Intellectual Property Owner’s Association

ITC Conference May 15, 2015

Katy Motiey Formerly

Corporate SVP, General Counsel & Secretary @ Spansion, Inc.

My Background

Georgetown University - 1989 Georgetown University Law Center – 1993 US District Court Clerkship – Chief Judge Manuel L. Real – 1993-1995 Skadden – Los Angeles & Palo Alto – 1995 - 1999 Various General Counsel Positions:

Maple Optical Systems (optical networking)

Magellan Navigation/Ashtech (GPS systems)

Invensense (motion tracking/semiconductor)

Spansion (flash memory/semiconductor)

Discussion Today

Managing Multi-District Patent Litigation Parallel: ITC, District Court, USPTO, Foreign Cases

Spansion/Macronix - ITC: Does Domestic Industry Really Matter?

Overall Themes Today

ITC cases are hugely complicated

ITC cases are extremely expensive and consume many more resources than just outside counsel

Some advice on how to organize the complexities and how to deal with management, Board of Directors and Downstream Respondents

Domestic Industry (“DI”) requirement

Ways to mitigate concerns about DI requirement

Managing Multi-District Patent Litigation

Back to My Background… No Engineering Background “What is a patent?” Maple Optical Systems

Start-up Put Together Patent Portfolio – Filed 60 patents in 2 years

Magellan Initiated licensing program Managed 15 patent litigation matters – mostly troll cases

New industry – everyone came out of the woodwork!! Invensense

Patent litigation – Troll case & ST Micro

Spansion Macronix Patent Litigation

Managing Multi-District Patent Litigation (cont’d.)

Spansion General Counsel – December 2013 GC Responsibilities:

Legal Staff Board Meetings SEC Filings (10Q, 10K, Proxy) Compliance – Insider Trading/FCPA Contracts/Licensing Debt Matters Employment Real Estate Patents/Trademark/Copyrights Litigation

Spansion/Macronix: 2 cases - Spansion ITC, Macronix EDVA

Managing Multi-District Patent Litigation (cont’d.)

What is the “ITC”??

Why does the CFO care? “It’s end of the quarter!” Spansion over its litigation budget

Managing Multi-District Patent Litigation (cont’d.)

12/27/13 - Macronix sues Spansion in ITC What? Taiwanese company? No Domestic Industry?

Managing Multi-District Patent Litigation (cont’d.)

January 2014 – Litigation takes over!! Spansion case against MXIC – Code Name “ITC 1” MXIC case against Spansion – Eastern District of VA – Code Name

“EDVA” Macronix case against Spansion – Code Name “ITC 2” Corporate Concerns:

Management – CEO & his team Board of Directors Sales Team – what to tell customers? Marketing Team – gaining market share? Public Relations – what do we announce? Investor Relations – impact on share price Downstream Respondents/Our Customers Legal Bills, legal bills, legal bills!!

Managing Multi-District Patent Litigation (cont’d.)

Litigation Management Stop, Breath, Pray, Meditate… Organize organize and organize some more!!

Managing Multi-District Patent Litigation (cont’d.)

Manage the process – don’t become an individual contributor! First Step - Organize Outside Counsel

We had 40+ attorneys + paralegals at 4 law firms working on our cases Regular Standing Meetings

3x per week, same day, same time

Create Code Names – “ITC 1, ITC2, etc.” Create Email Protocol

For example: “ITC 1 – Witness list”

One point of contact – preferably for entire matter but eventually lead attorney for each case

Manage the budget Beginning of Quarter – create forecast with Lead Outside Counsel Mid-way through … make adjustments Hit your numbers so you don’t screw up earnings High level - Track actual costs and have the law firms submit a forecast/budget then

keep lawyers on budget

Managing Multi-District Patent Litigation (cont’d.)

Second Step – CEO/Lead Strategist Communicate regularly/plain English Give him all the data – he sets the strategy

Third Step – Board of Directors Communicate Often and Openly

CEO Communication with Board – prep the CEO, ghost write emails Monthly Litigation Updates CEO Confers with Board re Strategy Bring in Outside Counsel

Fourth Step – Manage Internal Team Finance – manage budget, forecasts, discounts : ) Sales & Marketing Team - Communications with Customers Public Relations

What do you announce? How do you respond to press announcements by other side? Blogs?

Managing Multi-District Patent Litigation (cont’d.)

