Bungies Reply Brief Worlds 17-1481 Appeal CAFC

Case: 17-1481 Document: 26 Page: 1 Filed: 08/25/2017
Nos. 2017-1481, -1546, -1583
UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT
WORLDS INC.,
Appellant,
v.
BUNGIE, INC.,
Appellee.
Appeals from the United States Patent and Trademark Office, Patent Trial and
Appeal Board in Nos. IPR2015-01264, IPR2015-01319, and IPR2015-01321
BUNGIES RESPONSE BRIEF
Michael T. Rosato Matthew A. Argenti

Andrew S. Brown WILSON SONSINI GOODRICH & ROSATI
WILSON SONSINI GOODRICH & ROSATI 650 Page Mill Road
701 Fifth Avenue, Suite 5100 Palo Alto, CA 94301
Seattle, WA 98104 (650) 493-9300
(206) 883-2500
Richard L. Torczon
WILSON SONSINI GOODRICH & ROSATI
1700 K Street, NW
Washington, DC 20006
(202) 973-8800
Counsel for Appellee Bungie, Inc.

August 25, 2017
U.S. PATENT NO. 8,082,501, CLAIM 1

(infra p. 7, citing Appx343)
A method for enabling a first user to interact with

other users in a virtual space, each user of the first user
and the other users being associated with a three
dimensional avatar representing said each user in the
virtual space, the method comprising the steps of:
customizing, using a processor of a client device,

an avatar in response to input by the first user;
receiving, by the client device, position

information associated with fewer than all of the other
user avatars in an interaction room of the virtual space,
from a server process, wherein the client device does not
receive position information of at least some avatars that
fail to satisfy a participant condition imposed on avatars
displayable on a client device display of the client device;
determining, by the client device, a displayable set

of the other user avatars associated with the client device
display; and
displaying, on the client device display, the

displayable set of the other user avatars associated with
the client device display.
CERTIFICATE OF INTEREST
Counsel for Bungie, Inc. certifies the following.
1. The full name of every party represented by me: Bungie, Inc.
2. The name of the real party in interest represented by me: Bungie, Inc.
3. Parent corporations and publicly held companies that own 10% or more of
stock in the party: Microsoft, Corp. is a publicly-held company that owns 10%
or more of Bungie, Inc.
4. The names of all law firms and the partners or associates that appeared for the
party or amicus now represented by me in the trial court or agency or are
expected to appear in this court (and who have not or will not enter an
appearance in this case): None.
August 25, 2017
/s/ Michael T. Rosato

Michael T. Rosato
i
TABLE OF CONTENTS
Certificate of Interest ................................................................................................. i
Table of Contents ...................................................................................................... ii
Table of Authorities ................................................................................................. vi
Statement of Related Cases .................................................................................... viii
Introduction ................................................................................................................1
Statement of the Issues...............................................................................................3
Statement of the Case.................................................................................................3
I. The Appealed Patents ............................................................................5
II. The Prior Art .........................................................................................8
A. Funkhouser 95 Teaches Server-Side Filtering of Avatar

Message Updates and Client-Side Processing of Field-of-View
Perspective ..................................................................................9
B. Funkhouser 93 Teaches Display Optimization Algorithms with

Object Filtering .........................................................................11
C. Sitrick and Marathon Teach Other Independent Claim

Limitations ................................................................................13
III. The Inter Partes Review Proceedings.................................................13
A. Worldss Motion for Discovery Regarding Activision as a Real

Party-In-Interest ........................................................................14
1. The DevPub Agreement .................................................14
2. Worldss Proposed Interpretation of the DevPub

Agreement.......................................................................15
3. Bungies Opposition to Worldss Motion ......................17
ii
4. The Boards Decision on Worldss Motion ...................18
B. The Boards Decisions to Institute Inter Partes Review ..........19
1. Bungies Challenges of Claims 8 and 10 of the 501

Patent and Claims 13-15 of the 998 Patent ...................19
2. Worldss Real Party-In-Interest Challenge ....................22
C. Worldss Patent Owner Responses and Bungies Replies........24
1. Worldss Response to Bungies Challenges of Claims 8

and 10 of the 501 Patent and Claims 13-15 of the 998
Patent ..............................................................................24
2. Worldss Real Party-In-Interest Challenge ....................27
D. The Boards Final Written Decisions .......................................27
1. The 1264 Proceeding .....................................................27
2. The 1319 Proceeding .....................................................28
3. The 1321 Proceeding .....................................................30
Summary of the Argument.......................................................................................32
Standard of Review ..................................................................................................33
Argument..................................................................................................................34
I. The Board Correctly Determined Claims 8 and 10 of the 501 Patent

and Claims 13-15 of the 998 Patent Unpatentable ............................34
A. Substantial Evidence Supports the Boards Findings that the

Prior Art Teaches the Limitations of Claims 8 and 10 of
the 501 Patent and Claims 13-15 of the 998 Patent ...............35
1. Worlds Ignores the Prior Art Combination, Improperly

Attacks Funkhouser 93 Individually .............................38
iii
2. Bungies Theory on the Teaching of Funkhouser 93

Remained Consistent ......................................................40
3. The Board Was Not Required to Evaluate the

Importance of Avatars Relative to Other Objects .......43
B. Substantial Evidence Supports the Boards Findings that a

Person of Ordinary Skill in the Art Would Have Combined the
Prior Art ....................................................................................46
1. The Board Articulated a Sufficient Rationale to Combine

the Prior Art ....................................................................46
2. Funkhouser 93 Does Not Teach Away from Omitting

Avatars from Display......................................................53
II. The Board Correctly Determined Bungie Was the Sole Real Party-In-
Interest .................................................................................................54
A. The Boards Decision Is Not Subject To Review .....................55
B. The Boards Determination That Activision Was Not a Real

Party-In-Interest Is Correct and Supported By Substantial
Evidence ....................................................................................55
1. Worlds Failed To Provide Substantial Rebuttal Evidence

That Activision Was a Real Party-In-Interest ................55
2. Bungie Met Its Burden of Persuasion That Activision

Was Not a Real Party-In-Interest ...................................59
C. The Board Did Not Abuse Its Discretion in Its Ruling on the
Motion for Discovery and Its Institution Decision ...................60
D. Worlds Is Estopped From Raising the Issue of the Boards Real

Party-In-Interest Determination ................................................62
III. Inter Partes Review Proceedings Are Not Unconstitutional ..............64
Conclusion ...............................................................................................................64
Certificate of Service ...............................................................................................65

iv
Certificate of Compliance ........................................................................................66
v
TABLE OF AUTHORITIES
CASES
Achates Reference Publg, Inc. v. Apple, Inc., 803 F.3d 652 (Fed. Cir.
2015) ........................................................................................................34, 55
Allied Erecting & Dismantling Co. v. Genesis Attachments, LLC, 825

F.3d 1373 (Fed. Cir. 2016) ............................................................................ 34
B & B Hardware v. Hargis Industries, 135 S. Ct. 1293 (2015) .............................. 63
Chen v. Bouchard, 347 F.3d 1299 (Fed. Cir. 2003) ..........................................34, 61
Consol. Edison Co. v. NLRB, 305 U.S. 197 (1938) ................................................. 34
Dynamic Drinkware, LLC v. Natl Graphics, Inc., 800 F.3d 1375

(Fed. Cir. 2015).............................................................................................. 60
Gonzalez v. Banco Cent. Corp., 27 F.3d 751 (1st Cir. 1994) .................................. 57
Grieve v. Tamerin, 269 F.3d 149 (2d Cir. 2001) ..................................................... 63
In re Jolley, 308 F.3d 1317 (Fed. Cir. 2002) ........................................................... 42
In re Merck & Co., 800 F.2d 1091 (Fed. Cir. 1986) ................................................ 38
In re Nuvasive, Inc., 842 F.3d 1376 (Fed. Cir. 2016) ..................................37, 40, 52
In re Nuvasive, Inc., 841 F.3d 966 (Fed. Cir. 2016) ................................................ 52
MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284 (Fed.

Cir. 2015), cert. denied, 2016 WL 1724103 (Oct. 11, 2016) ........................ 64
Meiresonne v. Google, Inc., No. 2016-1755, slip op. (Fed. Cir. Mar. 7,
2017) .............................................................................................................. 54
Midwestern Pet Foods, Inc. v. Societe des Produits Nestle S.A., 685
F.3d 1046 (Fed. Cir. 2012) ............................................................................ 61
Nike, Inc. v. Adidas AG, 812 F.3d 1326 (Fed. Cir. 2016)........................................ 50
Outdry Techs. v. Geox S.P.A., No. 2016-1769, slip op. (Fed. Cir. June
17, 2017) ..................................................................................................45, 50
vi
Personal Web Techs., LLC v. Apple, Inc., 848 F.3d 987 (Fed. Cir.
2017) .............................................................................................................. 52
Pierce v. Underwood, 487 U.S. 552 (1988).......................................................34, 61
Randall Mfg. v. Rea, 733 F.3d 1355 (Fed. Cir. 2013) ............................................. 33
Rapoport v. Dement, 254 F.3d 1053 (Fed. Cir. 2001) ............................................. 33
S. Ala. Med. Sci. Found. v. Gnosis S.P.A., 808 F.3d 823 (Fed. Cir.
2015) .............................................................................................................. 34
Skky, Inc. v. MindGeek, S.A.R.L., No. 2016-2018, slip op. (Fed. Cir.
June 7, 2017) .................................................................................................. 51
Taylor v. Sturgell, 553 U.S. 880 (2008)................................................................... 57

STATUTES
35 U.S.C. 103(a) ..................................................................................................... 4
35 U.S.C. 314(a) .............................................................................................34, 61
35 U.S.C. 314(d) .............................................................................................34, 55
35 U.S.C. 315(b) .........................................................................3, 4, 33, 34, 55, 61

RULES AND REGULATIONS
37 C.F.R. 42.62(a)................................................................................................. 56
77 Fed. Reg. 48,756 ................................................................................................. 57
77 Fed. Reg. 48,759 ................................................................................................. 57
Fed. R. Evid. 301 ..................................................................................................... 56

