Case: 13-1489 Document: 54 Page: 1 Filed: 12/09/2013
`
`2013-1489
`IN THE
`UNITED STATES COURT OF APPEALS
`FOR THE FEDERAL CIRCUIT
`
`
`
`
`
`
`
`VIRNETX, INC.,
`and
`SCIENCE APPLICATIONS INTERNATIONAL CORPORATION,
`Plaintiffs-Appellees,
`
`
`
`
`
`v.
`CISCO SYSTEMS, INC.,
`Defendant,
`
`and
`APPLE INC.,
`
`
`
`
`
`
`
`Defendant-Appellant.
`
`
`
`Appeal from the United States District Court for the Eastern District of
`Texas in case no. 10-CV-0417, Chief Judge Leonard Davis.
`
`
`
`
`
`
`
`
`
`CORRECTED NON-CONFIDENTIAL BRIEF FOR
`PLAINTIFFS-APPELLEES VIRNETX INC. AND
`SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
`
`
`
`
`
`
`
`
`
`
`
` J. Michael Jakes
`Kara F. Stoll
`Srikala Atluri
`FINNEGAN, HENDERSON, FARABOW,
` GARRETT & DUNNER, LLP
`901 New York Avenue, NW
`Washington, DC 20001
`(202) 408-4000
`
`Benjamin R. Schlesinger
`FINNEGAN, HENDERSON, FARABOW,
` GARRETT & DUNNER, LLP
`3500 SunTrust Plaza
`303 Peachtree Street, NE
`Atlanta, GA 30308-3263
`(404) 653-6400
`[Counsel Continued]
`
`
`
`
`
`Page 1 of 89
`
`VIRNETX EXHIBIT 2030
`Apple v. VirnetX
`Trial IPR2014-00238
`
`

`
`Case: 13-1489 Document: 54 Page: 2 Filed: 12/09/2013
`
` Bradley W. Caldwell
`Jason D. Cassady
`John Austin Curry
`CALDWELL, CASSADY &
` CURRY
`2101 Cedar Springs Rd.
`Suite 1000
`Dallas, TX 75201
`(214) 888-4848
`
`Attorneys for VirnetX Inc.
`
`Donald Urrabazo
`Arturo Padilla
`Ronald Wielkopolski
`URRABAZO LAW, P.C.
`2029 Century Park East
`Suite 1400
`Los Angeles, CA 90067
`(310) 363-9088
`
`Andy Tindel
`MANN, TINDEL & THOMPSON
`112 E Line Street, Suite 304
`Tyler, TX 75702
`(903) 596-0900
`Attorneys for Leidos, Inc., formerly
`Science Applications International
`Corporation
`
`
`
`
`
`
`
`
`
`
`
`
`December 2, 2013
`
`
`
`
`
`Page 2 of 89
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`

`
`Case: 13-1489 Document: 54 Page: 3 Filed: 12/09/2013
`
`CERTIFICATE OF INTEREST
`
`Pursuant to Federal Circuit Rule 47.4, counsel of record for Plaintiff-Appellee
`VirnetX Inc. certify as follows:
`
`
`1.
`
`The full name of every party or amicus represented by us is:
`VirnetX Inc.
`
`
`
`
`
`
`
`
`
`2.
`
`3.
`
`4.
`
`
`
`The name of the real party in interest represented by us is: VirnetX Inc.
`
`All parent corporations and any publicly held companies that own 10
`percent or more of the stock of the party or amicus curiae represented by
`us are: VirnetX Inc. is a wholly owned subsidiary of VirnetX Holding
`Corporation (“VHC”). VHC’s stock is publicly traded on the New York
`Stock Exchange.
