`Tel: 571-272-7822
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`Paper 19
`Entered: February 12, 2014
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
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`APPLE INC.
`Petitioner
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`v.
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`VIRNETX, INC. and SCIENCE APPLICATION INTERNATIONAL
`CORPORATION
`Patent Owner
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`
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`Case IPR2013-00394
`Patent 7,418,504 B2
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`
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`Before SALLY C. MEDLEY, MICHAEL P. TIERNEY, and STEPHEN C. SIU,
`Administrative Patent Judges.
`
`SIU, Administrative Patent Judge.
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`DECISION
`Request for Rehearing
`37 C.F.R. § 42.71(d)
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`IPR2013-00394
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`Petitioner, Apple Inc., requests rehearing of the Decision on Institution,
`Paper 15, which denies institution of inter partes review of claims 1-3, 5-8, and
`14-60 of U.S. Patent No. 7,418,504 (“’504 Patent”) under 35 U.S.C. §§ 311-319.
`Rehear. Req. 1, 15 (Paper 16). Petitioner requests the Board to reverse its decision.
`Id. The request is denied.
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`BACKGROUND
`In its Decision on Institution, the Board determined that the Petition,
`challenging claims 1-3, 5-8, and 14-60, was not filed timely within the statutory
`period of 35 U.S.C. § 315(b). Dec. on Inst. 5. Therefore, the Board declined to
`institute an inter partes review.
`Section 315(b) follows:
`(b) PATENT OWNER’S ACTION.—An inter partes review may not
`be instituted if the petition requesting the proceeding is filed more
`than 1 year after the date on which the petitioner, real party in interest,
`or privy of the petitioner is served with a complaint alleging
`infringement of the patent. The time limitation set forth in the
`preceding sentence shall not apply to a request for joinder under
`subsection (c).
`In denying review, the Board found that Petitioner was served with a
`complaint alleging infringement of the ’504 Patent during two relevant occasions–
`–the “2010 litigation” and the “2012 litigation.”1 Dec. on Inst. 3. The Board also
`found that the former complaint was served more than one year before Petitioner
`filed the present Petition, the latter, less than one year. Id. The Board further
`found that a jury upheld the validity of the asserted claims in the 2010 litigation,
`and the district court entered judgment finding those claims valid. Id. The verdict
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`1 VirnetX Inc. v. Cisco Systems, Inc. et al., Civ. Act. No. 6:10-cv-00417-LED (E.D.
`Tex., filed Aug. 11, 2010) (the “2010 litigation”), and VirnetX Inc. v. Apple Inc.,
`Civ. Act. No. 6:12-cv-00855-LED (E.D. Tex., filed Nov. 6, 2012) (the “2012
`litigation”).
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`form involving Petitioner, defendant Apple in the 2010 litigation, shows that the
`jury upheld the validity of claims 1, 2, 5, 16, 21, and 27 of the ’504 patent, claims
`challenged in the Petition. See Ex. 2002.
`Applying the plain meaning to “a complaint” in 35 U.S.C. § 315 (b), the
`Board determined that the Petition was time barred under the statute: “the Petition
`‘[wa]s filed more than 1 year after the date on which the [P]etitioner . . . [wa]s
`served with a complaint alleging infringement of the patent.’ See 35 U.S.C.
`§ 315 (b). Therefore, according to the statute, ‘[a]n inter partes review may not be
`instituted.’” Dec. on Inst. 4 (quoting § 315 (b)).
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`ANALYSIS
`Petitioner argues in its rehearing request that the Board “misapprehended
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`Petitioner’s arguments and incorrectly applied § 315 (b).” Rehear. Req. 1.
`Petitioner maintains that the Board’s statutory interpretation “is illogical . . . and
`contrary to clearly expressed legislative intent.” Id. at 2.
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`The Board summarized Petitioner’s arguments as follows:
`Petitioner argues that its Petition is timely because it was filed
`less than one year after the date on which it was served with “any
`complaint”—i.e., the complaint in the 2012 litigation. Pet. 2.
`Petitioner argues that under the plain language of the statute [section
`315(b)], filing a petition within one year of “any complaint,” such as
`the December 2012 complaint, nullifies the effect of the earlier,
`August 2010 complaint, on the timeliness of this Petition.
`Dec. on Inst. 3 (quoting the Petition).
`Petitioner now maintains, contrary to the Board’s characterization set forth
`above, that Petitioner did not argue in its Petition that the 2012 complaint
`effectively nullifies the 2010 complaint. Rehear. Req. 1. This argument is
`misplaced, because Petitioner argued that “[t]he February 2011 amended
`complaint does not foreclose the present petition, as Patent Owner served a new
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`complaint on Petitioner asserting infringement of the ’504 patent in December of
`2012.” Pet. 2. Focusing on the “new” 2012 complaint, Petitioner attempted to
`equate “a complaint” in the statute with “any complaint,” arguing as follows: “a
`petition filed within 1 year of the date any complaint alleging infringement of the
`patent is served on a petitioner is timely under the plain statutory language of
`§ 315(b).” Pet. 2. Petitioner also argued that “Congress designed the IPR
`authority to be an option to contest validity of a patent concurrently with district
`court proceedings [i.e., the 2012 litigation] involving the same patent.” Id. at 2.
