Case 1:15-cv-00842-RGA Document 560 Filed 04/16/21 Page 1 of 11 PageID #: 34778
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`IN RE CHANBOND, LLC, PATENT
`LITIGATION
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`Civil Action No. 15-842-RGA
`CONSOLIDATED
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`MEMORANDUM OPINION
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`Stephen B. Brauerman, Ronald P. Golden III, BAYARD, P.A., Wilmington, DE; Robert A.
`Whitman, Mark S. Raskin, John F. Petrsoric, Michael DeVincenzo, Andrea Pacelli, KING &
`WOOD MALLESONS LLP, New York, NY, attorneys for Plaintiff.
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`Jack B. Blumenfeld, Jennifer Ying, MORRIS, NICHOLS, ARSHT & TUNNELL LLP,
`Wilmington, DE; Thomas M. Melsheimer, WINSTON & STRAWN LLP, Dallas, TX; Michael L.
`Brody, WINSTON & STRAWN LLP, Chicago, IL; David P. Enzminger, Nimalka
`Wickramasekera, WINSTON & STRAWN LLP, Los Angeles, CA; Krishnan Padmanabhan,
`WINSTON & STRAWN LLP, New York, NY, attorneys for Defendants.
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`April 16, 2021
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`Case 1:15-cv-00842-RGA Document 560 Filed 04/16/21 Page 2 of 11 PageID #: 34779
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`/s/ Richard G. Andrews
`ANDREWS, U.S. DISTRICT JUDGE:
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`Before the Court is Defendants’ Motion to Reopen Fact Discovery for Limited
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`Investigation of Standing Issues. (D.I. 524). I have reviewed the parties’ briefing. (D.I. 525, 529,
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`535, 556).
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`I.
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`BACKGROUND
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`In September 2015, Plaintiff ChanBond filed thirteen suits against numerous defendants
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`(collectively, “Defendants”) asserting infringement of U.S. Patent Nos. 7,941,822 (“the ʼ822
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`Patent”), 8,341,679 (“the ʼ679 Patent”), and 8,984,565 (“the ʼ565 Patent”). (See, e.g., D.I. 1
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`(complaint against Atlantic Broadband Group, LLC)). The actions were consolidated for all pre-
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`trial purposes. (D.I. 107).
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`Fact discovery closed on July 6, 2018. (D.I. 271). On July 2, 2020, I held a pretrial
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`conference and issued a Pretrial Order. (D.I. 507). The first trial, between Plaintiff and
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`Defendant Cox Communications, is scheduled for May 17, 2021. (D.I. 527). Defendants now
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`move to reopen fact discovery for a limited investigation into standing issues.1 (D.I. 524).
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`II.
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`LEGAL STANDARD
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`A federal court has broad discretion to manage discovery. See Sempier v. Johnson &
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`Higgins, 45 F.3d 724, 734 (3d. Cir. 1995). Under Federal Rule of Civil Procedure 16, a
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`scheduling order, including one for discovery, may only be modified “for good cause and with
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`the judge’s consent.” Fed. R. Civ. P. 16(b)(4). To establish good cause in a motion to reopen
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`discovery, the movant “must show that a more diligent pursuit of discovery was impossible.”
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`Dow Chem. Can. Inc. v. HRD Corp., 287 F.R.D. 268, 270 (D. Del. 2012), aff’d, 587 F. App’x
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`741, 744-45 (3d Cir. 2014). When a final pretrial order has been issued, the “court may modify
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`1 As the briefing has proceeded, Defendants have raised additional issues.
`2
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`Case 1:15-cv-00842-RGA Document 560 Filed 04/16/21 Page 3 of 11 PageID #: 34780
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`the order. . . only to prevent manifest injustice.” Fed. R. Civ. P. 16(e); see also Xcoal Energy &
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`Res. v. Bluestone Energy Sales Corp., 2020 WL 5369109, at *6 n.9 (D. Del. Sept. 8, 2020).
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`III. ANALYSIS
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`Defendants’ motion to reopen discovery centers on whether ChanBond has standing in
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`this suit. This argument is premised on a dispute between ChanBond’s former owner, Deirdre
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`Leane, ChanBond, and Chanbond’s present owner, UnifiedOnline.
