May 29, 2014
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`IPR2014-00237; IPR2014-00238
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`Conference Call
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` UNITED STATES PATENT AND TRADEMARK OFFICE
` _____________________________________
`
` BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
` _____________________________________
`
` APPLE INC.
` Petitioner
` v.
` VIRNETX, INC
` Patent Owner
` _____________________________________
` Cases IPR2014-00237,IPR2014-00238
` Patent 8,504,697
` _____________________________________
`
` Conference call in the above entitled
`matter held on Thursday, May 29, 2014 commencing at
`12:15 p.m.
`
`Before:
`HON. MICHAEL P. TIERNY,
`HON. STEPHEN C. SIU, and
`HON. KARL D. EASTHOM,
`Administrative Patent
`Judges
`
`202-220-4158
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`Henderson Legal Services, Inc.
`www.hendersonlegalservices.com
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`Page 1 of 47
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`VIRNETX EXHIBIT 2007
`Apple v. VirnetX
`Trial IPR2014-00238
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`IPR2014-00237; IPR2014-00238
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`Conference Call
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`1
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` UNITED STATES PATENT AND TRADEMARK OFFICE
` _____________________________________
`
` BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
` _____________________________________
`
` APPLE INC.
` Petitioner
` v.
` VIRNETX, INC
` Patent Owner
` _____________________________________
` Cases IPR2014-00237,IPR2014-00238
` Patent 8,504,697
` _____________________________________
`
` Conference call in the above entitled
`matter held on Thursday, May 29, 2014 commencing at
`12:15 p.m.
`
`Before:
`HON. MICHAEL P. TIERNY,
`HON. STEPHEN C. SIU, and
`HON. KARL D. EASTHOM,
`Administrative Patent
`Judges
`
`202-220-4158
`
`Henderson Legal Services, Inc.
`www.hendersonlegalservices.com
`
`Page 1 of 47
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`VIRNETX EXHIBIT 2007
`Apple v. VirnetX
`Trial IPR2014-00238
`
`
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`May 29, 2014
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`IPR2014-00237; IPR2014-00238
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`Conference Call
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`APPEARANCES:
` ON BEHALF OF THE PETITIONER:
` SIDLEY AUSTIN LLP
` BY: JEFFREY P. KUSHAN, Esq.
` jkushan@sidley.com
` 1501 K Street, N.W.
` Washington, DC 20005
` 202.736.8000
`
` ON BEHALF OF THE PATENT OWNER:
` FINNEGAN, HENDERSON, FARABOW, GARRETT &
` DUNNER LLP
` BY: JOSEPH PALYS, Esq.
` joseph.palys@finnegan.com
` NAVEEN MODI, Esq.
` naveen.modi@finnegan.com
` Two Freedom Square
` 11955 Freedom Drive
` Reston, VA 20190-5675
` 571.203.2700
`
` *** TELEPHONIC DISCUSSION ***
`
`202-220-4158
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`www.hendersonlegalservices.com
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` P R O C E E D I N G S
` JUDGE TIERNEY: All right. This
`is Judge Tierney. I'm going to start today.
` I believe we have Judge Siu and
`Judge Easthom on the line.
` JUDGE SIU: Yes, this is Judge
`Siu. I'm on the line.
` JUDGE TIERNEY: Thank you.
` JUDGE EASTHOM: And this is
`Judge Easthom. I'm on the line.
` JUDGE TIERNEY: Thank you.
` And then for the parties today,
`if the Petitioner could go ahead and announce
`who will be on the call today for the
`petitioner.
` MR. KUSHAN: Yeah, this is Jeff
`Kushan from Sidley for Petitioner.
` JUDGE TIERNEY: And then for
`Patent Owner?
` MR. PALYS: This is Joseph Palys
`and Naveen Modi for VirnetX.
` JUDGE TIERNEY: Welcome,
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`everyone, to the conference call.
` Today's call should be fairly
`straightforward -- court reporter, you are
`there, I take it.
` THE REPORTER: I am, thank you.
` JUDGE TIERNEY: Today's call
`should be very straightforward given the
`motions list that the parties provided.
