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`Paper No.
`Filed: September 20, 2021
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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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`THE MANGROVE PARTNERS MASTER FUND, LTD. and APPLE INC.,
`Petitioner
`v.
`VIRNETX INC.,
`Patent Owner
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`
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`Case IPR2015-010461
`Patent 6,502,135
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`Patent Owner’s Request for Director Rehearing
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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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`Case No. IPR2015-01046
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`TABLE OF CONTENTS
`Background ...................................................................................................... 1
`The Remand Decision’s Rationale for Finding that Kiuchi Anticipates
`the Claims Contravenes the Federal Circuit’s Prior Holdings ........................ 3
` A Principal Officer Must Consider This Rehearing Request ........................13
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`Case No. IPR2015-01046
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`On August 19, 2021, the Federal Circuit issued an order “allowing VirnetX
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`the opportunity to request Director rehearing.” VirnetX Inc. v. Mangrove Partners
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`Master Fund, Ltd., Nos. 2020-2271, 2020-2272, Dkt. No. 51 at 3 (Fed. Cir. Aug. 19,
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`2021). Pursuant to that order, VirnetX hereby requests Director rehearing of the
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`Final Written Decision on Remand issued July 14, 2020 (“Remand FWD”).
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`The patent claims at issue are directed to the automatic generation of secure
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`communications between client and target computers. On a prior appeal, the Federal
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`Circuit held (based on a prosecution disclaimer to distinguish the prior art) that the
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`claims require “direct communication,” whereby the client computer itself opens a
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`connection with the target computer. On remand, the Board failed to heed the
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`Federal Circuit’s guidance, and held the claims were anticipated by a prior-art
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`system with no connection between the client and target computers. That material
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`legal error warrants rehearing by a properly appointed Director.
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`Background
`The primary reference in this proceeding is Kiuchi (Ex. 1002). In Kiuchi, a
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`user agent requests information residing in an “origin server.” Kiuchi at 64-67. Two
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`entities are interposed between the user agent and origin server and relay information
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`between them. A “client-side proxy” relays information between a user agent and
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`the Internet, and a “server-side proxy” relays information between the Internet and
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`the origin server. Id. at 64. A “C-HTTP name server” facilitates exchange of
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`1
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`encryption keys between the client-side and server-side proxy. Id. at 64-65.
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`Case No. IPR2015-01046
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`The Federal Circuit first considered whether Kiuchi could render the ’135
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`patent claims unpatentable in VirnetX, Inc. v. Cisco Systems, Inc., 767 F.3d 1308
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`(Fed. Cir. 2014). In affirming a jury finding that it could not, Cisco explained that
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`Kiuchi did not disclose direct communication required by the claims; “the jury heard
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`expert testimony that Kiuchi’s client-side and server-side proxies terminate the
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`connection, process information, and create a new connection—actions that are not
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`‘direct’ within the meaning of the asserted claims.” Id. at 1323-24.
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`In the original Final Written Decision issued September 9, 2016 (“Original
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`FWD”), the Board nonetheless found Kiuchi rendered the challenged ’135 patent
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`claims unpatentable. The Federal Circuit vacated that decision, holding that
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`VirnetX’s claims should be construed to “require[] direct communication between
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`the client and target computers.” VirnetX Inc. v. Mangrove Partners Master Fund,
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`Ltd., 778 F. App’x 897, 910 (Fed. Cir. 2019). VirnetX’s claims, the court explained,
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`exclude systems where “the client cannot open a connection with the target itself,”
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`such as those that only communicate directly with an “intermediate server [that] then
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`relays the data to [the] target computer.” Id. On remand, in addressing the VPN
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`limitation,
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`the Board
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`found
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`that Kiuchi nonetheless disclosed “direct
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`communication” because the user agent generates a request that includes a URL that
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`identifies the server on which the desired resource resides. Remand FWD at 14-15.
