Preview
FILED
DALLAS COUNTY
11/4/2019 10:15AM
FELICIA PITRE
DISTRICT CLERK
CAROLYN SELLERS
CAUSE NO. DC-19-09397
CF DYNAMIC ADVANCES LLC AND
DBD CREDIT FUNDING, LLC IN THE DISTRICT COURT OF
Plaintiffs
V. DALLAS COUNTY, TEXAS
TECHDEV HOLDINGS, LLC AND THE
SPANGENBERG FAMILY FOUNDATION
FOR THE BENEFIT 0F CHILDREN’S
HEALTHCARE AND EDUCATION 162nd JUDICIAL DISTRICT
Defendants
DEFENDANTS’ SECOND AMENDED ANSWER AND SECOND AMENDED
COUNTERCLAIMS
Defendants TechDeV Holdings (“TechDeV”) and The Spangenberg Family Foundation for
the Benefit of Children’s Healthcare and Education (“SFF”), file this amended answer and
amended counterclaims in response to Defendants’ Rule 91a Motion t0 Dismiss, reserving the
right t0 amend as the record is further developed. In support Defendants respectfully show as
follows.
INTRODUCTION AND BACKGROUND
Eran Zur, Erez Levy, Fortress: A Questionable Business Model.
1. Eran Zur and Erez Levy are the masterminds of the notorious “loan t0 own” and
“patent troll” operations 0f Fortress Investment Group (“Fortress”), including the shell entities CF
Dynamic Advances, LLC (“CF-Fortress”) and DBD Credit Funding, LLC (“DBD-Fortress,” and
together with CF-Fortress, the “Fortress Entities”). DBD-Fortress and CF-Fortress are owned and
controlled by Fortress and as serial plaintiffs have filed this action and two prior related actions
that have been dismissed.
2. Having raised hundreds 0f millions of dollars} Eran Zur and Erez Levy spend their
time coming up With schemes to loan companies like Theranos (the famed blood fraud company)
money 0n outrageous terms and then abscond with their patents, depriving these companies 0f any
opportunity to survive and their investors 0f any chance of recovery?
3. The sharp business tactics of Eran Zur and Erez Levy are well-known in the patent
market.3 Intelligent market participants treat them as “lenders of last resort” for very good reason.
On information and belief, the default rate on “loans” originated by Eran Zur and Erez Levy
exceeds 50%.4 Once they catch wind of a potential default these two swing into action, launching
1
Softbank unit launches $400 million ”patent troll ”fund: Japanese bank launches $400 million patent troll
fund, New York Post, May 21, 2018, available at https://nvpost.com/2018/05/2l/iapanese-bank-launches-
400m-patent-troll-fund (“SoftBank’s Fortress Investment Group is raising a $400 million fund t0 sue tech
companies over intellectual property infringement, The Post has learned. .
.“I think they Will make a lot 0f
.
money,” a source Who is considering investing in the fund told The Post. The source added, though, that he
believes the arrangement is very odd. Japan’s SoftBank in December bought hedge fund Fortress for $3.3
billion”).
2
“Theranos closes deal With Fortress to shut down embattled firm,” MarketWatch, September 17, 2018.
https://www.marketwatch.com/storv/theranos—closes—deal-with-fortress-to-shut-down-embattled-firm-
2018—09—13 (“There was no likely path to achieving the Fortress milestones — and getting more funds —
before the company ran out of cash, according to several people close to the company’s finances”).
3
Federal Court Orders That Patent Troll Can Hide
’t
ItsMachinations, Electronic Frontier Foundation,
Jan. 19, 2019 at https://Www.eff.org/deeplinks/ZO19/01/federal-court-orders—patent—troll-cant-hide-its—
machinations (“...Apple appears to argue that Uniloc entities and Fortress Investment Group LLC divided
rights in the asserted patents in a way thatmeans the Uniloc entities no longer had a legal right to sue for
infringement. We say “appears” because the public cannot see most 0f the briefing and evidence. Because
the redactions (requested by Uniloc) make itimpossible t0 understand the dispute, we moved to intervene
to seek public access. Judge Alsup agreed that Uniloc had improperly sought to keep material secret. He
described the scope of Uniloc’s sealing requests as “astonishing” and noted that it even extended t0
redacting quotes from published court opinions.”).
4
DSS says Fortress has right t0 take possession 0f] 0 semiconductorpatents after default 0n Feb. 13, The
Patent Investor, Feb. 18, 2016, at https://thepatentinvestor.com/2016/02/dss—savs—fortress—has—right-to-
take-possession-of—10-semiconductor-patents-after-default-0n-feb-13/ (“In addition, as a result 0f the
default, the interest rate on the unpaid amounts due increased to 2% per year effective February 13, 2016.
The company said ithas been in discussions with Fortress to amend the agreement or otherwise to remedy
the default”).
their typical opening salvo of a threat to foreclose, which allows them to gain control 0f valuable
assets at a fraction of their true value.
4. Given Eran Zur’s and Erez Levy’s well-earned reputations, these sophisticated
market participants negotiate and draft their patent transaction agreements in a simplistic manner
to attempt to insulate themselves against the ramifications of their shady tactics.
SFF and TechDev Sell Valuable Assets Under Carefully Negotiated Agreements
to a Third Party.
5. In May 2014, SFF and Tech Dev sold extremely valuable patents rights, including
“ ‘798
an exclusive license to U.S. Patent N0. 7, 177, 798 (the Patent”), to a company (the “Buyer”).
TechDev and SFF were well aware that itwas possible at some future time the likes 0f Eran Zur
and Erez Levy would show up and attempt to orchestrate a plan to abscond with this valuable asset
to deprive TechDev and SFF of the benefit of their bargain.
6. The Purchase Agreement for that sale, dated May 2, 2014, by which TechDev and
SFF (the “SFF Purchase Agreement”) sold the ‘798 Patent t0 Buyer (Marathon Patent Group, Inc.,
as described in further detail below)), contains two critical provisions relevant here: an arbitration
provision and strict limitations 0n those intellectual property rightsS:
Governing Law; Arbitration; Prevailing Party. This Agreement and all claims 0r
causes of action that may be based upon, arise out 0f or relate t0 this Agreement 01'
the Collateral Agreements Will be construed in accordance With and governed by
the internal laws of the State of Texas applicable to agreements made and t0 be
performed entirely Within such State Without regard t0 conflicts of laws principles
thereof. Any dispute arising under 0r in connection with any matter 0f any
nature (whether sounding in contract 0r tort) relating t0 0r arising out 0f this
Agreement, shall be resolved exclusively by arbitration. [emphasis added]
5
The SFF Agreement and the related “Collateral Agreements” were publicly filed With the Securities and
Exchange Commission (“SEC”) on May 7, 2014 and have at all relevant times been free and accessible
through the SEC’s company filing portal.
https://www.sec.gov/Archives/edgar/data/1507605/000141588914001375/0001415889-14-001375-
index.htm
EX. 1 at EX. A, §9.2.
