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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

INGENIADOR, LLC, Plaintiff v. ALFRESCO SOFTWARE, INC., et al., Defendants.

) ) ) ) ) ) Case No. 3:11-cv-1840 ) ) ) ) ) )

DEFENDANT BRIDGELINE DIGITAL, INC.S MOTION TO SET ASIDE ENTRY OF DEFAULT AND DEFAULT JUDGMENT

Ricardo Casellas (Bar No. 203114) CASELLAS, ALCOVER & BURGOS PSC Suite 1400, Popular Center Bldg. 208 Ponce de Leon Ave. Hato Rey, PR 00918 P.O. Box 364924 San Juan, PR 00936-4924 787-756-1400 (t) 787-756-1401 (f) rcasellas@cabprlaw.com Of Counsel: T. Christopher Donnelly Adam B. Ziegler DONNELLY, CONROY & GELHAAR, LLP One Beacon Street, 33rd Floor Boston, MA 02108 617-720-2880 (t) 617-720-3554 (f) tcd@dcglaw.com abz@dcglaw.com Pro Hac Vice Application Forthcoming

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TABLE OF CONTENTS INTRODUCTION......................................................................................................................... 1 FACTS ........................................................................................................................................... 2 A. B. C. D. E. F. G. Ingeniadors Complaint .............................................................................. 2 Ingeniadors Failure to Properly Serve Bridgeline ..................................... 3 Bridgelines Lack of Contacts with Puerto Rico ........................................ 3 Bridgelines Unequivocal Expression of Intent to Defend Against Ingeniadors Claims .................................................................................... 4 The Clerks Entry of Default against Bridgeline ........................................ 5 Ingeniadors Failure to Provide Bridgeline With Written Notice of its Motion for Entry of Default Judgment ....................................................... 5 The Courts Entry of Default Judgment...................................................... 6

GOVERNING RULES ................................................................................................................. 6 ARGUMENT ................................................................................................................................. 7 I. The Default Judgment is Void and Must Be Set Aside .......................................... 7 A. B. C. II. The Default Judgment is Void Due to Improper Service of Process .......... 7 The Default Judgment is Void for Lack of Personal Jurisdiction ............. 10 The Default Judgment is Void Due to Ingeniadors Failure to Comply with FRCP 55(b)(2) .......................................................................................... 13 Bridgelines Motion Was Promptly Filed ................................................. 16 Bridgeline Has Numerous Meritorious Defenses ..................................... 16 Ingeniador Will Suffer No Unfair Prejudice ............................................. 19 The Balance Between Finality and Merits-Based Resolution Favors Bridgeline .................................................................................................. 20

The Default Judgment Also Should Be Set Aside Pursuant to FRCP 60(b) ........ 15 A. B. C. D.

CONCLUSION ........................................................................................................................... 20

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INTRODUCTION Pursuant to Fed. R. Civ. P. 55(c) and 60(b), defendant Bridgeline Digital, Inc. (Bridgeline) respectfully requests that the Court set aside the default and default judgment entered against Bridgeline in this case. See Order Granting Motion for Entry of Default (Dkt. No. 73); Default Judgment (Dkt. No. 235). Both the default and default judgment entered against Bridgeline should be set aside for four reasons. First, they are void and must be set aside because Bridgeline was never served properly with the summons and complaint, although Bridgeline did have actual knowledge of the complaint. See M&K Welding, Inc. v. Leasing Partners, LLC, 386 F.3d 361, 364 (1st Cir. 2004); Echevarria-Gonzalez v. Gonzalez-Chapel, 849 F.2d 24, 28 (1st Cir. 1988). Second, they are void and must be set aside because the Courts exercise of personal jurisdiction over Bridgeline, which has no contacts whatsoever with Puerto Rico, would violate due process. See M&K Welding, 386 F.3d at 364; see also Elecs. for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1350 (Fed Cir. 2003); Intl Shoe v. Washington, 326 U.S. 310, 316 (1945). Third, they are void and must be set aside because plaintiff Ingeniador, LLC (Ingeniador) did not provide Bridgeline with written notice of Ingeniadors motion for default judgment at least 7 days prior to the Courts entry of default judgment, as required by Fed. R. Civ. P. 55(b)(2). See Key Bank of Maine v. Tablecloth Textile Co. Corp., 74 F.3d 349, 351-56 (1st Cir. 1996); Muniz v. Vidal, 739 F.2d 699 (1st Cir. 1984). Although Bridgeline did not formally appear in this matter, Bridgeline had multiple direct communications with Ingeniadors counsel, in which Bridgeline rejected Ingeniadors allegations and expressed Bridgelines unequivocal intent to defend itself against Ingeniadors claim. As Judge Torruella made clear in the First Circuits decision in Key Bank of Maine, 74 F.3d 355, and as then-Judge Breyer made clear in Muniz, 739 F.2d at701, a defendants expression of a clear intent to defend triggers 1