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`The Board addressed Petitioner’s arguments, and determined, as noted
`above, that under the plain meaning of “a complaint” under § 315(b), the 2010
`complaint qualifies as “a complaint” that time bars the Petition. The Board also
`determined that “Petitioner does not explain persuasively how allowing a review
`outside the statutory one year limit based on the filing of another complaint
`corresponds to a ‘clearly expressed legislative intent’ that prevails over the plain
`meaning.” Dec. on Inst. 4.
`In its rehearing request, Petitioner presents selected segments from the
`legislative history to buttress its argument that the statute only applies to
`concurrent litigation, in this case, the 2012 litigation. See Rehear. Req. 3–6.
`Petitioner also asserts, for the first time, that the statute “is plainly ambiguous.” Id.
`at 9. This appears contrary to the arguments made in the Petition, wherein
`Petitioner urged the Board to follow the plain meaning, thereby indicating it is not
`ambiguous: “Rather than attempting to decipher which scenarios would be
`improper, the Board should follow the plain meaning of § 315(b), and find a
`petition timely if it is filed within 1 year of the date any complaint alleging
`infringement of the patent is served on a Petitioner.” Pet. 3.
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`These new rehearing arguments are improper. See 37 C.F.R. § 42.71(d).
`The Board could not have misapprehended or overlooked an argument presented
`for the first time in a rehearing request. Moreover, Petitioner has not shown that
`the Board abused its discretion by erring in determining that the plain meaning of
`the statute bars the Petition. See 37 C.F.R. § 42.71(c) (“a panel will review the
`[rehearing] decision for an abuse of discretion.”)2
`Expanding its Petition argument, Petitioner now asserts that the legislative
`history provides a simple reason for restricting the time bar to concurrent litigation,
`i.e., “litigation-simplifying benefits,” as follows: “The statutory design of the IPR
`authority envisions that IPR proceedings will be conducted concurrently with
`district court litigation involving the same patent. The reason is simple – an IPR,
`once completed, will reduce the number of issues the district court must ultimately
`resolve.” Rehear. Req. 4.
`Contrary to Petitioner’s new argument, even if Congress intended to reduce
`issues in district courts, this does not overcome the plain meaning involved in
`Congress’s carefully balanced statutory scheme that applies the time bar to “a
`complaint.” Petitioner effectively urges the Board to read the following exception
`into the statute: the time limitation shall not apply to patent infringement litigation
`unless it is concurrent with the filing of the petition. Petitioner’s arguments do not
`account for the specific exception that Congress expressly created: “The time
`limitation set forth in the preceding sentence shall not apply to a request for joinder
`under subsection (c).” 35 U.S.C. § 315 (b).
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`2 An abuse of discretion may be determined if a decision is based on an erroneous
`interpretation of law, if a factual finding is not supported by substantial evidence,
`or if the decision represents an unreasonable judgment in weighing relevant
`factors. Arnold Partnership v. Dudas, 362 F3d 1338, 1340 (Fed. Cir. 2004).
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`This express joinder exception signifies that Congress did not intend to
`create another implied exception to the time bar for concurrent district court
`litigation. Despite this clear statutory scheme, Petitioner cites to different portions
`of the legislative history to support its view. For example, Petitioner quotes
`Senator Kyl: “[T]he present bill does coordinate inter partes . . . review with
`litigation . . . setting a time limit for seeking . . . review if the petitioner . . . is sued
`for infringement of the patent.’” Rehear. Req. 6 (quoting H.R. PPT. 112-98, at 45,
`emphasis by Petitioner). Petitioner also points to Congress’s “‘fundamental
`purpose’ of replacing part of the litigation.” Rehear. Req. 5 (citing 157 Cong. Rec.
`S1364 (Mar 8, 2011)).
`Although Congress intended to create a cost-efficient alternative to district
`court litigation, it does not follow that the time bar only applies to concurrent
`litigation. See id. (describing a “fundamental purpose . . . to provide a cost-
`efficient alternative to litigation”). As quoted above, the legislative history
`generally describes time limits for petitions after suits “for infringement of the
`patent,” without restriction to concurrent litigation. As another example, a
`representative discussed a “deadline for a party to file a petition for an IPR . . .
`after it is sued for infringement of the same patent.” Transcript of Markup of H.R.
`1249, 79, House of Rep. Comm. on the Judiciary (April 14, 2011) (emphasis
`added). Again, the deadline (i.e. time bar) applies after a suit for infringement of
`the same patent (i.e., like the 2010 litigation at issue here). Similarly, the statute
`applies the time bar after “a complaint alleging infringement of the patent.”
`35 U.S.C. § 315(b) (emphasis added).