` I'll start today with the Patent
`Owner. There were no motions that you intend
`to file at this point in time or there are?
`Please clarify.
` MR. PALYS: At this point, your
`Honor, there are none. Obviously, we'll let
`the Board know if that changes.
` JUDGE TIERNEY: Are there any
`concerns you have regarding the schedule?
` MR. PALYS: No. We're willing
`to go forward with the schedule as is.
`Obviously, we asked for the 18-month schedule
`that the Board decided not to take, so we
`know what the schedule is.
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` JUDGE TIERNEY: Are there any
`concerns regarding a protective order?
` MR. PALYS: I think at this
`point, your Honor, you know, we don't think a
`protective order is necessary, but if and
`when we need to cross that bridge, obviously,
`we'll approach the Board on that.
` JUDGE TIERNEY: Okay. All
`right. I'm going to turn it over to -- is
`there anything further you would like to add
`before I turn it over to the Petitioner?
` MR. PALYS: No, your Honor.
` JUDGE TIERNEY: Okay.
` Petitioner, I'm going to be
`asking you the same questions.
` First of all, are there any
`motions you intend to file at this time that
`were not identified let's say on your
`motions, the last set you provided to the
`Board?
` MR. KUSHAN: No, your Honor.
`We're going to take the same posture that
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`VirnetX has. We'll wait and see. If there's
`a need for a motion, I'll absolutely approach
`the Board for leave at that point in time,
`but I don't see anything as we sit here
`today.
` JUDGE TIERNEY: My understanding
`from your paper is that you're -- the
`proposed schedule, is this accessible?
` MR. KUSHAN: Yeah, I did want to
`raise one question about the schedule.
` We have been looking at the
`schedule, and we do know that there's a trial
`date in 2015 that would involve the patent,
`and one of the things that we began to think
`about is whether if the Petitioner were to
`eventually truncate the -- one of the periods
`it has under the schedule that that be
`something that could essentially accelerate
`the schedule that we were thinking about,
`essentially shaving a month off our reply
`window in order to get to a conclusion of the
`proceeding.
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` And that was -- I think we kind
`of took a look at the schedule and saw that
`if we did that, we might be able to nudge the
`oral hearing up a month and all the other
`dates up a month.
` Is that something the Board has
`contemplated in doing in other proceedings?
`Obviously, the Board's schedule is a factor
`we don't have any knowledge about, but from
`our perspective at Apple, we would simply
`like to do whatever we can to get to an
`outcome as soon as possible in this
`proceeding.
` JUDGE TIERNEY: This is Judge
`Tierney. There is no one-size-fits-all on
`that. That is something we would take under
`consideration, given the specifics of the
`case, and the -- we'd have to also look at
`our dockets and determine whether or not it
`was something we could do.
` We are always open to
`modification of the schedule, and, in this
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`instance, you're identified as you'd be
`willing to give up one month I believe --
` MR. KUSHAN: Yes.
` JUDGE TIERNEY: -- move the
`hearing date up one month. That's something
`I'm willing to consider.
` I would like you to talk to the
`Patent Owner first, see if that can be done
`as a joint request. If not, it's something
`we would need to have you raise in a
`conference call where we have it specifically
`identified for the Patent Owner so they
`comment on such a request.
` MR. KUSHAN: Okay. Well, we'll
`consult -- we looked over the schedule just
`this morning with Mr. Palys, and we'll circle
`back with him, and then if there's a joint
`agreement about this, then maybe we'll come
`forward with an adjustment to the schedule
`for your consideration.
` UMPIRE TIERNEY: I would like it
`to, if possible, be joint. It's much easier.
`
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`With both parties requesting it, it's easier
`to grant such requests.
` If it is opposed, we would need
`to know the position of the opposition before
`we set it.
` At this time we'll let the
`parties speak, and then please raise it again
`once you've had a little time to talk it
`over.
` MR. KUSHAN: Okay. Thank you.
` UMPIRE TIERNEY: Is there
`anything else, the protective order, do you
`believe one is needed at this time?
` MR. KUSHAN: No, your Honor, we
`don't.