Fifth Step – Managing Investors’ Expectations Partner with CFO and Investor Relations on earnings announcement Review script Respond to questions from investment community Stay in the background

Sixth Step – Confer with Downstream Respondents Group Calls on Important Matters Communicate They are your customers after all

Does Domestic Industry Really Matter?

Recall… August 2013 - Spansion Sued Macronix in ITC - “ITC 1” December 2013 – Macronix Sued Spansion in ITC – “ITC 2” April 2014 – Spansion Sued Macronix in ITC – “ITC 3” May 2014 – Macronix Sued Spansion in ITC – “ITC 4”

All cases were instituted ITC 1 & ITC 2 cases went to trial All ITC cases are hugely expensive and some cases may have a

dispositive issue (i.e. DI) that could dispose of case Strategy - get ruling before huge expense incurred and before

respondents forced to get bogged down in trial

Does Domestic Industry Really Matter? (cont’d.)

From the ITC Trial Lawyers Association website – FAQs Q: What constitutes a domestic industry? In general, Section 337 requires that there be an industry in the United States relating in some manner to the products at issue. In cases based on federal statutory intellectual property rights, the proof required to establish a domestic industry involves an "economic" prong and a "technical" prong. The economic prong can be satisfied by demonstrating that there exists in the United States with respect to the products protected by the intellectual property right being asserted: significant investment in plant and equipment; significant employment of labor or capital; or substantial investment in its exploitation, including engineering, research and development, or licensing. To satisfy the technical prong in a patent-based Section 337 investigation, a complainant must prove that it or a licensee is practicing at least one claim of the asserted patent. In some cases, the domestic industry requirement may be satisfied by a complainant's investment in licensing, even if it does not practice the asserted intellectual property rights.

Does Domestic Industry Really Matter? (cont’d.)

From the ITC Trial Lawyers Association website – FAQs The Basics In a patent dispute before the ITC…

Section 337 requires –> Economic prong

Significant investment in plant and equipment Significant employment of labor or capital Substantive investment its exploitation – engineering, R&D, licensing

Technical Complainant or Licensee – practicing at least one claim of asserted patent

Does Domestic Industry Really Matter? (cont’d.)

Spansion/Macronix – without getting into confidential information

What is publicly known...

Cases were instituted in normal course

One of Macronix cases went to trial

Huge/Unmanageable Corporate Expense We were not Apple/Samsung!! Incurred expenses from August 2013 – October 2014 (for their case)

Does Domestic Industry Really Matter? (cont’d.)

Current Process – Domestic Industry reviewed at trial! Pilot Program – Hello… anybody home? Started 2 years ago

Invoked 2x - once for DI and a second time for standing ITC reluctant to use pilot program for DI issues, but they shouldn’t because of huge ITC

case expense

Problem – Again… unmanageable expense incurred for many months by the time you get to trial

Proposed Process

ALJ Reviews for Domestic Industry before Instituting Additional Pleading requirements with Initial Complaint Legislation to put in place these requirements

Does Domestic Industry Really Matter? (cont’d.)

Legislation – Aha!! Congressman Blake Farenholdt (R-TX) & Tony Cardenas (D-CA) introduced

“Trade Protection Not Troll Protection Act” – May 2014 Legislation meant to protect American companies from abusive litigation by

NPEs, patent trolls Bill also proposes added changes to Section 337 of Tariff Act

Requires ITC to conduct preliminary investigation into domestic industry standing

Initial DI determination to be made within 45 days of filing Complaint at beginning of review process

“[the bill] will also change current law to allow “public interest determinations” at the beginning of the review process. Currently, waiting for these determinations can force a producer or company to halt all work being done with the product in question. The legislation has been supported by a broad coalition of American companies including Apple, Broadcom, Ford, Google, HP, Intel, Avaya and Cisco.” – Farenholdt press release 5/29/14

In the End….

What happened to the Spansion/Macronix Litigation? Early October 2014 – Spansion v. MXIC trial – ITC 1 Later in October 2014 – MXIC v. Spansion trial – ITC 2 Never got Initial Determination on ITC 1 & ITC 2

December 1, 2014 – Spansion/Cypress enter into Merger Agreement

By February 2015

Mediation in Hawaii completed Spansion/MXIC signed settlement agreement – all cases dismissed

March 2015 – Spansion/Cypress Merger Closed!

Q&A