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` The Remand Decision’s Rationale for Finding that Kiuchi Anticipates
`the Claims Contravenes the Federal Circuit’s Prior Holdings
`In Mangrove, the Federal Circuit ruled that VirnetX had unambiguously
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`disclaimed indirect-communication VPNs like those in a prior-art system, Aventail.
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`778 F. App’x at 909. Aventail disclosed “a system in which a client computer
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`communicates with an intermediate server via a singular, point-to-point connection.”
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`Id. The “intermediate server then relays the data to a target computer.” Id. Unlike
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`VirnetX’s invention, VirnetX explained during prosecution, “the computers [in
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`Aventail] ‘do not communicate directly with each other” because “the client cannot
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`open a connection with the target itself.” Id. (internal quotation marks omitted).
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`VirnetX thus “clearly and unmistakably state[d] that . .. [its claims] require[] direct
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`communication between the client and target computers.” Id. Mangrove thus sets
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`clear bounds for what qualifies as “direct communication.” The client must be able
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`to “open a connection with the target itself.” Id. Systems where the client’s
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`connection is with an “intermediate server” that “relays the data” to the target server
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`are outside the claims. Id.
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`Under Mangrove’s claim construction, Kiuchi does not teach the required
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`“direct communication between a client computer and a target computer.” Kiuchi’s
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`“client” establishes a “connection ... to a client-side proxy”—not the origin server.
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`Ex. 1002 at 8. The client and the client-side proxy communicate using unencrypted
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`HTTP/1.0 communications. Id.; Ex. 2063 at 7. A second “connection is established”
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`between the client-side proxy and the server-side proxy. Ex. 1002 at 9. The client-
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`side proxy then “forwards” the user agent’s request to the server-side proxy, using a
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`C-HTTP encryption protocol. Ex. 1002 at 9. The server-side proxy creates a third
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`connection, to the origin server, and “forward[s]” the user agent’s request using
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`unencrypted HTTP/1.0. Id. The response is sent back the same way: “An HTTP/1.0
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`response sent from the origin server to the server-side proxy is encrypted in C-HTTP
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`format by the server-side proxy, and is forwarded to the client-side proxy. Then, in
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`the client-side proxy, the C-HTTP response is decrypted and the HTTP/1.0 response
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`extracted. . .. The resulting HTTP/1.0 response is sent to the user agent.” Id.
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`The HTTP/1.0 specification makes Kiuchi’s separate connections clear.
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`Kiuchi’s client is a conventional HTTP/1.0 user agent, and its client-side proxy is a
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`“HTTP/1.0 compatible proxy.” Ex. 1002 at 8. The HTTP/1.0 specification explains
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`that, where HTTP requests are made directly between a client and server, there is a
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`“single connection” between them. Ex. 1014 at 7. Where, however, “one or more
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`intermediaries” are involved, including a “proxy,” several connections are created.
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`Id. This is generally how proxies work. The client sends a request to the proxy’s IP
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`address; the proxy “must accept this incoming connection,” Ex. 1012 at 8; and then
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`the proxy “attempts to establish a connection to” the final target system or another
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`proxy, id. at 11. Id. at 7-12.
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`Kiuchi is also clear that the client-side and server-side proxies rewrite the data
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`passing through them before forwarding it using a new connection. For example,
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`when the client-side proxy receives an HTML document from the origin server, it
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`“rewrite[s]” the document before being returning it to the user agent.2 Ex. 1002 at
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`8-9 & Fig. b. The client- and server-side proxies also encrypt and decrypt the data.
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`“All encryption and decryption occur at the proxies, and the user agent and origin
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`server receive the relevant decrypted information from their respective proxies.”
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`Mangrove, 778 F. App’x at 905; see also Ex. 2043 ¶ 58; Ex. 1012 at 3-6 (RFC 1919:
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`distinguishing between “Direct communication (without a proxy)” and proxy
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`communication, and declaring that “[t]he functional goal of the proxy is to relay
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`application data between clients and servers that may not have direct IP
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`connectivity”); Ex. 2028 at 6 (a proxy “breaks the connection between sender and
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`receiver”). Kiuchi’s reliance on proxies to relay information by separate, rewritten
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`requests over multiple point-to-point connections takes it outside the claims’ scope.