` UMPIRE TIERNEY: Okay. Are
`there any other issues that you were wanting
`to speak of today before I go to issues the
`Board wanted to address?
` MR. KUSHAN: No, your Honor.
` UMPIRE TIERNEY: Okay. The
`question that did come up, I guess, is there
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`anything for the Patent Owner before I turn
`to Board issues?
` MR. PALYS: No, your Honor. Let
`me ask my co-counsel.
` Naveen, do you have anything?
` MR. MODI: No, I don't.
` JUDGE TIERNEY: Thank you.
` Okay. At this time I wanted to
`declare as to the Patent Owner, I notice you
`had filed a request for a hearing; is that
`correct?
` MR. PALYS: That's right, your
`Honor.
` JUDGE TIERNEY: My understanding
`is your request for a hearing is based upon
`the rules, in particular, 42.104(b), and with
`that Dornan (phonetic) citation to 312(a)(3);
`is that correct?
` MR. PALYS: Yes, your Honor.
`Obviously, there's arguments made in the
`request, but yeah, essentially you're one of
`four people.
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` UMPIRE TIERNEY: I would like to
`go over that just briefly.
` In particular, are you
`suggesting in your request for the hearing
`that the Board fails to provide with
`particularity the basis on which we're going
`forward?
` MR. PALYS: I think, obviously,
`I'll stand by the request, your Honor, but I
`think, in general, our position is that the
`Board has overlooked and misapprehended our
`arguments regarding --
` UMPIRE TIERNEY: Okay. That's
`not the question I asked though.
` MR. PALYS: Okay, your Honor.
` JUDGE TIERNEY: Please answer
`the question I asked first, and we'll go into
`your paraphrasing of your request for
`hearing.
` MR. PALYS: Okay. Can you
`repeat the question because maybe I
`misunderstood? I apologize.
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` UMPIRE TIERNEY: Court reporter,
`can you repeat the question or should I
`repeat it myself?
` (Record read.) "I would like
` to go over that just briefly.
` In particular, are you
` suggesting in your request
` for the hearing that the
` Board fails to provide with
` particularity the basis on
` which we're going forward?"
` UMPIRE TIERNEY: The issues
`going forward or the grounds going forward.
` MR. PALYS: I think the answer
`to that, your Honor, is yes.
` UMPIRE TIERNEY: So you are
`challenging that we have not brought a
`sufficient notice to you?
` MR. PALYS: I think that's part
`of our argument, yes, your Honor.
` UMPIRE TIERNEY: Okay. Please
`identify what is unclear in the decision to
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`institute as to what you fail to comprehend
`we're going forward on.
` MR. PALYS: Your Honor, may I
`have a moment to speak with my co-counsel on
`this? Make sure I don't misrepresent
`anything.
` May I, your Honor?
` UMPIRE TIERNEY: Yes, yes,
`please.
` (Brief pause.)
` MR. PALYS: I'm sorry for that
`delay, your Honor.
` I think in response, the grounds
`that the Board decided to institute those
`grounds that rely on Apple's reliance --
`within those grounds of the petition where
`Apple either cited directly to the
`declaration alone or did cite to the prior
`art, et cetera, those particular grounds, and
`to the extent that the Board is relying on
`what Petitioner set forth in those grounds,
`that's what we believe the -- there's an
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`issue with the Board's decision.
` And I don't have the petition in
`front of me, your Honor. I apologize. I
`wasn't prepared to really talk about this
`request, but it sounds like you might be
`interested in some briefing if that's --
` UMPIRE TIERNEY: I'm not --
`actually, that's incorrect. I'm not
`interested in briefing. I'm trying to
`ascertain the purpose of the request for a
`hearing because it's an abuse of discretion
`is what's been alleged.
` And I'm looking in particular at
`312 which says that they failed to identify
`with particularity the challenge claims, the
`grounds on which the challenge is based and
`the evidence that supports it.
` And looking right now at the
`petition, I'm looking at Ground 5, page I of
`the table of contents. It says:
` Precise reasons for relief
`requested.
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` And it says A: Claims 1 to 11,
`14 to 25 and 28 to 30 are anticipated by
`Besser. So we're clear on comparing to 312.