PATENT TRIAL AND APPEAL BOARD CASES
Atlanta Gas Light Co. v. Bennett Regulator Guards, Inc., IPR2013-
00453, Paper 88 (PTAB Jan. 6, 2015) .....................................................56, 57
OTHER
Restatement (Second) of Judgments 27 ................................................................ 63
vii
STATEMENT OF RELATED CASES
The patents at issue in these appeals, U.S. Patent Nos. 7,945,856 (the 856
patent), 8,082,501 (the 501 patent), and 8,145,998 (the 998 patent) have
been asserted by Appellant Worlds Inc. (Worlds) in Worlds Inc. v. Activision
Blizzard, Inc., Case No. 1:12-cv-10576-DJC (D. Mass.) (Worlds/Activision
lawsuit). This case is currently stayed. Bungie is not a party to this suit.
In Bungie, Inc. v. Worlds Inc., IPR2015-01325, Paper 42 (PTAB November
28, 2016) (the 1325 proceeding), the Patent Trial and Appeal Board (the
Board) found claims 1 and 20 of the 998 patent unpatentable in view of the prior
art. In Bungie, Inc. v. Worlds Inc., IPR2015-01268, Paper 44 (PTAB November 30,
2016) (the 1268 proceeding), the Board found claims 1-3, 5-7, 10-12, 14, 15, 17,
and 19 of related U.S. Patent No. 7,181,690 (the 690 patent) unpatentable in
view of the prior art. In Bungie, Inc. v. Worlds Inc., IPR2015-01269, Paper 42
(PTAB November 28, 2016) (the 1269 proceeding), the Board found claims 4, 6,
8, and 9 of related U.S. Patent No. 7,493,558 (the 558 patent) unpatentable in
view of the prior art. Worlds did not appeal the Boards final written decisions in
these proceedings. These proceedings involved findings and issues that may
directly affect the issues presented in this appeal.
viii
INTRODUCTION
The patents on appeal, in a general sense, describe a system for managing a
multi-user virtual world using a client-server network with server-side filtering and
client-side processing capabilities. In view of Bungies challenges, the Board
determined that the appealed claims were unpatentable as either anticipated by
Funkhouser 95, or obvious from Funkhouser 95 in combination with other
references, including Funkhouser 93. In reaching these determinations, the Board
also determined, as a threshold issue raised by Worlds, that Bungie was the sole
real party-in-interest, and its petitions were not barred for the purposes of
institution.
Now on appeal, Worldss challenges fall into either one of two categories: (1)
those directed to certain obviousness determinations made in two of the
proceedings;1 and (2) those directed to the real party-in-interest determination
common to all three proceedings. Throughout its challenges, however, a common
theme exists in Worldss approach: aspects of the evidence are isolated and a
divide-and-conquer strategy is employed in an effort to establish that a lack of
evidence exists to support the Boards decisions. But, in so doing, Worlds
1
Worlds is challenging the Boards obviousness determinations for only five of
the twenty-six claims at issue in this appeal.
1
overlooks the substantial evidence that undercuts their theories and that supports
the Boards reasonable findings.
In challenging the Boards obviousness determinations, Worlds attacks
references individually and focuses on isolated statements within the references in
order to reach its own conclusions regarding the teachings of the prior art. But, in
so doing, Worlds interprets the references contrary to the principles of an
obviousness inquiry and what those references disclose as a whole. As a result,
Worlds misses the evidence showing that the Boards own reasoned determinations
were based on a thorough review of the record as presented by the parties, and
supported by substantial evidence.
In a similar manner, Worldss challenges to the Boards real party-in-interest
determinations rely on a premise in which provisions of a standard development
agreement are cherry-picked to support speculative interpretations that are difficult
to reconcile with the ordinary meaning of the agreement as a whole. But, as with
its arguments against the Boards obviousness determinations, Worlds again
overlooks the substantial evidence that supports the Boards findings that were
contrary to Worldss own view.
What is truly common throughout the underlying proceedings is that the
Board properly resolved factual disputes between the parties through careful
consideration of the evidence and arguments put forth. And, in reaching its
2
reasoned conclusions on the issues, both for obviousness and the naming of all real
parties-in-interest, the Boards decisions were supported by substantial evidence.
Thus, because the Boards decisions are supported by substantial evidence, this
Court should affirm the Boards decisions.
STATEMENT OF THE ISSUES
1. Whether substantial evidence supports the Boards findings that the
prior art combination teaches or suggests the limitations of dependent claims 8 and
10 of the 501 patent and dependent claims 13-15 of the 998 patent.
2. Whether substantial evidence supports the Boards findings that a
person of ordinary skill in the art had reason to combine the prior art as applied to
claims 8 and 10 of the 501 patent and claims 13-15 of the 998 patent.
3. Whether, if this Court determines that timeliness under 35 U.S.C.
315(b) is appealable, Worlds is estopped under issue preclusion from contesting
the Boards finding that Bungie was the sole real party-in-interest to the
proceedings, or, if not estopped, whether substantial evidence supports that finding.
STATEMENT OF THE CASE
Worlds appeals from the final written decisions in inter partes reviews
IPR2015-01264 (the 1264 proceeding), IPR2015-01319 (the 1319
proceeding), and IPR2015-01321 (the 1321 proceeding), which respectively
3
held claim 1 of the 856 patent, claims 1-8, 10, 12, and 14-16 of the 501 patent,
and claims 1, 2, 7, 8, 12-18, and 20 of the 998 patent unpatentable.
On appeal, Worlds challenges the Boards determination in the 1319
proceeding that dependent claims 8 and 10 of the 501 patent are unpatentable
under 35 U.S.C. 103(a) in view of Thomas A. Funkhouser, RING: A Client-
Server System for Multi-User Virtual Environments, 1995 Symposium on
Interactive 3D Graphics (1995) (Funkhouser 95); U.S. Patent No. 4,521,014
(Sitrick); and Thomas A. Funkhouser & Carlo H. Squin, Adaptive Display
Algorithm for Interactive Frame Rates During Visualization of Complex Virtual
Environments, Computer Graphics Proceedings: Annual Conference Series (1993)
(Funkhouser 93). Worlds also challenges the Boards determination in
the 1321 proceeding that dependent claims 13-15 of the 998 patent are
unpatentable under 35 U.S.C. 103(a) in view of Funkhouser 95, Bungie
Products Software Corp., Marathon (1994) (Marathon), and Funkhouser 93.
Finally, Worlds challenges the Boards determination in each of the proceedings
that Activision Publishing, Inc. (Activision) was not shown to be an unnamed
real party-in-interest, and thus, Bungies petitions for inter partes review were not
untimely under 35 U.S.C. 315(b).
4
I. The Appealed Patents
The appealed patents generally describe a system that provides an efficient
communications network for client-server networks with large numbers of clients,
which enables multiple users to interact with each other in a virtual world.
Appx275(Abstract); Appx287(1:23-24); Appx299(Abstract); Appx311(1:25-26);
Appx322(Abstract); Appx334(1:26-28). In particular, each user interacts with a
client system, which is networked to a virtual world server, and chooses an avatar
to represent the user in the virtual world. Appx288(3:9-10; 3:20-22);
Appx312(3:14-15; 3:25-27); Appx335(3:14-15; 3:25-27).
Using the client system, each user can move his or her avatar around in the
virtual world. Appx288(3:34-35); Appx312(3:39-40); Appx335(3:39-40). So that
each user can see the location of each of the other avatars present in the virtual
world, each client sends its current location, or changes in its current location, to
the server and receives updated position information of the other clients from the
server, which acts as an intermediary between clients. Appx288(3:35-39);
Appx312(3:40-44); Appx335(3:40-44); see also Appx334-36(2:44-48; 5:42-49).
The client then executes a process to provide a view of the virtual world from the
perspective of the user. Appx275(Abstract); Appx299(Abstract);
Appx322(Abstract).
5
In certain embodiments, to provide for efficient communications over the
network, the server may maintain[] a variable, N, which sets the maximum
number of other avatars [a user] will see. Appx289(5:37-38); Appx313(5:42-43);
Appx336(5:42-43). The client may also maintain[] a variable, N', which might be
less than N, which indicates the maximum number of avatars the client wants to
see and/or hear. Appx289(5:38-41); Appx313(5:43-46); Appx336(5:43-46). One
reason for setting N' less than N is where [the client] is executed by a computer
with less computing power than an average machine and tracking N avatars would
make processing and rendering of the virtual world too slow. Appx289(5:41-45);
Appx313(5:46-50); Appx336(5:46-50). To determine which avatars to display, the
client uses the position data received from the server to select N' avatars from the
N avatars provided by the server. Appx289(6:6-8); Appx313(6:11-13);
Appx336(6:11-13). In addition to position data, the client may filter the N avatars
provided by the server based on other factors, such as an avatars user ID. See
Appx289(5:65-67); Appx313(6:3-5); Appx336(6:3-5).
Independent claim 1 of the 501 patent is representative of the claims at
issue in the proceedings, and is reproduced below. Claim 1 is a method claim that
recites, among other steps, server-side filtering of positional information associated
with other users avatars as a receiving step, and client-side processing that
6
determines which of the other users avatars received by the server to display as a
determining step.
1. A method for enabling a first user to interact with other

users in a virtual space, each user of the first user and the other users
being associated with a three dimensional avatar representing said
each user in the virtual space, the method comprising the steps of:
customizing, using a processor of a client device, an avatar in
response to input by the first user;
receiving, by the client device, position information associated
with fewer than all of the other user avatars in an interaction room of
the virtual space, from a server process, wherein the client device does
not receive position information of at least some avatars that fail to
satisfy a participant condition imposed on avatars displayable on a
client device display of the client device;
determining, by the client device, a displayable set of the other
user avatars associated with the client device display; and
displaying, on the client device display, the displayable set of
the other user avatars associated with the client device display.
Appx343(19:20-38).
Worlds challenges the Boards obviousness determinations for five of the
twenty-six claims on appeal. First, Worlds challenges the Boards determination
that claims 8 and 10 of the 501 patent are unpatentable over the prior art. Claims
8 and 10 depend from claim 1, and further recite that the determining step
includes client-side processing that determines which of the other users avatars to
7
display based on either: (1) a variable other than the positions of the other users
avatars and the orientation of the users avatar (claim 8), or (2) a client-side set
limit of the other users avatars that may be displayed (claim 10). Appx343(19:65-
20:4; 20:8-12).
Worlds also challenges the Boards determination that claims 13-15 of
the 998 are unpatentable over the prior art. Claims 13 and 14 depend from
independent claim 2. Claim 2 recites a system having server-side filtering and
client-side processing features similar to those recited in claim 1 of the 501 patent.
See Appx320(19:31-56). Claims 13 and 14 further recite that the client-side
processing limit the number of other users avatars displayed based on either: (1)
computing resources available to the display (claim 13), or (2) a selection made by
the user (claim 14). Appx320(19:31-56; 20:27-35). Claim 15 depends from claim
14, and recites that the selection is independent of the relative position of the users
avatars and other users avatars not shown on the display. Appx320(20:36-38).
II. The Prior Art

The Board generally determined that the claims on appeal were unpatentable
based on either Funkhouser 95 on anticipation grounds, or Funkhouser 95 on
obviousness grounds in combination with other references, including
Funkhouser 93. With regard to Worldss challenges to the Boards obviousness
determinations, the Board determined that claims 8 and 10 of the 501 patent were
8
unpatentable based on Funkhouser 95, Sitrick, and Funkhouser 93, and that
claims 13-15 of the 998 patent were unpatentable based on Funkhouser 95,
Marathon, and Funkhouser 93. Appx191; Appx238.
A. Funkhouser 95 Teaches Server-Side Filtering of Avatar Message

Updates and Client-Side Processing of Field-of-View Perspective
Funkhouser 95 describes a virtual reality system utilizing a client-server
design that supports real-time visual interaction between a large number of users
in a shared 3D virtual environment. Appx1351(Abstract). A key feature of the
design is the use of server-based visibility algorithms that compute potential
visual interactions between entities representing users in order to reduce the
number of messages required to maintain consistent state among many
workstations distributed across a wide-area network. Id.
Funkhouser 95 teaches that, when an entity changes state, a virtual reality
networks resources can be most efficiently utilized by filtering updates at the
server level, explaining that a server may determine that a particular update
message is relevant only to a small subset of clients and then propagate the
message only to those clients or their servers. Appx1353. The aim of this client-
server design is to shift some of the processing burden away from the client
workstations and into servers so that larger, more affordable, multi-user visual
simulation systems can be built using primarily low-cost client workstations. Id.
9
This server-side filtering (or [s]erver-based message culling) is
implemented using precomputed line-of-sight visibility information. Id.
Specifically, the shared virtual environment is partitioned into a spatial
subdivision of cells, and a visibility precomputation is performed in which the
set of cells potentially visible to each cell is determined by tracing beams of
possible sight-lines through transparent cell boundaries. Id.; see also id.(Fig.6).
The servers keep track of which cells contain which entities by exchanging
periodic update messages when entities cross cell boundaries. Id. Real-time
update messages are then propagated only to servers and clients containing
entities inside some cell visible to the one containing the updated entity. Id. This
simplified visibility algorithm allows servers to process update messages quickly
using cell visibility look-ups rather than more exact real-time entity visibility
computations, resulting in an entitys visibility being conservatively over-
estimated. Id.; see also Appx1354(Figs.6,7).
The client workstations maintain surrogates for some entities managed by
other clients (remote entities) and update[] the geometric and behavior models
for the local entity surrogates in which update messages are received. Appx1353.
Between updates, surrogate behavior is simulated by the client. Id. The client then
uses these calculations to render[] images of the virtual environment as perceived
from the users simulated viewpoint. Appx1351; see also Appx1353. Plates I
10
and II show images captured during tests with 512 entities in a 400-room
environment, each entity being managed by a client, where each client must
process update messages, simulate behavior, and store surrogates only for remote
entities potentially visible to one of its local entities. Appx1359; see also
Appx1355.
B. Funkhouser 93 Teaches Display Optimization Algorithms with