`
`The names of all law firms and the partners or associates that appeared
`for the parties represented by us in the trial court, or are expected to
`appear in this Court, are:
`
`Finnegan, Henderson, Farabow, Garrett & Dunner, LLP: J. Michael
`Jakes, Kara F. Stoll, Srikala P. Atluri, and Benjamin R. Schlesinger
`
`Caldwell, Cassady, & Curry: Bradley W. Caldwell, Jason D. Cassady,
`and John Austin Curry
`
`
`
`
`
`
`Page 3 of 89
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`

`
`Case: 13-1489 Document: 54 Page: 4 Filed: 12/09/2013
`
`CERTIFICATE OF INTEREST
`
`Pursuant to Federal Circuit Rule 47.4, counsel of record for Plaintiff-Appellee
`Leidos, Inc., formerly Science Applications International Corporation, certify as
`follows:
`
`
`The full name of every party or amicus represented by us is: Leidos, Inc.
`is the represented party. Science Applications International Corporation
`(“SAIC”) was recently renamed Leidos, Inc. as part of a corporate
`reorganization. This name change did not effect Leidos, Inc.’s interest in
`the patents at issue.
`
`The name of the real party in interest represented by us is: Leidos, Inc. is
`the real party in interest. Science Applications International Corporation
`(“SAIC”) was recently renamed Leidos, Inc. as part of a corporate
`reorganization. This name change did not effect Leidos, Inc.’s interest in
`the patents at issue.
`
`All parent corporations and any publicly held companies that own 10
`percent or more of the stock of the party or amicus curiae represented by
`us are: Leidos Holdings, Inc. owns 100% of Leidos, Inc. SAIC, Inc. and
`Science Applications International Corporation were recently renamed
`Leidos Holdings, Inc. and Leidos, Inc., respectively, as part of a
`corporate reorganization. This name change did not effect Leidos, Inc.’s
`interest in the patents at issue.
`
`The names of all law firms and the partners or associates that appeared
`for the parties represented by us in the trial court, or are expected to
`appear in this Court, are:
`
`URRABAZO LAW, P.C.: Donald Urrabazo, Arturo Padilla, Ronald
`Wielkopolski
`
`MANN, TINDEL & THOMPSON: Andy Tindel
`
`
`
`1.
`
`2.
`
`3.
`
`4.
`
`
`
`
`
`
`
`Page 4 of 89
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`

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`Case: 13-1489 Document: 54 Page: 5 Filed: 12/09/2013
`
`TABLE OF CONTENTS
`
`TABLE OF AUTHORITIES ..................................................................................... v
`
`STATEMENT OF RELATED CASES .................................................................... ix
`
`I.
`
`STATEMENT OF JURISDICTION ................................................................. 1
`
`II. COUNTERSTATEMENT OF THE ISSUES ................................................... 1
`
`III. COUNTERSTATEMENT OF THE CASE ...................................................... 2
`
`A. Preliminary Statement ............................................................................... 2
`
`B. Course of Proceedings and Disposition Below ......................................... 2
`
`IV. COUNTERSTATEMENT OF THE FACTS .................................................... 3
`
`A. Background ................................................................................................ 3
`
`1. The Problem: Secure Communications on Unsecured
`Networks ........................................................................................... 3
`
`2. The Inventors Solve the Problem ...................................................... 5
`
`B. VirnetX’s ’135 and ’151 Patents ............................................................... 6
`
`1. Common Specification ...................................................................... 6
`
`2. Asserted Claims................................................................................. 8
`
`C. VirnetX’s ’504 and ’211 Patents ............................................................... 9
`
`1. Common Specification ...................................................................... 9
`
`2. Asserted Claims............................................................................... 11
`
`D. VirnetX Is Formed to Implement the Inventions .................................... 13
`
`1. VirnetX Begins to Implement the Inventions ................................. 14
`
`2. VirnetX’s Licensing Policy and Other Licenses ............................. 15
`
`E. Apple’s Accused Products ....................................................................... 16
`
`
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`Page 5 of 89
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`

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`Case: 13-1489 Document: 54 Page: 6 Filed: 12/09/2013
`
`1. VPN On Demand Products ............................................................. 16
`
`2.
`
`FaceTime Products .......................................................................... 19
`
`F. District Court Proceedings ...................................................................... 22
`
`1.
`
`Infringement Evidence: ’135 and ’151 Patents ............................... 22
`
`a.
`
`b.
`
`c.