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Fed. R. Civ. P. 55(b)(2)s written notice requirement, even when the defendant has not formally appeared or made any submissions in court. The failure to give the mandatory written notice at least seven days prior to entry of default judgment requires that the default judgment be set aside. Fourth, even if the default and default judgment were not void, the Court should set them aside pursuant to Fed. R. Civ. P. 55(c) and 60(b). Bridgeline filed the instant motion promptly upon learning of the default judgment. Bridgeline has numerous meritorious procedural and substantive defenses both to liability and to damages. Bridgelines default was not willful but instead resulted from Ingeniadors improper service and Bridgelines lack of knowledge of the default proceedings. And Ingeniador will suffer no unfair prejudice from a ruling setting aside the default and default judgment, given that the case has not progressed beyond the motion to dismiss stage. For these reasons, pursuant to Fed. R. Civ. P. 55(c) and 60(b), Bridgeline respectfully requests that the Court set aside the default and default judgment. In addition, given the deficiencies in service, the lack of personal jurisdiction, the failure to state a claim against Bridgeline, and the misjoinder of Bridgeline with the other defendants, Bridgeline respectfully requests that the Court dismiss the claims against Bridgeline pursuant to Fed. R. Civ. P. 12(b)(2), 12(b)(5), 12(b)(6) and 20(a)(2). FACTS A. Ingeniadors Complaint

Ingeniador commenced this patent infringement action on August 26, 2011. Ingenaidors complaint asserts that a hodge-podge of 16 unrelated corporate defendants infringed U.S. Patent No. 6,990,629 (the 629 Patent), which relates to a web-based editing and publishing system comprising a network of client computers, network file server and a Light Weight Directory Access Protocol (LDAP) directory server. See 629 Patent (Claim 1) (Dkt. No. 1-3). 2

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Bridgeline was one of the 16 named defendants. In a single paragraph, the Complaint asserts [u]pon information and belief, that Bridgelines iAPPS Content Manager product infringes unspecified claims of the 629 Patent in unspecified ways. Compl. 27 (Dkt. No. 1). B. Ingeniadors Failure to Properly Serve Bridgeline

Bridgeline has been unable to locate any record of being served with the summons and complaint in this case. (Prinn Decl. 24). The Proof of Service filed by Ingeniador (Dkt. No. 26) states that someone named Thomas F. Cabral of Capitol Process Services, Inc., in Washington, DC, served the summons on Kelly Quinlan, an executive assistant at Bridgeline, on September 15, 2011, at 10 Sixth Street, Woburn, MA. 1 In its motion for entry of default, Ingeniador falsely reported to this Court that Ms. Quinlan represented to be the person designated to accept service of process on behalf of defendant, and that Mr. Cabral had so declared under penalty of perjury. See Motion for Entry of Default 2 (Dkt. No. 72). Mr. Cabral did not declare that Ms. Quinlan had made such a representation, see Proof of Service (Dkt. No. 26), and Ms. Quinlan has no recollection of communicating with or receiving anything from Mr. Cabral, let alone representing that she was authorized to accept service. (Quinlan Decl. 3-4). In fact, Ms. Quinlan is not an officer or managing or general agent of Bridgeline, and she is not authorized to accept service of process for Bridgeline. (Quinlan Decl. 5; Prinn Decl. 25). C. Bridgelines Lack of Contacts with Puerto Rico

Bridgeline is a Delaware corporation with its principal place of business in Burlington, Massachusetts. (Prinn Decl. 3-4). Bridgeline is not licensed, qualified or registered to do business in Puerto Rico and has never had a registered agent for service of process in Puerto

Bridgelines address at the time was 10 Sixth Road, Woburn, Massachusetts, and in February 2012, it moved its offices from Woburn, Massachusetts to Burlington, Massachusetts. (Prinn Decl. 4).

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Rico. (Prinn Decl. 16-17). Bridgeline has never conducted any business in Puerto Rico. (Prinn Decl. 18). Bridgeline has never had any offices or facilities in Puerto Rico, owned or rented any property in Puerto Rico, or maintained any telephone numbers, fax numbers, mailing addresses in Puerto Rico. (Prinn Decl. 5-8). Bridgeline has never had any bank accounts or other assets in Puerto Rico. (Prinn Decl. 6-7). Bridgeline has never had any employees, agents, representatives, independent contractors, distributors, resellers, or channel partners in Puerto Rico. (Prinn Decl. 9-11). Bridgeline has never had any customers in Puerto Rico, paid any taxes in Puerto Rico, or generated any revenue from Puerto Rico. (Prinn Decl. 12-15, 19). Bridgeline has never made, used, offered to sell, or sold any of its products in Puerto Rico, including the accused product the iAPPs Content Manager. (Prinn Decl. 13-14, 20). Bridgeline maintains a website, which does not permit interactive commercial transactions and has never permitted visitors to purchase products. (Prinn Decl. 22). Bridgeline has never offered its iAPPS products, including Content Manager, for sale through its website. (Prinn Decl. 21). Bridgelines software products, including the iAPPS Content Manager, are sold through direct interactions between its sales force and potential customers, require significant financial commitment by customers, and consequently have a lengthy sales cycle that typically runs from 4 to 6 months. (Prinn Decl. 21). D. Bridgelines Unequivocal Expression of Intent to Defend Against Ingeniadors Claims