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`2 The Board placed weight on testimony that Kiuchi does not expressly discuss
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`whether image and sound objects are similarly modified. Remand FWD at 17. But
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`that is a red herring. First, the absence of any discussion of the latter does not negate
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`the disclosure of the former or somehow “maintain the requirement for direct
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`communication,” id. Second, the SOCKS server in Aventail did not modify, but
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`only relayed, the message. Mangrove, 778 F. App’x at 909; Ex. 2036 at 4-5.
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`Mangrove’s holding that Aventail does not teach direct communication
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`compels the conclusion that Kiuchi does not either. 778 F. App’x at 909. The
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`Federal Circuit held that Aventail does not teach direct communication because the
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`“connection at the socket layer” is between the “client” and the “SOCKS server”;
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`the SOCKS server “relays that data to a target computer” over a different connection.
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`Id. A SOCKS server is a proxy. Ex. 2046 at 201; Ex. 1012 at 10. In Kiuchi, the
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`client is connected to the client-side proxy, and two additional connections are
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`required to “forward” the data to the origin server and receive data in return. The
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`Federal Circuit also found it relevant that, in Aventail, the “communications between
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`the client and target stop at the intermediate SOCKs server.” Mangrove, 778 F.
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`App’x at 909. Likewise in Kiuchi, connections stop at the client-side and server-
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`side proxies, which encrypt/decrypt the data and can rewrite the request. Ex. 2043
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`at ¶ 58. Kiuchi’s communications is even less “direct” than in Aventail, for it uses
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`two intermediate proxy servers, rather than one.
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`It is thus not surprising that the Federal Circuit in Cisco upheld the jury
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`determination that Kiuchi does not feature “direct communication.” 767 F.3d at
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`1323-24. Cisco found evidence that the “client-side and server-side proxies
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`terminate the connection, process information, and create a new connection.” Id.
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`Those “actions,” it held, “are not ‘direct’ within the meaning of the asserted claims.”
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`Id. While not binding on the Board, Cisco expressly articulated the Federal Circuit’s
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`view of “direct communication”: sending data through proxies, which terminate the
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`connections and forward modified data using new connections and separate
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`requests/responses, is “not ‘direct’ within the meaning of the claims.” Id.
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`The Board acknowledged that Kiuchi involves relay of information by proxies
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`over multiple connections. The Board found that when “Kiuchi’s user agent
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`generates a request that includes a resource address,” the “client-side proxy
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`intercepts the request and ... maps the request to the particular server-side proxy that
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`can access the requested resource.” Remand FWD at 14-15. Instead of connecting
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`the user agent and origin server directly, the “client-side proxy establishes a
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`connection with the server-side proxy, which retrieves the resource from the
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`appropriate origin server and returns it to the client-side proxy, which in turn returns
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`the resource to the user agent.” Id. at 15. The Board’s finding that Kiuchi lacks a
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`single “connection” from the client to the origin server, and instead relies on proxies
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`to relay information across multiple separate connections, id., should have ended the
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`inquiry. Under Mangrove, those features of Kiuchi defeat direct communication.
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`The Board reached the opposite conclusion by effectively revisiting claim
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`construction, in defiance of Mangrove’s mandate. Id. at 14. It pointed to the
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`specification’s disclosure of interconnected TARP “routers” that pass data packets
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`from a source device to a destination device. Id. Because the TARP embodiment
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`includes routers connected with each other via “multiple links,” the Board reasoned,
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`“direct communication” encompasses relay of information by proxies over multiple
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`connections. Id.
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`That reasoning is an improper frontal challenge to Mangrove. The Federal
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`Circuit has ruled that systems like Aventail—where a “client cannot open a
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`connection with the target itself,” but instead “communicates with an intermediate
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`server” that “relays the data to a target computer”—fall outside the claims.
