Order is Appropriate In a footnote (Reply at 9 n.5), Rambus incorrectly contends that the relief accorded IBM should not extend to the two related patents and related patent application that Rambus filed during the interference, because those patents and the application were not the subject of the APJs decision. In fact, those patents and the application were the subject of the APJs decision. IBMs proposed motion 2 requested that the Board order suspension of prosecution of all patent applications claiming benefit of the 161 Patent filing date, but the Board denied IBM leave to file that motion.

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(Metz Decl. 49, 51 & Exh. L). Therefore Rambus was able to file three more applications 9, and have patents issue on two of them, because of the Boards failure to grant, or even hear, proposed motion 2. As a result, it is appropriate that the relief granted IBM extend to Rambuss two related patents and related patent application that Rambus filed during the interference. CONCLUSION The decision of the Board declining to hear IBMs motions was, as a matter of law, not based upon substantial evidence, and was an abuse of discretion. IBMs Cross Motion for Summary Judgment should be granted in all respects, in accordance with IBMs [Proposed] Order.

Dated: October 21, 2011 By:

Respectfully submitted, s/ Edward A. Kmett Edward A. Kmett (CA Bar No. 204374) FITZPATRICK, CELLA, HARPER & SCINTO 650 Town Center Drive Suite 1600 Costa Mesa, CA 92626 Telephone: (714) 540-8700 Facsimile: (714) 540-9823

The Rambus patents at issue are U.S. Patent Nos. 7,526,597 and 7,523,248. The pending Rambus application is Application No. 12/411,003. The two patents issued only after Rambus overcame double patenting rejections, based upon the Rambus 161 patent in interference, by filing terminal disclaimers. All these patents claim priority from the 161 patent. (Metz Decl. 52). CV 10-04017 PLAINTIFF IBMS REPLY IN SUPPORT OF IBMS CROSS MOTION FOR SUMMARY JUDGMENT 13

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Anthony M. Zupcic (Pro Hac Vice) Robert H. Fischer (Pro Hac Vice) Douglas Sharrott (Pro Hac Vice) FITZPATRICK, CELLA, HARPER & SCINTO 1290 Avenue of the Americas New York, New York 10104-3800 Telephone: (212) 218-2100 Facsimile: (212) 218-2200 Kenneth R. Adamo (Pro Hac Vice) KIRKLAND& ELLIS LLP 300 North LaSalle Chicago, IL 60654 Telephone: (312) 862-2000 Facsimile: (312) 579-2200 Attorneys for Plaintiff International Business Machines Corporation

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 below:

CERTIFICATE OF SERVICE I hereby certify, under penalty of perjury, that on October 21, 2011 a true and correct copy of the foregoing was filed electronically via the Courts ECF system, pursuant to Civil L.R. 5-4, and served electronically, pursuant to Civil L.R. 5-5(b) and this Courts General Order No. 45(IX), on all counsel of record, including: Counsel for Defendant, Rambus Inc. Tina E. Hulse tina.hulse@finnegan.com A courtesy copy of the foregoing was also served by e-mail on counsel for Defendant listed Barbara Clarke McCurdy barbara.mccurdy@finnegan.com Naveen Modi naveen.modi@finnegan.com Date: October 21, 2011 /s/_Edward A. Kmett__________

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