Although Bridgeline was not properly served with the summons and complaint, Bridgeline did have actual knowledge of Ingeniadors complaint. (Zucker Decl. 5). In the week before Ingeniador purportedly attempted service by delivery to Ms. Quinlan, Ingeniadors counsel, Adam Saxon, and Bridgelines Chief Technology Officer, Brett Zucker, had multiple written communications and two telephone conversations about Ingeniadors claim and the

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meritlessness of allegations of infringement against Bridgeline. (Zucker Decl. 5-6; Zucker Exh. A). These communications included Ingeniadors transmission of a document summarizing the 629 Patent and Ingeniadors allegations, which Mr. Zucker reviewed and then discussed with Ingeniadors counsel, explaining in detail that Bridgelines technology did not practice the patented invention at all. (Zucker Decl. 7; Zucker Exh. B). Ingeniadors counsel stated that he would relay the information to his client and would be back in touch with Bridgeline, which he did not do. (Zucker Decl. 7-8). On at least two separate occasions, including immediately after that telephone discussion, Mr. Zucker reiterated to Ingeniadors counsel, in writing, that Ingeniadors patent claim was meritless. (Zucker Decl. 6-7; Zucker Exhs. A-B). E. The Clerks Entry of Default against Bridgeline

On October 19, 2011, Ingeniador moved for entry of default against Bridgeline. See Motion for Entry of Default (Dkt. No. 72). In its motion, Ingeniador falsely stated that Bridgeline had been served and that the alleged process server, Mr. Cabral, had declared under penalty of perjury that Ms. Quinlan had represented to be the person designated to accept service of process on behalf of defendant. Motion 2. Ingeniador did not disclose to the Court that it had had direct communications with Bridgeline just weeks before, and Ingeniador did not send Bridgeline any notice of the motion for entry of default. The Court immediately entered default against Bridgeline on October 19, 2011, the day the motion was filed. (Dkt No. 73). F. Ingeniadors Failure to Provide Bridgeline With Written Notice of its Motion for Entry of Default Judgment

Ingeniador filed its motion for entry of default judgment on April 25, 2012 (Dkt. No. 235). Despite the fact that Bridgeline had expressly denied liability during multiple oral and written communications between the parties, Ingeniadors motion falsely asserted that Bridgeline had done nothing showing any intent to defend from or contest the infringement of U.S. Patent

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No. 6,990,629. Motion at 2. Ingeniador requested the Court to enter default judgment and award damages of $1,437,000, based on a hypothetical royalty rate of 1.5% of Bridgelines total revenues from all services and products, only one of which was the accused product. Ingeniador again failed to inform this Court of its repeated interactions with Bridgeline. Nor did Ingeniador provide Bridgeline with written notice of its motion for entry of default judgment seven days prior to the Courts ruling. Ingeniadors motion certifies that, on April 25, 2012, it mailed the motion to Bridgelines old address in Woburn, Massachusetts, which Bridgeline had not occupied since February 2012. Ingeniador did not send the motion to Bridgelines actual address, which is reported on the very corporate website from which Ingeniador selected the pages it presented to the Court in support of its motion for entry of default judgment. See Motion for Entry of Default Judgment, at 5 n.1 & n.2 (relying on information retrieved by Ingeniador from Bridgelines website). G. The Courts Entry of Default Judgment

On April 26, 2012, one day after Ingeniador filed its motion, the Court entered a default judgment against Bridgeline awarding the requested damages. See Order and Default Judgment (Dkt. Nos. 234-235). GOVERNING RULES Fed. R. Civ. P. 55(c) provides: The court may set aside an entry of default for good cause, and it may set aside a default judgment under Rule 60(b). Fed. R. Civ. P. 60(b) in turn provides: On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect;

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(2) newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party; (4) the judgment is void; (5) the judgment has been satisfied, released or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or (6) any other reason that justifies relief. ARGUMENT I. The Default Judgment is Void and Must Be Set Aside [A] default judgment issued without jurisdiction over a defendant is void and remains vulnerable to being vacated at any time. M&K Welding, Inc., 386 F.3d at 364; see Precision Etchings & Findings, Inc. v. LGP Gem, Ltd., 953 F.2d 21, 23 (1st Cir. 1992) (same). If the judgment is void, the district court has no discretion but to set aside the entry of default judgment. Echevarria-Gonzalez v. Gonzalez-Chapel, 849 F.2d at 28. The default judgment entered against Bridgeline is void and must be set aside for three reasons: (1) Bridgeline was not properly served; (2) Bridgeline does not have sufficient contacts with Puerto Rico to permit this Court to exercise personal jurisdiction; and (3) Ingeniador did not comply with Fed. R. Civ. P. 55(b)(2) by giving Bridgeline written notice of its motion for entry of default judgment at least seven days prior to entry of default judgment. A. The Default Judgment is Void Due to Improper Service of Process