Limitations 0n Assignment. Except as expressly permitted in this Section, none 0f
Marathon, DAA or Dynamic may grant 0r assign any rights or delegate any duties
under this Agreement t0 any Third Party (including by way of a “change in
control”) 0r may sell, transfer, or spin—off any 0f the Interests in Dynamic 0r any of
its material assets, including the Patents, Without the prior written consent of
TechDeV and SFF. Notwithstanding the foregoing, Marathon, DAA or Dynamic
shall be permitted t0 transfer or assign (i)the Patents; (ii)a maj ority of the Interests;
0r (iii)its respective its rights, interests and obligations under this Agreement, as
applicable, Without Sellers’ prior written consent as part of a sale 0f all 0r
substantially all 0f its business, equity to, or a change in control transaction with a
Third Party acquirer (an “M&A Transaction”, and an “Acquirer,” respectively);
provided that (a) such transfer 0r assignment is subject t0 all 0f the terms and
conditions 0fthis Agreement and the Collateral Agreements; and (ii)such Acquirer
executes a written undertaking towards Sellers agreeing to be bound by all of the
terms and conditions 0f this Agreement and the Collateral Agreements With respect
to the rights being transferred or assigned. Except as otherwise expressly limited
herein, the provisions hereof shall inure t0 the benefit 0f, and be binding upon, the
successors, permitted assigns, heirs, executors, and administrators 0f the Parties
hereto.
1d. § 9.3.
Zur, Levy, and Fortress Make An Appearance—Under the Guise 0f a “Revenue Sharing
Agreement.”
7. Sure enough, after SFF and TechDeV entered into the SFF Agreement, Eran Zur,
Erez Levy, and Fortress showed up and entered into a curiously named “Revenue Sharing
Agreement” With the Buyer that had recently purchased the ‘789 Patent from TechDeV and SFF.
8. Fortress and Buyer, now Borrowers, did this deal, driven by the Buyer’s need for
quick cash, With all parties knowing full well that TechDeV and SFF retained certain rights in all
the transferred intellectual property (including the ‘798 Patent) in the SFF Purchase Agreement.
9. As part 0f that “Revenue Sharing Agreement,” Fortress conducted extensive
diligence and was well aware ofthe SFF Agreement and its terms. Fortress nevertheless demanded
rights t0 certain of the Buyer’s patents from SFF and TechDeV before they would hand over any
cash. Those two papered up their fire sale “patents for fast cash” deal, even though their hands
were already tied to the SFF Agreement as they well knew. After more backroom deal-making
and brainstorming on their perceived cleverness in manufacturing a way to skirt the TechDev-SFF
obligations (even though they identified those very rights in their deal-making), Fortress created
new entities (Plaintiffs here) that Fortress principals Eran Zur and Erez Levy could manipulate.
10. Over less than a two-year period, Fortress entered into no less than three material
amendments to the Revenue Sharing Agreement, each time, as they consistently do, tightening the
financial chains around the borrower with whom they enter into agreements to leverage their
negotiating position to gain control of valuable assets at a fraction of their real value.
Zur, Levy and Fortress Orchestrate a “Contribution” of the Valuable Assets
11. In the Fall of 2017, less than 24 months after entering into the original “Revenue
Sharing Agreement,” Eran Zur and Erez Levy negotiated a transaction with the Buyer to
“contribute” the ‘789 Patent to a newly formed entity controlled by Zur, Levy, and Fortress. By
this transaction, described further below, the Fortress Entities called out and identified specifically
the rights owed to TechDev and SFF, then pressured them into finding a way to avoid triggering
the carefully negotiated obligations and right to patent monetization proceeds set forth in the 2014
Agreements (specifically, the “Pay Proceeds Agreement” (attached as Exhibit 2).
The Third Case Filed by Fortress—This Time in Texas.
12. TechDev and SFF learned of the Fortress scheme to thwart the TechDev/SFF right
to proceeds when Plaintiffs filed suit against Amazon.com in the Northern District of New York,
asserting the ‘798 Patent. TechDev and SFF reached out to remind Fortress about the 2014
Agreements to which the ‘798 Patent was bound, including TechDev and SFF’s right to a
percentage of proceeds from the Amazon litigation. Those overtures resulted in Plaintiffs’ rush to
a courthouse in New York. Texas residents TechDev and SFF challenged personal jurisdiction
5
and won, by an order issued July 2, 2019. Only now, nine months later, d0 Plaintiffs come to
Texas to try, for a third time, to avoid their obligation to arbitrate this disagreement about the SFF
Agreement.
GENERAL DENIAL
13. As permitted under Rule 92 0fthe Texas Rules 0f Civil Procedure, Defendants deny
each and every, alland singular, the allegations made in Plaintiffs’ Original Petition. As Plaintiffs
have made allthese allegations, they should be required t0 prove each and every one of them by a
preponderance 0f all the credible evidence and by clear and convincing evidence Where necessary.
AFFIRMATIVE DEFENSES
14. Defendants assert and affirmatively plead the defense of their rights t0 have an
arbitral forum decide this dispute in the pending arbitration that TechDeV/SFF initiated in
November 2018. Exhibit 1.
15. Defendants assert and affirmatively plead the defense 0f waiver.
16. Defendants assert and affirmatively plead the defense of estoppel.
17. Defendants assert and affirmatively plead that Plaintiffs failed to mitigate their
damages.
18. Defendants assert and affirmatively plead that Plaintiffs had notice of the
outstanding obligations and thus fail t0pass the test for bona fide purchaser status.
19. Defendants assert and affirmatively plead application of caps on exemplary
damages, insofar as exemplary damages are even recoverable, Which Defendants dispute.
ADDITIONAL FACTUAL BACKGROUND IN SUPPORT OF COUNTERCLAIMS
20. Defendants incorporate by reference the foregoing, and in particular the
introductory factual background, and further allege as follows.
21. Before May 2, 2014, TechDev and SFF owned 100% of the member interests in
Dynamic Advances, LLC (“Dynamic Advances”), a Texas limited liability company. Dynamic
Advances held an extremely valuable exclusive patent license (the “Exclusive Patent License”) on
various patents owned by Rensselaer Polytechnic Institute (the “Dynamic Patents”). Dynamic
Advances had no other significant assets on May 2, 2014 other than the Dynamic Patents.
22. On May 2, 2014, the DA Purchase Agreement was entered into among TechDev,
SFF, DA Acquisition LLC, a Texas limited liability company (“DAA”), and Marathon Patent
Group, Inc. (“Marathon”). Ex. 1 at 1/16. Marathon owned 100% of DAA. Id. (identifying DAA
as Marathon’s wholly-owned subsidiary). Pursuant to the DA-SFF Purchase Agreement, on May
2, 2014 DAA acquired 100% of the interests in Dynamic Advances that had previously been held
by TechDev and SFF. Id. (third “witnesseth” clause).
23. Marathon made full public disclosure of the DA Purchase Agreement and the
related Collateral Agreements (including the Pay Proceeds Agreement) in a Securities and
Exchange Commission (“SEC”) Current Report on Form 8-K filed on May 7, 2014:
https://www.sec.gov/Archives/edgar/data/1507605/000141588914001375/0001415889-14-
001375-index.htm At all times since the May 7, 2014 filing, the DA Purchase Agreement
(including the related Collateral Agreements) has been publicly available, the subject of numerous
press releases, and many of Marathon’s SEC filings.
24. On information and belief, Fortress exercises complete control over and has
masterminded and instructed Plaintiffs/Counter-Defendants how to respond with respect to the DA
Purchase Agreement and related Collateral Agreements.
25. In January 2015, Marathon entered into a Revenue Sharing and Securities Purchase
Agreement (“Revenue Sharing Agreement”) with Plaintiffs/Counter-Defendant DBD-Fortress,
7
ostensibly a shell company affiliate of Fortress. Pursuant to the Revenue Sharing Agreement,
DBD-Fortress agreed to advance funds to Marathon in consideration of DBD-Fortress’s receiving
a portion of various revenues received by Marathon in the future.