`
`“Determining Whether” .......................................................... 22
`
`Initiating VPN “Between” Client and Target ......................... 23
`
`“Encrypted Channel Between” Client and Secure
`Server ...................................................................................... 23
`
`2.
`
`Infringement Evidence: ’504 and ’211 Patents ............................... 24
`
`a. Construction of “Domain Name” ........................................... 24
`
`b. Construction of “Secure Communication Link”..................... 25
`
`c. Evidence Relating to “Domain Name” and Direct
`Communication ....................................................................... 27
`
`3. Validity Evidence ............................................................................ 27
`
`4. Evidence on Damages ..................................................................... 29
`
`V. SUMMARY OF ARGUMENT ....................................................................... 32
`
`VI. ARGUMENT ................................................................................................... 34
`
`A. Standard of Review ................................................................................. 34
`
`B. The District Court Properly Denied JMOL of Noninfringement
`of the ’135 and ’151 Patents .................................................................... 35
`
`1.
`
`2.
`
`Substantial Evidence Shows VPN On Demand
`“Determines Whether” a Secure Site Is Requested ........................ 35
`
`Substantial Evidence Shows VPN On Demand Performs
`the “VPN,” “Secure Channel,” and “Encrypted Channel”
`Elements .......................................................................................... 37
`
`
`
`ii
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`Page 6 of 89
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`

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`Case: 13-1489 Document: 54 Page: 7 Filed: 12/09/2013
`
`a. VPN On Demand Initiates a VPN and Secure
`Channel ................................................................................... 37
`
`b. VPN On Demand Initiates an Encrypted Channel
`Under the Doctrine of Equivalents ......................................... 40
`
`C. The District Court Properly Denied JMOL of Noninfringement
`of the ’504 and ’211 Patent Claims ......................................................... 42
`
`1. The District Court Properly Construed “Domain Name” ............... 42
`
`a. The Intrinsic Evidence Supports the District Court’s
`Construction ............................................................................ 42
`
`b. Apple’s Extrinsic Evidence Cannot Overcome the
`Intrinsic Evidence ................................................................... 44
`
`2. Even Under Apple’s Construction, Disputed Issues of Fact
`Would Remain................................................................................. 46
`
`3. The District Court Properly Construed “Secure
`Communication Link” ..................................................................... 46
`
`a. Apple Waived Its Construction Argument ............................. 46
`
`b.
`
`Intrinsic Evidence Supports the District Court’s
`Construction ............................................................................ 47
`
`c. Misplaced Reliance on the ’181 Patent .................................. 49
`
`d.
`
`If This Court Adopts Apple’s Construction, Disputed
`Issues of Fact Remain ............................................................. 50
`
`4.
`
`Substantial Evidence Shows FaceTime “Supports
`Establishing a Secure Communication Link” ................................. 50
`
`D. The District Court Properly Refused to Overturn the Jury’s
`Findings that the Patents Are Not Invalid ............................................... 53
`
`1.
`
`2.
`
`Substantial Evidence Supports that Kiuchi Does Not
`Anticipate the ’135 Patent ............................................................... 53
`
`Substantial Evidence Supports that Kiuchi Does Not
`Anticipate the ’151 Patent ............................................................... 54
`iii
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`Page 7 of 89
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`

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`Case: 13-1489 Document: 54 Page: 8 Filed: 12/09/2013
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`3.
`
`Substantial Evidence Supports that Kiuchi Does Not
`Anticipate the ’504 and ’211 Patents .............................................. 54
`
`E. The District Court Did Not Abuse Its Discretion Excluding
`Evidence of Ongoing Reexaminations .................................................... 55
`
`F. The Court Should Affirm the Damages Award ...................................... 58
`
`1. The Jury Instruction Was Correct: There Is No Per Se
`Rule that an Entire Product Cannot Constitute the Smallest
`Salable Patent-Practicing Unit ........................................................ 58
`
`2.