Fed. R. Civ. P. 4(h)(1) provides that a corporation must be served in a judicial district of the United States: (A) in the manner prescribed by Rule 4(e)(1) for serving an individual; or 7

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(B) by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process and if the agent is one authorized by statute and the statute so requires by also mailing a copy of each to the defendant. Ingeniador has the burden of proving proper service on Bridgeline in compliance with Rule 4(h)(1). Rivera-Lopez v. Municipality of Dorado, 979 F.2d 885, 886 (1st Cir. 1992). As shown below, Ingeniador cannot carry this burden. 1. Ingeniador Did Not Serve Bridgeline At All

Ingeniador did not deliver the summons and complaint to Kelly Quinlan, an executive assistant at Bridgeline, on September 15, 2011, as reported on the Proof of Service. Ingeniador has found no record of any service, and Ms. Quinlan has no memory of receiving such service. (Quinlan Decl. 3-4; Prinn Decl. 24). Bridgeline was not served at all. 2. Ingeniador Did Not Serve Bridgeline In A Manner Prescribed By Rule 4(e)(1)

Even if Ingeniador had delivered the summons and complaint to Ms. Quinlan, as claimed, delivery to Ms. Quinlan would not have been effective service on Bridgeline under Fed. R. Civ. P. 4(e)(1), which permits a defendant to be served by following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made. (a) Service Pursuant to Puerto Rico Law

Puerto Rico has two sources of law governing service upon corporations: (1) Puerto Rico Rule of Civil Procedure 4.4(e) and (2) the Puerto Rico Law on Corporations. See Gonzalez v. Ritz Carlton Hotel Co. of Puerto Rico, 241 F.Supp.2d 142, 147 (D.P.R. 2003). Both sources confirm that any attempted service on Ms. Quinlan would be ineffective. First, Puerto Rico Rule of Civil Procedure 4.4(e) provides that service upon a corporation

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may be made by delivering a copy of the summons and of the complaint to an officer, managing or general agent, or to any other agent authorized by appointment or designated by law to receive service of process. 32 L.P.R.A.App. III R. 4.4(e), quoted in Miranda v. IPR Pharmaceuticals, Case No. 10-2238, 2011 WL 5977813 at *6 (D. P. R. Nov. 29, 2011)(holding that attempted service on security guard was ineffective). Ms. Quinlan is an executive assistant, who is not an officer, a general agent, or a managing agent of Bridgeline, and she is not authorized to accept service on behalf of Bridgeline. (Quinlan Decl. 5; Prinn Decl. 25). The law is clear that attempted service on such persons is ineffective. See, e.g., Miranda, 2011 WL 5977813 at *5-6 (D. P. R. Nov. 29, 2011)(holding that attempted service on security guard was ineffective); Turpin v. Wellpoint Companies, Inc., Case No. 3:10CV850, 2011 WL 1086482 at *2 n.6 (E.D. Va. Mar. 23, 2011) (service on administrative assistant ineffective); Bender v. Broadcom Corp., Case No. 09-1147, 2009 WL 3571286 at *3 (N.D. Cal. Oct. 30, 2009) (service on a receptionist or administrative assistant ineffective); Carlyn Dairy Products, Inc. v. First Intern., Inc., Case No. 03-C-1168, 2003 WL 21800065 at *1 (N.D. Ill. Jul. 29, 2003) (service on administrative assistant ineffective). Second, Ingeniadors attempted service is not valid under the Puerto Rico Law on Corporations, 14 L.P.R. 3781(a), which provides: Service of legal process upon any corporation of the Commonwealth shall be made by delivering a copy personally to any officer or director of the corporation in the Commonwealth, or the registered agent of the corporation in the Commonwealth, or by leaving it at the dwelling house or usual place of abode in the Commonwealth of any officer, director or registered agent (if the registered agent be an individual), or at the registered office or other place of business of the corporation in the Commonwealth. Bridgeline is not a Puerto Rico corporation and has no officers, directors, registered agents, or places of business in Puerto Rico and, in any event, the alleged service on Bridgeline was

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attempted in Massachusetts, not in Puerto Rico. (b) Service Pursuant to Massachusetts Law

Ingeniadors alleged attempted service likewise was defective under Massachusetts law. Mass. R. Civ. P. 4(d)(2) requires that service on a corporation be made: [B]y delivering a copy of the summons and the complaint to an officer, to a managing or general agent, or to the person in charge of the business at the principal place of business thereof within the Commonwealth, if any; or by delivery delivering such copies to any other agent authorized by appointment or by law to receive service of process, provided that any further notice required by law be given. Similarly, Mass. Gen. Laws c. 223 37 requires that service be made by delivering the summons and complaint to a corporations president, treasurer, clerk, resident agent cashier, secretary, agent or other officer in charge of its business. Again, Ms. Quinlan - even if she had received the summons and complaint was not an officer, managing or general agent, or person in charge of the office, and she was not authorized to accept service for Bridgeline. 3. Ingeniador Did Not Serve Bridgeline by Delivering the Summons and Complaint to an Officer or Agent Authorized to Accept Service of Process