26. Fortress and Marathon also entered into a First Amendment to the Amended RSSA
(the “First Amendment”). See Exhibit 3, attached. The First Amendment describes the transaction
as a “contribution” of the Designated Patents, defined to include the ‘789 Patent. The contribution
requirement was accomplished through an assignment of the ‘789 Patent to a new special purpose
entity (SPE), through Fortress’s machinations via its investment vehicles, DBD-Fortress CFDA-
Fortress.
27. The First Amendment recognizes the May 2, 2014 Agreement between
TechDev/SFF and Marathon, which by definition includes the Pay Proceeds Agreement. It lists
the Agreement by and among TechDev Holdings, LLC, The Spangenberg Family Foundation for
the Benefit of Children’s Healthcare and Education, DA Acquisition LLC and the Company dated
May 2, 2014, which it identifies as an agreement listed on the First Amendment’s Schedule 1(d).
28. The First Amendment includes Section 2.2 (“Creation of Special Purpose Entity;
Required Consents”), which sets up and reflects the Fortress Entities’ intent to manipulate the
transaction in a way that would avoid triggering the requirement, known full well to it,to pay
TechDev and SFF.
29. Because there was, in truth and in fact, no actual consent to a transfer of the
intellectual property—as the 2014 Agreements/SFF Agreement require—the parties had to find a
way out of the obligations triggered because of the lack of consent.
30. Section 2.2.1 reads as follows:
From and after the Amendment Effective Date, the Company and the Collateral Agent
shall work diligently and in good faith to effect the contribution of the Designated
8
Portfolios to the SPE (the “Restructuring”), including that the Company will use its
best efforts to secure shareholder approval of the Restructuring (including a
ratification of this Amendment), and to secure any third party consents deemed
necessary or desirable (in the judgment of the Collateral Agent) to permit the
assignment of the Designated Portfolios to the SPE without triggering any payment
obligation to any such third party, it being understood that such assignment may be
conditioned on the execution by the SPE of a joinder to the agreements noted on
Schedule 2.2.1 to the Amendment and the assumption by the SPE of certain liabilities
of the Company and its Subsidiaries under such agreements as specified on Schedule
2.2.1 to the Amendment (collectively, the “Required Consents”).
31. The parties further recognized that there could be no warranty regarding the
transferred assets because those representations were “subject only to the obligation of the
Company to make the Third Party Payments reflected in full on Schedule I(d) to the Amendment
(which, with respect to the Designated Portfolio, are reflected on Schedule I(c) to the
Amendment).” Ex. 3, attached (First Amendment) §3.5.
32. “Third-Party Payments” referred to in Section 3.5 are defined as “amounts due to
prior owners or licensors of the Patents or due to consultants, attorneys, and other third parties, in
each case, in connection with any applicable Monetization Revenues, but solely to the extent
described on Schedule I(d) to the Amendment.” Id.
33. Pursuant to the Amended Revenue Sharing Agreement, it is apparent that the “SPE”
referred to above that acquired title to the Dynamic Patents is “CF Dynamic Advances, LLC,”
referred to herein as CFDA-Fortress. On information and belief, CFDA-Fortress is 100% owned
by DBD-Fortress and that CFDA-Fortress is the owner of the Dynamic Patents.
34. In May 2018, CFDA-Fortress sued Amazon.com for infringement of the Dynamic
Patents (the “Amazon Litigation”), including the -798 Patent. TechDev and SFF became aware of
this litigation in August 2018.
35. Counsel for TechDev and SFF (not the undersigned counsel for this matter)
contacted a representative of Fortress, DBD-Fortress, and CFDA-Fortress on September 10, 2018.
9
Over the following weeks, Fortress and its affiliates declined the opportunity t0 resolve this matter
through good faith negotiations. Despite representations in communications during that dialogue
that they would not file a declaratory judgment action, Plaintiffs did file one. First in federal court,
then in state court in New York. TeChDeV and SFF, taking the hint that the time for good faith
communications was over, asserted their rights t0 arbitration by filing a demand for arbitration
with the American Arbitration Association, as the 2014 Agreements require.
COUNTERCLAIMS
FIRST CAUSE OF ACTION:
UNJUST ENRICHMENT AND CONSTRUCTIVE TRUST
36. Defendants/Counter-Plaintiffs incorporate by reference the foregoing and further
allege as follows.
37. Insofar as Fortress Plaintiffs/Counter-Defendants have recovered 0r are in the
process 0f recovering proceeds and revenues in any form from any type 0f monetization activity
associated with the ‘798 patent, they have been unjustly enriched.
38. The successful track record 0f the ‘798 Patent in securing revenues and creating a
market recognition for its value is attributable to the work that SFF and TechDeV did prior to the
sale of the DA Assets per the 2014 Agreements. Those agreements acknowledge TechDeV and
SFF’s success in bringing attention and value t0 the ‘798 Patent; they d0 so by rewarding them
With future additional payments, guaranteed to them even after the sale of the DA assets.
Plaintiffs/Counter-Defendants are the passive recipients 0f that success and recognition as they
continue the monetization trajectory that TechDeV/SFF successfully created, with great monetary
success and public recognition. The sums that P1aintiffs/Counter-Defendants retain that belong to
TechDeV/SFF represent unjust enrichment. P1aintiffs/Counter-Defendants usurped for themselves
10
additional monies not due to them by virtue of duress and/or undue advantage effected upon cash-
strapped Marathon, and a constructive trust should be imposed on those funds to do equity.
39. TechDev/SFF do not yet have access to the books and record that
Plaintiffs/Counter-Defendants and/or Fortress are maintaining to account for leads and
transactions involving the ‘798 Patent. TechDev/SFF request that a constructive trust also be in
effect to safeguard those assets until the appropriate adjudicatory authority orders the proper
percentage of the ill-gotten gains turned over to TechDev/SFF.
SECOND CAUSE OF ACTION:
CONVERSION
40. Defendants/Counter-Plaintiffs incorporate by reference the foregoing and further
allege as follows.
41. In refusing to recognize and admit TechDev/SFF’s right to their percentage of
revenues from any monetization event, Plaintiffs/Counter-Defendants wrongfully exercise
dominion and control over property that rightfully belongs to TechDev and SFF.
42. TechDev or SFF never assented to Plaintiffs/Counter Defendants’ retaining or
withholding from TechDev and SFF property allocated to them in the Pay Proceeds Agreement.
Plaintiffs/Counter-Defendants’ retention of those sums constitute conversion and they should be
ordered to be damages accordingly.
RESERVATION OF RIGHT TO AMEND
43. Defendants/Counter-Plaintiffs expressly invoke the right to amend to include
additional causes of action and/or re-assert withdrawn causes of action and arguments in support
thereof as the litigation continues and the evidentiary record changes accordingly.
JURY DEMAND
44. Defendants/Counter-Plaintiffs request a trial by jury.
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PRAYER FOR RELIEF
WHEREFORE, PREMISES CONSIDERED, Defendants pray that Plaintiffs take nothing
by this suit, that all relief requested by Plaintiffs be denied, and all of Plaintiffs’ causes of action
be dismissed with prejudice to the refiling of same; and that Defendants go hence with their costs
without delay on the claims brought by Plaintiffs.
Defendants further pray that the Court upon a final hearing or trial that TechDev and SFF
recover judgment against Plaintiffs/Counter-Defendants, jointly and severally, compensatory
damages, including exemplary damages, in an amount that exceeds the minimum jurisdictional
limits of the Court as set forth above; attorneys’ fees for trial and any appeal, prejudgment and
post-judgment interest as provided by law, costs of suit, and for such other and further relief, in
law and in equity, to which they may show themselves justly entitled.