` I see in writings, it was
`provided in writing the petition. Each
`challenge claim was identified. The ground
`on which it was identified was anticipation.
`And the evidence that support the ground was
`including Besser.
` There's no dispute that the copy
`of Besser was provided. I'm trying to
`ascertain the violation of 312.
` Furthermore, I wanted to clarify
`if you had a basis to go forward in this
`decision, that you found the institution
`decision problematic to go forward.
` You indicated that you were more
`concerned about particularity, but I'm
`looking at page 33 of the institution
`decision, looking at the order, and the first
`part of the order it is ordered, further
`ordered and then further ordered.
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` In the second further order, it
`says that the trial is limited to the
`following grounds: Claims 1 to 11, 14 to 25
`and 28 to 30, under 35 U.S.C. 102 as
`instituted by Besser.
` Again, the Board here has
`identified each challenged claim that we're
`going forward on, the ground on which the
`challenge is based, which is 102, any
`evidence supporting the grounds of the
`challenge, again Besser, which is consistent
`with the petition, which is consistent with
`312.
` But, again, I want to ascertain
`what is the reason for the abuse of
`discretion here. Please clarify.
` MR. PALYS: I think, your Honor,
`I mean obviously I would like to rely on what
`we prepared in our request, but I think the
`filing is related to the same arguments. I
`would just mention that.
` It's the failure of
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`particularity that what the Petitioner has
`done in its petition, and I think we -- or at
`least we tried to point out those -- those
`issues, and --
` UMPIRE TIERNEY: But let's start
`with 312(a)(3) which you're saying was
`violated. Please clarify, so it's a
`violation of the statute.
` MR. MODI: Your Honor, this is
`Naveen Modi.
` Joe, maybe I can jump in and see
`if I can try to address Judge Tierney's
`questions, and you can supplement.
` So, your Honor, I think the
`issue we have, and I apologize, I'm going to
`try not to repeat some of the arguments that
`are hopefully -- I'll try to address.
` I think the issue we have here
`is that the petition we believe is defective
`under 312(a)(3) and some of the rules that go
`with it which, you know, includes
`42.104(b)(4), because the Petitioner relies
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`entirely on a declaration, you know, for
`example, taking the 237 proceeding, you know,
`the Board has considered the Besser
`reference.
` The petition doesn't even cite
`to the prior art. It doesn't cite to the
`Besser reference, and it's very clear that
`the Board drew under 104(b)(4) that the
`Petitioner hasn't cited the prior art, and,
`in fact, there's other cases --
` UMPIRE TIERNEY: Mr. Modi, let's
`take a second and look at 312(a)(3) -- or
`(b)(3), which you're saying is violated, and
`look at the petition which identifies the
`claims, the grounds and the evidentiary
`basis, and I want to understand why is that
`not sufficient.
` I understand there's a degree,
`and we can argue about the rules, but I'm
`trying to find the statutory problem here.
` MS. MODI: Your Honor, like I
`said, you know, our understanding, obviously,
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`(inaudible) protected, quite obviously has --
`is implemented under the rules, and so they
`are tied to each other, and with all due
`respect, you know, I don't think they should
`be parsed.
` And, you know, our argument is
`that by not providing sufficient
`particularity.
` For example, you know, when it
`comes to particularity, if you look at some
`of the indications, so -- and this is on page
`505 (inaudible), we laid out that the
`petition doesn't explain how Besser is
`determinative and responsive to the request
`by the second effort devices available for
`communication service.
` And even the decision
`acknowledges, your Honor, that the petition
`is sometimes implicit about stuff, and I
`think it's unfair to us and, quite frankly,
`the Board to assume stuff that the Petitioner
`hasn't explained.
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` It is the Petitioner's burden in
`this proceeding to show that they have made a
`case, and we feel the petition was defective,
`because they're giving it -- it relies entire
`on the declaration and not the prior art and
`doesn't cite to the prior art in a particular
`fashion as required by the rules and by the
`statute.