Object Filtering
Funkhouser 93 describes an adaptive display algorithm for interactive frame
rates during visualization of complex virtual environments. Appx1929(Abstract);
see also Appx1934-35. The algorithm relies upon a hierarchical model
representation in which objects are described at multiple levels of detail and can be
drawn with various rendering algorithms. Appx1929(Abstract). The idea
behind the algorithm is to adjust image quality adaptively to maintain a uniform,
user-specified target frame rate. Id.
The process involves defining an object tuple, (O, L, R), to be an instance
of object O, rendered at level of detail L, with rendering algorithm R. Appx1930.
Two heuristics are defined: cost (i.e., the time required to render an object
tuple) and benefit (the contribution to model perception of a rendered object
tuple). Id. The approach described attempts to choose a level of detail and
rendering algorithm for each potentially visible object by maximizing the benefit
11
heuristic, while ensuring that the cost heuristic does not exceed the target frame
time (i.e., do as well as possible in a given amount of time). Id.
Funkhouser 93 describes its approach as one that can be applied to a wide
variety of problems that require images to be displayed in a fixed amount of time.
Id. For instance, the approach may allow for levels of detail for some objects
representing no polygons at all, which handles cases where the target frame
time is not long enough to render all potentially visible objects even at the lowest
level of detail. Appx1931. In such instances, only the most valuable objects
are rendered so that the frame time constraint is not violated. Id.
Once the optimization algorithm has been defined, the computer
generating the virtual environment applies the algorithm to determine which
objects to display, and the level of detail for each independent object. Appx1933.
Figure 11 shows images generated using the optimization algorithm according to
varying target frame times. See Appx1935; Appx1936(Fig.11). In particular, a
target frame rate of 0.15 seconds results in the omission of texture on the
bookshelves in Figure 11b1, and, a target frame rate of 0.10 seconds results in the
omission of books on bookshelves and texture on doors in Figure 11c1.
Appx1935.
12
C. Sitrick and Marathon Teach Other Independent Claim

Limitations
Sitrick describes a networked, multi-player gaming system in which the user
may select a distinguishable visual image as his avatar. Appx1648(Abstract). The
Board relied upon Sitrick as teaching the customizing step of independent claim
1 of the 501 patent. See Appx229.
Marathon describes a networked video game in which a user may use the
delete key to switch views to other players. Appx4575. The Board relied upon
Marathon as teaching the perspective-switching feature of independent claim 2 of
the 998 patent. See Appx155.
III. The Inter Partes Review Proceedings

Bungies petition in the 1264 proceeding challenged, in part, claim 1 of
the 856 patent as anticipated based on Funkhouser 95. See Appx355. Bungies
petition in the 1319 proceeding challenged, in part, claims 1-8, 10, 12, and 14-16
of the 501 patent as obvious over Funkhouser 95 and other references, including
Sitrick and Funkhouser 93.2 See Appx4919. Bungies petition in the 1321
proceeding challenged claims 1-3, 4, 8, and 12-18 of the 998 patent as obvious
2
The petitions in the 1264 proceeding and the 1319 proceeding also
challenged the same claims as anticipated or obvious from U.S. Patent No.
5,659,691 (Durward), which is not at issue in this appeal.
13
over Funkhouser 95 and other references, including Marathon and Funkhouser 93.
See Appx3729-30.3
A. Worldss Motion for Discovery Regarding Activision as a Real

Party-In-Interest
Prior to filing its preliminary responses, Worlds filed a motion for routine or
additional discovery. See Appx394. The basis for its motion was a publicly
available agreement between Bungie and Activision, titled Software Publishing
and Development Agreement (the DevPub Agreement), which, Worlds
contended, served as evidence that Activision was an unnamed real party-in-
interest to the proceedings of the appealed patents.4 See Appx405.
1. The DevPub Agreement
On its face, the DevPub Agreement, effective April 16, 2010, outlines the
terms of a business arrangement by which Bungie agreed to develop a series of
videogames entitled Destiny (the Destiny Products), which would be
3
Bungie also filed three related petitions against Worlds patents, relying on
substantially the same prior art. In particular, Bungie filed petitions against
the 690 patent and the 558 patent in the 1268 proceeding and the 1269
proceeding, respectively, challenging, in part, certain claims as anticipated by
Funkhouser 95, or as obvious over Funkhouser 95 and Funkhouser 93. See
Bungie, IPR2015-01268, Paper 3 at 8; Bungie, IPR2015-01269, Paper 3 at 11.
Bungie also filed a second petition against the 998 patent in the 1325 proceeding
challenging certain claims as obvious over Durward and other references. See
Bungie, Paper 3 at 11.
4
Worlds filed identical motions in the1268 proceeding, the 1269 proceeding,
and the 1325 proceeding. See Appx394.
14
exclusively published and distributed by Activision. Appx2915(Recitals C-D).
In general, the DevPub Agreement includes provisions that govern the
responsibilities of both parties during the term of the contract. See, e.g.,
Appx2921-24(7, 7A) (outlining development-related responsibilities for each
party); Appx2928-29(10) (outlining development-related payment obligations).
The DevPub Agreement further includes other standard contractual provisions,
including representations and warranties by each of the parties, Appx2933-35(14),
and agreements to indemnify under certain circumstances, Appx2935-36(15).
2. Worldss Proposed Interpretation of the DevPub

Agreement
In its motion, Worlds pointed to certain provisions of the DevPub
Agreement that it contended evidenced a contractual opportunity for Activision
to control and fund the proceedings of the appealed patents. Appx397-99. In
particular, Worlds noted that, under the terms of Bungies development
responsibilities, Bungie was responsible for [c]onducting legal reviews of the
[Destiny] Products to ensure that all Intellectual Propertyare fully cleared for
use, which would be subject to Activisions prior review and approval.
Appx398 (citing Appx2924(7A.15(j))). Worlds also pointed to Bungies
warranty that, after reasonable investigation, the use, development, distribution
and publishing of intellectual property related to the Destiny Products shall not
infringe upon or violate the rights of, nor require the consent of, any other party.
15
Id. (citing Appx2933-34(14.1.2)). In addition, Activision agreed to pay
[d]evelopment [a]dvances for the development of the Destiny Products, which
would fully fund [Bungies] operations directly related to the development of the
[Destiny] Products (including overhead costs associated therewith), which
Bungie warranted would be used solely to fund the costs of creation and
development of the [Destiny] Products and otherwise cover day-to-day overhead
and operational expenses that are reasonably necessary and related to the creation
and development of the [Destiny] Products. Appx398-99 (citing
Appx2928(10.1); Appx2934(14.1.4)).
On November 13, 2014, Worlds sent a letter to Activision that indicated
Worldss intent to add the Destiny Products to the Worlds/Activision lawsuit filed
in 2012. Appx399 (citing Appx2944). Based on the above provisions, Worlds
contended that the letter triggered a requirement for Bungie to perform legal
reviews related to the Worlds patents for IP clearance and warranty of non-
infringement, which were contractually subject to Activisions prior review and
approval. Id. Moreover, according to Worlds, Activision and Bungie intended
for these legal reviews to be funded by Activisions development advances. Id.
Therefore, under Worldss interpretation, the term legal reviews encompassed
Bungies petitions for inter partes review of the appealed patents, and that any
legal reviews were to be funded by Activision through development advances
16
paid as part of operations directly related to the development of the Destiny
Products. See id. Worlds thus argued that the DevPub Agreement gave Activision
a contractual opportunity to control and fund Bungies petitions, and requested
discovery to seek evidence of actual control and funding. See id.
3. Bungies Opposition to Worldss Motion
In its opposition, Bungie maintained that it was solely responsible for the
cost and control of the inter partes review proceedings against the appealed patents.
Appx409-10. In response to Worldss assertions, Bungie countered that neither the
DevPub Agreement nor the Worlds/Activision lawsuit5 supported the contention
that Activision was an unnamed real party-in-interest or otherwise justified the
requested discovery. Appx409.
With regard to the DevPub Agreement, Bungie explained that Worldss
interpretation of garden-variety contract provisions was based on an erroneous and
illogical reading of the agreement. See Appx409; Appx412. In particular,
Worldss assertion that the DevPub Agreement provided sufficient evidence that
Activision was an unnamed real party-in-interest was based on the faulty
assumption that an inter partes review is a legal review under the terms of the
agreement. Appx414. Rather, Bungie noted the provision provided for legal
reviews of the [Destiny] Products, which, in the context of a standard

5
As noted by Bungie, neither the Destiny Products nor any other Bungie
product has been added to the Worlds/Activision lawsuit. See Appx410-11.
17
development agreement for a videogame, typically covers legal clearance reviews
that would be desired during development (e.g., reviewing the title, script, and
visual and audio assets to ensure that any appropriate rights have been obtained
and that they do not infringe any trademarks or copyrights). Appx414-15
(emphasis in original). This was a more reasonable reading of the provision,
especially given that the subject of Bungies petitions was Worldss patents, not
any of the Destiny Products. Id.
Bungie also noted the inconsistency in Worldss interpretation of legal
reviews in light of other provisions. See Appx415. Specifically, under the
indemnity provision, Bungie is solely responsible for costs relating to any defense
of third-party claims of patent infringement against the Destiny Products, and has
the right to assume control of any such defense, which would encompass both
invalidity and noninfringement defenses. Id. (citing Appx2935(15)). As
explained by Bungie, interpreting the term legal reviews in a way that would
give Activision the ability to control such defenses would be inconsistent with
Bungies rights under the indemnity provision. Id.
4. The Boards Decision on Worldss Motion
The Board denied Worldss motion for discovery. Appx432. In concluding
that Worlds did not meet its burden on the motion, the Board analyzed the parties
positions regarding the interpretation of the DevPub Agreement and the relied-
18
upon provisions. See Appx425-432. The Board noted that Worldss theory
hinges on the assertion that the [DevPub] Agreement allows Activision to control
the IPRs, because legal reviews for IP clearance and a warranty of non-
infringementinclude the filings of IPRs. Appx428-29. The Board found,
however, that a legal review of a Product under the DevPub agreement and other
provisions do not specify, require, or necessarily include filing an IPR against a
patent. Appx429; see also Appx430 (listing assumptions required for Worldss
interpretation). Thus, Worldss theory was nothing more than a mere possibility
that such a legal review includes filing IPRs that Activision could or does control,
and discovery was not justified. Appx429-32.
B. The Boards Decisions to Institute Inter Partes Review
Worlds filed a preliminary response in each of the proceedings responding to
Bungies petitions. See Appx434-78; Appx3815-50; Appx5005-58. The Board
instituted inter partes review of claim 1 of the 856 patent, claims 1-8, 10, 12, and
14-16 of the 501 patent, and claims 1-3, 7, 8, 12-18, and 20 of the 998 patent.
See Appx511; Appx3878-79; Appx5096.
1. Bungies Challenges of Claims 8 and 10 of the 501 Patent

and Claims 13-15 of the 998 Patent
In the 1319 proceeding, Worlds responded to Bungies challenge to claims
8 and 10 of the 501 patent by asserting that Funkhouser 93 failed to disclose the
limitations of claims 8 and 10. Appx5040. Specifically, Worlds contended that