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Date: November 4, 2019 Respectfully submitted,
/s/ Elizabeth A. Wiley
Elizabeth A. Wiley
Grable Martin Fulton PLLC
State Bar N0. 00788666
lwiley@grablemartin.com
1101 W. 34th Street, N0. 565
Austin, Texas 78705
Telephone: 512.560.3480
ATTORNEY FOR DEFENDANTS
CERTIFICATE OF SERVICE
I hereby certify that the counsel 0f record Who are deemed t0 have consented to electronic service
are being served With a copy of this document Via an approved electronic filing system.
Dated: November 4, 2019 /s/ Elizabeth A. Wiley
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EXHIBIT 1
6/2018
11/1 ex1 0-4.htm
EX-10.4 7 exlO-4.htm PURCHASE AGREEMENT BETWEEN THE COMPANY, TECHDEV, SFF AND DA ACQUISITION LLC
DATED MAY 2, 2014.
Exhibit 10.4
Agreement—Dynamic Advances
This Agreement (this “Agreement”), ismade as of May 2, 2014 (the “Effective Date”), by and among TechDev Holdings,
LLC, a Texas company,
limited liability of 719 W. Front Street,Suite 242, Tyler,TX 75702 (“TechDev”), The Spangenberg Family
Foundation for the Benefit of Children’s Healthcare and Education, a 501(c)(3) charitable organization organized under the laws of
Texas (“SFF”; TechDev and SFF are collectively referred toas the “Sellers” and individually as a “Seller”);DA Acquisition LLC, a
newly formed Texas limited liability company with an address of 2331 Mill Road, Suite 100, Alexandria, VA 223 14 (“DAA”), a wholly-
owned subsidiary of Marathon Patent Group, Inc., a Nevada corporation with an address of 2331 Mill Road, Suite 100, Alexandria, VA
22314 (“Marathon”) and Marathon. A11 the partiesto this Agreement shall be referred to collectivelyherein as the “Parties” and
separately as a “Party”.
Witnesseth:
WHEREAS, TechDev and SFF collectivelyown 100% of the limited liabilitycompany membership interests(the “Dynamic
Interests” or “Interests”) of Dynamic Advances, LLC (“Dynamic”), a Texas limited liabilitycompany; and
WHEREAS, DAA wishes to acquire Sellers’ Which
entire interest in the Interests, following DAA will become the sole interest
holder of Dynamic, all according to the provisions set forth herein below;
NOW, THEREFORE, in consideration of the mutual promises and covenants hereby agree as
set forth herein, the Parties hereto
follows:
1. Definitions
1.1 “Affiliate” means, with respect to a Party, any Person in any country that directly or indirectly Controls,
isControlled
by or isunder common Control with such Party. For the purposes of this Agreement, the term “Control” of a Person means ownership, of
record or beneficially, directly or through other Persons, of fifty percent (50%) or more of the voting equity of such Person or, inthe case
of a non-corporate Person, equivalent interests.
1.2 “Collateral Agreements” means all such concurrent or subsequent agreements, documents and instruments, as
amended, supplemented, or otherwise modified in accordance with the terms hereof or thereof, including without limitation, the
Registration Rights Agreement, the Certificate of Designation, the Opportunity Agreement, the Pay Proceeds Agreement, the Common
InterestAgreement and the Promissory Note.
1.3 “Entity” means any corporation, partnership, limitedliabilitycompany, association, joint stock company, trust, joint
venture, unincorporated organization, Governmental Body (asdefined below) or any other legal entity.
1.4 “Governmental Body” means any (i) U.S. Federal, state,county, municipal, city,town Village,district,or other
jurisdiction or government of any nature; (ii)governmental or quasi-governmental authority of any nature (including any governmental
agency, branch, department, official, or other entity and any court or other tribunal);
or body
(iii) exercising, or entitled or purporting to
exercise, any administrative, executive, power of any
judicial, legislative, police, regulatory, or taxing authority or nature.
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1/1
6/2018
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1.5 “Intellectual Property” means alldomestic or foreign rights in, toand concerning Dynamic’s: (i)trademarks, service
marks, brand names, certification marks, collectivemarks, d/b/a’s,trade dress, logos, symbols, trade names, assumed names, fictitious
names, corporate names and other indications or indicia of origin, including translations,adaptations, derivations, modifications,
combinations and renewals thereof; published and unpublished works of authorship, whether copyrightable or not (including databases
(ii)
and other compilations of data or information), copyrights therein and thereto, moral rights, and rights equivalent thereto,including but
not limited to, the rights of attribution, assignation and integrity; (iii) trade secrets, confidential and/or proprietary information (including
ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical
data, schematics, designs, discoveries, drawings, prototypes, specifications,hardware configurations, customer and supplier financial
lists,
information, pricing and cost information, financial projections, and business and marketing methods plans and proposals), collectively
“Trade Secrets”; (iv)computer software, including programs, applications, source and object code, data bases, data, models, algorithms,
flowcharts, tables and documentation related to the foregoing; (V) other similar tangible or intangible intellectual property or proprietary
rights,information and technology and copies and tangible embodiments thereof (in Whatever form or medium); (Vi) all applications to
and renewals or extensions of the foregoing;
register, registrations, restorations, reversions domain names;
(Vii) internet and the
(viii) all
goodwill associated with each of the foregoing and symbolized thereby; and (ix)all other intellectualproperty or proprietary rights and
claims or causes of action arising out of or related to any infringement, misappropriation or other Violation of any of the foregoing,
including rights to recover for past, present and future Violations thereof.
1.6 “Lien” means any mortgage, pledge, security interest,encumbrance, lien,charge or debt of any kind, any trust,any
filing or agreement to grant, deposit or file a pledge or financing statement as debtor under applicable law, any subordination arrangement
in favor of any Person, or any other Third Partyright.
1.7 “Patents” means the patents and patent applications listedon Schedule 1.7 hereto allof Which are owned, controlled
or licensable by Dynamic pursuant to an exclusive license.
1.8 “Patent Rights” means and
all right, title interest in the Patentsowned, controlled or licensable by Dynamic and,
subject in all cases to the terms and conditions of the applicable exclusive license pursuant to Which Dynamic holds itsrights in such
make, have made, use, import, put into use, distribute,
Patents, as applicable, all rights to (a) sell and have sold products and to practice
any process, method, or use under the Patents; (b) engage in any causes of action (whether currently pending, filed, or otherwise),
Proceedings and other enforcement rights under the Patents including, without limitation, all rights to
sue, to countersue and to pursue
damages, injunctive relief,and any other remedies of any kind for past, current and future infringement; and agreements or
(c) all rights to
understandings with respect to settlements, licenses, royalties and the like and the right to enforce, recover and collect settlement
arrangements, license payments (including lump sum payments), royaltiesand other payments due now or hereafter due or payable with
respect thereto and to the matters described in Section 1.8(a), under or on account of any of the Patents and any Proceeding with respect to
any of the foregoing; and (d) any and allprivileges, including the benefit ofall attorney-client privilegeand attorney work product
privilege, in respect of the items described in the foregoing clauses (a) through (c).
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6/2018
11/1 ex1 0-4.htm
1.9 “Person” means any individual or Entity.
1.10 “Proceeding” means any claim, mediation, hearing, audit, charge, inquiry,
suit, litigation, arbitration, investigation,
governmental investigation, regulatory proceeding or other proceeding or action of any nature (whether civil,criminal, legislative,
commenced, brought, conducted, or known
administrative, regulatory, prosecutorial, investigative, or informal) to be threatened, or heard
by or before, or otherwise involving, any Governmental Body, arbitrator or mediator or similar person or body.
