`By:
`
`Joseph E. Palys
`Paul Hastings LLP
`875 15th Street NW
`Washington, DC 20005
`Telephone: (202) 551-1996
`Facsimile: (202) 551-0496
`E-mail: josephpalys@paulhastings.com
`
`
`
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`
`
`Paper No.
`Filed: October 11, 2019
`
`Naveen Modi
`Paul Hastings LLP
`875 15th Street NW
`Washington, DC 20005
`Telephone: (202) 551-1990
`Facsimile: (202) 551-0490
`E-mail: naveenmodi@paulhastings.com
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`THE MANGROVE PARTNERS MASTER FUND, LTD. and APPLE INC.,
`Petitioner
`v.
`VIRNETX INC.,
`Patent Owner
`
`
`
`Case IPR2015-010461
`Patent 6,502,135
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`
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`Patent Owner’s Reply in Support of Motion for Additional Discovery
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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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`Patent Owner VirnetX Inc. (“VirnetX”) filed its motion for additional
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`discovery to determine whether RPX Corporation (“RPX”)—a third-party entity
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`that previously sought to challenge VirnetX’s patents on behalf of the time-barred
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`Petitioner Apple Inc. (“Apple”)—is an unnamed RPI and/or privy of Petitioner The
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`Mangrove Partners Master Fund, Ltd. (“Mangrove”). Petitioners disparage
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`VirnetX’s argument as a “conspiracy theory.” (Paper 82 at 1.) But the record
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`shows both extensive ties between RPX and Mangrove, and RPX’s keen interest in
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`reducing risk from VirnetX’s patent to Apple—who Mangrove singled out to its
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`investors as one of RPX’s main customers. (See Ex. 1051 at 3.) Specifically, the
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`record shows: (1) RPX’s role as a for-profit company that seeks to invalidate
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`patents on behalf of its clients, (2) RPX’s past attempt to invalidate the patent-at-
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`issue on Apple’s behalf after Apple was found to be time-barred, (3) Mangrove’s
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`extensive ties to RPX, including communications with RPX and substantial
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`investment in RPX, (4) Mangrove’s decision to hire RPX’s former counsel to help
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`try to invalidate the patent at issue here, and (5) Mangrove, like RPX (but unlike
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`Apple), was never charged with infringement. (See generally Paper 81.)
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`Petitioners now admit that Mangrove’s investment in RPX occurred in the
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`exact same month that Mangrove filed its IPR petitions against VirnetX’s patents,
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`which further supports the need for additional inquiry. (Paper 82 at 4, 12
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`(acknowledging that Mangrove began acquiring RPX stock in April 2015).)
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`1
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`Petitioners argue the two decisions are “unrelated,” and that Mangrove’s decision
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`IPR2015-01046
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`to challenge VirnetX’s patents was motivated solely by Mangrove’s desire to short
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`VirnetX’s stock. (Id. at 7; see also id. at 1, 12.) But if so, Mangrove should not
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`fear the limited and targeted discovery VirnetX proposed. More fundamentally,
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`Mangrove’s assertion that it initiated this proceeding solely as part of its short-
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`selling strategy cannot outweigh the evidence of ties between Mangrove and RPX.
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`Petitioners’ arguments against additional discovery, the denial of which
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`would be highly prejudicial to VirnetX, are unavailing:
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`Post-Institution Information: Petitioners argue that “[t]he only information
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`or acts relevant to compliance with § 315(b) would be dated before October 7,
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`2015, the date these proceedings were instituted.” (Paper 82 at 5.) That is too
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`simplistic an approach. First, documents dated after October 7, 2015 may
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`nonetheless include information from before October 7, 2015 (e.g., emails and
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`documents routinely contain earlier dated threads and attachments). Second, post-
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`October 7, 2015 documents may be informative of Mangrove’s motivation prior to
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`that date.
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`Pre-Institution Information: Petitioners argue that discovery of pre-
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`institution information should be denied because VirnetX has not demonstrated
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`that RPX is a real party-in-interest (“RPI”) or in privity with Mangrove. (Paper 82
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`at 6-8.) This argument puts the cart before the horse. The purpose of VirnetX’s
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`2
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`motion is obtain the requested discovery so that VirnetX can make that showing.
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`IPR2015-01046
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`Garmin does not require a moving party to demonstrate it will win an underlying
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`issue to obtain additional discovery. Petitioners argue that Mangrove’s investment
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`strategies concerning RPX and VirnetX were independent. (Paper 82 at 6-7.) But
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`these allegedly independent strategies were implemented simultaneously in April
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`2015. (See Paper 82 at 4, 12.) Evidence suggests this timing is more than a
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`coincidence given the extensive connections between Mangrove and RPX, as well
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`as the prior history between RPX and VirnetX. (See Paper 81 at 6-13.)