19
Bungies reliance on Figure 11 of Funkhouser 93, showing books having been
omitted from the virtual environment, was misplaced because the Funkhouser 93s
optimization algorithm did not include a maximum number of objects or a
comparison of the number of objects to be displayed relative to a maximum
number. Appx5040-42. Instead, under Worldss viewpoint, the results of
Funkhouser 93s optimization algorithm shown in Figure 11 was the result of the
object size of the omitted books, not any consideration of a maximum number
of objects. Appx5042.
In the 1321 proceeding, Worlds did not separately respond to Bungies
challenge to claims 13-15 of the 998 patent. See Appx3838-39.
In its decision granting institution in the 1319 proceeding, the Board
rejected Worldss arguments that Funkhouser 93s optimization algorithm does
not include a maximum number of objects to be displayed, noting that claims 8
and 10 did not recite such a requirement. Appx5076-77. Rather, the Board
observed that the user-specified target frame rate in Funkhouser 93 teaches or
suggests a variable other than position and orientation that is used to filter objects
for display, as claim 8 requires, given that the specified target frame rate may
result in omission of objects from a display, and the frame rate results in a limit,
set at the client, on the objects that may be displayed, as recited by claim 10.
20
Appx5077 (citing Appx1929; Appx1933; Appx1935; Appx1936(Fig.11);
Appx5315-16(154, 156)).
The Board also found persuasive that a person of ordinary skill would have
had reason to combine the teachings of Funkhouser 93 with Funkhouser
[95]with a reasonable expectation of success. Id. (citing Appx4946-49;
Appx5312-15(146-52)). The Board, relying on the testimony of Bungies expert,
Dr. Zyda, noted that Funkhouser 95 and Funkhouser 93 were written by the
same author, and teach complementary ways to minimize data processing and
the burden on a computer displaying a virtual environment. Appx5077-78 (citing
Appx5313-15(147-50)). Thus, the Board found that [i]n the combined system,
the client would determine which objects to display based on the orientation of the
object, as taught in Funkhouser [95], and the clients performance capabilities and
the target frame rate, as taught in Funkhouser 93. Appx5078 (citing Appx5312-
13(146)).
In its decision granting institution in the 1321 proceeding, the Board
determined that Bungie had established a reasonable likelihood of prevailing in its
challenge to claims 13-15 based on Funkhouser 95, Marathon, and
Funkhouser 93. Appx3866. The Board credited Bungies evidence showing that
Funkhouser 95 display[s] user avatars and Funkhouser 93 omit[s] display of
books, which teaches or suggests the limitations of claims 13-15, and that one of
21
ordinary skill in the art would have combined Funkhouser [95] and Marathons
interacting users in a three-dimensional virtual environment using server-based
message culling and Funkhouser 93s omitting objects in a display in order to
further reduce processing requirements of client workstations. Appx3865 (citing
Appx3763-70).
2. Worldss Real Party-In-Interest Challenge
In each of its preliminary responses, Worlds repeated its arguments that
Activision was an unnamed real party-in-interest to the proceedings. See
Appx467-76; Appx3841-48; Appx5047-56. Worldss theory was largely based on
the same provisions invoked in its motion for discovery. See Appx468-73;
Appx3843-46; Appx5049-53. In addition, Worlds further contended that sections
18.1 and 18.2, relating to Activisions right of approval over any Change of
Control of Bungie, and right to designate one personas a non-voting observer
in all meetings of [Bungies] Board of Directors, provided further confirm[ation]
that Activision had at minimum the opportunity to control the proceedings.
Appx473; Appx3846-47; Appx5053-54.
In its decisions granting institution, the Board rejected Worldss arguments
that the DevPub Agreement was sufficient to raise an issue that Activision was an
unnamed real party-in-interest. See Appx511; Appx3878; Appx5095. The Board
explained that Worldss arguments were based on unreasonable assumptions and
22
interpretations of various sections of the DevPub Agreement, and proceeded to
explicitly address each of Worldss contentions. See Appx506-11; Appx3873-78;
Appx5091-95.
Namely, the Board reiterated that Worldss argument that the proceedings
constituted legal reviews of the Destiny Products under the DevPub Agreement
was premised on a faulty presumption. Appx507; Appx3874; Appx5092. In
addition, Worldss reliance on sections 18.1 and 18.2 failed to show any
relationship to Activisions ability to control the inter partes review proceedings,
especially in view of [t]he limited involvement in [Bungies] management that
these provisions afford Activision. Appx507-08; Appx3874-75; Appx5092-93.
The Board also rejected Worldss contention that provisions governing the
payment and use of development advances provided evidence that Activision
funded the proceedings. Appx508-09; Appx3875-77; Appx5093-94. In addition
to failing to show that the proceedings fell under the term legal reviews as used
in the DevPub Agreement, the Board noted that Worlds had not sufficiently
established that legal reviews of the [Destiny] Products under section 7A.15(j)
would even fall within permissible uses of the development advances as outlined
by the relevant provisions (e.g., creation and development of the [Destiny]
Products, and day-to-day overhead and operational expenses, such as office
lease, computers[,] employee salaries). Appx509 (citing Appx2928(10.1);
23
Appx2934(14.1.4)); Appx3876-77 (same); Appx5094 (same). Thus, the Board
concluded that Worldss arguments did not support a theory that the DevPub
Agreement gives Activision any opportunity to control the proceedings. See
Appx509; Appx3877; Appx5094.
C. Worldss Patent Owner Responses and Bungies Replies
Worlds filed a Patent Owner Response in each proceeding responding to
Bungies challenges and the Boards findings made in its institution decisions,
which was supported by the testimony of Mr. Pesce. See Appx524; Appx3893;
Appx5108; Appx3358-439. Bungie filed a Reply in each proceeding. See
Appx590; Appx3959; Appx5171.
1. Worldss Response to Bungies Challenges of Claims 8 and

10 of the 501 Patent and Claims 13-15 of the 998 Patent
In the 1319 proceeding, Worlds responded to Bungies challenges to claims
8 and 10 of the 501 patent by focusing on the alleged shortcomings of
Funkhouser 93. See Appx5138-42. First, Worlds contended that because
Funkhouser 93 failed to disclose avatars, Bungies argument that the omission
of books teaches or suggests the limitations of claims 8 and 10 was insufficient.
Appx5140. In addition, Worlds argued that the omission of books in
Funkhouser 93 was not a true omission of an object, but rather an adjustment of
the level of detailor texture on the bookshelf object. Appx5140 (emphasis
omitted). In other words, according to Worlds, the bookshelf was the object, and
24
the books merely reflected a texture that could be adjusted on the bookshelf. Id.
Thus, Worlds concluded that this adjustment of detail was not a filter of objects,
nor the result of a limit of objects that may be displayed. Appx5140-41. Worlds
further argued that the user-specified target frame rate disclosed in
Funkhouser 93 was not a client-side set limit on the avatars that may be displayed,
as recited in claim 10. See Appx5141.
In the 1321 proceeding, in addition to advancing the same arguments set
forth in the 1319 proceeding, Worlds specifically challenged the motivation to
combine Funkhouser 95 and Funkhouser 93. See Appx3915-24. In particular,
Worlds argued that cross-reference in Funkhouser 95 to Funkhouser 93, see
Appx1357, along with Dr. Zydas cross-examination testimony on this point, see
Appx4112-13(166), was insufficient to establish a reason to combine the
references. See Appx3921-24.
In its Replies, Bungie first responded to Worldss contention that the
obviousness challenge must fail because Funkhouser 93 does not disclose avatars
by noting that Funkhouser 95 was being relied upon for this feature. Appx3975;
Appx5186. In response to the contention that Funkhouser 93 does not disclose
omitting objects, just a reduction in texture, Bungie pointed to Figure 11 and its
description, which distinguishes between textures and omitted books:
25
Noticethe omission of texture on the bookshelves in Figure

11b1. Similarly, noticethe omission of books on bookshelves and
texture on doors in Figure 11 c1.
Appx5187 (citing Appx1935) (emphasis in original); Appx3976 (same).
In addition, Bungie noted that, [c]onsistent with the discussion of Figure
11, Funkhouser 93 expressly states that its optimization algorithm can omit entire
objects from the display by allowing levels of detail representing no polygons at
all, in which case only the most valuable objects are rendered so that the time
frame constraint is not violated. Appx5187 (citing Appx1931); Appx3976 (same).
Moreover, Bungie noted that Worldss argument that the user-specified target
frame rate was not a client-side set limit on the avatars that may be displayed, as
recited in claim 10, was directly at odds with Funkhouser 93s disclosure on this
point, as objectsassigned a no polygons at all detail levelwill result in them
being omitted form the display once the maximum number of objects displayable
within the maximum cost is exceeded. Appx5187 (citing Appx1931;
Appx1933); Appx3976 (same).
Finally, in the 1321 proceeding, Bungie responded to Worldss arguments
that there was no reason to combine Funkhouser 95 and Funkhouser 93, by
explaining that [b]cause the Funkhouser 93 level of detail determination occurs
separately from the field of view calculation demonstrated in both Funkhouser [95]
and Funkhouser 93, it would have been a simple matter to add the process taught
26
in Funkhouser 93 to the system described in Funkhouser 95. Appx3977 (citing
Appx4110-12(162, 164)).
2. Worldss Real Party-In-Interest Challenge
In each of its Patent Owner Responses, Worlds maintained its arguments
made in its motion for discovery and preliminary responses that Activision was an
unnamed real party-in-interest to the proceedings. See Appx467; Appx3841;
Appx5047.
D. The Boards Final Written Decisions
The Board issued its final written decision in the 1264 proceeding on
November 10, 2016, its final written decision in the 1319 proceeding on
December 6, 2016, and its final written decision in the 1321 proceeding on
November 28, 2016.6
1. The 1264 Proceeding
The Board found that Bungie had shown by a preponderance of the evidence
that claim 1 of the 856 patent is unpatentable. Appx115. The Board also
6
The Board also issued final written decisions in the related 1268 proceeding
on November 30, 2016, the 1269 proceeding on November 28, 2016, and
the 1325 proceeding on November 28, 2016. See Bungie, IPR2015-01268, Paper
44; Bungie, IPR2015-01269, Paper 42; Bungie, IPR2015-01325, Paper 42. Like
the proceedings on appeal, the Board determined that the DevPub Agreement
failed to provide sufficient evidence that Activision was a real party-in-interest.
See Bungie, IPR2015-01268, Paper 44 at 127-28; Bungie, IPR2015-01269, Paper
42 at 125-26; Bungie, IPR2015-01325, Paper 42 at 61. Worlds did not appeal
those decisions of the Board.
27
reiterated its conclusion that there was insufficient evidence to establish that
Activision was an unnamed real party-in-interest. Appx106-07.
Worlds does not challenge the Boards findings in the 1264 proceeding
beyond the Boards determination that there was insufficient evidence establishing
that Activision was an unnamed real party-in-interest.
that claims 1-8, 10, 12, and 14-16 of the 501 are unpatentable. Appx267. Worlds
does not challenge the Boards findings in the 1319 proceeding beyond the
Boards determination that dependent claims 8 and 10 are unpatentable, and that
there was insufficient evidence establishing that Activision was an unnamed real
party-in-interest.
With regard to claims 8 and 10, the Board addressed arguments raised in
Worldss Patent Owner Response and Bungies Reply. See Appx232-38. First, the
Board addressed the parties disagreement over whether the combination of
Funkhouser 93s omitting objects and Funkhouser[ 95s] avatars teaches or
suggests filtering the other user avatars, as recited in claims 8 and 10. Appx232.
In rejecting Worldss contention that Funkhouser 93 does not teach omitting
avatars, the Board determined that the issue was whether the combination of
Funkhouser 95, which the Board found teaches the claimed other user avatars,
28
and Funkhouser 93 teaches the limitations of claims 8 and 10, not whether
Funkhouser 93 alone discloses those limitations. Appx233-34 (citing Appx 1351;
Appx1359(Plate II)).
The Board also found that Funkhouser 93 teaches the omission of objects
from the display under certain circumstances. Appx234. As support, the Board
noted the distinction between objects (i.e., book) and texture made in the
Funkhouser 93s description of Figure 11, and the disclosure of a level of detail
representing no polygons at all, which demonstrate that Funkhouser 93 teaches
that objects that cannot be rendered within the target frame rate, even at the lowest
detail or accuracy level, may be excluded or omitted from the display. Appx234-
35 (citing Appx1931; Appx1935-36(Fig.11); Appx5187). Thus, the Board
concluded that the combination of Funkhouser 95 and Funkhouser 93 teaches or
suggest filtering the other user avatars as recited in claims 8 and 10. Appx235.
The Board also addressed the parties dispute over whether Funkhouser 93
teaches filtering the other user objects displayed on the client device display,
as recited in claim 10. Appx235. For reasons similar to above, the Board found
that, based on the evidence, Funkhouser 93s disclosure of a level of detail
representing no polygons at all and an optimization algorithm that results in
books on a bookshelf being omitted as a result of a selection made by the local
user teaches filtering the other user objects displayed on the client device
29
display. Appx236-37 (citing Appx1931; Appx4944; Appx4946; Appx4948).
And, based on the uncontested showing that Funkhouser 95 teaches avatars, the
Board concluded that the combination of Funkhouser 95, Sitrick, and
Funkhouser 93 teaches or suggests limit of the other user avatars displayed on the
client device display, as recited in claim 10. Appx237.
that claims 1, 2, 7, 8, 12-18, and 20 of the 998 are unpatentable. Appx203.
Worlds does not challenge the Boards findings in the 1321 proceeding beyond
the Boards determination that dependent claims 13-15 are unpatentable, and that
there was insufficient evidence establishing that Activision was an unnamed real
party-in-interest.
In its discussion of claims 13-15, the Board addressed the specific arguments
raised in Worldss Patent Owner Response and Bungies Reply. See Appx181-91.
Specifically, the Board addressed similar arguments raised by both parties in
the 1319 proceeding regarding whether Funkhouser 93 teaches the omission of
objects (rather than simply an omission of texture), and whether the combination of
Funkhouser 95 and Funkhouser 93 teaches the omission of avatars. See
Appx182-85. The Board also addressed similar arguments regarding whether the
combination of Funkhouser 95, Marathon, and Funkhouser 93 teaches or
30
suggests to limit the number of remote user avatars, as recited in claims 13-15.
See Appx185-88.
The Board further addressed the parties arguments on whether a person of
ordinary skill in the art would have been motivated to combine Funkhouser 95,
Marathon, and Funkhouser 93. Appx188. The Board found that Bungie had
articulated a sufficient rationale to combine the references. Appx189 (citing
Appx3767-68). Specifically, crediting both the testimony of Dr. Zyda and Mr.
Pesce, the Board found that the evidence established that it would have been
obvious to one of ordinary skill in the art to combine Funkhouser 93s
optimization approach with the system taught in Funkhouser 95,resulting in the
client determining which objects, including other user avatars, to display based on
the orientation of the client avatar, on the performance capabilities of the client
computer, and desired frame rate of the displayed environment as selected by the
user. Appx189-90 (citing Appx2704-05(215:19-216:25); Appx3767-68;
Appx4110-11(162-63)). In addition, the Board determined that Dr. Zydas
testimony provide[d] sufficient support for [Bungies] articulated reasoning with
rational underpinnings to support the motivation to combine the references.
Appx190 (citing Appx4110-11(162-63)).
31
SUMMARY OF THE ARGUMENT
The Board did not commit reversible error in its final written decisions, and
this Court should decline Worldss invitation to overturn based on its narrow view
of the prior art. Contrary to the theories that Worlds presents, the Board engaged
in a proper obviousness analysis, appreciating the prior art for what it taught as a
whole. The Boards findings were well-reasoned and supported by substantial
evidence. This Court should not second guess the Boards factual findings and the
obviousness determinations that those findings support.
In contrast to the Boards analysis, Worldss challenges ignore the teachings
of the prior art combinations by improperly attacking Funkhouser 93 individually
for its failure to disclose avatars. Worlds also urges that Bungie shifted theories
on the teachings of Funkhouser 93 despite Bungies consistent position that
Funkhouser 93 teaches the omission of objects in its optimization algorithm.
Moreover, Worlds requires the Board to have specifically evaluated the
importance of avatars relative to the objects disclosed in Funkhouser 93 in order
to arrive at its findings, even in the face of substantial evidence that the prior art
combination suggests the omission of avatars under certain circumstances.
Furthermore, despite Worldss assertions, the Board articulated a sufficient
rationale to combine the prior art, which was supported by substantial evidence.
Worldss argument that Funkhouser 93 teaches away from the omission of avatars
32
fails to diminish this conclusion. Therefore, Worldss arguments fail to undercut
the Boards reasoned findings as to the obviousness of claims 8 and 10 of the 501
patent and claims 13-15 of the 998 patent and the substantial evidence that
supports those findings, and this Court should affirm the Boards decisions.
In addition, as a threshold matter, the Boards determination that Bungie
correctly named itself as the sole real party-in-interest for the purposes of
determining timeliness under 35 U.S.C. 315(b) is not subject to review under this
Courts binding precedent. In any event, should this Court find that the Boards
determination is reviewable, this Court should affirm the Boards decision because
Worlds is estopped from raising the issue in this appeal under issue preclusion.
Moreover, even if Worlds is not estopped from raising this issue, this Court should
affirm the Boards findings as supported by substantial evidence and its decision as
not an abuse of discretion.
STANDARD OF REVIEW
Obviousness is a question of law based on findings of fact, and this Court
reviews the Boards underlying factual determinations for substantial evidence.
Randall Mfg. v. Rea, 733 F.3d 1355, 1362 (Fed. Cir. 2013). The Boards
determination as to what a reference teaches is a question of fact. Rapoport v.
Dement, 254 F.3d 1053, 1060-61 (Fed. Cir. 2001). Whether there would have been
a motivation to combine multiple references at the time of invention is also a
33
question of fact. S. Ala. Med. Sci. Found. v. Gnosis S.P.A., 808 F.3d 823, 826 (Fed.
Cir. 2015). Accordingly, these findings are reviewed for substantial evidence.
Allied Erecting & Dismantling Co. v. Genesis Attachments, LLC, 825 F.3d 1373,
1380 (Fed. Cir. 2016). A finding is supported by substantial evidence if a
reasonable mind might accept the evidence as adequate to support the conclusion.
Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938).
The Boards determination to institute an inter partes review is final and
non-appealable. 35 U.S.C. 314(d). A determination that a petitioner has
satisfied the timeliness requirement of 35 U.S.C. 315(b) is part of the Boards
determination to institute, and therefore, is also non-appealable. Achates Reference
Publg, Inc. v. Apple, Inc., 803 F.3d 652, 658 (Fed. Cir. 2015). Nevertheless, the
Boards institution power is discretionary, 35 U.S.C. 314(a), and discretionary
decisions are reviewed for an abuse of discretion, Pierce v. Underwood, 487 U.S.
552, 558-59 (1988). Moreover, the Boards rulings on discovery, like other
evidentiary rulings, are reviewed for abuse of discretion. See Chen v. Bouchard,
347 F.3d 1299, 1307 (Fed. Cir. 2003).
ARGUMENT
I. The Board Correctly Determined Claims 8 and 10 of the 501 Patent