`
`Substantial Evidence Supports that the Royalty Base Only
`Included the Smallest Salable Patent-Practicing Units ................... 60
`
`3. District Court Did Not Abuse Its Discretion Admitting
`Licenses ........................................................................................... 62
`
`4. Nash Bargaining Solution Analysis Is Directly Tied to the
`Facts of the Case and Properly Admitted........................................ 66
`
`5. Alternative Per-Unit-Royalty Calculation Incorporating
`Entire Market Value Rule for FaceTime Was Properly
`Admitted .......................................................................................... 69
`
`6. Three Theories Independently Support the Jury’s Award .............. 71
`
`VII. CONCLUSION ................................................................................................ 72
`
`
`CONFIDENTIAL MATERIAL OMITTED
`
`The material omitted on page 16 describes a sealed Apple document. The
`material omitted on page 70 describes the results of internal Apple customer
`surveys. This material was designated confidential by Appellant Apple Inc.
`pursuant to the Protective Order entered August 2, 2011, and amended March 5,
`2012.
`
`
`
`
`iv
`
`Page 8 of 89
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`

`
`Case: 13-1489 Document: 54 Page: 9 Filed: 12/09/2013
`
`TABLE OF AUTHORITIES
`
`
`FEDERAL CASES
`Acoustical Design, Inc. v. Control Electronics Co.,
`932 F.2d 939 (Fed. Cir. 1991) ............................................................................ 56
`
`Page(s)
`
`ActiveVideo Networks, Inc. v. Verizon Communications, Inc.,
`694 F.3d 1312 (Fed. Cir. 2012) .................................................................... 63, 65
`
`Arthrocare Corp. v. Smith & Nephew, Inc.,
`406 F.3d 1365 (Fed. Cir. 2005) .......................................................................... 36
`
`Bose Corp. v. JBL, Inc.,
`274 F.3d 1354 (Fed. Cir. 2001) .......................................................................... 34
`
`Calloway Golf Co. v. Acushnet Co.,
`576 F.3d 1331 (Fed. Cir. 2009) .......................................................................... 57
`
`Commil USA, LLC v. Cisco Systems, Inc.,
`720 F.3d 1361 (Fed. Cir. 2013) .................................................................... 55, 56
`
`Conoco, Inc. v. Energy & Environmental International, L.C.,
`460 F.3d 1349 (Fed. Cir. 2006) .......................................................................... 37
`
`Cordis Corp. v. Medtronic AVE, Inc.,
`511 F.3d 1157 (Fed. Cir. 2008) .......................................................................... 50
`
`Cornell University v. Hewlett-Packard Co.,
`609 F. Supp. 2d 279 (N.D.N.Y.), amended, No. 01-CV-1974,
`2009 WL 1405208 (N.D.N.Y. May 15, 2009) ............................................. 58-59
`
`Daubert v. Merrell Dow Pharmaceuticals, Inc.,
`509 U.S. 579 (1993) ...................................................................................... 64, 66
`
`Digital-Vending Services International, LLC v. University of Phoenix, Inc.,
`672 F.3d 1270 (Fed. Cir. 2012) .................................................................... 46-47
`
`Electro Scientific Industries, Inc. v. Dynamic Details Inc.,
`307 F.3d 1343 (Fed. Cir. 2002) .................................................................... 46, 50
`
`
`
`v
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`Page 9 of 89
`
`

`
`Case: 13-1489 Document: 54 Page: 10 Filed: 12/09/2013
`
`Energy Transportation Group, Inc. v. William Demant Holding A/S,
`697 F.3d 1342 (Fed. Cir. 2012) .................................................................... 71-72
`
`Finjan, Inc. v. Secure Computing Corp.,
`626 F.3d 1197 (Fed. Cir. 2010) ..................................................62, 64, 65, 68, 69
`
`Garretson v. Clark,
`111 U.S. 120 (1884) ...................................................................................... 58, 59
`
`Hilgraeve Corp. v. Symantec Corp.,
`265 F.3d 1336 (Fed. Cir. 2001) .................................................................... 36, 40
`
`Hoechst Celanese Corp. v. BP Chemicals Ltd.,
`78 F.3d 1575 (Fed. Cir. 1996) ............................................................................ 56
`
`Huss v. Gayden,
`571 F.3d 442 (5th Cir. 2009) .............................................................................. 62