1.11 “Third Party” means any Person other than a Party or itsAffiliates.
2. Sale and Purchase of Interests
Subject to the terms and conditions hereof, at the Closing, Sellersshall sell,assign, transfer,convey and deliver to DAA the
Interests and DAA shallpurchase and accept the assignment, trans
Preview
FILED DALLAS COUNTY 11/4/2019 10:15AM FELICIA PITRE DISTRICT CLERK CAROLYN SELLERS CAUSE NO. DC-19-09397 CF DYNAMIC ADVANCES LLC AND DBD CREDIT FUNDING, LLC IN THE DISTRICT COURT OF Plaintiffs V. DALLAS COUNTY, TEXAS TECHDEV HOLDINGS, LLC AND THE SPANGENBERG FAMILY FOUNDATION FOR THE BENEFIT 0F CHILDREN’S HEALTHCARE AND EDUCATION 162nd JUDICIAL DISTRICT Defendants DEFENDANTS’ SECOND AMENDED ANSWER AND SECOND AMENDED COUNTERCLAIMS Defendants TechDeV Holdings (“TechDeV”) and The Spangenberg Family Foundation for the Benefit of Children’s Healthcare and Education (“SFF”), file this amended answer and amended counterclaims in response to Defendants’ Rule 91a Motion t0 Dismiss, reserving the right t0 amend as the record is further developed. In support Defendants respectfully show as follows. INTRODUCTION AND BACKGROUND Eran Zur, Erez Levy, Fortress: A Questionable Business Model. 1. Eran Zur and Erez Levy are the masterminds of the notorious “loan t0 own” and “patent troll” operations 0f Fortress Investment Group (“Fortress”), including the shell entities CF Dynamic Advances, LLC (“CF-Fortress”) and DBD Credit Funding, LLC (“DBD-Fortress,” and together with CF-Fortress, the “Fortress Entities”). DBD-Fortress and CF-Fortress are owned and controlled by Fortress and as serial plaintiffs have filed this action and two prior related actions that have been dismissed. 2. Having raised hundreds 0f millions of dollars} Eran Zur and Erez Levy spend their time coming up With schemes to loan companies like Theranos (the famed blood fraud company) money 0n outrageous terms and then abscond with their patents, depriving these companies 0f any opportunity to survive and their investors 0f any chance of recovery? 3. The sharp business tactics of Eran Zur and Erez Levy are well-known in the patent market.3 Intelligent market participants treat them as “lenders of last resort” for very good reason. On information and belief, the default rate on “loans” originated by Eran Zur and Erez Levy exceeds 50%.4 Once they catch wind of a potential default these two swing into action, launching 1 Softbank unit launches $400 million ”patent troll ”fund: Japanese bank launches $400 million patent troll fund, New York Post, May 21, 2018, available at https://nvpost.com/2018/05/2l/iapanese-bank-launches- 400m-patent-troll-fund (“SoftBank’s Fortress Investment Group is raising a $400 million fund t0 sue tech companies over intellectual property infringement, The Post has learned. . .“I think they Will make a lot 0f . money,” a source Who is considering investing in the fund told The Post. The source added, though, that he believes the arrangement is very odd. Japan’s SoftBank in December bought hedge fund Fortress for $3.3 billion”). 2 “Theranos closes deal With Fortress to shut down embattled firm,” MarketWatch, September 17, 2018. https://www.marketwatch.com/storv/theranos—closes—deal-with-fortress-to-shut-down-embattled-firm- 2018—09—13 (“There was no likely path to achieving the Fortress milestones — and getting more funds — before the company ran out of cash, according to several people close to the company’s finances”). 3 Federal Court Orders That Patent Troll Can Hide ’t ItsMachinations, Electronic Frontier Foundation, Jan. 19, 2019 at https://Www.eff.org/deeplinks/ZO19/01/federal-court-orders—patent—troll-cant-hide-its— machinations (“...Apple appears to argue that Uniloc entities and Fortress Investment Group LLC divided rights in the asserted patents in a way thatmeans the Uniloc entities no longer had a legal right to sue for infringement. We say “appears” because the public cannot see most 0f the briefing and evidence. Because the redactions (requested by Uniloc) make itimpossible t0 understand the dispute, we moved to intervene to seek public access. Judge Alsup agreed that Uniloc had improperly sought to keep material secret. He described the scope of Uniloc’s sealing requests as “astonishing” and noted that it even extended t0 redacting quotes from published court opinions.”). 4 DSS says Fortress has right t0 take possession 0f] 0 semiconductorpatents after default 0n Feb. 13, The Patent Investor, Feb. 18, 2016, at https://thepatentinvestor.com/2016/02/dss—savs—fortress—has—right-to- take-possession-of—10-semiconductor-patents-after-default-0n-feb-13/ (“In addition, as a result 0f the default, the interest rate on the unpaid amounts due increased to 2% per year effective February 13, 2016. The company said ithas been in discussions with Fortress to amend the agreement or otherwise to remedy the default”). their typical opening salvo of a threat to foreclose, which allows them to gain control 0f valuable assets at a fraction of their true value. 4. Given Eran Zur’s and Erez Levy’s well-earned reputations, these sophisticated market participants negotiate and draft their patent transaction agreements in a simplistic manner to attempt to insulate themselves against the ramifications of their shady tactics. SFF and TechDev Sell Valuable Assets Under Carefully Negotiated Agreements to a Third Party. 5. In May 2014, SFF and Tech Dev sold extremely valuable patents rights, including “ ‘798 an exclusive license to U.S. Patent N0. 7, 177, 798 (the Patent”), to a company (the “Buyer”). TechDev and SFF were well aware that itwas possible at some future time the likes 0f Eran Zur and Erez Levy would show up and attempt to orchestrate a plan to abscond with this valuable asset to deprive TechDev and SFF of the benefit of their bargain. 6. The Purchase Agreement for that sale, dated May 2, 2014, by which TechDev and SFF (the “SFF Purchase Agreement”) sold the ‘798 Patent t0 Buyer (Marathon Patent Group, Inc., as described in further detail below)), contains two critical provisions relevant here: an arbitration provision and strict limitations 0n those intellectual property rightsS: Governing Law; Arbitration; Prevailing Party. This Agreement and all claims 0r causes of action that may be based upon, arise out 0f or relate t0 this Agreement 01' the Collateral Agreements Will be construed in accordance With and governed by the internal laws of the State of Texas applicable to agreements made and t0 be performed entirely Within such State Without regard t0 conflicts of laws principles thereof. Any dispute arising under 0r in connection with any matter 0f any nature (whether sounding in contract 0r tort) relating t0 0r arising out 0f this Agreement, shall be resolved exclusively by arbitration. [emphasis added] 5 The SFF Agreement and the related “Collateral Agreements” were publicly filed With the Securities and Exchange Commission (“SEC”) on May 7, 2014 and have at all relevant times been free and accessible through the SEC’s company filing portal. https://www.sec.gov/Archives/edgar/data/1507605/000141588914001375/0001415889-14-001375- index.htm EX. 1 at EX. A, §9.2. Limitations 0n Assignment. Except as expressly permitted in this Section, none 0f Marathon, DAA or Dynamic may grant 0r assign any rights or delegate any duties under this Agreement t0 any Third Party (including by way of a “change in control”) 0r may sell, transfer, or spin—off any 0f the Interests in Dynamic 0r any of its material assets, including the Patents, Without the prior written consent of TechDeV and SFF. Notwithstanding the foregoing, Marathon, DAA or Dynamic shall be permitted t0 transfer or assign (i)the Patents; (ii)a maj ority of the Interests; 0r (iii)its respective its rights, interests and obligations under this Agreement, as applicable, Without Sellers’ prior written consent as part of a sale 0f all 0r substantially all 0f its business, equity to, or a change in control transaction with a Third Party acquirer (an “M&A Transaction”, and an “Acquirer,” respectively); provided that (a) such transfer 0r assignment is subject t0 all 0f the terms and conditions 0fthis Agreement and the Collateral Agreements; and (ii)such Acquirer executes a written undertaking towards Sellers agreeing to be bound by all of the terms and conditions 0f this Agreement and the Collateral Agreements With respect to the rights being transferred or assigned. Except as otherwise expressly limited herein, the provisions hereof shall inure t0 the benefit 0f, and be binding upon, the successors, permitted assigns, heirs, executors, and administrators 0f the Parties hereto. 