and Claims 13-15 of the 998 Patent Unpatentable
Worlds does not challenge on appeal: (1) the Boards determinations
regarding the unpatentability of claim 1 of the 501 patent based on
34
Funkhouser 95 and Sitrick, and (2) the Boards determinations regarding the
unpatentability of independent claim 2 of the 998 patent based on Funkhouser 95
and Marathon, including the references specific teachings in relation to the
limitations recited in the independent claims. Rather, in its appeal of the Boards
determinations that dependent claims 8 and 10 of the 501 patent and dependent
claims 13-15 the 998 patent are unpatentable, Worlds is only disputing the
Boards findings related to the teachings of Funkhouser 93 and its findings related
to the combination of Funkhouser 95 and Funkhouser 93.
As explained below, substantial evidence supports the Boards findings that
the combination of Funkhouser 95 and Funkhouser 93 teaches the features of
these claims, and that a person of ordinary skill in the art would have been
motivated to combine the references to arrive at the claimed invention. Therefore,
the Boards decisions that: (1) claims 8 and 10 of the 501 patent are unpatentable
in view of Funkhouser 95, Sitrick, and Funkhouser 93, and (2) claims 13-15 of
the 998 patent are unpatentable in view of Funkhouser 95, Marathon, and
Funkhouser 93 should be affirmed.
A. Substantial Evidence Supports the Boards Findings that the

Prior Art Teaches the Limitations of Claims 8 and 10 of the 501
Patent and Claims 13-15 of the 998 Patent
Worlds does not dispute, nor did it dispute in the proceedings below, that
Funkhouser 95 discloses a system where users are represented by entities (i.e.,
35
avatars) in a virtual environment. See, e.g., Appx184; Appx234; Appx739; Blue
Br. 15-16. Moreover, as explained by Bungie and accepted by the Board,
Funkhouser 95 specifically describes a client-server system for multi-user virtual
environments that supports real-time visual interaction between a large number
of users in a shared 3D virtual environment using server-based visibility
algorithmsin order to reduce the number of messages required to maintain the
virtual environment. Appx3732 (citing Appx1351); Appx4923 (same); see also
Appx148-49 (citing Appx1351; Appx1353; Appx1357(Fig.12)); Appx225 (same).
In its analysis of claims 8 and 10 of the 501 patent and claims 13-15 of
the 998 patent, the Board found that Funkhouser 93 teaches not only the
reduction of texture in an object, but also the omission of objects, from a virtual
display under certain circumstances; namely, in order to maintain a target frame
rate. See Appx184-85; Appx234. As support for its findings, the Board cited to
Figure 11 of Funkhouser 93 and noted its description expressly distinguished
between textures and omitted books (i.e., omission of texture on the bookshelves
in Figure 11b1and omission of books on bookshelves and texture on doors in
Figure 11c1). Appx185 (citing Appx1935; Appx3976) (emphasis in original); see
also Appx234-35 (citing Appx1935; Appx5187). In addition, the Board
considered Funkhouser 93s disclosure that the level of detail in its optimization
algorithm could include no polygons at all further demonstrated that
36
Funkhouser 93 teaches that objects that cannot be rendered within the target
frame rate, even at the lowest detail or accuracy level, may be excluded or omitted
from the display. Appx184-85 (citing Appx1931; Appx1935-36; Appx727(55:1-
7); Appx863-64(191:14-192:12)); Appx234 (same). The Board therefore found
that these disclosures support Funkhouser 93 teaching or at least suggesting
filtering objects where they cannot be rendered at the target frame rate. Appx185;
Appx235. Specifically, the Board found that Funkhouser 93 teaches that its
optimization results in booksbeing omitted (i.e., limit of remote user objects) as
a result of a selection made by the local user (i.e., user selection) and the
optimization algorithm (i.e., based on computing resources or user selection).
Appx185 (citing Appx1929; Appx1935); Appx235-36 (same). On this basis, the
Board concluded that the combination of Funkhouser 93s optimization algorithm
with the multi-user environment of Funkhouser 95 would result in the filtering or
limiting of avatars from the display as recited in claims 8 and 10 of the 501
patent and claims 13-15 of the 998 patent. See Appx185; Appx189; Appx235;
Appx237.
As discussed in further detail below, contrary to Worldss contentions that
there was a lack of record evidence to support the Boards conclusions, Blue Br.
27, this reasoned analysis represents an articulation of the Boards findings that is
substantially supported by evidence as required by this Court. See In re Nuvasive,
37
842 F.3d 1376, 1382 (Fed. Cir. 2016) (requiring the Board make necessary
findings that have an adequate evidentiary basis and articulate a satisfactory
explanation).
1. Worlds Ignores the Prior Art Combination, Improperly

Attacks Funkhouser 93 Individually
In an attempt to avoid the reasoned findings of the Board, Worlds first
focuses its efforts solely on the disclosure of Funkhouser 93. See Blue Br. 31. In
particular, Worlds contends that Funkhouser 93 does not disclose or suggest the
features of the challenged claims because Funkhouser 93 fails to disclose the
concept of avatars. Id. Worldss argument, however, fails to appreciate the
nature of the obviousness inquiry and was correctly rejected below by the Board.
See Appx182-84; Appx232-34. Specifically, as noted by the Board, Worldss
argument attacks Funkhouser 93 individually, rather than focusing on whether the
combination of Funkhouser 95 and Funkhouser 93 teaches the limitations of the
claims. See Appx184 (citing In re Merck & Co., 800 F.2d 1091, 1097 (Fed. Cir.
1986)); Appx233 (same). Thus, whether Funkhouser 93 explicitly discloses
avatars is irrelevant as Funkhouser 95 was relied upon for the teaching, and it
was the combination of the references that the Board reached its conclusion that
the prior art teaches the features of the challenged claims. See Appx184 (citing
Appx1351; Appx1359(Plate II)); Appx233-34 (same).
38
In a similar vein, Worlds goes on to reason that, because Funkhouser 93
fails to disclose how to apply its optimization technique toavatars, the Boards
determinations that the combination teaches the elements of the challenged claims
are unsupported by the evidence. Blue Br. 31-32. Instead, Worlds suggests the
Board concluded that Funkhouser 93 teaches omitting objects from the display
under certain circumstances[,] Appx0184, and then leap[ed] from that statement to
conclude that Funkhouser [95], Marathon, and Funkhouser 93 teaches or
suggestsclaims 13-15 of the 998 patent. Blue Br. 32 (expressing similar
reasoning for claims 8 and 10 of the 501 patent). Under Worldss view, the
Boards analysis is expressly missing any discussion of the certain circumstances
under which an avatar would be among the objects omitted. Id.
With the above reasoning, however, Worlds attempts to draw sharp
conclusions from a single, isolated portion of the record. For instance, in the
sentence immediately following the Boards statement that Funkhouser 93 teaches
omitting objects under certain circumstances, the Board explains:
As [Bungie] points out, Funkhouser 93 makes clear the possibility

that the target frame time [may] not [be] long enough to render all
potentially visible objects even at the lowest level of detail and
explains that its approach can handle such a situation if levels of
detail representing no polygons at all are allowed, such that only
the most valuable objects are rendered.
39
Appx184-85(citing Appx1931; Appx1935; Appx1936(Fig.11)); see also
Appx234 (same).
This is an explicit identification of the certain circumstances that Worlds
demands: an avatar may be omitted in the multi-user virtual environment of
Funkhouser 95 in combination with the optimization algorithm of Funkhouser 93
when the target frame time is not long enough to render all potentially visible
objects, including avatars, even at the lowest level. See Appx185 (finding Figure
11 and the figure itself to lend additional support to Funkhouser 93 teaching or at
least suggesting omitting objects where they cannot be rendered at the target frame
rate); Appx235 (same); Appx184 (finding Funkhouser 95 teaches the claimed
avatars; citing Appx1351; Appx1359(Plate II)); Appx233-34 (same). Even if the
Boards explanation of the certain circumstances were imperfectly laid out as
Worlds insists, it certainly can be discerned from a reasonable reading of the
Boards analysis, and the evidence supporting that analysis, as a whole. See In re
Nuvasive, 842 F.3d at 1382 (Although we do not require perfect explanations, we
may affirm the [Boards] findings if we may reasonably discern that it followed a
proper path, even if that path is less than perfectly clear.).
2. Bungies Theory on the Teaching of Funkhouser 93