`
`i4i Ltd. Partnership v. Microsoft Corp.,
`598 F.3d 831 (Fed. Cir. 2010), aff’d, 131 S. Ct. 2238 (2011) .......... 47, 61, 63, 68
`
`InterDigital Communications, LLC v. ITC,
`690 F.3d 1318 (Fed. Cir. 2012) .......................................................................... 44
`
`LaserDynamics, Inc. v. Quanta Computer, Inc.,
`694 F.3d 51 (Fed. Cir. 2012) ........................................................................ 58, 62
`
`LNP Engineering Plastics, Inc. v. Miller Waste Mills, Inc.,
`275 F.3d 1347 (Fed. Cir. 2001) .......................................................................... 38
`
`Lucent Technologies, Inc. v. Gateway, Inc.,
`580 F.3d 1301 (Fed. Cir. 2009) ....................................................... 59, 61, 62, 65
`
`Maxwell v. J. Baker, Inc.,
`86 F.3d 1098 (Fed. Cir. 1996) ............................................................................ 61
`
`On-Line Technologies, Inc. v. Bodenseewerk Perkin-Elmer GmbH,
`386 F.3d 1133 (Fed. Cir. 2004) .......................................................................... 37
`
`Phillips v. AWH Corp.,
`415 F.3d 1303 (Fed. Cir. 2005) .......................................................................... 43
`
`
`
`vi
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`

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`Case: 13-1489 Document: 54 Page: 11 Filed: 12/09/2013
`
`Rite-Hite Corp. v. Kelley Co.,
`56 F.3d 1538 (Fed. Cir. 1995) ...................................................................... 59-60
`
`Robert Bosch, LLC v. Pylon Manufacturing Corp.,
`719 F.3d 1305 (Fed. Cir. 2013) ............................................................................ 1
`
`Sinclair Refining Co. v. Jenkins Petroleum Process Co.,
`289 U.S. 689 (1933) ............................................................................................ 65
`
`Sprint/United Management Co. v. Mendelsohn,
`552 U.S. 379 (2008) ............................................................................................ 59
`
`St. Clair Intellectual Property Consultants, Inc. v. Canon Inc.,
`412 F. App’x 270 (Fed. Cir. 2011) ..................................................................... 13
`
`SuperGuide Corp. v. DirecTV Enterprises, Inc.,
`358 F.3d 870 (Fed. Cir. 2004) ............................................................................ 44
`
`SynQor, Inc. v. Artesyn Technologies, Inc.,
`709 F.3d 1365 (Fed. Cir. 2013) .......................................................................... 57
`
`TWM Manufacturing Co. v. Dura Corp.,
`789 F.2d 895 (Fed. Cir. 1986) ................................................................ 61, 62, 69
`
`Uniloc USA, Inc. v. Microsoft Corp.,
`632 F.3d 1292 (Fed. Cir. 2011) .............................................................. 59, 67, 72
`
`Versata Software, Inc. v. SAP America, Inc.,
`717 F.3d 1255 (Fed. Cir. 2013) .............................................................. 58, 64, 72
`
`Walther v. Lone Star Gas Co.,
`952 F.2d 119 (5th Cir. 1992) .............................................................................. 71
`
`Weisgram v. Marley Co.,
`528 U.S. 440 (2000) ............................................................................................ 72
`
`Wellogix, Inc. v. Accenture, L.L.P.,
`716 F.3d 867 (5th Cir. 2013) .............................................................................. 34
`
`z4 Technologies, Inc. v. Microsoft Corp.,
`507 F.3d 1340 (Fed. Cir. 2007) .......................................................................... 36
`
`
`
`vii
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`Page 11 of 89
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`

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`Case: 13-1489 Document: 54 Page: 12 Filed: 12/09/2013
`
`FEDERAL RULES
`
`Fed. R. Evid. 103 ..................................................................................................... 63
`
`Fed. R. Evid. 403 ..................................................................................................... 34
`
`Fed. R. Evid. 702 ............................................................................................... 66, 68
`
`OTHER AUTHORITIES
`Brief of Defendant-Appellant Acushnet Company, Calloway Golf. Co. v.
