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`UNITED STATES PATENT AND TRADEMARK OFFICE
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`––––––––––––––––––
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`––––––––––––––––––
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`THE MANGROVE PARTNERS MASTER FUND, LTD. and APPLE INC.,
`Petitioners,
`
`v.
`
`VIRNETX INC.,
`Patent Owner.
`
`––––––––––––––––––
`
`Case No. IPR2015-010461
`U.S. Patent No. 6,502,135 B1
`
`––––––––––––––––––
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`PETITIONERS’ BRIEF ADDRESSING WHETHER THE BOARD SHOULD WITHDRAW
`APPLICATION OF THE GENERAL ORDER TO THESE PROCEEDINGS
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`
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`1 Apple Inc., who filed a petition in IPR2016-00062, has been joined as a Petitioner
`in the instant proceeding.
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`IPR2015-01046
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`U.S. Patent No. 6,502,135 B1
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`Table of Contents
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`Summary of Request ..................................................................................... 1
`I.
`Background .................................................................................................... 1
`II.
`III. Argument ........................................................................................................ 3
`A.
`These Proceedings Were Not Remanded Under Arthrex. ..................... 3
`B.
`There Are No Valid Appointments Clause Issues In These Cases. ...... 3
`C.
`Holding These Cases In Abeyance Would Unfairly Prejudice Apple,
`Violate Congress’s Direction That IPR Proceedings Be Promptly
`Resolved, And Be Arbitrary and Capricious. ....................................... 5
`IV. Conclusion ...................................................................................................... 6
`CERTIFICATE OF SERVICE .............................................................................. 8
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`i
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`IPR2015-01046
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`U.S. Patent No. 6,502,135 B1
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`TABLE OF AUTHORITIES
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` Page(s)
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`Cases
`Apple Inc. v. Andrea Electronics Corp.
`IPR2017-00626 ..................................................................................................... 6
`Ariosa Diagnostics v. Verinata Health, Inc.,
`805 F.3d 1359 (Fed. Cir. 2015) ............................................................................ 6
`Arthrex, Inc. v. Smith & Nephew, Inc.,
`941 F.3d 1320 (Fed. Cir. 2019) ...................................................................passim
`Caterpillar Paving Prods. Inc. v. Wirtgen Am., Inc.,
`No. 2020-1261 (Fed. Cir. May 6, 2020) ............................................................... 5
`Customedia Techs., LLC v. Dish Network Corp.,
`941 F.3d 1173 (Fed. Cir. 2019) ............................................................................ 4
`Polygroup Limited (MCO) v. Willis Electric Co., Ltd. (Taiwan),
`IPR2016-01781 ..................................................................................................... 6
`Retractable Techs. Inc. v. Becton Dickinson & Co.,
`757 F.3d 1366 (Fed. Cir. 2014) ............................................................................ 4
`Sanofi-Aventis Deutschland GMBH v. Mylan Pharm. Inc.,
`791 F. App’x 916 (Fed. Cir. 2019) ....................................................................... 4
`TCT Mobile, Inc. v. Wireless Protocol Innovations, Inc.,
`IPR2016-01494 ..................................................................................................... 6
`Tronzo v. Biomet, Inc.,
`236 F.3d 1342 (Fed. Cir. 2001) ............................................................................ 4
`VirnetX Inc. v. Mangrove Partners Master Fund, Ltd.,
`778 Fed. App’x 897 (Fed. Cir. 2019) ............................................................... 2, 3
`WebPower, Inc. v. WAG ACQUISITION, LLC,
`IPR2016-01238 ..................................................................................................... 6
`
`ii
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`IPR2015-01046
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`U.S. Patent No. 6,502,135 B1
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`Statutes
`35 U.S.C. § 316(a)(11) ............................................................................................... 6
`Other Authorities
`37 C.F.R. § 42.71(d) .................................................................................................. 5
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`iii
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`IPR2015-01046
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`U.S. Patent No. 6,502,135 B1
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`I.