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`A. Dispute over ChanBond’s Ownership
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`At the time of filing suit, ChanBond was owned by Deirdre Leane. In October 2015, Ms.
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`Leane entered into an Interest Sales Agreement (“ISA”) with UnifiedOnline. (D.I. 525, Exh. D at
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`89 of 355). The ISA provided, “Seller [Ms. Leane] owns 100% of the limited liability company
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`membership interests” of ChanBond, and, “Purchaser [UnifiedOnline] wishes to acquire Seller’s
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`entire interest in ChanBond, following which Purchaser will become the sole interest holder of
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`ChanBond.” (Id.). Under this agreement, UnifiedOnline acquired Ms. Leane’s entire interest in
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`ChanBond in exchange for five million dollars and 44,700,000 shares of UnifiedOnline. (Id. at
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`89, 92 of 355).
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`Section 8.3 of the ISA sets forth certain limitations on assignment:
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`Limitations on Assignment. Except as expressly permitted in this Section, none of
`Purchaser or ChanBond may grant or assign any rights or delegate any duties under this
`agreement to any Third Party (including by way of a ‘change in control’) or may sell,
`transfer, or spin-off any of the interests in ChanBond or any of its material assets without
`the prior written consent of Seller.
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`(D.I. 525-1, Exh. D at 99 of 355). At her deposition on April 24, 2018, Ms. Leane testified that
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`the ISA transferred “100 percent [of ChanBond’s] membership interest,” including “all rights
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`and obligations,” to UnifiedOnline. (D.I. 525-1, Exh. B at 19, 29 of 355).
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`On September 2, 2020, Defendants received an email from Ms. Leane’s counsel,
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`informing them of a dispute between Ms. Leane and ChanBond. (D.I. 525-1, Exh. E at 125 of
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`355). The email stated, “As we read Section 8.3 of the ISA, Ms. Leane’s written consent is
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`required given that a license is a transfer of an interest in the patents-in-suit, which in turn are
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`material assets of ChanBond.” (Id.). The email warned, “[P]lease take notice that to the extent
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`that you enter into any settlement with ChanBond that includes a transfer of any interest in the
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`patents-in-suit, without Ms. Leane’s written approval of the settlement terms, you do so at your
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`own risk.” (Id.). This letter spurred Defendants to file the instant motion.
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`Ms. Leane’s dispute with ChanBond and UnifiedOnline is currently playing out in two
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`other courts. Ms. Leane and her consulting company IPNav are suing ChanBond and
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`UnifiedOnline in the Northern District of Texas. (D.I. 536-1, Exh. N at 2 of 111). Ms. Leane also
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`sued Mishcon de Reya LLP, Mishcon de Reya New York LLP, King & Wood Mallesons LLP,
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`Robert Whitman and Mark Raskin (Plaintiff’s attorneys in this litigation) in the Supreme Court
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`of New York. (Id., Exh. Q at 38 of 111).
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`B. Defendants’ Motion to Reopen Discovery for Limited Investigation of
`Standing Issues
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`Defendants argue that good cause exists to reopen discovery for the limited purpose of
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`investigating standing. (D.I. 525 at 5). Defendants contend that the September 2020 email from
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`Ms. Leane’s counsel raises questions about whether Plaintiff has standing to proceed to trial.
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`(Id.). Defendants argue that they could not have reasonably obtained discovery on the issues
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`raised in the September 2020 email, as the email came after the close of fact discovery and the
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`email reflects a change in Ms. Leane’s understanding of her rights under the ISA. (Id.).
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`Defendants also assert that they acted diligently during discovery and after receipt of the
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`September 2020 email. (Id. at 6). Defendants state that they sought discovery on ownership of
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`the asserted patents from ChanBond, as well as from third parties UnifiedOnline and Ms. Leane.
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`(Id.). Further, Defendants argue that upon receipt of the September 2020 email, they promptly
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`reached out to ChanBond to discuss their concerns, but such concerns were dismissed. (Id. at 7).
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`The essence of Defendants’ argument is that good cause exists to reopen discovery as they
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`diligently sought information pertaining to ownership of the patents during discovery and that
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`they now seek new information which they could not have sought during discovery. (Id. at 6-8).