` UMPIRE TIERNEY: The question,
`though, is abuse of discretion. The Board
`has reviewed this and on this has met
`sufficient standards for this particular
`case, that it was sufficient to institute and
`move forward.
` I'm reading your request for a
`hearing. You said there's a statutory
`problem. I went through the statute. It met
`the literal language of the statute.
` You then say they failed to
`comply with the rule. The Board, by
`instituting shows that they found that they
`met at least for this particular case, the
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`minimum requirements of the rule.
` And now you're coming back and
`you're pointing out you disagree. Why is
`that something that we misapprehended or
`overlooked?
` I don't understand why we're
`having a request for a hearing on that.
` MR. PALYS: If I may, this is
`Joe Palys, your Honor.
` Going back to what your question
`was in your terms of the statute and the
`rules, I think, again, as it's laid out in
`the request, but one of the things that I
`think we were trying to point out in the
`request is that the Board's decision in
`making its institution decision didn't really
`reference our arguments regarding 104(b)(4),
`and, obviously, the corresponding statute
`relating to that.
` And, you know, these are the
`arguments that we raised in our response.
`Our preliminary response is the same.
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` We didn't see where the Board
`really addressed those, and the precedent,
`actually, that the PTAB has given directly on
`this issue, so for that we think --
` UMPIRE TIERNEY: And the reason
`for the request for a hearing was because we
`didn't specifically address it in our
`decision to institute?
` MR. PALYS: Your Honor, we --
`the reason for the request is based on the
`Board -- in our view the Board's
`misapprehension or with looking up those
`arguments and those rules. I think it's laid
`out in the request. And we --
` UMPIRE TIERNEY: Okay. Let's
`go -- I want to go on a going-forward basis
`to make this clear.
` MR. PALYS: Okay.
` UMPIRE TIERNEY: We decided to
`institute.
` Is there something in our
`decision to institute that lacks sufficient
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`clarity for you to be able to put on a case
`going forward? And, if so, I need to know
`now, because I don't want to put you in an
`undue situation.
` So what is there going forward
`that you're saying is causing you undue
`prejudice in our decision to institute?
` MR. PALYS: Well, I think our
`point here, your Honor, is that the petition
`is defective.
` JUDGE TIERNEY: Okay. And,
`again, I'm pointing to our decision to -- I
`want to know on a going-forward basis.
` MR. PALYS: I guess -- I'm
`sorry. I'm a little confused.
` So are you asking that, your
`Honor, I apologize, the petition as is, do we
`have any issues the way the Board has
`interpreted --
` UMPIRE TIERNEY: Are you in any
`way going to be unable to understand what
`your -- the challenge is such that you cannot
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`put on a proper Patent Owner response?
` MS. MODI: Your Honor, this is
`Naveen Modi.
` I think the issue we are having,
`your Honor, is, of course, the decision, as
`you know, to institute relies on the
`declaration, and that declaration will limit
`us, and we think it's extremely prejudicial
`and with all due respect to the Board --
` THE REPORTER: Mr. Modi, Mr.
`Modi, I do need you to slow down. I'm sorry
`to interrupt.
` MR. MODI: Okay.
` THE REPORTER: But you have to
`slow down.
` Go ahead, please.
` MS. MODI: You know, I'll start
`over.
` I mean, your Honor, it is
`extremely prejudicial to the Patent Owner to
`get a petition that on its face it's 60 pages
`yet relies on a declaration that's much more
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`than that, and then for the Board to go in
`and rely on the declaration, then the
`(inaudible) and institute something -- for
`example, you know what --
` UMPIRE TIERNEY: Well, what --
`Mr. Modi, let's stop there.
` Are you saying that -- this is
`something your firm has done itself, so I
`find it interesting that your firm files
`cases with voluminous declarations as a
`Petitioner, but then when it comes in as
`Patent Owner, it's outside undue prejudice.
` MR. MODI: You know --
` JUDGE TIERNEY: Can you explain
`how that --
` MS. MODI: I'm sorry, your
`Honor, I apologize for interrupting.
` So I think that in terms, your
`Honor, is that -- we think certainly
`Petitioners can rely on declarations, but
`what they should do is still make their case
`in their petition, and -- but you do that by
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`citing to prior art and citing to the
`declaration.