1d. § 9.3. Zur, Levy, and Fortress Make An Appearance—Under the Guise 0f a “Revenue Sharing Agreement.” 7. Sure enough, after SFF and TechDeV entered into the SFF Agreement, Eran Zur, Erez Levy, and Fortress showed up and entered into a curiously named “Revenue Sharing Agreement” With the Buyer that had recently purchased the ‘789 Patent from TechDeV and SFF. 8. Fortress and Buyer, now Borrowers, did this deal, driven by the Buyer’s need for quick cash, With all parties knowing full well that TechDeV and SFF retained certain rights in all the transferred intellectual property (including the ‘798 Patent) in the SFF Purchase Agreement. 9. As part 0f that “Revenue Sharing Agreement,” Fortress conducted extensive diligence and was well aware ofthe SFF Agreement and its terms. Fortress nevertheless demanded rights t0 certain of the Buyer’s patents from SFF and TechDeV before they would hand over any cash. Those two papered up their fire sale “patents for fast cash” deal, even though their hands were already tied to the SFF Agreement as they well knew. After more backroom deal-making and brainstorming on their perceived cleverness in manufacturing a way to skirt the TechDev-SFF obligations (even though they identified those very rights in their deal-making), Fortress created new entities (Plaintiffs here) that Fortress principals Eran Zur and Erez Levy could manipulate. 10. Over less than a two-year period, Fortress entered into no less than three material amendments to the Revenue Sharing Agreement, each time, as they consistently do, tightening the financial chains around the borrower with whom they enter into agreements to leverage their negotiating position to gain control of valuable assets at a fraction of their real value. Zur, Levy and Fortress Orchestrate a “Contribution” of the Valuable Assets 11. In the Fall of 2017, less than 24 months after entering into the original “Revenue Sharing Agreement,” Eran Zur and Erez Levy negotiated a transaction with the Buyer to “contribute” the ‘789 Patent to a newly formed entity controlled by Zur, Levy, and Fortress. By this transaction, described further below, the Fortress Entities called out and identified specifically the rights owed to TechDev and SFF, then pressured them into finding a way to avoid triggering the carefully negotiated obligations and right to patent monetization proceeds set forth in the 2014 Agreements (specifically, the “Pay Proceeds Agreement” (attached as Exhibit 2). The Third Case Filed by Fortress—This Time in Texas. 12. TechDev and SFF learned of the Fortress scheme to thwart the TechDev/SFF right to proceeds when Plaintiffs filed suit against Amazon.com in the Northern District of New York, asserting the ‘798 Patent. TechDev and SFF reached out to remind Fortress about the 2014 Agreements to which the ‘798 Patent was bound, including TechDev and SFF’s right to a percentage of proceeds from the Amazon litigation. Those overtures resulted in Plaintiffs’ rush to a courthouse in New York. Texas residents TechDev and SFF challenged personal jurisdiction 5 and won, by an order issued July 2, 2019. Only now, nine months later, d0 Plaintiffs come to Texas to try, for a third time, to avoid their obligation to arbitrate this disagreement about the SFF Agreement. GENERAL DENIAL 13. As permitted under Rule 92 0fthe Texas Rules 0f Civil Procedure, Defendants deny each and every, alland singular, the allegations made in Plaintiffs’ Original Petition. As Plaintiffs have made allthese allegations, they should be required t0 prove each and every one of them by a preponderance 0f all the credible evidence and by clear and convincing evidence Where necessary. AFFIRMATIVE DEFENSES 14. Defendants assert and affirmatively plead the defense of their rights t0 have an arbitral forum decide this dispute in the pending arbitration that TechDeV/SFF initiated in November 2018. Exhibit 1. 15. Defendants assert and affirmatively plead the defense 0f waiver. 16. Defendants assert and affirmatively plead the defense of estoppel. 17. Defendants assert and affirmatively plead that Plaintiffs failed to mitigate their damages. 18. Defendants assert and affirmatively plead that Plaintiffs had notice of the outstanding obligations and thus fail t0pass the test for bona fide purchaser status. 19. Defendants assert and affirmatively plead application of caps on exemplary damages, insofar as exemplary damages are even recoverable, Which Defendants dispute. ADDITIONAL FACTUAL BACKGROUND IN SUPPORT OF COUNTERCLAIMS 20. Defendants incorporate by reference the foregoing, and in particular the introductory factual background, and further allege as follows. 21. Before May 2, 2014, TechDev and SFF owned 100% of the member interests in Dynamic Advances, LLC (“Dynamic Advances”), a Texas limited liability company. Dynamic Advances held an extremely valuable exclusive patent license (the “Exclusive Patent License”) on various patents owned by Rensselaer Polytechnic Institute (the “Dynamic Patents”). Dynamic Advances had no other significant assets on May 2, 2014 other than the Dynamic Patents. 22. On May 2, 2014, the DA Purchase Agreement was entered into among TechDev, SFF, DA Acquisition LLC, a Texas limited liability company (“DAA”), and Marathon Patent Group, Inc. (“Marathon”). Ex. 1 at 1/16. Marathon owned 100% of DAA. Id. (identifying DAA as Marathon’s wholly-owned subsidiary). Pursuant to the DA-SFF Purchase Agreement, on May 2, 2014 DAA acquired 100% of the interests in Dynamic Advances that had previously been held by TechDev and SFF. Id. (third “witnesseth” clause). 23. Marathon made full public disclosure of the DA Purchase Agreement and the related Collateral Agreements (including the Pay Proceeds Agreement) in a Securities and Exchange Commission (“SEC”) Current Report on Form 8-K filed on May 7, 2014: https://www.sec.gov/Archives/edgar/data/1507605/000141588914001375/0001415889-14- 001375-index.htm At all times since the May 7, 2014 filing, the DA Purchase Agreement (including the related Collateral Agreements) has been publicly available, the subject of numerous press releases, and many of Marathon’s SEC filings. 24. On information and belief, Fortress exercises complete control over and has masterminded and instructed Plaintiffs/Counter-Defendants how to respond with respect to the DA Purchase Agreement and related Collateral Agreements. 25. In January 2015, Marathon entered into a Revenue Sharing and Securities Purchase Agreement (“Revenue Sharing Agreement”) with Plaintiffs/Counter-Defendant DBD-Fortress, 7 ostensibly a shell company affiliate of Fortress. Pursuant to the Revenue Sharing Agreement, DBD-Fortress agreed to advance funds to Marathon in consideration of DBD-Fortress’s receiving a portion of various revenues received by Marathon in the future. 26. Fortress and Marathon also entered into a First Amendment to the Amended RSSA (the “First Amendment”). See Exhibit 3, attached. The First Amendment describes the transaction as a “contribution” of the Designated Patents, defined to include the ‘789 Patent. The contribution requirement was accomplished through an assignment of the ‘789 Patent to a new special purpose entity (SPE), through Fortress’s machinations via its investment vehicles, DBD-Fortress CFDA- Fortress. 27. The First Amendment recognizes the May 2, 2014 Agreement between TechDev/SFF and Marathon, which by definition includes the Pay Proceeds Agreement. It lists the Agreement by and among TechDev Holdings, LLC, The Spangenberg Family Foundation for the Benefit of Children’s Healthcare and Education, DA Acquisition LLC and the Company dated May 2, 2014, which it identifies as an agreement listed on the First Amendment’s Schedule 1(d). 