Remained Consistent
Worlds next attempts to establish that a lack of evidence exists by
contending that Bungies theories on the teachings of Funkhouser 93 shifted
40
during the proceedings. Blue Br. 32. According to Worlds, Bungies initial
reliance on Figure 11 of Funkhouser 93 in its petitions, followed by a reference to
Funkhouser 93s teaching of a level of detail representing no polygons at all in
its Replies, constituted a shift that resulted in no evidence on how this conceptual
no polygons option would have been understood by a person of ordinary skill in
the art, or how it would have been implemented in an environment containing
avatars.7 Blue Br. 33-37. Yet again, Worldss argument is premised on faulty
reasoning and a failure to take into account the Boards actual findings, which are
supported by substantial evidence.
Contrary to Worldss characterization that Bungies theory shifted,
Bungies position on the teachings of Funkhouser 93 remained consistent:
Funkhouser 93 teaches an optimization algorithm that may exclude some objects
from the display entirely if they exceed the maximum number the computer is
capable of displaying at the desired frame rate. See Appx4109(159); Appx5311-
12(145). In its petitions, as support for this notion, Bungie pointed to Figure 11
and its corresponding discussion, which showed that, at the highest target frame
rate, the display resulted in the omission of books on bookshelves. Appx3765;
Appx4944-45; see also Appx4109(159); Appx5312(145).
7
If Bungies discussion on this point rose to a true shift in theory, then
Worlds could have objected to the Board as constituting a new argument. It did
not do so.
41
In its Patent Owner Response, Worlds attempted to characterize the
omission of the books shown in Figure 11 as being merely a reduction in texture of
the bookshelf. Appx3919; Appx5140. In response to this theory, Bungie noted
that Figure 11 distinguishes between texture reduction (e.g., texture on the
bookshelves and texture on doors) and object omission (e.g., books on
bookshelves). Appx3976; Appx5186-87. And, as further support that Worldss
interpretation of Figure 11 was incorrect, Bungie then followed that [c]onsistent
with the discussion of Figure 11, Funkhouser 93 expressly states that its
optimization algorithm can omit entire objects from the display when levels of
detail representing no polygons at all are allowed. Appx3976 (emphasis added);
see also Appx5187.
The Board considered both parties arguments and concluded that the
evidence supported a finding that Funkhouser 93 teaches the omission of objects
as part of its optimization algorithm, citing to Figure 11 and the express disclosure
that a level of detail can include no polygons at all. See Appx184-85; Appx234-
35. That the Boards determination was contrary to Worldss theory is irrelevant
to this appeal (even if that theory is plausible, which Bungie does not concede)
because the Boards determination was reasonable and supported by substantial
evidence. See In re Jolley, 308 F.3d 1317, 1320 (Fed. Cir. 2002) ([W]e will not
42
find the Boards decision unsupported by substantial evidence simply because the
Board chose one conclusion over another.).
3. The Board Was Not Required to Evaluate the Importance

of Avatars Relative to Other Objects
Worlds next focuses on Funkhouser 93s no polygons at all approach and
attempts to isolate this disclosure by contending that no evidence exists to
establish a relative importance between avatars.and objects such as bookshelves,
doors, and chairs. Blue Br. 37. According to Worlds, Funkhouser 93 simply
doesnt give you the tools or the ability to weigh the relative value of avatar versus
object.8 Blue Br. 38.
Once again, however, Worlds misses the point of the Boards determination,
which is based on the combination of Funkhouser 95 and Funkhouser 93. As
stated above, substantial evidence supports that an avatar may be omitted in the
multi-user virtual environment of Funkhouser 95 in combination with the

8
Worldss argument on this point is puzzling in light of its later contention that
Funkhouser 93 teaches away from the omission of avatars. See Blue Br. 40-41.
There, Worlds argues Funkhouser 93 expressly teaches that some objects may
have inherent importance, and points to considerations that Funkhouser 93
identifies as part of an assignment of importance, including that enemy robots
might be most important. Blue Br. 40 (citing Appx1932). Worlds then concludes
that Funkhouser 93 teaches the most important objects are those with which the
user may interact and suggests this teaches away from omitting avatars. Blue
Br. 40-41. How Worlds can contend that Funkhouser 93 simply doesnt give you
the tools or the ability to weigh the relative value of avatar versus object in one
instance, yet contend that Funkhouser 93 discusses the importance of various
objects so extensively as to teach away from omitting avatars in another is
unexplained, but calls into doubt both theories.
43
optimization algorithm of Funkhouser 93 when the target frame time is not long
enough to render all potentially visible objects, including avatars, even at the
lowest level. See supra section I.A.1. Indeed, when discussing this point during
oral argument, the Board appreciated Funkhouser 93s teaching of object omission
to achieve a target frame time, as applied to the large number of users in a shared
3D virtual environment of Funkhouser 95, provided evidence for a determination
that an avatar may be omitted in certain circumstances:
JUDGE EASTHOM: [S]uppose there is a bunch of people

now, a bunch of avatars, if you will, in your field of view, and more
and more come in this field of view but sooner or later you are going
to exceed the frame rate, right, you cant handle all of that, and then
Funkhouser 93 says, well, if you cant handle all of that just lop some
of them off, dont give them all of the information.
MR. HELGE: In that regard, Your Honor, what Funkhouser 93
says, and, again, at best we can point to page 249 [i.e., no polygons
at all], what Funkhouser 93 says is display the most valuable objects.
What Funkhouser [93] says is only the most valuable objects will be
displayed. But Funkhouser 93 doesnt give you the tools to tell you
how to make that evaluation.
Now, if I have more avatars than I can manage to hit a frame
rate, maybe the first thing that drops is the podium.
JUDGE EASTHOM: Well, I mean, it would seem the obvious
place to do it would be if you are just limiting them
[Funkhouser] 95 is limiting them to a field of view. The ones on the
44
very edge of the field of view, those would be the least favorable ones,
it would seem to me.
You wouldnt try to squeeze everybody in the whole frame so
you just keep the ones that are, you know, not on the edge of the field
of view, I would say.
Appx753-54(81:20-82:20); see also Appx744(72:8-14) (questioning
Worldss argument as piecemeal and suggesting the combination of
Funkhouser 95s avatars with Funkhouser 93s teaching of omitting objects
would perhaps suggest omitting avatars); Appx752(80:6-23);
Appx756(84:17-25).
Moreover, as noted by Worlds, see Blue Br. 40, Funkhouser 93
expressly describes a number of potential qualitative factors that may be
included in determining importance of an object in its optimization
algorithm (e.g., an objects inherent importance or an objects position on
the screen), supporting that Funkhouser 93 provides a flexible approach on
the assignment of value. Appx1932; see also Appx1930 (stating that the
optimization algorithm can be applied to a wide variety of problems that
require images to be displayed in a fixed amount of time); Outdry Techs. v.
Geox S.P.A., No. 2016-1769, slip op. at 7 (Fed. Cir. June 17, 2017) (stating
an agencys decision will be upheld if its path may reasonably be
discerned).
45
Accordingly, because substantial evidence supports the Boards
findings that the combination of Funkhouser 93s optimization algorithm
with the multi-user environment of Funkhouser 95 teaches the limitations of
claims 8 and 10 of the 501 patent and claims 13-15 of the 998 patent, the
Boards determinations should be affirmed.
B. Substantial Evidence Supports the Boards Findings that a Person

of Ordinary Skill in the Art Would Have Combined the Prior Art
Worlds also asserts the Board failed to provide any reasoning for combining
Funkhouser 95 and Funkhouser 93. Blue Br. 43. To the extent that Worlds even
disputed whether there was a reason to combine Funkhouser 95 and
Funkhouser 93, the Board articulated a satisfactory explanation and cited to
substantial evidence for its determination that a person of ordinary skill in the art
would have had reason to combine Funkhouser 95 and Funkhouser 93.
1. The Board Articulated a Sufficient Rationale to Combine

the Prior Art
(1) The 1321 Proceeding
In the 1321 proceeding, Worlds specifically argued that a person of
ordinary skill would not have been motivated to combine Funkhouser 95 and
Funkhouser 93 in its Response. See Appx3921. On appeal, Worlds contends that
the Board failed to articulate a sufficient rationale for combining Funkhouser 95
and Funkhouser 93 because [t]he Boardgenerally endorsed [Bungies] theory,
46
without issuing its own specific findings on the alleged reason to combine the
references. Blue Br. 44.
In its decision, the Board specifically addressed the parties evidence and
arguments on the motivation to combine Funkhouser 95 and Funkhouser 93.
Appx188-90. In particular, the Board found that Bungie had advance[d] [a]
specific rationale for the combination in its petition. Appx188 (citing Appx3767-
70). Moreover, on the basis of the evidence as a whole, the Board also rejected
Worlds arguments that no motivation existed because Dr. Zyda initially failed to
recall Funkhouser 95s cross-reference to Funkhouser 93. See Appx189-90
(finding the inconsistency does not persuade us to disregard or entitle little weight
to his testimony).
The Board then made specific findings that Funkhouser 93s level of detail
determination is a distinct process from the field of view calculation of
Funkhouser 95, and therefore, it would have been a simple matter to add the
process taught in Funkhouser 93 to the system described in Funkhouser [95].
Appx189 (citing Appx3977). The Board specifically credited the testimony of
Worldss expert as agreeing that the optimization objectives of both
Funkhouser 93 and Funkhouser 95 are not incompatible. Appx190 (citing
Appx2704-05(215:19-216:25)). The Board further agreed with Bungie, stating:
47
[I]t would have been obvious to one of ordinary skill in the art
to combine Funkhouser 93s optimization approach with the system
taught in Funkhouser [95], resulting in the client determining
which objects, including other user avatars, to display based on [1]
the orientation of the client avatar, [2] on the performance
capabilities of the client computer, and [3] desired frame rate of the
displayed environment as selected by the user.
Appx189 (citing Appx4110-11(162-63)) (emphasis added).
In other words, the Board specifically found that the reason to combine
Funkhouser 95 and Funkhouser 93 was to provide a client system that determined
which objects, including avatars, to display based on the additional parameters of
the computers performance capabilities and a desired frame rate.
In its determinations, the Board also made clear that it found that paragraphs
162-163 of Dr. Zydas testimony provided sufficient support for [Bungies]
articulated reasoning with rational underpinnings to support the motivation to
combine the references. Id. And, contrary to Worldss contentions that these
portions are tainted with conclusory language, Blue Br. 46, this testimony
provides substantial evidence supporting the Boards reasoned determination that a
person of ordinary skill in the art would have reason to combine Funkhouser 95
and Funkhouser 93. Appx4110-11(162-63). In particular, Dr. Zyda states:
163. Both Funkhouser [95] and Funkhouser 93 describe