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`Mangrove, 778 F. App’x at 910. Under the Board’s reading of the claims, however,
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`such systems are not excluded. Indeed, Aventail—the very reference that gave rise
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`to the prosecution history disclaimer this Court identified in Mangrove—would
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`feature direct communication under the Board’s construction, since Aventail’s
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`“SOCKS server” “relays” data received on one connection to a target through a
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`second connection. Id. The Board’s only task on remand was to apply the Federal
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`Circuit’s construction to Kiuchi, to determine whether it disclosed a single direct
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`connection between client and target, or multiple connections via intermediaries. Id.
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`The Board was not entitled to reassess the “scope of the claims,” Remand FWD at
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`14, to determine whether the claims could somehow be read to encompass systems
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`with multiple connections that the Federal Circuit had already ruled out. See AFG
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`Indus, Inc. v. Cardinal IG Co., 375 F.3d 1367, 1372 (Fed. Cir. 2004).
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`The Board’s reasoning was infirm in any event. The Board incorrectly
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`equated use of multiple TARP routers with Kiuchi’s multiple “connections” between
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`computers. TARP is a packet-routing protocol that, like the IP protocol, operates at
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`or below the network layer of Internet communications. Ex. 1001 at 10:63-11:43;
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`Ex. 1037 at 48 (“router” definition). End-to-end “connections” between computers
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`are formed at a higher layer, the transport layer, typically using the TCP protocol.
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`Id. at 54 (TCP); Ex. 1002 at 10-11 (Kiuchi discussing TCP connections between
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`proxies); Ex. 1014 at 8 (“HTTP communication generally takes place over TCP/IP
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`connections.”); Ex. 1012 at 2-4, 8. Data packets on the Internet are passed from one
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`router to another until reaching the final destination. TARP adds security using
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`“specialized TARP routers” that otherwise are “similar in function to regular IP
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`routers.” Ex. 1001 at 3:1-3, 7:40-49, Fig. 2. TARP routing does not affect how
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`computers form connections or engage in direct or indirect communication. As
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`VirnetX’s expert attested, and Apple’s counsel had admitted in district court, TARP
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`routers are just pass-through devices. Ex. 2043 at ¶¶ 19-23; Ex. 1036 at 248-249;
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`Ex. 2035 at 3-6. Indeed, the Federal Circuit explained in Cisco that “routers” “do
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`not impede direct communication” because “they do not terminate the connection.”
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`767 F.3d at 1319-1320; Ex. 1019 at 8 n.2. The proxies used in Kiuchi function
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`differently from routers, as discussed above.
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`Rather than address the Federal Circuit construction, the Board pivoted to the
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`question of direct addressability, noting the statement by VirnetX’s district-court
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`expert that “‘direct communication refers to direct addressability.’” Remand FWD
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`at 14 (quoting Ex. 1044 at 51:3-5). But VirnetX’s expert was referring to the client’s
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`ability to address packets to a target computer on the Internet, so that it can open a
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`connection to the target computer. Ex. 1044 at 50:3-51:17; see also Mangrove, 778
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`F. App’x at 910. VirnetX’s expert in this IPR verified that direct addressability
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`refers to the addressing of messages for transmission from the client to the target
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`computer. Ex. 1036 at 232. Direct addressability does not require that the client
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`specify the target computer’s IP address, see Remand FWD at 16; for example, target
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`computers may sit on private networks, and messages may be directly addressed to
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`the network’s public-facing IP address and the target computer’s public transport
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`address (port), which allows a Network Address Translation router to pass packets
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`through to the target computer’s internal IP address, see Cisco, 767 F.3d at 1319-20;
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`Ex. 1044 at 50:3-18. But direct addressability does require a network address so that
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`the client can itself open a connection with the target computer. Mangrove, 778 F.
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`App’x at 910; Ex. 1036 at 232.