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`Summary of Request
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`On May 1, 2020, the Chief Judge issued a General Order holding in abeyance
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`all “cases remanded by the Federal Circuit under Arthrex”2 pending further review.
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`IPR2015-01046, Paper 106, 2 (PTAB May 1, 2020). That Order incorrectly included
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`these proceedings, which were not remanded under Arthrex and do not properly raise
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`any issues that turn on Arthrex or its future disposition. VirnetX’s appointments
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`clause objection, improperly raised for the first time in a rehearing motion several
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`months after the Federal Circuit remanded on other grounds, is outside the scope of
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`the Federal Circuit’s remand, contrary to Arthrex, and meritless. Delaying these pro-
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`ceedings is highly prejudicial to Petitioner Apple, against whom VirnetX is pursuing
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`over $700 million in damages based on the patents. It also violates the Board’s ob-
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`ligation to promptly conclude IPR proceedings and is arbitrary and capricious. The
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`Board should accordingly withdraw application of the General Order to both cases.
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`II. Background
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`The ’135 and ’151 patents are the subject of a decade-long dispute between
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`Patent Owner VirnetX and one of the Petitioners, Apple. VirnetX first asserted the
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`patents against Apple in 2010 in the Eastern District of Texas. In response, in 2011,
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`Apple requested an inter partes reexamination against each patent. Both proceedings
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`2 Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019).
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`1
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`IPR2015-01046
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`U.S. Patent No. 6,502,135 B1
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`are still pending due to repeated procedural delays by VirnetX. See Nos. 95/001,682,
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`95/001,697; see also Nos. 95/001,679, 95/001,714 (additional IP reexamination re-
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`quested by Cisco). The Board has found claims in 15 patents closely related to the
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`’135 and ’151 patents unpatentable, and those determinations have either been af-
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`firmed by the Federal Circuit or not appealed.
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`The present proceeding has been pending since April 2015. After the IPR was
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`instituted, VirnetX sought authorization to file a motion for discovery based on its
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`unsubstantiated theory that Petitioners Mangrove and Apple were in privity. Paper
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`22. The Board denied VirnetX’s request and, in September 2016, issued a final writ-
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`ten decision finding all challenged claims unpatentable. See Paper 71.
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`VirnetX appealed, challenging the Board’s claim construction and the denial
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`of its discovery request. VirnetX did not raise an appointments clause challenge. On
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`July 8, 2019, the Federal Circuit found that the Board incorrectly construed one of
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`the ’135 patent claim terms and erred in not allowing VirnetX to move for additional
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`discovery. VirnetX Inc. v. Mangrove Partners Master Fund, Ltd., 778 Fed. App’x
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`897 (Fed. Cir. 2019). It remanded, directing the Board to address patentability under
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`the proper construction, and to permit VirnetX to file its discovery motion.
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`On remand, VirnetX filed a motion for additional discovery, which the Board
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`denied in part and granted in part. After the Federal Circuit decided Arthrex, VirnetX
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`sought rehearing of the Board’s discovery order, raising the appointments clause for
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`2
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`IPR2015-01046
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`U.S. Patent No. 6,502,135 B1
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`the first time. VirnetX renewed its objection in its opposition brief, suggesting a new
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`panel should issue the final written decision “to avoid constitutional concerns.” Pa-
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`per 96, 31-32. The parties briefed the merits and the Board held oral argument on
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`January 24, 2020. The Board had set a target date for a final written decision of
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`February 14, 2020.
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`III. Argument
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`A. These Proceedings Were Not Remanded Under Arthrex.