ways to minimize the amount of data that must be processed by a
48
virtual reality system, at least in part to reduce the burden on the

computer displaying the virtual environment. Funkhouser [95]
describes a network infrastructure for such a system, including ways
to optimize the system to shift some of the processing burden away
from the client workstations and enable more affordable, multi-user
visual simulation systems [that] can be built using primarily low-cost
client workstations. [Appx1353]. In Funkhouser [95], the burden
on client workstations is reduced by filtering data at the server level,
reducing the amount of data that the client receives and must process.
Funkhouser 93 provides a similar technique to reduce client
workstation burden, teaching a way to process virtual environment
data to determine the appropriate qualitative and quantitative
restrictions to apply to the display of that data for achieving a desired
frame rate. Id.
Appx4111(163) (emphasis added).
The above illustrates that both Funkhouser 95 and Funkhouser 93
teach ways to minimize the amount of data that must be processed by a
virtual reality system, at least in part to reduce the burden on the computer
displaying the virtual environment. Appx4111(163). Funkhouser 95
reduces that clients processing burden at the server level by filtering update
messages to the client. Id. Funkhouser 93 reduces the clients processing
burden at the client level by processing virtual environment data in a way
that achieves a desired frame rate. Id. Thus, that Funkhouser 93 provides a
49
technique similar to Funkhouser 95 to further reduce the processing burden
on the client lends additional evidentiary support to the Boards
determination that a person of ordinary skill in the art would have been
motivated to combine Funkhouser 95 and Funkhouser 93. Cf. Nike, Inc. v.
Adidas AG, 812 F.3d 1326, 1337 (Fed. Cir. 2016) (affirming the Boards
determination that a person of ordinary skill in the art interested in
Nishidas preference to minimize waste in the production process would
have logically consulted the well-known practice of flat-knitting, which
eliminates the cutting process altogether). That the Board endorse[d]
Bungies theory, as asserted by Worlds, see Blue Br. 44, was not improper
as the Board engaged in reasoned decision-making, articulated its analysis,
and made clear what evidence it had relied on for its findings. See Outdry
Techs., No. 2016-1769, slip op. at 10 (holding the Board provided adequate
explanation for finding motivation to combine when the Board articulated
[petitioners] arguments with evidentiary support and expressly adopted
them).
Finally, Worlds contends that the Board improperly gave no
consideration to the fact that Funkhouser [i.e., the individual] saw a different
50
relationship between his techniques than the one espoused by Bungie. 9
Blue Br. 48 (citing Appx3400-01). The Board, however, reviewed the
evidence presented by Worlds and chose not to credit it, which it was free to
do. See Skky, Inc. v. MindGeek, S.A.R.L., No. 2016-2018, slip op. at 13 (Fed.
Cir. June 7, 2017) (finding no error in Boards decision not to credit patent
owners expert evidence simply because patent owner offered it, noting
[w]e may not reweigh this evidence on appeal).
Accordingly, because substantial evidence supports the Boards
findings that a person of ordinary skill in the art would have been motivated
to combine Funkhouser 95 and Funkhouser 93, the Boards obviousness
determination should be affirmed.
9
Worlds asserts that Funkhouser 95s cross-reference to Funkhouser 93 is
limited to Funkhouser 93s use of factors as a technique for evaluating the
optimal set of messages to be communicated in Funkhouser 95. Blue Br. 48
(citing Appx1357). This is based on an incomplete and inappropriately limited
reading of the section. Immediately following this discussion, Funkhouser 95
describes that time critical computing algorithms (i.e., Funkhouser 93s method)
can also be useful for behavior simulation in clients, going on to state: By
allowing clients to choose a behavioral model to simulate for each remote entity
dynamically based on its perceptible importance to local entities, we can further
reduce the processing requirements of client workstations. Appx1357 (emphasis
added); see also Appx3769.
51
(2) The 1319 Proceeding
In the 1319 proceeding, Worlds did not specifically contest Bungies
evidence that a person of ordinary skill in the art would have been motivated to
combine Funkhouser 95 and Funkhouser 93 in its Response. See Appx5138-42.
Thus, when the Board reached its final determination, Bungies position that a
person of ordinary skill in the art would have been motivated to combine
Funkhouser 95 and Funkhouser 93 was not in dispute. See Personal Web Techs.,
LLC v. Apple, Inc., 848 F.3d 987, 992 (Fed. Cir. 2017) (explaining the amount of
explanation needed will vary, depending onthe issues raised in the record);
In re Nuvasive, 842 F.3d at 1382 (explaining the Board must make a finding of a
motivation to combine when it is disputed); In re Nuvasive, Inc., 841 F.3d 966,
972-73 (Fed. Cir. 2016) (finding notice of reliance on a prior art figure provided in
one proceeding failed to provide notice of that figure in related, but distinct,
proceeding).
Nevertheless, the Board determined that Bungie provided substantial
evidence to support a motivation to combine Funkhouser 95 and Funkhouser 93.
See Appx5077-78. In particular, the Board credited Dr. Zydas testimony that
Funkhouser 95 and Funkhouser 93 were written by the same author, a well-
known researcher in the field of virtual reality and graphical displays, and teach
complementary ways to minimize data processing and the burden on a computer
52
displaying a virtual environment. Id. (citing Appx4946-49; Appx5312-15(147-
52)). In its final written decision, the Board addressed the parties arguments on
disputed issues and, for those issues not in dispute, the Board found that Bungies
evidence and testimony were persuasive and adopted its evidence and reasoning as
its own, including Bungies evidence supporting a rationale to combine the
references. See Appx237-38 (citing Appx4943-49). Thus, substantial evidence
supports the Boards findings that a person of ordinary skill in the art would have
been motivated to combine Funkhouser 95 and Funkhouser 93, and the Boards
obviousness determination should be affirmed.
2. Funkhouser 93 Does Not Teach Away from Omitting

Avatars from Display
Worlds contends that Funkhouser 93 [i]n [f]act [t]eaches [a]way [f]rom
[o]mitting [a]vatars [f]rom [d]isplay.10 Blue Br. 40-41. As its basis for this
assertion, Worlds relies on Funkhouser 93s teaching that some types of object[s]
may have inherent importance, including enemy robots, which might be
most important. Blue Br. 40 (citing Appx1932). Thus, Worlds concludes that
Funkhouser 93 teaches that the most important objects are those with which the
user may interact, suggesting that Funkhouser 93 teaches away from the
10
Worlds characterizes this argument as a teaching away in its heading, but is
careful not to explicitly state that Funkhouser 93 does provide a teaching away
within the body. See Blue Br. 40-41. Worlds made no teaching away argument
below.
53
omission of avatars. See Blue Br. 40-41. Funkhouser 93 mere suggestion,
however, that an enemy robot might be most important does not rise to the level
of teaching a person of ordinary skill in the art away from omitting an avatar no
matter the circumstance. See Meiresonne v. Google, Inc., No. 2016-1755, slip op.
at 6 (Fed. Cir. Mar. 7, 2017) (A reference that merely expresses a general
preferencebut does not criticize, discredit, or otherwise discourage investigation
into the claimed invention does not teach away. (internal quotations omitted)).
Thus, Worldss teaching away argument fails to undercut the substantial
evidence supporting the Boards findings that a person of ordinary skill in the art
would have been motivated to combine Funkhouser 95 and Funkhouser 93.
II. The Board Correctly Determined Bungie Was the Sole Real Party-In-
Interest
Like its attacks on the Boards obviousness determinations, Worlds takes a
similar approach for the Boards determination that Bungie was the sole real party-
in-interest to the proceedings. See Blue Br. 52-67. In particular, Worlds maintains
that on its face the DevPub Agreement establishes that Activision had an
opportunity to control to the proceedings, see Blue Br. 59, despite thorough
analysis by the Board that Worldss real party-in-interest theory was premised on
unreasonable assumptions and interpretations of various sections, see, e.g.,
Appx506-09.
54
A. The Boards Decision Is Not Subject To Review
Under Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652 (Fed.
Cir. 2015), this Court held 35 U.S.C. 314(d) prohibitsreviewing the Boards
determination to initiate IPR proceedings based on its assessment of the time-bar
of 315(b). Id. at 658. The prohibition extends to the Boards determination on
whether a petitioner has named all real parties-in-interest as it applies to the
timeliness requirement of 315(b). See id. at 657. Thus, the Boards
determination that Bungie was the sole real party-in-interest and, as a result, the
petitions were timely under 315(b) is not subject to review.
B. The Boards Determination That Activision Was Not a Real

Party-In-Interest Is Correct and Supported By Substantial
Evidence
To the extent that this Court finds that the Boards determination on this
issue to be subject to review, this Court should affirm the Boards factual
determinations as correct and supported by substantial evidence, and find that the
Board did not abuse its discretion in concluding that Bungies petitions were
timely under 315(b).
1. Worlds Failed To Provide Substantial Rebuttal Evidence

That Activision Was a Real Party-In-Interest
Worlds contends the Board erroneously placed the burden of proving that
Activision was a real party-in-interest on Worlds, relying on various statements by
the Board indicating that Worlds had not shown or demonstrated certain
55
contentions that it raised regarding the interpretation of the DevPub Agreement.
See Blue Br. 53-56. The Board, however, did not improperly place any burden of
proof on Worlds. Rather, under the Boards own practice regarding real party-in-
interest inquiries, Worlds simply did not meet its initial burden of production
necessary to rebut the presumption that Bungie correctly identified itself as the sole
real party-in-interest.
In inter partes review proceedings, the Board generally accepts the
petitioners identification of real parties in interest at the time of filing the petition.
Atlanta Gas Light Co. v. Bennett Regulator Guards, Inc., IPR2013-00453, Paper
88 at 7 (PTAB Jan. 6, 2015). Because the Federal Rules of Evidence apply to inter
partes review proceedings, 37 C.F.R. 42.62(a), this acceptance of the petitioners
identification of the real parties-in-interest in a proceeding acts as a rebuttable
presumption that benefits the petitioner. Id. The patent owner has the initial
burden of producing evidence to rebut that presumption, although the burden of
persuasion remains on the petitioner to establish that it identified all real parties-in-
interest. See Fed. R. Evid. 301. To rebut this presumption, the Board requires that
the patent owner provide sufficient rebuttal evidence that reasonably brings into
question the accuracy of a petitioners identification of the real parties in interest.
Atlanta Gas Light, IPR2013-00453, Paper 88 at 8 (emphasis added).
56
The Patent Office Trial Practice Guide cites Taylor v. Sturgell, 553 U.S. 880
(2008), as outlining several factors relevant to whether a third party is a real party-
in-interest, including whether a pre-existing substantive legal relationship with the
party named in the proceeding justifies binding the third party, and whether the
third party exercised or could have exercised control over the proceeding. Office
Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,759 (Aug. 14, 2012). With
regard to the latter factor, the Practice Guide cites Gonzalez v. Banco Cent. Corp.,
27 F.3d 751 (1st Cir. 1994), see 77 Fed. Reg. at 48,759, which acknowledges that
there is no bright-line test for establishing control, but advises that the tribunal
consider the totality of the circumstances to determine whether they justify a
reasonable inference of the nonpartys potential or actual involvement as a
decisionmaker and that the evidence as a whole shows that the nonparty
possessed effective control over a partys conduct of the [proceeding] as measured
from a practical, as opposed to a purely theoretical, standpoint. Gonzalez, 27
F.3d at 759 (emphasis added); see also Atlanta Gas Light, IPR2013-00453, Paper
88 at 12, n.7 (noting that Gonzalez is consistent with the Boards requirement that
patent owner must rebut adequately petitioners presumption).
Despite Worldss repeated assertions that the DevPub Agreement is so clear
on its face as to have reasonably brought into question Activisions contractual
right and opportunity to control the proceedings, Blue Br. 52, the Boards more
57
reasoned analysis of the DevPub Agreement establishes that Worlds failed to
provide sufficient rebuttal evidence that reasonably [brought] into question the
accuracy of Bungies identification of the real parties-in-interest. In particular,
after careful consideration of the provisions relied upon by Worlds and its
interpretation of those provisions, the Board found that Worldss theory hinged on
several assumptions including: (1) Bungie treated the filing of IPRs as legal
reviews subject to Activisions review;11 (2) Bungie treated legal reviews as
product development funded by advances from Activision; (3) the letter by
[Worlds] to Activisions counsel discussing Destinytriggered the indemnity
provision; and (4) indemnity somehow relates to control by Activision of the
IPRs. Appx430. The Board also found that Worldss consistently blinkered
interpretation of the provisions of the DevPub Agreement was unsupported when
those provisions were considered in their entirety. See, e.g., Appx508-09 (noting
examples of overhead and operational expenses of sections 10.1 and 14.1.4 as
including office lease, computers[,] employee salaries were disparate from the
legal reviews of section 7A.15(j)). Thus, Worldss strained reading of the
DevPub Agreement had failed to reasonably bring[] into question the accuracy
of Bungies identification of the real parties-in-interest, and Worlds did not
11
Indeed, Worldss theory must be speculative, given that the effective date of
the DevPub Agreement is April 16, 2010, which was prior to the enactment of the
America Invents Act and its trial proceedings.
58
adequately rebut the presumption that Bungie had correctly identified itself as the
sole real party-in-interest.
2. Bungie Met Its Burden of Persuasion That Activision Was

