PUBLIC VERSION
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`UNITED STATES INTERNATIONAL TRADE COMMISSION
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`Washington, DC.
`
`In the Matter of
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`CERTAIN DEVICES WITH SECURE
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`COMMUNICATION CAPABILITIES,
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`COMPONENTS THEREOF, AND
`PRODUCTS CONTAINING SAME
`
`
`
`Inv. No. 337-TA-858
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`ORDER N O. 20:
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`INITIAL DETERMINATION GRANTING MOTION TO
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`TERMINATE; AND
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`ORDER DENYING MOTION FOR SANCTION S
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`(April 22, 2013)
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`On March 4, 2013, Complainants VimetX, Inc. (“VimetX”) and Science Applications
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`International Corporation (“SAIC”) (collectively, “Complainants”) filed a motion seeking to
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`terminate the Investigation in its entirety based upon withdrawal of the Complaint so that
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`Complainants may focus on their district court litigation. (Motion Docket No. 858-018.)
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`Respondent Apple Inc. (“Apple”) opposed the motion in part on March 14, 2013. On March 19,
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`2013, Complainants sought leave, which is hereby GRANTED, to file a reply in support of their
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`motion. (Motion Docket No. 858-019.)
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`On March 26, 2013, Apple filed a related motion seeking sanctions against Complainants.
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`(Motion Docket No. 858-020 (“Sanctions Motion”).) On April 15, 2013, Apple withdrew its
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`Sanctions Motion with respect to SAIC. On the same day, VirnetX opposed Apple’s motion.
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`After a careful review of the arguments and materials submitted by the parties, the
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`Administrative Law Judge finds as follows.
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`Turning to the Sanctions Motion first, Apple argues inter alia that VirnetX has engaged in
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`page 1 of 11
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`1
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`VIRNETX EXHIBIT 2025
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`Apple v. VirnetX
`Trial lPR2014-00485
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`

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`PUBLIC VERSION
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`sanctionable conduct pursuant to Commission Rule 210.4(0). (Sanctions Mot. at 1.) According to
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`Apple, VimetX’s first investigation, the 818 Investigation, was dismissed alter the exchange of
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`expert reports based on a lack of standing. (Sanctions Mot. Mem. at 1-2.) Apple explains that
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`VimetX filed this Investigation (along with SAlC), reasserting infringement ofthe '181 patent, and
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`also instituted other district court litigation on the '18] and other patents, all for the goal of
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`obtaining a license from Apple.
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`(1d. at 4.) Apple asserts that VimetX has been forum shopping
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`and has caused the waste of public and private resources in its efforts to obtain a license.
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`(Id. at
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`7-8.) Therefore, Apple requests that, prior to termination, the Administrative Law Judge should
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`grant sanctions in the form of Commission fees, Apple’s costs and fees related to
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`Commission-specific activity such as expenses related to the domestic industry portion of the
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`Investigation, and a heightened showing of good cause prior to institution of any new Section 337
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`investigations with VimetX as complainant.
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`(1d. at 9, 1 1-12, 14.)
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`VimetX responds, inter alia, that efforts to license a patent are common and not a basis for
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`sanctions. (Sanctions Mot. Opp. at 6.) VimetX also argues that it is inappropriate to seek
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`sanctions after a complaint has been withdrawn. (Id. at 7.) VimetX disputes Apple’s claim that
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`the Commission should impose heightened scrutiny on VimetX before instituting any further
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`investigations it files. (1d.) According to VimetX, this is tantamount to finding that an
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`investigation be terminated with prejudice, which Commission precedent does not permit. (Id. at 8
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`(citing Certain Bar Clamps, Bar Clamp Pads, and Related Packaging, Display, and Other
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`Materials, Inv. No. 337-TA-429, Commission Opinion (U.S.I.T.C., Feb. 2001) (“Bar Clamps”)).)
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`With respect to Apple’s request for monetary sanctions, VimetX argues that Apple’s reliance on
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`the Commission Order in the 524 Investigationl is misplaced and that Apple has failed to set forth
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`l Certain Point ofSale Terminals and Components Thereof, Inv. No. 337—TA—524, Commission Order (U.S.I.T.C.,
`Sept. 2007) (“Point ofSale Terminals”).