28. The First Amendment includes Section 2.2 (“Creation of Special Purpose Entity; Required Consents”), which sets up and reflects the Fortress Entities’ intent to manipulate the transaction in a way that would avoid triggering the requirement, known full well to it,to pay TechDev and SFF. 29. Because there was, in truth and in fact, no actual consent to a transfer of the intellectual property—as the 2014 Agreements/SFF Agreement require—the parties had to find a way out of the obligations triggered because of the lack of consent. 30. Section 2.2.1 reads as follows: From and after the Amendment Effective Date, the Company and the Collateral Agent shall work diligently and in good faith to effect the contribution of the Designated 8 Portfolios to the SPE (the “Restructuring”), including that the Company will use its best efforts to secure shareholder approval of the Restructuring (including a ratification of this Amendment), and to secure any third party consents deemed necessary or desirable (in the judgment of the Collateral Agent) to permit the assignment of the Designated Portfolios to the SPE without triggering any payment obligation to any such third party, it being understood that such assignment may be conditioned on the execution by the SPE of a joinder to the agreements noted on Schedule 2.2.1 to the Amendment and the assumption by the SPE of certain liabilities of the Company and its Subsidiaries under such agreements as specified on Schedule 2.2.1 to the Amendment (collectively, the “Required Consents”). 31. The parties further recognized that there could be no warranty regarding the transferred assets because those representations were “subject only to the obligation of the Company to make the Third Party Payments reflected in full on Schedule I(d) to the Amendment (which, with respect to the Designated Portfolio, are reflected on Schedule I(c) to the Amendment).” Ex. 3, attached (First Amendment) §3.5. 32. “Third-Party Payments” referred to in Section 3.5 are defined as “amounts due to prior owners or licensors of the Patents or due to consultants, attorneys, and other third parties, in each case, in connection with any applicable Monetization Revenues, but solely to the extent described on Schedule I(d) to the Amendment.” Id. 33. Pursuant to the Amended Revenue Sharing Agreement, it is apparent that the “SPE” referred to above that acquired title to the Dynamic Patents is “CF Dynamic Advances, LLC,” referred to herein as CFDA-Fortress. On information and belief, CFDA-Fortress is 100% owned by DBD-Fortress and that CFDA-Fortress is the owner of the Dynamic Patents. 34. In May 2018, CFDA-Fortress sued Amazon.com for infringement of the Dynamic Patents (the “Amazon Litigation”), including the -798 Patent. TechDev and SFF became aware of this litigation in August 2018. 35. Counsel for TechDev and SFF (not the undersigned counsel for this matter) contacted a representative of Fortress, DBD-Fortress, and CFDA-Fortress on September 10, 2018. 9 Over the following weeks, Fortress and its affiliates declined the opportunity t0 resolve this matter through good faith negotiations. Despite representations in communications during that dialogue that they would not file a declaratory judgment action, Plaintiffs did file one. First in federal court, then in state court in New York. TeChDeV and SFF, taking the hint that the time for good faith communications was over, asserted their rights t0 arbitration by filing a demand for arbitration with the American Arbitration Association, as the 2014 Agreements require. COUNTERCLAIMS FIRST CAUSE OF ACTION: UNJUST ENRICHMENT AND CONSTRUCTIVE TRUST 36. Defendants/Counter-Plaintiffs incorporate by reference the foregoing and further allege as follows. 37. Insofar as Fortress Plaintiffs/Counter-Defendants have recovered 0r are in the process 0f recovering proceeds and revenues in any form from any type 0f monetization activity associated with the ‘798 patent, they have been unjustly enriched. 38. The successful track record 0f the ‘798 Patent in securing revenues and creating a market recognition for its value is attributable to the work that SFF and TechDeV did prior to the sale of the DA Assets per the 2014 Agreements. Those agreements acknowledge TechDeV and SFF’s success in bringing attention and value t0 the ‘798 Patent; they d0 so by rewarding them With future additional payments, guaranteed to them even after the sale of the DA assets. Plaintiffs/Counter-Defendants are the passive recipients 0f that success and recognition as they continue the monetization trajectory that TechDeV/SFF successfully created, with great monetary success and public recognition. The sums that P1aintiffs/Counter-Defendants retain that belong to TechDeV/SFF represent unjust enrichment. P1aintiffs/Counter-Defendants usurped for themselves 10 additional monies not due to them by virtue of duress and/or undue advantage effected upon cash- strapped Marathon, and a constructive trust should be imposed on those funds to do equity. 39. TechDev/SFF do not yet have access to the books and record that Plaintiffs/Counter-Defendants and/or Fortress are maintaining to account for leads and transactions involving the ‘798 Patent. TechDev/SFF request that a constructive trust also be in effect to safeguard those assets until the appropriate adjudicatory authority orders the proper percentage of the ill-gotten gains turned over to TechDev/SFF. SECOND CAUSE OF ACTION: CONVERSION 40. Defendants/Counter-Plaintiffs incorporate by reference the foregoing and further allege as follows. 41. In refusing to recognize and admit TechDev/SFF’s right to their percentage of revenues from any monetization event, Plaintiffs/Counter-Defendants wrongfully exercise dominion and control over property that rightfully belongs to TechDev and SFF. 42. TechDev or SFF never assented to Plaintiffs/Counter Defendants’ retaining or withholding from TechDev and SFF property allocated to them in the Pay Proceeds Agreement. Plaintiffs/Counter-Defendants’ retention of those sums constitute conversion and they should be ordered to be damages accordingly. RESERVATION OF RIGHT TO AMEND 43. Defendants/Counter-Plaintiffs expressly invoke the right to amend to include additional causes of action and/or re-assert withdrawn causes of action and arguments in support thereof as the litigation continues and the evidentiary record changes accordingly. JURY DEMAND 44. Defendants/Counter-Plaintiffs request a trial by jury. 11 PRAYER FOR RELIEF WHEREFORE, PREMISES CONSIDERED, Defendants pray that Plaintiffs take nothing by this suit, that all relief requested by Plaintiffs be denied, and all of Plaintiffs’ causes of action be dismissed with prejudice to the refiling of same; and that Defendants go hence with their costs without delay on the claims brought by Plaintiffs. Defendants further pray that the Court upon a final hearing or trial that TechDev and SFF recover judgment against Plaintiffs/Counter-Defendants, jointly and severally, compensatory damages, including exemplary damages, in an amount that exceeds the minimum jurisdictional limits of the Court as set forth above; attorneys’ fees for trial and any appeal, prejudgment and post-judgment interest as provided by law, costs of suit, and for such other and further relief, in law and in equity, to which they may show themselves justly entitled. 12 Date: November 4, 2019 Respectfully submitted, /s/ Elizabeth A. Wiley Elizabeth A. Wiley Grable Martin Fulton PLLC State Bar N0. 00788666 lwiley@grablemartin.com 1101 W. 34th Street, N0. 