`Congress did not intend to allow a defendant to lose a patent infringement
`suit in district court, and then file an IPR petition challenging the same patent after
`the one year time bar expires. In addition to running counter to the statute’s plain
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`meaning, that would thwart several of Congress’s intents. Such a petition would
`not be in the alternative to the terminated litigation. In addition, it would thwart
`Congress’s intent to ensure “quiet title”: Congress “recognizes the importance of
`quiet title to patent owners to ensure continued investment resources.” Report on
`HR 1249, 48 (June 1, 2011). Changes to the statutory structure “are not to be used
`as tools for harassment or a means to prevent market entry through repeated
`litigation and administrative attacks . . . . Doing so would frustrate the purpose of
`the section as providing quick and alternatives to litigation.” Id. A “quiet title”
`allows a patent holder who has won a district court infringement suit to obtain
`investment funding, see id., and, if necessary, enforce its patent by suing a serial
`infringer (i.e., after the first suit) without fear of a later administrative attack that
`challenges the same patent.
`Contrary to Petitioner’s related arguments, Congress did not limit the reach
`of the time bar in § 315(b) to asserted claims in a patent. Rehear. Req. 6 (arguing
`that § 315(b) does not apply to “unasserted claims”).3 Rather, as noted, Congress
`imposed a time limit that runs from “a complaint” in a suit for infringement of “the
`patent.” As discussed above, if Congress intended to exempt certain infringement
`suits involving the same patent from the one year time bar, it would have added
`another exception to the existing joinder exception.
`Petitioner also argues that it would have been “impossible to satisfy” the
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`Board’s reading of § 315(b), because that reading forces Petitioner to “fil[e] a
`petition before the IPR law was even enacted.” See Rehear. Req. 4; accord id. at
`11–12. According to Petitioner, the Board’s “application of § 315(b) is . . .
`illogical,” because Congress did not intend to “unconditionally bar” a whole class
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`3 Petitioner’s point here is not clear––the claims asserted in the 2010 litigation are
`challenged in the Petition, as noted above. See Ex. 2002.
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`of patents involved in “pre-AIA lawsuits”––i.e., lawsuits involving “patents that
`had been asserted against a petitioner prior to enactment of the AIA.” See Rehear.
`Req. 11.
`Petitioner’s reading, which apparently does not apply to terminated law
`suits, only bars concurrent litigants whose district court cases had been pending for
`over a year prior to the AIA effective date. In both situations, it would have been
`impossible to comply with the time bar. Contrary to Petitioner’s approach, the
`Board applies the time bar evenly to “a complaint,” according to the statute, in
`concurrent and terminated litigation, whether filed pre- or post-AIA.
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`Petitioner alternatively suggests in a footnote that the Board may resolve any
`ambiguities involving multiple lawsuits by “simply reading § 315(b) as applying
`only to actions commenced after the date the IPR authority was enacted.” Rehear.
`Req. 12, n. 2. Petitioner does not point the Board to support for this interpretation,
`which amounts to creating a new effective AIA date for patents involved in the
`AIA. Chapter 31, which includes 35 U.S.C. 315, “applies to any patent issued
`before, on, or after Sept. 16, 2012.” PATENT TRADEMARK AND COPYRIGHT LAWS,
`145, n. 33 (Samuels, June 13, ed.)(Inter Partes Review). Creating a new effective
`date also runs contrary to the plain meaning of § 315(b), which applies the time bar
`in an even fashion to “a complaint” served in past and concurrent litigation, served
`pre-AIA or post-AIA.4
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`Petitioner raises other arguments regarding the speedy resolution of
`concurrent reexamination proceedings in the office. See Rehear. Req. 12–15. The
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`4 Even if a basis exists to alter the effective date of the AIA for some patents, this
`alternative reading would force the Board to allow petitions to be instituted even
`when certain pre-AIA filed infringement lawsuits had transpired for several years
`after the AIA effective date, lawsuits ranging from those filed years prior to the
`enactment, up to those filed one day prior to the enactment.
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`Board remains sympathetic to Petitioner’s concerns about obtaining just and
`speedy results before the PTO. Nevertheless, these concerns about concurrent
`reexamination proceedings do not show that the Board misapprehended the plain
`meaning of 35 U.S.C. § 315(b).
`Deciding, at this late rehearing stage, that the time bar does not apply to
`various litigant classes pursuant to Petitioner’s alternative interpretations, or
`creating a new effective date for the AIA, would circumvent the careful balance
`underlying the plain meaning of the statute and would be unfair to Patent Owner,
`other patent holders, and various other stakeholders.
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`DECISION on REHEARING
`Petitioner’s sought-after relief is DENIED.
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`For Petitioner Apple Inc.:
`Jeffrey P. Kushan
`Joseph A. Micallef
`SIDLEY AUSTIN LLP
`jkushan@sidley.com
`jmicallef@sidley.com
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`For Patent Owner VirnetX, Inc.:
`Joseph E. Palys
`Naveen Modi
`FINNEGAN, HENDERSON, FARABOW
`GARRETT & DUNNER, L.L.P.
`joseph.palys@finnegan.com
`naveen.modi@finnegan.com
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