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`2
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`Page 2 of 11
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`PUBLIC VERSION
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`the requisite specificity needed for sanctions under Commission Rule 210.4.
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`(Id. at 9-12.)
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`As an initial matter, the Administrative Law Judge notes that VirnetX’s motion to
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`withdraw the Complaint has not yet been granted and therefore the Administrative Law Judge
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`rejects VimetX’s argument (Sanctions Mot. Opp. at 7) that Apple’s sanctions motion is somehow
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`improperly timed under the circumstances. Indeed, it is the withdrawal of the Complaint that
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`Apple seems to find improper because it lays the foundation for claiming in hindsight that VimetX
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`was allegedly not serious about its second litigation here.
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`Turning to the merits of the Sanctions Motion, the Administrative Law Judge has looked at
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`the 818 Investigation and notes that the Administrative Law Judge in that case made specific
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`findings that a portion of VimetX’s complaint lacked candor. Certain Devices with Secure
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`Communication Capabilities, Components Thereof and Products Containing the Same, Inv. No.
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`337-TA-818, Order No. 9 at 4-6 (U.S.I.T.C., 2012) (“Secure Communication Devices”); id., Order
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`No. 14 at 2-3. For example, Administrative Law Judge Shaw said
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`The original complaint and the proposed amended complaint both state: “VimetX
`owns by assignment all right, title, and interest in and to the '181 patent.” Compl.,
`113; Proposed Amended Compl., 1[3 (Mot. Ex. B). That statement cannot be
`accurate if SAIC is a necessary party, which would be the case if the District
`Court’s ruling applies in equal force to the '181 patent.
`In some parts of the
`proposed amended complaint, SAIC is identified as a complainant, yet in other
`parts it appears as some sort of unspecified party. Compare Proposed Amended
`Compl., cover sheet (which on the same page both includes and excludes SAIC as a
`complainant) and 11 (which lists SAIC in the introduction but refers only to
`VirnetX and the “Complainant”) with 117
`(which lists SAIC in the section
`discussing “Complainant§”).
`In summary, either SAIC has rights or an interest in
`the '181 patent (in which case the original and proposed amended complaint
`erroneously state that VirnetX has “all right, title and interest”), or SAIC has no
`right or interest in the '181 patent (in which case the pending motion has failed to
`show that SAIC would be a proper party in this investigation).
`* * *
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`[E]ven if VimetX had a good faith belief that SAIC lacked “substantial” rights in
`the '181 patent, based upon the District Court’s March 2012 Order as provided in
`the pending motion, it is undeniable that SAIC has some rights or interest in the
`patent. Thus, assuming that District Court Order applies to the '181 patent, the
`statement made in the original complaint that VirnetX “owns by assignment all
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`3
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`right, title, and interest in and to the '181 patent” could not have been not [sic]
`accurate when it was made, and cannot be accurate now.[ 1
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`Secure Communication Devices, Order No. 9 at 4-5, 6 (emphasis in original). As another example,
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`Administrative Law Judge Shaw said
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`Even if the evidence could be interpreted to suggest that VimetX had a good faith
`belief that joining SAIC as a complainant in this investigation was not necessary,
`VirnetX’s original complaint nevertheless failed to comply with the Commission
`Rule requiring that a complaint identify the ownership of any asserted patent and
`include a certified copy of each assignment of the patent.
`See 19 CPR. §
`210.12(9).
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`Secure Communication Devices, Order No. 14 at 2-3 (emphasis in original). However, the
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`prospect of sanctions in the 818 Investigation does not appear to have been raised by Apple or
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`contemplated in the pertinent orders. Id.