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`The General Order places into administrative abeyance all “cases remanded
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`by the Federal Circuit under Arthrex.” These proceedings, however, were not re-
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`manded under Arthrex. Paper 106, 2. They were remanded on July 8, 2019, more
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`than three months before Arthrex issued on October 31, 2019. The remand also had
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`no connection to Arthrex. The Federal Circuit remanded based on the Board’s denial
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`of VirnetX’s discovery motion and the Board’s claim construction. See Mangrove,
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`778 F. App’x at 911. The appointments clause was neither raised nor addressed.
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`These cases thus do not fall within the category of cases described in the General
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`Order and should be removed from the Order’s scope.
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`B.
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`There Are No Valid Appointments Clause Issues In These Cases.
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`There also is no basis for holding these proceedings in abeyance pending fur-
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`ther review in Arthrex. Indeed, doing so would violate the Federal Circuit’s mandate.
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`3
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`IPR2015-01046
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`U.S. Patent No. 6,502,135 B1
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`Any possible challenge premised on the appointments clause is barred by the
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`mandate rule. In its initial appeal, VirnetX could have raised—but did not—an ap-
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`pointments clause challenge to the Board’s authority to hear these cases. If VirnetX
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`had timely raised its argument, the Federal Circuit could have remedied any potential
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`violation such that there would have been no appointments clause issue on remand.
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`See Arthrex, 941 F.3d at 1337–38 (severing removal restrictions going forward).
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`Because VirnetX failed to raise the appointments clause in its initial appeal and the
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`Federal Circuit did not remand on that issue, the Board may not consider it on re-
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`mand. See Retractable Techs. Inc. v. Becton Dickinson & Co., 757 F.3d 1366, 1371
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`(Fed. Cir. 2014); Tronzo v. Biomet, Inc., 236 F.3d 1342, 1347–49 (Fed. Cir. 2001).
`
`It is no answer that Arthrex was decided after VirnetX’s appeal. Ordinary for-
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`feiture rules apply to appellants who failed to raise the appointments clause issue in
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`pre-Arthrex appeals. See Customedia Techs., LLC v. Dish Network Corp., 941 F.3d
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`1173, 1174 (Fed. Cir. 2019) (“[Appellant] did not raise any semblance of an Ap-
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`pointments Clause challenge in its opening briefs …. Consequently, we must treat
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`that argument as forfeited in these appeals.”); Sanofi-Aventis Deutschland GMBH v.
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`Mylan Pharm. Inc., 791 F. App’x 916, 928 (Fed. Cir. 2019) (similar). The same
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`principle bars VirnetX’s belated attempt to inject an appointments clause issue into
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`this case for the first time on remand. It is simply too late in the day for VirnetX to
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`challenge the panel’s authority to hear these cases.
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`4
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`IPR2015-01046
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`U.S. Patent No. 6,502,135 B1
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`In any event, VirnetX’s appointments clause objection is both improper and
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`meritless. First, VirnetX cannot seek “rehearing” of the appointments clause issue
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`because it never raised that issue in briefing its discovery motion—it raised it only
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`after the Board denied its motion. Rule 42.71(d) and the Board’s published policies
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`limit rehearing to issues actually raised by a party. See 37 C.F.R. § 42.71(d) (requir-
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`ing identification of “the place where each matter was previously addressed”). Sec-
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`ond, the Board’s discovery ruling presents no appointments clause problem because
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`Arthrex is expressly “limited to … final written decisions.” 941 F.3d at 1340; accord
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`Caterpillar Paving Prods. Inc. v. Wirtgen Am., Inc., No. 2020-1261 (Fed. Cir. May
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`6, 2020). And there is no problem with the panel proceeding to issue a final written
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`decision because Arthrex remedied the appointments clause violation prospectively,
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`940 F.3d at 1338, and the panel will be deciding the issues remanded to it, not simply
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`“rubber-stamp[ing] [an] earlier unconstitutionally rendered decision.” Id. at 1340.
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`Accordingly, the appointments clause issue decided in Arthrex is not germane
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`to these proceedings. The Board should not reward VirnetX’s belated and meritless
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`attempt to further delay these proceedings.