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`Petitioners assert that VirnetX further needs to show a direct link between
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`Mangrove and Apple. (Paper 82 at 8.) Petitioners’ position, if adopted, would
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`lead to perverse results as an entity otherwise barred by 35 U.S.C. § 315(b) (e.g.,
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`Apple) could use intermediaries (e.g., RPX) to facilitate IPR challenges by others
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`free from any efforts to expose that connection back to the time-barred party.2
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`Depositions: Petitioners argue that deposition discovery should be denied
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`because “written discovery is far less burdensome.” (Paper 82 at 11.) Petitioners
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`ignore that VirnetX has already agreed to a single four-hour deposition of
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`Nathaniel August to address both of VirnetX’s deposition notices. (Paper 81 at 5
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`n.2.) More importantly, deposition discovery is a “critical component of the tools
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`2 Even on this, it is telling that Apple has taken the lead on behalf of Mangrove in
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`fighting against discovery in meet-and-confer telephone calls and correspondence.
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`3
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`of justice” and “rank[s] high in the hierarchy of pre-trial, truth-finding
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`IPR2015-01046
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`mechanisms.” Founding Church of Scientology of Washington, D.C. v. Webster,
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`802 F.2d 1448, 1451 (D.C. Cir. 1986); see also Alexander v. FBI, 186 F.R.D. 113
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`(D.D.C. 1998) (at deposition, “‘there is no opportunity to reflect and carefully
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`shape the information given’”) (citation omitted).
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` Petitioners attempt to
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`circumvent this important tool by “respond[ing] to VirnetX’s present deposition
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`requests as if they were interrogatories.” (Id.) Allowing Petitioners to unilaterally
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`replace deposition discovery with self-serving representations on deposition topics
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`leaves VirnetX with no avenue to check the veracity of such statements and would
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`be prejudicial. Moreover, as VirnetX anticipated (Paper 81 at 15), Mangrove’s
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`supposed responses are woefully inadequate and raise only more questions. For
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`instance, Mangrove’s assertions of “reasonable” efforts to locate communications
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`are unclear and unverified. (Ex. 1049 at 2, 3, 5, 6.) It also appears that Mangrove
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`did not investigate non-written communications, or written communications that
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`no longer exist. Indeed, Mangrove repeatedly discussed and treated the deposition
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`topics as “RFP[s],” and not interrogatories. (Ex. 1049 at 3, 6.)
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`Petitioners try to justify their resistance to deposition discovery because
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`Mangrove ostensibly fears VirnetX may initiate litigation against Mangrove for
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`seeking to shorten its stock. (Paper 82 at 13-14.) This contention is baseless.
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`While VirnetX previously argued that Mangrove’s conduct warrants denial of
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`4
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`institution, VirnetX has never suggested it would sue Mangrove.
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`IPR2015-01046
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`Document Requests: Petitioners are wrong that Mangrove’s voluntary
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`production renders much of VirnetX’s motion moot. (Paper 82 at 8-9.) Mangrove
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`has produced hardly anything at all. VirnetX should be allowed to explore,
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`through a deposition, Mangrove’s self-serving representations.
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` Moreover,
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`Petitioners appear to acknowledge that Mangrove has “internal-to-Mangrove
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`documents” relating to RPX that it nevertheless has refused to produce (id. at 9), as
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`well as communications, documents, or things relating to its acquisition of RPX
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`stock that it refuses to produce (id. at 10) because of the purported fear of litigation
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`(id. at 10-11). Mangrove’s concerns are unsupported, and should not block
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`discovery of relevant documents and related information that are now exposed to
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`exist. Moreover, Mangrove’s production is unilaterally limited by its incorrect
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`October 7, 2015 cutoff date, as discussed above.
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`RPX: Petitioners resist discovery from RPX because it would purportedly
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`be redundant to that sought from Mangrove and would supposedly “disrupt the
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`remand schedule.” (Paper 82 at 14-15.) This argument ignores that such discovery
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`would serve as a vital evidentiary crosscheck, especially given the passage of time.
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`(Paper 81 at 14.) Further, unless Petitioners have some undisclosed insight as to
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`third party RPX’s plans regarding the requested discovery, Petitioners’ stated
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`concern about the schedule is purely speculative.
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`5
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`Dated: October 11, 2019
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`IPR2015-01046
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`
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`Respectfully submitted,
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`By: /Joseph E. Palys/
`Joseph E. Palys
`Registration No. 46,508
`
`Counsel for VirnetX Inc.
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`6
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`IPR2015-01046
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`CERTIFICATE OF SERVICE
`Pursuant to 37 C.F.R. § 42.6(e), I certify that I caused to be served on the
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`counsel for Petitioner a true and correct copy of the foregoing Patent Owner’s
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`Reply in Support of Motion for Additional Discovery by electronic means on the
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`date below at the following address of record:
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`Abraham Kasdan (akasdan@wiggin.com)
`James T. Bailey (jtb@jtbaileylaw.com)
`IP@wiggin.com
`
`Jeffrey P. Kushan
`Scott Border
`Thomas A. Broughan III
`iprnotices@sidley.com
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`Dated: October 11, 2019
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`Respectfully submitted,
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` /Joseph E. Palys/
`Joseph E. Palys
`Counsel for VirnetX Inc.
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`