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`Here, in the 858 Investigation, VimetX was not given an opportunity to start over with
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`respect to the '18] patent but instead was expected to resume the litigation as close to where it had
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`lefi off as practicable.2 (Order Nos. 2, 3, 7.) This raises the question as to whether any future
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`complaint filed at the lntemational Trade Commission on the '181 patent against Apple on the
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`same set of operative facts would perhaps be an impermissible attempt to gain a fresh start by
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`judge shopping, not to mention harassing and wastefial conduct. Apple documents that it has
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`already spent {
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`} defending against VimetX’s allegations with respect to the
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`‘1 81 patent at the lntemational Trade Commission (Sanctions Mot, Ex. D), and therefore Apple is
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`concerned with detem'ng re-litigation of the same issues here. However, it is premature to reach
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`such an issue at this stage, as there is no support to show that VimetX’s statement that it wishes to
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`focus solely on its district court litigation also lacks candor. (Mot. at 2. See also Sanctions Mot.
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`Opp. at 8, n.7.) Furthermore, the Commission made clear in Bar Clamps that it believes that there
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`are “adequate” safeguards in place to protect respondents against “unwarranted, unfair repetitive
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`2 This restriction applied equally to Apple.
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`investigations.” Bar Clamps, at 8. Therefore, the Administrative Law Judge finds that Apple’s
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`request to have restrictions placed on termination, such as a heightened showing of good cause
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`prior to institution of any new Section 337 investigation on the same issues with VirnetX as
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`complainant, should be DENIED.
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`The Administrative Law Judge also finds that Apple’s request for monetary sanctions
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`should be DENIED. Apple has not persuasively shown that VirnetX has already crossed the line
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`into sanctionable conduct under the Commission’s rules. The Administrative Law Judge rejects
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`Apple’s argument that VirnetX inappropriately seeks a license. (Sanctions Mot. at 9.) Many
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`litigants file complaints in district court or at the International Trade Commission in the hopes of
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`licensing their patents. This is not, in itself, an objectively reasonable basis for finding
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`inappropriate conduct under Commission Rule 210.4.3 Furthermore, Apple has not persuasively
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`demonstrated that VirnetX was never interested in an exclusion order. (Sanctions Mot. Mem. at 15 ;
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`Mot., Ex. C at 49.)
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`Likewise, two complaints filed on the same patent at this agency, while they have resulted
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`in the significant expenditure of fees and costs by Apple as well as the use of agency and other
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`resources, are not yet enough to become a pattern of harassing behavior. Apple does not propose
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`that VimetX’s motion to withdraw the Complaint should be denied so that the litigation may
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`continue to proceed on the merits. (Opp. at 7.) Instead, Apple faults VirnetX for failing to
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`withdraw sooner. (Sanctions Mot. Mem. at 10-11.) In justifying its sanctions claim, Apple relies
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`3 Indeed, this is a common enough rationale for litigation that some court and ITC rules are based on licenses or offers
`to license. Patent damages calculations in district court are oflen based upon the “hypothetical negotiation or the
`‘willing licensor-willing licensee’ approach[:] attempts to ascertain the royalty upon which the parties would have
`agreed had they successfully negotiated an agreement just before infringement began." Lucent Technologies, Inc. v.
`Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009). As another example of how common the tie between licensing
`and litigation is, the Commission allows evidence of offers to license prior to filing suit to be a consideration in the
`determination of whether litigation expenses may be allocated for domestic industry purposes. Certain Coaxial Cable
`Connectors and Components Thereofand Products Containing Same, Inv. No. 337-TA—650, Commission Opinion, at
`54-56 (U.S.I.T.C., April 2010).
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`5
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`somewhat misleadingly on a Commission Order in the 524 Investigation. (Id. at 1] (citing the
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`Commission Opinion in Point ofSale Terminals to assert that the Commission ordered $30,000 in
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`sanctions afier the administrative law judge found that complainant lacked standing).)