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`C. Holding These Cases In Abeyance Would Unfairly Prejudice Ap-
`ple, Violate Congress’s Direction That IPR Proceedings Be
`Promptly Resolved, And Be Arbitrary and Capricious.
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`Delaying these proceedings would also be severely prejudicial to Apple and
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`to the administration of justice. VirnetX continues to assert the ’135 and ’151 patents
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`5
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`IPR2015-01046
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`U.S. Patent No. 6,502,135 B1
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`against Apple, and a trial is set for August 17, 2020. Apple has already paid one
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`judgment in excess of $450 million, and in the upcoming trial, VirnetX is expected
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`to seek additional damages over $700 million—all based on claims that the Board
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`and the PTO have previously found unpatentable. Time is thus of the essence.
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`Moreover, the indefinite delay contemplated by the General Order—which
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`could last a year or more if the Supreme Court grants review—is inconsistent with
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`Congress’s mandate that IPR proceedings be resolved expeditiously. See 35 U.S.C.
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`§ 316(a)(11); Ariosa Diagnostics v. Verinata Health, Inc., 805 F.3d 1359, 1368 (Fed.
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`Cir. 2015). And the Board provided no explanation for holding these cases in abey-
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`ance, even though they were not remanded under Arthrex, and even though the Gen-
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`eral Order did not include other similarly situated cases that were remanded before
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`Arthrex. See Apple Inc. v. Andrea Electronics Corp. IPR2017-00626; WebPower,
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`Inc. v. WAG Acquisition, LLC, IPR2016-01238; TCT Mobile, Inc. v. Wireless Pro-
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`tocol Innovations, Inc., IPR2016-01494; Polygroup Limited (MCO) v. Willis Elec-
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`tric Co., Ltd. (Taiwan), IPR2016-01781. The unexplained and disparate treatment of
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`these cases is arbitrary and capricious.
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`IV. Conclusion
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`For these reasons, the Board should withdraw application of the General Or-
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`der to these proceedings and issue its final written decision promptly.
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`6
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`IPR2015-01046
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`U.S. Patent No. 6,502,135 B1
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`Dated: May 14, 2020
`
`/Jeffrey P. Kushan/
`Jeffrey P. Kushan
`Reg. No. 43,401
`Sidley Austin LLP
`1501 K Street, N.W.
`Washington, D.C. 20005
`T: 202-736-8000
`Attorney for Petitioner Apple Inc.
`
`
`
`
`Respectfully Submitted,
`
`/James T. Bailey/
`James T. Bailey
`Reg. No. 44,518
`The Law Office of James. T. Bailey
`504 W. 136th St. #1B
`New York, NY 10031
`T: 917-626-1356
`Attorney for Petitioner Mangrove
`
`7
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`IPR2015-01046
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`U.S. Patent No. 6,502,135 B1
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`CERTIFICATE OF SERVICE
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`Pursuant to 37 C.F.R. § 42.6(e), I hereby certify that on this 14th day of
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`May, 2020, I caused to be served a true and correct copy of the foregoing and any
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`accompanying exhibits by electronic mail on the following counsel:
`
`Joseph E. Palys
`josephpalys@paulhastings.com
`
`Naveen Modi
`Naveenmodi@paulhastings.com
`
`
`
`
`
`Dated: May 14, 2020
`
`/Jeffrey P. Kushan/
`Jeffrey P. Kushan
`Reg. No. 43,401
`Sidley Austin LLP
`1501 K Street, N.W.
`Washington, D.C. 20005
`T: 202-736-8000
`Attorney for Petitioner Apple Inc.
`
`
`
`
`Respectfully Submitted,
`
`/James T. Bailey/
`James T. Bailey
`Reg. No. 44,518
`The Law Office of James. T. Bailey
`504 W. 136th St. #1B
`New York, NY 10031
`T: 917-626-1356
`Attorney for Petitioner Mangrove
`
`8
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`
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