`Acushnet Co., 576 F.3d 1331 (Fed. Cir. 2009) (No. 2009-1076),
`2009 WL 434213 ................................................................................................ 57
`
`Brief for Defendant-Appellant Cisco Systems, Inc., Commil USA, LLC v.
`Cisco Systems, Inc., 720 F.3d 1361 (Fed. Cir. 2013) (No. 2012-1042),
`2012 WL 830381 ................................................................................................ 56
`
`
`
`
`
`
`
`
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`viii
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`Page 12 of 89
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`Case: 13-1489 Document: 54 Page: 13 Filed: 12/09/2013
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`STATEMENT OF RELATED CASES
`
`No other appeal from the same Civil Action No. 10-CV-417 (E.D. Tex.) was
`
`previously before this Court or any other appellate court. The following cases
`
`known to counsel involve one or more of the patents-in-suit (U.S. Patent Nos.
`
`6,502,135 (“the ’135 patent”); 7,490,151 (“the ’151 patent”); 7,418,504 (“the ’504
`
`patent”); and 7,921,211 (“the ’211 patent”)) or patents related to the patents-in-
`
`suit, and may be directly affected by the Court’s decision in this appeal:
`
`VirnetX, Inc. v. Apple Inc., No. 13-cv-211 (E.D. Tex.)
`VirnetX, Inc. v. Apple Inc., No. 12-cv-855 (E.D. Tex.)
`VirnetX, Inc. v. Apple Inc., No. 11-cv-563 (E.D. Tex.)
`VirnetX, Inc. v. Cisco Sys., Inc., No. 10-cv-417 (E.D. Tex.)
`VirnetX, Inc. v. Microsoft Corp., No. 13-cv-351 (E.D. Tex.)
`
`
`
`
`
`ix
`
`Page 13 of 89
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`

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`Case: 13-1489 Document: 54 Page: 14 Filed: 12/09/2013
`
`I.
`
`STATEMENT OF JURISDICTION
`
`VirnetX agrees with Apple’s Statement of Jurisdiction except for Apple’s
`
`assertion that the district court’s judgment is non-final. It is final for the reasons
`
`the district court noted in its opinion (A83-88), consistent with Robert Bosch, LLC
`
`v. Pylon Manufacturing Corp., 719 F.3d 1305 (Fed. Cir. 2013).
`
`II. COUNTERSTATEMENT OF THE ISSUES
`Did the district court correctly deny JMOL of noninfringement of the ’135
`1.
`
`and ’151 patents where substantial evidence supports that VPN On Demand
`
`(1) performs the “determining whether” element; and (2) initiates a VPN,
`
`secure channel, and encrypted channel “between” the client and target
`
`computer or secure server?
`
`2.
`
`Did the district court correctly deny JMOL of noninfringement of the ’504
`
`and ’211 patents where the court properly construed the terms “domain
`
`name” and “secure communication link,” and substantial evidence supports
`
`that FaceTime uses “direct communication,” as Apple advocated in the
`
`construction of “secure communication link”?
`
`3.
`
`Did the district court correctly deny JMOL of invalidity where substantial
`
`evidence supports that Kiuchi does not teach (1) “direct communication”
`
`between a client and target; and/or (2) “storing a plurality of domain names
`
`and corresponding IP addresses”?
`
`
`
`1
`
`Page 14 of 89
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`Case: 13-1489 Document: 54 Page: 15 Filed: 12/09/2013
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`4.
`
`Did the district court properly exclude non-final reexamination evidence that
`
`was more prejudicial than probative?
`
`5.
`
`Did the district court err in denying Apple’s damages JMOL and motion for
`
`new trial when properly admitted theories support the award?
`
`III. COUNTERSTATEMENT OF THE CASE
`Preliminary Statement
`A.