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`Specifically Apple says “[t]he Commission previously ordered that a complainant who moved to
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`terminate an investigation based on withdrawal of its complaint pay fees to the US Treasury (afier
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`the Administrative Law Judge found that the complainant lacked standing to maintain the
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`investigation without joining another party).” (1d.) Apple’s characterization of the facts in the
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`Point ofSale Terminals case skirts perilously close to sanctionable conduct in itself under
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`Commission Rule 210.4(c)(2), as the Commission Order dated Sept. 25, 2007 does not provide, as
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`Apple implies, that the sanctions were due to the withdrawal of the complaint after the judge’s lack
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`of standing finding (Sanctions Mot. Mem. at 11). Instead the sanctions were based on the
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`administrative law judge’s remand findings with respect to the complainant’s other objectively
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`unreasonable conduct, including a failure to conduct adequate pre-filing due diligence before
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`bringing the complaint and flagrant misrepresentations of fact in filings before the International
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`Trade Commission. See, e.g., Point ofSale Terminals, Order No. 63 at 18-33, 40 (finding that
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`complaint’s pervasive and egregious rule 210.4 violations warranted sanctions payable to the US.
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`Treasury that would deter any repetition of such conduct). Thus Apple’s legal contentions, based
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`on its inadequate characterization of Point ofSale Terminals, are unwarranted. Even ifthe Point of
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`Sale Terminals case were not so grossly inapposite to the point of whether VirnetX should have
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`withdrawn the 858 Complaint sooner, the Administrative Law Judge questions why Apple did not
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`raise this opinion in front of Administrative Law Judge Shaw in the 818 Investigation at the point
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`when VirnetX’s standing and candor were in fact questioned to some extent. As noted above,
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`there is no suggestion that Apple did so. Apple does not point to new conduct, such as factual
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`errors or misrepresentations in the 858 Complaint, to suggest sanctions under Point ofSale
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`Terminals here.
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`Apple also relies on district court precedent for monetary sanctions under district court
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`rules. (Sanctions Mot. Mem. at 12-13.) The Administrative Law Judge finds that this precedent is
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`also unpersuasive and inapposite. Bar Clamps, at 8. Accordingly, the Administrative Law Judge
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`orders that Apple’s motion for sanctions (Motion Docket No. 858-020) should be DENIED.
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`Turning to the motion for termination, the Commission’s Rules permit a motion to
`terminate an investigation as to any or all respondents based upon withdrawal ofthe complaint
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`before issuance of the initial determination on violation of section 337. 19 CPR. § 210.21(a)(1).
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`Such a motion must identify any agreements between the parties concerning the subject matter of
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`the investigation, or contain a statement that there are no such agreements, written or oral, express
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`or implied. 1d. The Administrative Law Judge may grant said motion upon such terms and
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`conditions as he deems proper. Id. Further, the Commission has held that “in the absence of
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`extraordinary circumstances, termination of an investigation will be readily granted to a
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`complainant during the preheating stage of an investigation.” Certain Ultrafiltration Membrane
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`Systems, and Components Thereof, Including Ultrafiltration Membranes, Inv. No. 337-TA-107,
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`Comm’n Action and Order, at 2 (U.S.I.T.C., Mar. 11, 1982).
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`Here, Complainants have identified all agreements between the parties concerning the
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`subject matter of the Investigation and have attached them to their motion papers. (Mot. at 3; Mot.
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`Exs. 1-6.) In addition, the Administrative Law Judge, in view of the order denying Apple’s
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`Sanctions Motion, knows of no extraordinary circumstances to prevent Complainants’ withdrawal
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`of their Complaint. Likewise, while Apple has sougut conditions (rejected in the above order), no
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`party objects to the withdrawal of the Complaint and termination of the Investigation. (Reply at 1;
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`Opp. at l.) Granting the pending motion will result in the immediate conservation of public and
`7
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`private resources. The Administrative Law Judge does note, however, that termination here will
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`not involve resolution of the overall dispute between the parties, and should Complainants file
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`again on the same facts, there is the danger of duplicated expenditure of public and private
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`resources, not to mention other concerns which are outlined in the above order. The
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`Administrative Law Judge finds, however, that these concerns should not be a bar to termination
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`now, but should instead be addressed by the Commission or the presiding administrative law judge,
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`as may be appropriate, should Complainants later file an additional complaint against Apple on the
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`same operative facts.
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`Accordingly, it is the Administrative Law Judge’s Initial Determination that Motion
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`Docket No. 858-018 should be GRANTED and that this Investigation be terminated in its entirety.