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`Lastly, Defendants argue that reopening discovery will not prejudice Plaintiff as it will be a
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`limited and inexpensive delay that will help Plaintiff determine its own rights in the dispute. (Id.
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`at 10-11).
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`Plaintiff argues that Defendants have not shown good cause to reopen discovery because
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`the information Defendants now seek could and should have been sought during discovery. (D.I.
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`529 at 8-9). Plaintiff contends that it produced the ISA to Defendants almost four years ago and
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`that Defendants had a full and fair opportunity to seek discovery concerning the agreement. (Id.
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`at 8). Plaintiff states that Defendants sought discovery regarding the ISA and deposed Ms.
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`Leane, UnifiedOnline, ChanBond, and William Carter (ChanBond’s manager and
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`UnifiedOnline’s CEO) regarding the ISA. (Id. at 8-9).
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`Plaintiff further argues that even if Defendants could show good cause, their motion
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`should still be denied as the discovery sought is not relevant or likely to lead to the discovery of
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`relevant information. (Id. at 11). Plaintiff contends that there is no unambiguous language in the
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`ISA’s Limitations on Assignment Section; thus, the extrinsic evidence that Defendants seek in
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`discovery is irrelevant. (Id.). Plaintiff asserts that the plain and unambiguous meaning of Section
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`8.3 is that Ms. Leane’s consent is not necessary for a license to one of the patents-in-suit because
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`such a license is not a transfer or sale of a material asset. (Id. at 13). Lastly, Plaintiff argues that
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`even if Ms. Leane had the right to veto ChanBond’s grant of a license, that still would not affect
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`ChanBond’s standing as such a veto does not deprive the patent owner of standing to sue in its
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`own name. (Id. at 14-15).
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`“Standing must be present at the time the suit is brought.” Simcom Sys., Ltd. v. Agilent
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`Techs., Inc., 427 F.3d 971, 975-76 (Fed. Cir. 2005). A patent is “a bundle of rights which may be
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`divided and assigned, or retained in whole or part.” Vaupel Textilmaschinen KG v. Meccanica
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`Euro Italia SPA, 944 F.2d 870, 875 (Fed. Cir. 1991). When “a sufficiently large portion of this
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`bundle of rights is held by one individual, we refer to that individual as the owner of the patent
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`and that individual is permitted to sue for infringement in his own name.” Alfred E. Mann
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`Found. For Sci. Research v. Cochlear Corp., 604 F.3d 1354, 1360 (Fed. Cir. 2010).
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`ChanBond acquired the patents-in-suit in a Patent Purchase Agreement on April 9, 2015.
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`(D.I. 525-1, Exh. C at 34 of 355). This agreement dictated, “Seller [CBV, Inc.] shall sell, assign,
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`transfer and convey to Purchaser [ChanBond] its right, title and interest in and to the Assigned
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`Patent Rights.” (Id. at 37 of 355). Thus, as of April 2015, ChanBond owned the “right, title and
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`interest in and to” the patents-in-suit. (Id. at 34, 37-38 of 355). ChanBond filed suit in September
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`2015. (See, e.g., D.I. 1 (complaint against Atlantic Broadband Group)). It is clear, and
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`undisputed, that ChanBond owned the asserted patents at the time that it filed suit.
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`As ChanBond owned the “right, title and interest in and to” the patents-in-suit at the time
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`of filing, and still owns such rights, it has standing to bring this suit. It holds “a sufficiently large
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`portion of this bundle of rights” and is thus “permitted to sue for infringement in its own name.”
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`Alfred E. Mann Found., 604 F.3d at 1360. Disputes over ChanBond’s ownership or whether Ms.
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`Leane’s consent is required to license the patents does not impact ChanBond’s standing to sue in
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`its own name. Regardless of the outcome of these suits, ChanBond will be the entity that wins or
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`loses. Any dispute about ChanBond’s ownership is outside the scope of the issues in these cases
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`and will not impact the overall outcome. As ChanBond’s standing is not impacted by Ms.
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`Leane’s allegations regarding ChanBond’s ownership, Defendants have not shown good cause to
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`reopen discovery.