Not a Real Party-In-Interest
Even if Worlds had met its initial burden of production and successfully
rebutted Bungies presumption that it was the sole real party-in-interest to the
proceedings, Bungie met both its burden of production and its burden of persuasion
that it correctly identified all real parties-in-interest to the proceedings in its
response to Worldss motion for discovery.
Consistent with its narrow-minded view of the DevPub Agreement, Worlds
takes a similar approach to its view on the burden of production. Specifically,
under Worldss view, Bungie was required to provide [its own] evidence
sufficient to carry its burden of proof to rebut Worldss theory on the real party-
in-interest issue. See Blue Br. 53. Thus, Worlds essentially asserts that, to counter
its position that Activision was an unnamed real party-in-interest, Bungie was
required to produce some evidence other than the DevPub Agreement that would
prove a negative of a fact. And, according to Worlds, because Bungie only
responded with attorney arguments, Bungie failed to rebut Worldss own
arguments, and the Board was required to make its findings against Bungie. See
Blue Br. 56-58, 63, 65.
59
Worlds fails to appreciate, however, that in responding to Worlds, Bungie
was entitled to rely on the same piece of evidence relied upon by Worlds: namely,
the DevPub Agreement itself. See Dynamic Drinkware, LLC v. Natl Graphics,
Inc., 800 F.3d 1375, 1379 (Fed. Cir. 2015) (explaining that the burden of going
forward with evidence may entailpresenting persuasive argument based
onevidence already of record (internal quotations omitted)). Moreover, Worlds
overlooks that its own contention that the DevPub Agreement establishes
Activisions ability to control the proceedings is also premised on attorney
argument as to the agreements interpretation. See Blue Br. 57-58. Bungie merely
rebutted Worldss arguments with explanation as to why Worldss interpretation
was incorrect. This was sufficient to meet any shifted burden.
The Board considered the evidence of record (i.e., the DevPub Agreement)
and the arguments presented by both parties as to the proper interpretation of the
agreement. The Board then correctly found that Bungies reasonable interpretation
of the DevPub Agreement was persuasive over Worldss forced theory. And, as
explained in detail throughout the proceedings, substantial evidence supports the
Boards finding that Bungie was the sole real party-in-interest to the proceedings.
C. The Board Did Not Abuse Its Discretion in Its Ruling on the
Motion for Discovery and Its Institution Decision
Although in its Notices of Appeal Worlds specified its appeal of the Boards
orders denying Worldss motion for discovery, Worlds did not separately address
60
the Boards discovery ruling in its opening brief. See Appx869; Appx4037;
Appx5244; Blue Br. 2, 52-67. Nevertheless, the Boards ruling in this regard is
reviewed for an abuse of discretion. Midwestern Pet Foods, Inc. v. Societe des
Produits Nestle S.A., 685 F.3d 1046, 1052 (Fed. Cir. 2012) (Supervision of
discovery lies within the Boards discretion.). In denying Worldss request,
the Board concluded, based on similar reasoning described above, that [t]he
evidence asserted does not rise to more than a mere allegation that something
useful to establishing that Activision controlled or even could have controlled the
proceedings would be found. Appx432; supra section II.B. Thus, for reasons
similar to those explained above, the Boards conclusion was reasonable and based
on substantial evidence, and thus, does not rise to an abuse of discretion. See Chen
v. Bouchard, 347 F.3d 1299, 1307 (Fed. Cir. 2003); supra section II.B.
Similarly, if subject to review, the Boards decision to institute inter partes
review is discretionary. 35 U.S.C. 314(a). Therefore, the Boards conclusion
that Bungies petitions were timely under 35 U.S.C. 315(b), and institution of
inter partes review was proper is reviewed for an abuse of discretion. See Pierce v.
Underwood, 487 U.S. 552, 558-59 (1988). For reasons similar to those explained
above, Worlds also has not shown that the Boards decision to institute inter partes
review in the underlying proceedings was an abuse of discretion. See supra
section II.B.
61
D. Worlds Is Estopped From Raising the Issue of the Boards Real

Party-In-Interest Determination
Finally, Worlds should be estopped from arguing that Activision is an
unnamed real party-in-interest in this appeal under issue preclusion. In addition to
filing the three petitions that led to the present appeal, Bungie filed three other
petitions against Worlds patents, each resulting in final written decisions. See
Bungie, IPR2015-01268, Paper 44; Bungie, IPR2015-01269, Paper 42; Bungie,
IPR2015-01325, Paper 42. In those proceedings, Worlds raised the issue that
Activision was an unnamed real party-in-interest based on the DevPub Agreement.
See Bungie, IPR2015-01268, Paper 44 at 127; Bungie, IPR2015-01269, Paper 42 at
125; Bungie, IPR2015-01325, Paper 42 at 61. In its final written decisions, the
Board determined that Activision was not an unnamed real party-in-interest. See
Bungie, IPR2015-01268, Paper 44 at 128; Bungie, IPR2015-01269, Paper 42 at
126; Bungie, IPR2015-01325, Paper 42 at 61. The time to appeal the Boards
determinations in those proceedings has lapsed, and thus, the Boards decisions
have become final and not subject to appeal.
The general rule for issue preclusion is:
When [1] an issue of fact or law is [2] actually

litigated and [3] determined by a valid and final judgment,
and [4] the determination is essential to the judgment, the
determination is conclusive in a subsequent action
62
between the parties, whether on the same or a different

claim.
Restatement (Second) of Judgments 27; see also B & B Hardware v. Hargis
Industries, 135 S. Ct. 1293, 1306 (2015) (ordinary elements of issue preclusion are
those set out in 27).
Here, all four elements are met so as to preclude Worlds from relitigating the
real party-in-interest issue on appeal. Specifically, whether Activision was an
unnamed real party-in-interest is an issue of fact that was actually litigated in all of
the related inter partes review proceedings. In each of those proceedings, the
Board determined that Activision was not an unnamed real party-in-interest. The
Boards decisions are now a valid and final judgment. See Grieve v. Tamerin, 269
F.3d 149, 154 (2d Cir. 2001) (finding when a judgment is entered and the time for
appeal runs, that judgment is final for purposes of collateral estoppel, even if
another, earlier-commenced action is still in progress). Finally, the Boards
determination was essential to the Boards final decisions, as a finding in favor of
Worlds on the issue would have been outcome-determinative.
Therefore, this Court should find that Worlds is estopped under issue
preclusion from arguing this issue in this appeal.
63
III. Inter Partes Review Proceedings Are Not Unconstitutional
In MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284, 1291 (Fed.
Cir. 2015), cert. denied, 2016 WL 1724103 (Oct. 11, 2016), this Court held that the
inter partes review provisions did not violate Article III and the Seventh
Amendment. Thus, under this Courts binding precedent, inter partes review
proceedings are not unconstitutional.
CONCLUSION
Accordingly, Bungie respectfully requests that the Boards decision be
affirmed.
Date: August 25, 2017 Respectfully submitted,

Michael T. Rosato
64
CERTIFICATE OF SERVICE
I certify that counsel for the parties have been served with a true and correct
copy of the foregoing document via this Courts CM/ECF system on August 25,
2017.

Michael T. Rosato
65
CERTIFICATE OF COMPLIANCE
I certify that this brief complies with the type-volume limitation of Fed. R.
App. P. 32(a)(7)(B). The brief contains 13,972 words, excluding the parts of the
brief exempted by Fed. R. App. P. 32(f) and Fed. Cir. R. 32(b). This brief complies
with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style
requirements of Fed. R. App. P. 32(a)(6). The brief has been prepared in a
proportionally spaced typeface using Microsoft Word 2010 in 14 point Times New
Roman font.
Date: August 25, 2017 Respectfully submitted,

Michael T. Rosato
66

Bungies Reply Brief Worlds 17-1481 Appeal CAFC

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Case: 17-1481 Document: 26 Page: 1 Filed: 08/25/2017

Nos. 2017-1481, -1546, -1583

UNITED STATES COURT OF APPEALS

BUNGIES RESPONSE BRIEF

Michael T. Rosato Matthew A. Argenti

Counsel for Appellee Bungie, Inc.

U.S. PATENT NO. 8,082,501, CLAIM 1

A method for enabling a first user to interact with

customizing, using a processor of a client device,

receiving, by the client device, position

determining, by the client device, a displayable set

displaying, on the client device display, the

Counsel for Bungie, Inc. certifies the following.

1. The full name of every party represented by me: Bungie, Inc.

or more of Bungie, Inc.

party or amicus now represented by me in the trial court or agency or are

appearance in this case): None.

August 25, 2017

/s/ Michael T. Rosato

Certificate of Interest ................................................................................................. i

Table of Contents ...................................................................................................... ii

Table of Authorities ................................................................................................. vi

Statement of Related Cases .................................................................................... viii

Statement of the Issues...............................................................................................3

Statement of the Case.................................................................................................3

I. The Appealed Patents ............................................................................5

II. The Prior Art .........................................................................................8

A. Funkhouser 95 Teaches Server-Side Filtering of Avatar

B. Funkhouser 93 Teaches Display Optimization Algorithms with

C. Sitrick and Marathon Teach Other Independent Claim

III. The Inter Partes Review Proceedings.................................................13

A. Worldss Motion for Discovery Regarding Activision as a Real

1. The DevPub Agreement .................................................14

2. Worldss Proposed Interpretation of the DevPub

3. Bungies Opposition to Worldss Motion ......................17

4. The Boards Decision on Worldss Motion ...................18

B. The Boards Decisions to Institute Inter Partes Review ..........19

1. Bungies Challenges of Claims 8 and 10 of the 501

2. Worldss Real Party-In-Interest Challenge ....................22

C. Worldss Patent Owner Responses and Bungies Replies........24

1. Worldss Response to Bungies Challenges of Claims 8

2. Worldss Real Party-In-Interest Challenge ....................27

D. The Boards Final Written Decisions .......................................27

1. The 1264 Proceeding .....................................................27

2. The 1319 Proceeding .....................................................28

3. The 1321 Proceeding .....................................................30

Summary of the Argument.......................................................................................32

Standard of Review ..................................................................................................33

I. The Board Correctly Determined Claims 8 and 10 of the 501 Patent

A. Substantial Evidence Supports the Boards Findings that the

1. Worlds Ignores the Prior Art Combination, Improperly

2. Bungies Theory on the Teaching of Funkhouser 93

3. The Board Was Not Required to Evaluate the

B. Substantial Evidence Supports the Boards Findings that a

1. The Board Articulated a Sufficient Rationale to Combine

2. Funkhouser 93 Does Not Teach Away from Omitting

A. The Boards Decision Is Not Subject To Review .....................55

B. The Boards Determination That Activision Was Not a Real

1. Worlds Failed To Provide Substantial Rebuttal Evidence

2. Bungie Met Its Burden of Persuasion That Activision

D. Worlds Is Estopped From Raising the Issue of the Boards Real

III. Inter Partes Review Proceedings Are Not Unconstitutional ..............64

Certificate of Service ...............................................................................................65

Certificate of Compliance ........................................................................................66