`Seeking to overturn the jury verdict, Apple raises numerous issues and only
`
`tells half the story for each. With little room in its brief to educate the Court on all
`
`issues, Apple does not even begin to identify evidence the jury reasonably relied
`
`on to find infringement, no anticipation, and damages. Nor does Apple address
`
`intrinsic evidence supporting the district court’s claim construction. Further,
`
`although nearly all contested issues are reviewed for substantial evidence or abuse
`
`of discretion, Apple treats them like legal issues, ignoring this Court’s standard of
`
`review. As discussed below, substantial evidence supports the jury verdict on
`
`infringement, anticipation, and damages, and Chief Judge Davis properly exercised
`
`his discretion on evidentiary issues. Moreover, the intrinsic and extrinsic evidence
`
`supports the court’s construction of “domain name” and “secure communication
`
`link,” limitations from two of the four patents-in-suit.
`
`B. Course of Proceedings and Disposition Below
`This appeal is from a final judgment in a patent case. After the court
`
`construed the claims, the case proceeded to trial. The parties presented expert
`2
`
`
`
`Page 15 of 89
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`Case: 13-1489 Document: 54 Page: 16 Filed: 12/09/2013
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`testimony and other evidence to the jury over five days. The jury found
`
`infringement of all asserted patents, none of the claims invalid, and awarded
`
`damages of $368,160,000. A240-41.
`
`IV. COUNTERSTATEMENT OF THE FACTS
`A. Background
`The Problem: Secure Communications on Unsecured
`1.
`Networks
`
`During Gulf War I, the military faced a critical problem: using unsecured
`
`commercial satellites to communicate sensitive data. A1072:9-1074:4. The
`
`military turned to Science Applications International Corporation (“SAIC”), a
`
`company providing technology solutions to organizations like the CIA. SAIC
`
`tasked Dr. Bob Short and Mr. Gif Munger with building a secure satellite network
`
`using unsecured satellites. A1072:3-1074:4; A1186:16-1187:25.
`
`At the time, many different solutions attempted to provide security over
`
`public networks like the Internet. For example, Kiuchi—the prior art Apple relies
`
`on—taught a technique called “closed HTTP” (“C-HTTP”) for communications
`
`between hospitals. In Kiuchi, C-HTTP allowed website users at one hospital to
`
`retrieve information from another hospital’s network. A15008. As depicted
`
`below, the website user could not directly access resources in the other hospital’s
`
`network. Instead, communications between the website user and origin server
`
`were proxied by the client-side and server-side proxy servers, which terminated the
`
`
`
`3
`
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`Case: 13-1489 Document: 54 Page: 17 Filed: 12/09/2013
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`connection, wrapped/unwrapped the messages, encrypted/decrypted the contents,
`
`reformatted, and re-sent the messages. A15009-10. Furthermore, as Kiuchi
`
`recognizes, this solution was not commercially viable. A15012-13(“Our system is
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`assumed to accommodate up to a few hundred[] proxies[,] much smaller than that
`
`needed for most commercial purposes.”).
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`
`
`Apple Trial Demonstrative
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`Other solutions involved virtual private networks (“VPNs”). As its name
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`suggests, a virtual private network extends a private network across the Internet or
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`other public network. It enables a computer outside a private network to send and
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`4
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`receive data across public networks as if it were directly connected to the secure
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`private network. A1323:23-1324:2.
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`After successfully completing the satellite project, Short and Munger
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`continued providing communication security to CIA operatives, inventing a
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`complex type of VPN (called a TARP VPN in the patents-in-suit). A1075:4-
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`1076:3; A1081:7-24. In-Q-Tel, a company Congress established to identify and
`
`develop emerging technologies, granted a $3.5M contract to SAIC to continue
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`developing that VPN in exchange for a 3% royalty. A1084:5-1085:9; A1596:14-
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`20.
`
`In developing the TARP VPN, Short and Munger recognized that setting up
`
`even a normal VPN was complex—requiring configuration of security, encryption,
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`and network parameters on either side of the connection. A1081:22-1083:11;
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`A1193:9-1195:16; A20241. They appreciated that users would use secure
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`connections like VPNs only if they were easy or automatic. A1083:5-19;
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`A1195:11-21.
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`The Inventors Solve the Problem
`
`2.