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`Even if the ISA were determined to require Ms. Leane’s permission to license the
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`asserted patents2, it would not prevent ChanBond from having standing to sue for infringement
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`in its own name. ChanBond would still hold “a sufficiently large portion of this bundle of
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`rights.” Alfred E. Mann Found., 604 F.3d at 1360.
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`Via the September 2, 2020 email, Ms. Leane is now asserting that her written consent is
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`required to grant a license to the patents-in-suit. (D.I. 525-1, Exh. E at 125 of 355). A consent
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`requirement would be a licensing veto, analogous to a “sub-licensing veto,” which the Federal
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`Circuit has found does not prevent standing. Vaupel Textilmaschinen, 944 F.2d at 874-75. In that
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`case, the patentee entered into an agreement that gave plaintiffs the exclusive right to make, sell,
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`and use the patented product in the United States. Id. at 875. The agreement provided that the
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`plaintiffs could only grant sublicenses to others with the prior written consent of the patentee. Id.
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`at 874. The Federal Circuit concluded that this “sub-licensing veto” was a “minor derogation
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`from the grant of [patent] rights.” Id. at 874-75. The Federal Circuit determined that such a veto
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`“did not substantially interfere with the full use by [plaintiffs] of the exclusive rights under the
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`patent” and held that the plaintiffs had standing to sue for infringement. Id. at 875-76.
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`2 In Ms. Leane and IPNav’s suit against ChanBond and UnifiedOnline in the Northern District of Texas, the court
`denied a Temporary Restraining Order, concluding that the plaintiffs had not demonstrated a substantial likelihood
`of success on the merits. Leane v. UnifiedOnline, Inc., 2020 WL 6683106, at *1 (N.D. Tex. Nov. 12, 2020). The
`court determined that the ISA’s “anti-assignment provision restricts Defendants’ ability to transfer ownership of the
`Patents.” Id. at *3. The court stated that based on its “interpretation of the anti-assignment provision, Defendants
`[UnifiedOnline and ChanBond] have not breached the ISA by assigning away interests in the recovery of the
`Delaware Suits and will not breach it simply by settling the lawsuits.” Id. at *5.
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`Under this precedent, even if Ms. Leane’s written consent was required to grant a license,
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`ChanBond still has standing. Ms. Leane’s purported licensing veto is at most a “minor
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`derogation from the grant of rights” that does not “substantially interfere with the full use by
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`[ChanBond] of the exclusive rights under the patent.” Id. at 875.
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`For these reasons, Defendants’ motion to reopen discovery to investigate standing issues
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`is denied.
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`C. Defendants’ Other Arguments to Reopen Discovery
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`In their reply brief, Defendants expand their request. They seek to reopen discovery to
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`obtain “improperly withheld documents from ChanBond, Leane, and UOL, as they impact issues
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`including standing, and a license to a vendor of accused equipment (Technicolor).” (D.I. 535 at
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`2). Defendants argue, based on Ms. Leane’s allegations in her pending suits, that Plaintiff
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`withheld documents in the litigation before me and they are entitled to obtain those documents.
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`(Id. at 5-7). Specifically, Defendants assert that the Advisory Services Agreement (“ASA”)
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`between ChanBond and IPNav, and other additional documents pertaining to Ms. Leane’s rights
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`in the asserted patents, were withheld. (Id. at 2-5). Defendants contend that they have shown
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`good cause to reopen discovery as they acted with diligence and could not reasonably have been
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`expected to obtain the documents as “ChanBond purposely withheld” them. (Id. at 6).
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`With leave from the Court (D.I. 555), Plaintiff filed a sur-reply. (D.I. 556). Plaintiff
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`argues that none of Defendants’ new arguments support its motion. (Id. at 2). Specifically,
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`Plaintiff contends that Defendants now are basing their request to reopen discovery on the ASA
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`and allegations that Plaintiff improperly withheld it, which differs from their arguments in their
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`opening brief. (Id.). Plaintiff also argues that Defendants were aware of the ASA and did not
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`show reasonable diligence in trying to secure its production. (Id.). Further, Plaintiff asserts that
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`Defendants’ request for discovery to investigate Technicolor’s hypothetical license to
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`Technicolor is irrelevant as the ASA was a consulting agreement that did not give Ms. Leane the
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`power to grant licenses. (Id. at 3). Lastly, Plaintiff contends that Defendants had the opportunity
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`to secure production of other documents, particularly in relationship to UnifiedOnline and its
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`agreements with third parties, but they did not do so. (Id.).