565 Austin, Texas 78705 Telephone: 512.560.3480 ATTORNEY FOR DEFENDANTS CERTIFICATE OF SERVICE I hereby certify that the counsel 0f record Who are deemed t0 have consented to electronic service are being served With a copy of this document Via an approved electronic filing system. Dated: November 4, 2019 /s/ Elizabeth A. Wiley 13 EXHIBIT 1 6/2018 11/1 ex1 0-4.htm EX-10.4 7 exlO-4.htm PURCHASE AGREEMENT BETWEEN THE COMPANY, TECHDEV, SFF AND DA ACQUISITION LLC DATED MAY 2, 2014. Exhibit 10.4 Agreement—Dynamic Advances This Agreement (this “Agreement”), ismade as of May 2, 2014 (the “Effective Date”), by and among TechDev Holdings, LLC, a Texas company, limited liability of 719 W. Front Street,Suite 242, Tyler,TX 75702 (“TechDev”), The Spangenberg Family Foundation for the Benefit of Children’s Healthcare and Education, a 501(c)(3) charitable organization organized under the laws of Texas (“SFF”; TechDev and SFF are collectively referred toas the “Sellers” and individually as a “Seller”);DA Acquisition LLC, a newly formed Texas limited liability company with an address of 2331 Mill Road, Suite 100, Alexandria, VA 223 14 (“DAA”), a wholly- owned subsidiary of Marathon Patent Group, Inc., a Nevada corporation with an address of 2331 Mill Road, Suite 100, Alexandria, VA 22314 (“Marathon”) and Marathon. A11 the partiesto this Agreement shall be referred to collectivelyherein as the “Parties” and separately as a “Party”. Witnesseth: WHEREAS, TechDev and SFF collectivelyown 100% of the limited liabilitycompany membership interests(the “Dynamic Interests” or “Interests”) of Dynamic Advances, LLC (“Dynamic”), a Texas limited liabilitycompany; and WHEREAS, DAA wishes to acquire Sellers’ Which entire interest in the Interests, following DAA will become the sole interest holder of Dynamic, all according to the provisions set forth herein below; NOW, THEREFORE, in consideration of the mutual promises and covenants hereby agree as set forth herein, the Parties hereto follows: 1. Definitions 1.1 “Affiliate” means, with respect to a Party, any Person in any country that directly or indirectly Controls, isControlled by or isunder common Control with such Party. For the purposes of this Agreement, the term “Control” of a Person means ownership, of record or beneficially, directly or through other Persons, of fifty percent (50%) or more of the voting equity of such Person or, inthe case of a non-corporate Person, equivalent interests. 1.2 “Collateral Agreements” means all such concurrent or subsequent agreements, documents and instruments, as amended, supplemented, or otherwise modified in accordance with the terms hereof or thereof, including without limitation, the Registration Rights Agreement, the Certificate of Designation, the Opportunity Agreement, the Pay Proceeds Agreement, the Common InterestAgreement and the Promissory Note. 1.3 “Entity” means any corporation, partnership, limitedliabilitycompany, association, joint stock company, trust, joint venture, unincorporated organization, Governmental Body (asdefined below) or any other legal entity. 1.4 “Governmental Body” means any (i) U.S. Federal, state,county, municipal, city,town Village,district,or other jurisdiction or government of any nature; (ii)governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or other entity and any court or other tribunal); or body (iii) exercising, or entitled or purporting to exercise, any administrative, executive, power of any judicial, legislative, police, regulatory, or taxing authority or nature. https://www.sec.gov/Archives/edgar/data/1 507605/000141 588914001 375/ex1 0-4.htm 6 1/1 6/2018 11/1 ex1 0-4.htm 1.5 “Intellectual Property” means alldomestic or foreign rights in, toand concerning Dynamic’s: (i)trademarks, service marks, brand names, certification marks, collectivemarks, d/b/a’s,trade dress, logos, symbols, trade names, assumed names, fictitious names, corporate names and other indications or indicia of origin, including translations,adaptations, derivations, modifications, combinations and renewals thereof; published and unpublished works of authorship, whether copyrightable or not (including databases (ii) and other compilations of data or information), copyrights therein and thereto, moral rights, and rights equivalent thereto,including but not limited to, the rights of attribution, assignation and integrity; (iii) trade secrets, confidential and/or proprietary information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, schematics, designs, discoveries, drawings, prototypes, specifications,hardware configurations, customer and supplier financial lists, information, pricing and cost information, financial projections, and business and marketing methods plans and proposals), collectively “Trade Secrets”; (iv)computer software, including programs, applications, source and object code, data bases, data, models, algorithms, flowcharts, tables and documentation related to the foregoing; (V) other similar tangible or intangible intellectual property or proprietary rights,information and technology and copies and tangible embodiments thereof (in Whatever form or medium); (Vi) all applications to and renewals or extensions of the foregoing; register, registrations, restorations, reversions domain names; (Vii) internet and the (viii) all goodwill associated with each of the foregoing and symbolized thereby; and (ix)all other intellectualproperty or proprietary rights and claims or causes of action arising out of or related to any infringement, misappropriation or other Violation of any of the foregoing, including rights to recover for past, present and future Violations thereof. 1.6 “Lien” means any mortgage, pledge, security interest,encumbrance, lien,charge or debt of any kind, any trust,any filing or agreement to grant, deposit or file a pledge or financing statement as debtor under applicable law, any subordination arrangement in favor of any Person, or any other Third Partyright. 1.7 “Patents” means the patents and patent applications listedon Schedule 1.7 hereto allof Which are owned, controlled or licensable by Dynamic pursuant to an exclusive license. 1.8 “Patent Rights” means and all right, title interest in the Patentsowned, controlled or licensable by Dynamic and, subject in all cases to the terms and conditions of the applicable exclusive license pursuant to Which Dynamic holds itsrights in such make, have made, use, import, put into use, distribute, Patents, as applicable, all rights to (a) sell and have sold products and to practice any process, method, or use under the Patents; (b) engage in any causes of action (whether currently pending, filed, or otherwise), Proceedings and other enforcement rights under the Patents including, without limitation, all rights to sue, to countersue and to pursue damages, injunctive relief,and any other remedies of any kind for past, current and future infringement; and agreements or (c) all rights to understandings with respect to settlements, licenses, royalties and the like and the right to enforce, recover and collect settlement arrangements, license payments (including lump sum payments), royaltiesand other payments due now or hereafter due or payable with respect thereto and to the matters described in Section 1.8(a), under or on account of any of the Patents and any Proceeding with respect to any of the foregoing; and (d) any and allprivileges, including the benefit ofall attorney-client privilegeand attorney work product privilege, in respect of the items described in the foregoing clauses (a) through (c). https://www.sec.gov/Archives/edgar/data/1 507605/000141 588914001 375/ex1 0-4.htm 2/1 6 6/2018 11/1 ex1 0-4.htm 1.9 “Person” means any individual or Entity. 1.10 “Proceeding” means any claim, mediation, hearing, audit, charge, inquiry, suit, litigation, arbitration, investigation, governmental investigation, regulatory proceeding or other proceeding or action of any nature (whether civil,criminal, legislative, commenced, brought, conducted, or known administrative, regulatory, prosecutorial, investigative, or informal) to be threatened, or heard by or before, or otherwise involving, any Governmental Body, arbitrator or mediator or similar person or body. 1.11 “Third Party” means any Person other than a Party or itsAffiliates. 2. Sale and Purchase of Interests Subject to the terms and conditions hereof, at the Closing, Sellersshall sell,assign, transfer,convey and deliver to DAA the Interests and DAA shallpurchase and accept the assignment, trans