Ingeniadors attempted service even if it occurred also was ineffective pursuant to Fed. R. Civ. P. 4(h)(1)(B), which authorizes service on a corporation by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process. For the reasons explained above, Ms. Quinlan fits none of those categories. Ingeniador therefore failed to make effective service on Bridgeline, and the default judgment must be set aside as void. B. The Default Judgment is Void for Lack of Personal Jurisdiction

Even if Ingeniador had properly served Bridgeline, the default judgment still would be void because Bridgeline lacks sufficient contacts with Puerto Rico to permit this Court to

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exercise personal jurisdiction. Because this is a patent infringement action, Federal Circuit law controls the personal jurisdiction analysis. See Silent Drive, Inc. v. Strong Indus., 326 F.3d 1194, 1201 (Fed. Cir. 2003). Ingeniador has the burden to prove that the Court has jurisdiction over Bridgeline. Campbell Pet Co. v. Miale, 542 F.3d 879, 888-89 (Fed. Cir. 2008). The existence of personal jurisdiction over an out-of-state defendant involves two inquires: (1) whether the forum states long-arm statute permits service of process, and (2) whether the assertion of personal jurisdiction would violate due process. See Genetic Implant Sys. Inc. v. Core-Vent Corp., 123 F.3d 1455, 1458 (Fed. Cir. 1997). Because Puerto Ricos long-arm statute reaches up to the point allowed by the Constitution, the two inquiries collapse into a single inquiry focused on whether the exercise of personal jurisdiction would violate due process. Negron-Terros v. Verizon Communications, Inc., 478 F.3d 19, 24 (1st Cir. 2007). The federal due process inquiry requires the defendant to have certain minimum contacts with the forum such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. Elecs. for Imaging, Inc. v. Coyle, 340 F.3d at 1350, quoting Intl Shoe v. Washington, 326 U.S. 310, 316 (1945)). For due process purposes, [t]he Supreme Court has drawn a distinction between specific jurisdiction and general jurisdiction. Avocent Huntsville Corp. v. Aten Intl Co., Ltd., 552 F.3d 1324, 1330 (Fed. Cir. 2008). To establish specific jurisdiction, a plaintiff must demonstrate that the defendant has purposefully directed his activities at residents of the forum, and that the litigation results from alleged injuries that arise out of or relate to those activities. Id. (internal citations and quotation marks omitted). To establish the minimum contacts necessary to establish general personal jurisdiction, plaintiffs bear a higher burden and must establish that the defendant ha[s]

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continuous and systematic contacts with the forum state. Id. at 1331-32. 1. The Court Does Not Have Specific Jurisdiction Over Bridgeline

In patent infringement suits, for purposes of specific jurisdiction, the jurisdictional inquiry is relatively easily discerned from the nature and extent of the commercialization of the accused products or services by the defendant in the forum. Avocent, 552 F.3d at 1332. Ingeniador has accused only Bridgelines iAPPS Content Manager product. See Compl. 27. Bridgeline does not sell any products in Puerto Rico, including the iAPPS Content Manager product. (Prinn Decl. 13-14). No person or entity in Puerto Rico has ever purchased anything from Bridgeline, including the iAPPS Content Manager product. (Prinn Decl. 12-13, 19). Bridgeline has not commercializ[ed] the accused product at all in Puerto Rico. Moroever, Bridgelines website does not permit interactive commercial transactions. (Prinn Decl. 22). Potential customers cannot purchase the accused product through the website, but instead acquire Bridgelines products through a lengthy, person-to-person sales process. (Prinn Decl. 21). Accordingly, there is no specific personal jurisdiction over Bridgeline. 2. The Court Does Not Have General Jurisdiction Over Bridgeline

General jurisdiction requires continuous and systematic contacts with a forum, and the law is clear that sporadic and insubstantial contacts do not suffice to subject a defendant to general jurisdiction. Campbell Pet Co. v. Miale, 542 F.3d 879, 884 (Fed. Cir. 2008). Bridgeline has no contacts whatsoever with Puerto Rico. It is a Delaware corporation with its principal offices in Massachusetts and no offices in Puerto Rico. (Prinn Decl. 3-5). It has no property, assets, employees, customers, or business partners in Puerto Rico. (Prinn Decl. 6-12). It derives no revenue from Puerto Rico and pays no taxes in Puerto Rico. (Prinn Decl. 15,19).