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`I agree with Plaintiff that Defendants had the opportunity during discovery to seek the
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`documents that they now want to get. At Ms. Leane’s deposition, Defendants questioned her
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`about IPNav’s relationship with ChanBond. (D.I. 529-3, Exh. C at 24-25 of 42). Ms. Leane
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`confirmed that “there is an advisory services agreement” between ChanBond and IPNav. (Id. at
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`25 of 42). After Ms. Leane confirmed this, Defendants’ counsel told Plaintiff’s counsel that he
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`did not think the agreement had been produced. (Id.). Plaintiff’s counsel replied that he would
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`“take a look” and Defendants’ counsel stated, “So we’re going to formally request production,
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`obviously.” (Id.). There is no evidence in the record, and Defendants do not argue, that they in
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`fact formally requested production of the ASA and that Plaintiff failed to provide it. Defendants
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`were on notice that the ASA existed and had the opportunity to obtain the document from
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`ChanBond. However, they failed to exercise reasonable diligence in doing so. For that reason,
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`there is no good cause to open discovery on this ground.
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`Defendants also had the opportunity to seek, during discovery, the other documents they
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`now argue are a basis for reopening discovery. One such document is an agreement between
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`UnifiedOnline and UO! of NC. (D.I. 535 at 5). As Plaintiff argues, this agreement did not
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`involve ChanBond (D.I. 556 at 3), and therefore it was not ChanBond’s to produce. Further,
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`Defendants had the opportunity to seek this document from UnifiedOnline, but they did not
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`pursue that request with diligence.
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`Defendants served a subpoena on UnifiedOnline requesting numerous documents. (D.I.
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`556, Exh. 9 at 22-25 of 100). Of these requests, the agreement between UnifiedOnline and UO!
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`of NC would likely only fit into request 12: “All documents concerning any agreement related to
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`any ChanBond Patent, Whitaker Patent, or any Related Patents.” (Id. at 24 of 100).
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`UnifiedOnline objected to this document request “as overly broad and unduly burdensome” and
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`offered “to meet and confer regarding the scope of this request.” (Id., Exh. E at 82-83 of 100).
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`Defendants followed up on some of their document requests (see id., Exh. F at 94-95 of 100), but
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`there is no evidence in the record that they followed up on document request 12 or made any
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`other efforts to obtain UnifiedOnline’s agreements with third parties. Had Defendants thought
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`such agreements were important, they had opportunity to show more diligence in obtaining the
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`documents from UnifiedOnline during discovery.
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`Based on Ms. Leane’s allegations, Defendants argue that certain documents were
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`purposefully withheld in this litigation. (D.I. 535 at 3-4). Specifically, Ms. Leane alleges that at
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`her deposition in this litigation, Plaintiff’s attorney informed her that Plaintiff had not produced
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`the ASA and that its failure to produce the ASA would cause problems in this litigation. (Id. at 4
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`(citing D.I. 536-1, Exh. P at 26 of 111)). Regardless of whether this conversation occurred,
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`Defendants were on notice that the ASA existed and they told Plaintiff that they would be
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`formally requesting it. (See D.I. 529-3, Exh. C at 25 of 42). Defendants did not formally request
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`it and Plaintiff therefore did not have the opportunity to formally respond. Defendants could
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`have obtained this document, but they did not do so. The record establishes that Defendants did
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`not pursue acquisition of the documents with reasonable diligence. Further, it does not appear
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`that either the ASA or the other agreements that Defendants seek are relevant, as ChanBond is
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`the owner of the patents (under the Patent Purchase Agreement) and has standing to sue for
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`infringement in its own name, regardless of the provisions of the other agreements. Defendants’
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`motion to reopen fact discovery on document production grounds is denied.
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`IV. CONCLUSION
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`For the foregoing reasons, Defendants’ motion to reopen fact discovery (D.I. 524) is
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`denied. A corresponding order will issue.
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