`While returning from an In-Q-Tel contract kick-off meeting, Short had his
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`“aha” moment. Recognizing that users were accustomed to entering domain
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`names to initiate Internet communications, Short conceived of using a domain
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`name to trigger secure communications. A1087:9-1089:8; A1195:22-1198:7. The
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`other inventors immediately knew this was the elegant solution they sought.
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`A1197:18-1198:18.
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` Over
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`the next several months,
`
`they
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`fleshed out
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`implementation details, and eventually applied for and received multiple patents.
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`A1094:22-1098:3; A1197:18-1199:23; A242-529. Within SAIC, the project was
`
`called “VirnetX,” meaning “virtual network exchange.” A1013:25-1014:3.
`
`B. VirnetX’s ’135 and ’151 Patents
`Common Specification
`1.
`The ’135 and ’151 patents disclose a novel system in which a Domain Name
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`Server (“DNS”) proxy automatically and transparently creates a VPN in response
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`to a DNS lookup. A298(37:17-21). As background, conventional DNSs are used
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`in the Internet to resolve domain names (e.g., “Yahoo.com”)1 into Internet Protocol
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`(“IP”) addresses. Id.(37:22-27). A web browser then uses the IP address to
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`request a website. Id.(37:24-29).
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`Figure 26 depicts an embodiment in the patents. A273; A298(38:14-15).
`
`
`1 The patents list “Yahoo.com” as an example domain name in a “conventional
`scheme,” but recognize domain names may be any name corresponding to an IP
`address. A298(37:33-36); A303(47:24-25, 39); A446(37:4-6).
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`
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`6
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`
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`Browser (2605) within user computer (2601) generates a domain name service
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`request when a domain name is entered. Instead of conventional DNS (2609)
`
`receiving the request, DNS proxy (2610) intercepts it and determines whether the
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`request is for a secure site. A298(38:23-25). According to a preferred
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`embodiment, this determination is made by checking the domain name against a
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`table of domain names. Id.(38:23-30(whether “access to a secure site has been
`
`requested” is determined “by reference to an internal table of such sites”)).
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`If the domain name is listed, DNS proxy (2610) determines the request is
`
`requesting access to a secure site and automatically initiates a VPN between
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`browser (2605) and secure target site (2604). Id.(38:25-33). If the domain name is
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`not listed, DNS proxy (2610) determines that the request is not seeking access to a
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`secure site and forwards the request to conventional DNS (2609) for resolution
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`(without initiating a VPN). Id.(38:43-47).
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`Asserted Claims
`
`2.
`At trial, VirnetX asserted that Apple’s VPN On Demand products infringed
`
`’135 patent claims 1, 3, 7, and 8, and ’151 patent claims 1 and 13. ’135 patent
`
`claim 1 is representative:
`
`A method of transparently creating a virtual private
`network (VPN) between a client computer and a target
`computer, comprising the steps of:
`
`(1) generating from the client computer a Domain Name
`Service (DNS) request that requests an IP address
`corresponding to a domain name associated with the
`target computer;
`
`(2) determining whether the DNS request transmitted in
`step (1) is requesting access to a secure web site; and
`
`(3) in response to determining that the DNS request in
`step (2) is requesting access to a secure target web site,
`automatically initiating the VPN between the client
`computer and the target computer.
`
`A303(47:20-32). Italics represent limitations Apple contends are not met.
`
`’151 patent claims 1 and 13 are similar to ’135 patent claim 1, except they
`
`require “initiating an encrypted path” and “secure channel,” respectively, instead
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`of a “VPN.” A450(46:55-67); A451(48:18-29).
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`C. VirnetX’s ’504 and ’211 Patents
`Common Specification
`1.
`The ’504 and ’211 patents share the same specification and disclose a novel
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`domain name service system that, unlike conventional DNS, resolves domain
`
`names beyond just simple web pages on the Internet and facilitates establishing
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`secure communication links. A383(49:1-6). The “secure communication link” of
`
`the ʼ504 and ʼ211 patents is not the same as the “VPN” communication of the
`
`’135 patent. The ’504 and ’211 patents explain that, “[a]ccording to one variation
`
`of t