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Bridgeline is not subject to general jurisdiction in Puerto Rico. Because this Court does not have personal jurisdiction over Bridgeline, the default judgment is void and must be vacated. 2 C. The Default Judgment is Void Due to Ingeniadors Failure to Comply with FRCP 55(b)(2)

When a defendant has appeared, Rule 55(b)(2) requires a plaintiff seeking entry of default judgment to provide the defendant with at least 7 days written notice of its application for entry of default judgment. It is black letter law that an appearance sufficient to trigger the requirement of Rule 55(b)(2) need not be a formal presentation or submission[] to the court. Key Bank of Maine, 74 F.3d at 353; Muniz, 739 F.2d at 700. Rather, the First Circuit has made clear in multiple cases that a defaulting party has appeared for Rule 55 purposes if it has indicated to the moving party a clear purpose to defend the suit. Key Bank of Maine, 74 F.3d at 353 (quoting Muniz, 739 F.2d at 799). In particular, informal contacts in the nature of settlement discussions and presentations of defenses are sufficient to constitute an appearance triggering Rule 55(b)(2)s requirement of written notice. Key Bank of Maine, 74 F.3d at 353354; see Muniz, 739 F.2d at 700-701. In short, any expression by a defendant of a clear intent to defend triggers the Rule 55(b)(2) requirement of seven days advance written of a motion for entry of default judgment. As Judge Torruella explained in Key Bank of Maine, 74 F.3d at 354, the party seeking entry of default and default judgment has a duty to apprise the district court of a defendants prior expressions of intent to defend and to give the required written notice. The failure to provide the requisite notice [is] a grave error. Id. at 355. Rule 55(b)(2) reflects the practical
2

Bridgeline respectfully requests that the Court, upon vacating the default judgment, order the dismissal of all claims against Bridgeline pursuant to Fed. R. Civ. P. 12(b)(2), 12(b)(5), 12(b)(6), and 20(a)(2). If necessary, once the default judgment has been vacated, Bridgeline will separately file a motion to dismiss; however, Bridgeline respectfully submits that additional motion practice is unnecessary given that the arguments made in such motion would be identical to arguments included in this motion. In addition, the Court already has the benefit of parallel motions and extensive briefing from the other defendants, which fully address the critical issues, and which Bridgeline hereby joins.

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and equitable reality that it is a simple matter for plaintiffs counsel to notify a defendant of a default proceeding when the parties have previously communicated about the substance of the claim, and the rule is designed to prevent plaintiffs from seeking to reap tactical advantage from defendants prior neglect by acquiring by stealth a decision sheltered by the rules which protect final judgments. Key Bank of Maine, 74 F.3d at 356 (quoting Charlton L. Davis & Co., P.C. v. Fedder Data Center, Inc., 556 F.2d 308, 309 (5th Cir. 1977)). The rule also rests upon the view that the Federal Rules of Civil Procedure are designed to be fair, that Rule 55(b)(2) was promulgated to protect parties who, although delaying in a formal sense by failing to file pleadings within the twenty-one day period, have otherwise indicated to the moving party a clear purpose to defend the suit,and our traditional preference for resolution of cases on the merits while giving due consideration to practical requirements of judicial administration. Key Bank of Maine, 74 F.3d at 356 (internal citations and quotation marks omitted). 3 No question exists in this case that Bridgeline expressed a clear intent to defend against Ingeniadors meritless claims and thus appeared for purposes of Rule 55(b)(2). On September 9, 2012, Bridgelines CTO stated to Ingeniadors counsel in an email, following a telephone conversation: As I mentioned in our conversation, I have read through the filing in detail and Bridgeline's position is this is a nuisance suit with little to no tangible evidence existing since it has no merit whatsoever. (Zucker Decl. 6; Zucker Exh. A). On September 22, 2011, Ingeniadors counsel sent Bridgeline a document summarizing Ingeniadors purported claim, and the parties had a telephone conversation in which Bridgelines CTO again rejected Ingeniadors allegations and explained in detail why they had no merit, including the basic fact that the accused product iAPPS Content Manager does not use a core element of what is claimed in
3

Local Rule 55(a) reflects similar values by imposing a burden on plaintiffs seeking default judgment to send notice of the motion directly to the party and to the partys counsel, whenever the plaintiff knows or reasonably should know the partys attorney.

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the 629 patent. (Zucker Decl. 7). That same day, following the conversation, Bridgelines CTO sent another email to Ingeniadors counsel stating: Bridgeline reiterates its position that we are not in violation of your client's patent claim and, with your client fully bearing the cost, if you'd like to spend some time with us we are willing to do so in good faith. As the next step discussed, I will wait to hear back from you after you talk with your client. (Zucker Decl. 7; Zucker Exh. B). Ingeniador did not respond, but instead proceeded to acquire a default and default judgment against Bridgeline. (Zucker Decl. 8). Bridgeline could not have been any clearer in expressing to Ingeniador its intent to defend against Ingeniadors meritless claims. Bridgeline therefore was entitled to written notice pursuant to Rule 55(b)(2), and Ingeniadors failure to fulfill its duty to provide such notice renders the default judgment void. As Judge Torruella emphasized in Key Bank of Maine, 74 F.3d at 356, it would have been a simple matter for Ingeniador or its counsel to communicate directly with Bridgeline about the default proceedings. Instead, Ingeniador remained silent, acquir[] by stealth a default and default judgment against Bridgeline, and violated Rule 55(b)(2). Id. at 357. The default and default judgment therefore must be set aside. II. The Default Judgment Also Should Be Set Aside Pursuant to FRCP 60(b) Even if the entry of default and default judgment were not void, the Court still should vacate them pursuant to Rule 60(b). As the First Circuit has emphasized, such decisions tend to rest on fact-specific considerations informed by the nature and circumstances of the particular case. Ungar v. Palestine Liberation Organization, 599 F.3d 79, 83 (1st Cir. 2010) (vacating order denying motion to set aside default judgment). The Court should undertake a holistic appraisal of the circumstances, including factors such as the timing of the request for relief, the extent of any prejudice to the opposing party, the existence or non-existence of meritorious claims of defense, and the presence or absence of exceptional circumstances. Id. The Court 15