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`This Initial Determination is hereby certified to the Commission. Pursuant to 19 C.F.R. §
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`210.42(h), this Initial Determination shall become the determination of the Commission unless a
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`party files a petition for review of the Initial Determination pursuant to 19 C.F.R. § 2]0.43(a), or
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`the Commission, pursuant to 19 C.F.R. § 210.44, orders on its own motion a review of the Initial
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`Determination or certain issues herein.
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`Within seven days of the date of this document, each party shall submit to the Office of the
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`Administrative Law Judges a statement as to whether or not4 it seeks to have any portion of this
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`document deleted fiom the public version. Any party seeking to have any portion ofthis document
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`deleted from the public version thereof must submit to this office a copy of this document with red
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`brackets clearly indicating any portion asserted to contain confidential business information.
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`The parties’ submissions may be made by facsimile and/or hard copy by the
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`aforementioned date. In addition, an electronic courtesy copy is required pursuant to Ground Rule
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`
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`4 This means that parties that do not seek to have any portion redacted are still required to submit a statement to this
`effect.
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`8
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`1.3.2. The parties’ submissions concerning the public version of this document need not be filed
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`with the Commission Secretary.
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`SO ORDERED.
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`ELM-
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`’
`
`E. James Gildea
`
`Administrative Law Judge
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`Page 9 of 11
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`CERTAIN DEVICES WITH SECURE
`
`COMMUNICATION CAPABILITIES,
`
`COMPONENTS THEREOF, AND
`PRODUCTS CONTAINING SAME
`
`337-TA-858
`
`PUBLIC CERTIFICATE OF SERVICE
`
`1, Lisa R. Barton, hereby certify that the attached ORDER has been served upon the following
`parties as indicated on APR 1 0 2013
`
`Lisa R. Barton
`
`Acting Secretary to the Commission
`US. International Trade Commission
`
`500 E Street, SW, Room 1 12A
`
`Washington, DC. 20436
`
`ON BEHALF OF COMPLAINANT VIRNETX INC:
`
`Benjamin Levi, Esq.
`McKOOL SMITH, P.C.
`1999 K Street, N.W., Ste. 600
`Washington, DC. 20006
`202-370-8300
`
`) Via Hand Delivery
`(
`(\1 Via Overnight Mail
`(
`) Via First Class Mail
`(
`) Other: > _
`H
`
`ON BEHALF OF COMPLAINANT SCIENCE APPLICATIONS INTERNATIONAL
`
`CORPORATION:
`
`Donald Urrabazo, Esq.
`URRABAZO LAW, P.C.
`2029 Century Park East, 14‘h Fl.
`Los Angeles, CA 90067
`310-388-9099
`
`) Via Hand Delivery
`(
`(\lVia Overnight Mail
`(
`) Via First Class Mail
`(
`) Other:
`
`Page 10 of 11
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`CERTAIN DEVICES WITH SECURE
`
`COMIWUNICATION CAPABILITIES,
`COMPONENTS THEREOF, AND
`PRODUCTS CONTAINING SAME
`
`337-TA-858
`
`ON BEHALF OF RESPONDENT APPLE INC;
`
`Marcia H. Sundeen, Esq.
`KENYON & KENYON LLP
`
`1500 K Street, NW.
`
`Washington, DC. 20005
`202-220-4200
`
`) Via Hand Delivery
`(
`( \) Via Overnight Mail
`(
`) Via First Class Mail
`(
`) Other:
`
`PUBLIC MAILING LIST
`
`Angela Ruby
`LEXIS — N EXIS
`
`9443 Springboro Pike
`Miarnisburg, OH 45342
`
`Kenneth Clair
`
`THOMSON WEST
`
`1100 13th Street, NW, Suite 200
`Washington, DC 20005
`
`) Via Hand Delivery
`(
`) Via Overnight Mail
`(
`(\) Via First Class Mail
`(
`) Other:
`
`) Via Hand Delivery
`(
`) Via Overnight Mail
`(
`NVia First Class Mail
`(
`) Other:
`
`Page 11 of 11
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