` And what -- the issue we have
`here is what Apple did in its petition is
`it's only citing to the declaration, and by
`doing so it went beyond the 60 pages, and --
`but, you know, our petition, I believe the
`one I filed, your Honor, I've been careful to
`make sure we correct all of the grounds in
`the petition, and there's evidence in the
`declaration that we submitted.
` And I think the one issue we
`have, your Honor, and if you could look at
`them in our petition is the evolutionary time
`in between. It's, you know, after we filed a
`preliminary response, but that's very
`telling.
` That petition was filed by
`Apple, and it hasn't come up with anything
`that we're complaining about here, and yet
`the Board has instituted the filing of our
`petition was late, and that's our argument
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`here, your Honor, that it was late, and we
`feel like we have been put in a situation not
`to respond to something we, you know,
`respectfully feel is waived given how much
`declaration evidence is being relied upon.
` Even the decision acknowledges,
`you know, on F14, it says:
` Petitioner implies in its
`discussion of prior art, so to think -- we
`don't think that's fair to the Patent Owner.
`That is not, with all due respect, your
`Honor, so I think that's what our argument
`is, and that's what the issue is, and we
`understand where the Board is coming from,
`and I think at the end of the day what we
`would request at a minimum is some guidance
`from the Board for, you know, future
`petitioners and for our -- something
`regarding the volume-based petitioners, you
`know, in terms of making sure that the bar
`knows what is expected of petitioners in
`petitions.
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` And so there's been consistency
`in the decision, and so with all due respect,
`your Honor, that's certainly what it boils
`down to.
` UMPIRE TIERNEY: We understand
`your concerns in this case. I am not going
`to say it was a perfect model of clarity. I
`think that's apparent from the record, what
`was being done by the Petitioner, but because
`of the specifics of the case and the
`fact-by-fact we went through, it met the
`requirements. We went forward.
` And that's why I've been
`pointing out we're going forward, and I want
`to make sure that you're able to respond
`going forward.
` I'm hearing that you're saying
`that that question is voluminous, but I
`notice in many cases filed, even by your firm
`with the voluminous declaration being able to
`respond to, if you have specifics that you
`feel are causing undue concern, I'd like to
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`know, but I'm not seeing those in your
`request for a hearing. If I --
` MR. PALYS: If I may, your
`Honor, this is Joseph Palys again.
` It seems like this is a question
`that is apart from our request for rehearing.
`It seems like, if I understand this
`correctly, the Board is asking us:
` "Look, we're maintaining our
`institution, so our" -- "what are your issues
`with our decision."
` And I think that's a separate
`question, and I'd like to have the
`opportunity to think about that. I think
`that's separate and apart from what we're
`arguing in our request for a hearing.
` UMPIRE TIERNEY: The request for
`a hearing indicated that there was some
`concerns of prejudice and vagueness. We've
`already -- we've looked at this.
` I wanted to -- I will start
`asking you today about the statutory
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`violation, the rule violation. Does it meet
`the minimum requirements in this case.
` I'll make it clear the Panel's
`considered the request for a hearing. The
`request for a hearing is hereby denied.
` My concern is going forward if
`there's a problem, I haven't heard it
`identified specifically, as to what the
`problem is except the declaration is
`voluminous. Many cases have voluminous
`declarations.
` MR. PALYS: I think, your Honor,
`I hope you were done. I didn't mean to
`interrupt.
` I think the point that's
`confusing is that we actually won't know
`those specifics about what -- based on its
`decision until we really start writing them
`up and put them in our prelim response, but
`-- and this idea about the declaration being
`voluminous, we are not arguing that just
`because the declaration is so large that --
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`the issue is how they rely on the declaration
`to make a specific point based on a
`particular claim limitation.
` And if the Board is relying on a
`citation, like 38 paragraphs, that -- like
`the Petitioner did, I'm paraphrasing the
`number, that in itself could be an issue.
`It's not the fact that there's a
`200-some-page declaration, it's how they use
`that declaration to support their grounds.
` And then if the Board is
`essentiall
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