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also should balance the importance of finality in litigation against the desirability of deciding cases on the merits. Id. at 83. These factors are neither exclusive nor rigidly applied. Id. at 83-84. A district court must analyze the totality of the circumstances, and cannot rest on categorical rules. Id. at 87. Based on the circumstances here, including all of the common factors, the Court should set aside the default and default judgment entered against Bridgeline. A. Bridgelines Motion Was Promptly Filed

Bridgeline acted promptly. Ingeniadors motion for entry of default judgment was filed just days ago on April 25, 2012, and default was entered a day later on April 26, 2012. Immediately upon learning of the default judgment, Bridgeline retained litigation counsel, and Bridgeline now files this motion to set aside the default and default judgment only days after the default judgment was entered. B. Bridgeline Has Numerous Meritorious Defenses

Bridgeline has multiple meritorious defenses to Ingeniadors patent infringement claims. Because a complete recitation of all of Ingeniadors defenses is neither practical nor possible, given the conclusory and insufficient allegations in the Complaint, below is a brief nonexhaustive summary of certain of Ingeniadors defenses. 1. Failure to State a Claim

Ingeniadors allegations against Bridgeline consist of a single paragraph, asserted entirely upon information and belief, which lists one product the iAPPS Content Manager and then makes perfunctory, conclusory assertions that Bridgeline directly infringes the 629 Patent in some unspecified way, and/or induces the infringement by unspecified others of unspecified claims of the 629 Patent, and/or contributes to the infringement by unspecified others of unspecified claims of the 629 Patent. These broad-brush, generic allegations fall far short of the minimum pleading standards established in Ashcroft v. Iqbal, 556 U.S. 7 (2009), and Bell 16

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Atlantic Co. v. Twombly, 550 U.S. 544 (2007), and they fail to state a claim against Bridgeline, for all of the reasons argued in the Joint Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) filed by the other defendants in this action. See Joint Motion (Dkt. No. 96). 4 2. Misjoinder

In violation of Fed. R. Civ. P. 20(a)(2), Ingeniador has attempted to join Bridgeline with 15 other unrelated defendants solely on the basis that all defendants are asserted to have infringed the same patent. Ingeniador does not assert nor can it that Bridgeline is jointly and severally liable to any defendant or that its claims against the defendants all arise out of the same transaction, occurrence or series of transactions or occurrences. As other defendants have pointed out in their various motions to dismiss, given the dissimilarity of facts and issues, it would be prejudicial for Bridgeline to have to defend itself alongside all of the other defendants in this case. 5 3. Non-Infringement

Bridgelines iAPPS Content Manager does not infringe the 629 Patent. An essential element of each of the claims of the 629 Patent is the use of a Light Weight Directory Access Protocol (LDAP) directory server to, among other things, stor[e]information defining and limiting the rights of authors and readers in the system and to store, for purposes of retrieval, directory content. See 629 Patent (Independent Claims 1 and 20). The use of an LDAP directory server for these purposes is critical to the patented invention and an essential element of both independent claims (Claim 1 and Claim 20) and thus all claims of the 629 Patent. A

Bridgeline respectfully joins and incorporates by reference the Joint Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) by Defendants Microsoft, Hewlett-Packard, EMC, Nuxeo, Informatica, Oracle, SAP America, and Lexmark International (Dkt. No. 96). For the sake of brevity and avoiding duplication of arguments, Bridgeline respectfully incorporates the arguments made regarding misjoinder by defendants SDL Tridion, Inc. (Dkt. No. 139), EMC (Dkt. No. 99), and Blackboard (Dkt. No. 106).
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technology that makes no use of an LDAP directory server for these purposes cannot possibly infringe the 629 Patent. 6 As Bridgelines Chief Technology Officer has testified, the iAPPS Content Manager the Bridgeline product Ingeniador accuses of infringement does not make any use of a Light Weight Directory Access Protocol (LDAP) directory server to (a) store information defining and limiting the rights of authors and readers or (b) to store or retrieve directory content. (Zucker Decl. 4). The iAPPS Content Manager does not use LDAP directory servers at all for these purposes; instead, these functions are performed internally within the iAPPS Content Manager application itself. (Zucker Decl. 4). Because Bridgelines accused product does not involve using an LDAP directory server for these purposes, neither Bridgeline nor anyone using the iAPPS Content Manager can even practice the invention claimed by the 629 Patent. Accordingly, Bridgeline cannot possibly be liable to Ingeniador for any form of patent infringement. 4. Damages

Ingeniadors damages argument, as made in its Motion for Entry of Default Judgment, is blatantly false and disingenuous, even if there were some basis to believe that Bridgeline could be liable for infringement. First, Ingeniador based its purported reasonable royalty calculation of 1.5% on all of Bridgelines annual revenues, rather than just revenues associated with the only accused product, iAPPS Content Manager. See Motion for Entry of Default, at 6 (Dkt. No. 233). Thus, Ingeniador calculated the royalty based on $95.8 million in revenues between 2008 and 2011, when the revenues derived by Bridgeline from licensing the accused product are only a very small portion of total revenues. (Prinn Decl. 23). Second, Ingeniador based its purported
6

Bridgeline notes that during prosecution of the patent, following an initial rejection of the claims, the patent applicant argued specifically that it was the the use of the LDAP directory server for these purposes that showed the claimed invention not to be anticipated by prior art. (Ziegler Exh. A).

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calculation on gross revenues, not profits attributable to the patented invention, even though the factor it cited to this Court and relied upon focuses much more narrowly on the portion of realizable profit attributable to invention. See Motion for Entry of Default, at 5. Bridgelines profits are significantly less than its revenues, like all companies. Moreover, even if Bridgelines product infringed the 629 Patent, the patented invention would be but one component of the accused product. Ingeniador could never obtain more than the portion of profit attributable to the patented invention. Third, the 1.5% royalty rate requested by Ingeniador is totally arbitrary, self-serving, and unsupported by any evidence of royalty rates obtained by Ingeniador from any actual licensees. For all of these reasons, the reasonably royalty calculation proffered by Ingeniador and accepted by this Court has no basis. 5. Other Potential Defenses

Bridgeline has not yet had an opportunity to perform a complete investigation of other possible defenses to Ingeniadors claims. Should Ingeniadors claims against Bridgeline survive dismissal, despite the grounds argued above, Bridgeline expects to pursue any and all additional defenses, including without limitation defenses relating to Ingeniadors purported standing to assert the 629 Patent and defenses relating to the invalidity of the 629 Patent. C. Ingeniador Will Suffer No Unfair Prejudice

Ingeniador will suffer no unfair prejudice from the setting aside of the default and default judgment entered against Bridgeline. This case is still in its infancy, and the Court has pending before it a variety of motions to dismiss filed by all of the other defendants. If Ingeniadors claims survive those motions to dismiss, which they should not, then Bridgeline can simply take its place alongside the other defendants. This clearly is not a situation in which Ingeniador would have to relitigate issues already addressed or put on hold its prosecution of claims against other defendants while it dealt with Bridgeline. Nor is this a situation in which so much time has 19

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passed that relevant witnesses and documentary evidence would have been lost, such that it would be unfair to put Ingeniador to the burden of proving its claims. To the contrary, there has been no claim construction, no discovery, no analysis of the validity of the patent, and no other action taken by Ingeniador other than to oppose the other defendants motions to dismiss. D. The Balance Between Finality and Merits-Based Resolution Favors Bridgeline

For similar reasons, the importance of finality in litigation is not a factor that favors Ingeniador. In the event Ingeniador survives dismissal, this litigation is a long way from finality. Setting aside the default and default judgment against Bridgeline does not threaten finality. The judicial preference for resolution on the merits, however, strongly favors Bridgeline and a decision setting aside the default and default judgment. Particularly when a non-practicing alleged patent-holder like Ingeniador, on the barest possible allegations, asserts a host of generic, cookie-cutter claims against a group of unrelated defendants, the courts should permit a defendant like Bridgeline to present its defenses rather than allow a plaintiff to profit from its questionable tactics. This is especially so when a case is still at its early stages. CONCLUSION For the foregoing reasons, Bridgeline respectfully requests the Court to set aside the entry of default and default judgment, and dismiss all claims asserted against Bridgeline. BRIDGELINE DIGITAL, INC. /s/ Ricardo Casellas______________ Ricardo Casellas (Bar No. 203114) CASELLAS, ALCOVER & BURGOS PSC Suite 1400, Popular Center Bldg. 208 Ponce de Leon Ave. Hato Rey, PR 00918 P.O. Box 364924 San Juan, PR 00936-4924 787-756-1400 (t) 787-756-1401 (f) rcasellas@cabprlaw.com 20

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Of Counsel: T. Christopher Donnelly Adam B. Ziegler DONNELLY, CONROY & GELHAAR, LLP One Beacon Street, 33rd Floor Boston, MA 02108 617-720-2880 (t) 617-720-3554 (f) tcd@dcglaw.com abz@dcglaw.com Pro Hac Vice Application Forthcoming

CERTIFICATE OF SERVICE I hereby certify that on May 7, 2012, I electronically filed the foregoing paper with the Clerk of the Court using the ECF system which will send notification to all counsel. /s/ Ricardo Casellas

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