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`In Kiuchi, however, the client never has the network address of the origin
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`server and cannot send IP packets to it. Kiuchi’s client connects only to the client-
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`side proxy. Ex. 1002 at 8. Conversely, the origin server only ever connects to the
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`server-side proxy. Id. “From the view of the user agent or client-side proxy, all
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`resources appear to be located in [the] server-side proxy… .” Ex. 1002 at 9. As
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`VirnetX’s expert attested, in Kiuchi “a user agent cannot directly address and cannot
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`connect to the origin server,” Ex. 1036 at 256, “because the client-side proxy and
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`the server-side proxy precludes those communications,” id. at 258; see also id. at
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`231-232, 264.
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`The Board thought Kiuchi featured “direct addressability” because the user
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`agent generates a request that includes a URL identifying the requested resource.
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`Remand FWD at 14-15. But a URL does not enable sending IP packets or creating
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`a connection to a target computer. Indeed, in Kiuchi, the client-side proxy uses the
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`URL to look up the IP address of the server-side proxy. Ex. 1002 at 8; see also Ex.
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`2047 at 25:5-13; Remand FWD at 15. That IP address is what enables the client-
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`side proxy to establish a connection with the server-side proxy. Ex. 1002 at 8.
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`The Board’s contrary analysis effectively reads VirnetX’s disclaimer out of
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`the claims. A resource will be identified in nearly all communication systems, direct
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`or indirect. Aventail illustrates this point. In Aventail, the initial request from the
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`client includes a “destination hostname” akin to the URL in Kiuchi’s request. Ex.
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`2036 at 4-5. But the connection in Aventail is still not direct because “the user
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`transmits data over a SOCKS connection to the SOCKS server,” which “then,
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`separately relays that transmitted data to the target” that has the resource identified
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`by the destination hostname. Id. at 5. The connection in Kiuchi is not direct for the
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`same reason. In Kiuchi, the user agent only communicates with the client-side
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`proxy, which communicates with the server-side proxy, which in turn then provides
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`a separate connection to the origin server that includes the resource identified by the
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`Case No. IPR2015-01046
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`URL. A URL (or hostname) may be used in both direct communication, as in
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`VirnetX’s invention, or indirect communication, as in Aventail and Kiuchi. The
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`mere fact that a URL identifies “‘the resource that you want’” does not make a
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`method using multiple connections to communicate with the origin server direct.
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`See Remand FWD at 16.
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`The Board also rejected the theory “that Kiuchi does not disclose direct
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`communication because its user agent does not provide the server-side proxy’s
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`address.” Id. at 16-17 (citing Paper 105 at 39:6-12). But that is immaterial. VirnetX
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`never advanced that theory and, in fact, argued that Kiuchi’s involved indirect
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`communications because requests are only addressed to the server-side proxy’s IP
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`address. Paper 105 at 39:11-12. Besides, the Board’s conclusion that VirnetX’s
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`claims “do not require the client computer [to] provide the address of the target
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`computer” but instead “require only that the client computer generates a request for
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`‘an IP address corresponding to a domain name associated with the target
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`computer’” is confused. The direct-communication dispute concerns the VPN
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`limitation, not the address-request limitation. And in any event the Board cited no
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`evidence for the proposition that Kiuchi’s user agent ever directly addresses the
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`origin server, much less that a URL satisfies direct addressability. In fact, Apple’s
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`expert in the district court trial admitted at deposition that the user agent did not
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`directly address the origin server. Ex. 2048 at 60:8-63:14.
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`Notably, unlike Kiuchi, the TARP routing encryption protocol described in
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`the ’135 patent
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`is compatible with direct addressing.
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` In TARP-based
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`communication, the IP address of the final destination (i.e., the “true destination”)
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`for a packet is included when the communication is initiated by the client. Ex. 1001
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`at 7:59-8:36. While that IP address is encrypted, its very presence is what enables
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`the packet to be routed to the final destination. Id. at 7:59-8:36; see also Cisco, 767
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`F.3d at 1318-20 (recognizing that each TARP packet includes the true destination,
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`and that direct addressability is consistent with the use of firewalls and routers).
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` A Principal Officer Must Consider This Rehearing Request
`VirnetX’s rehearing request cannot be decided until a new Director is
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`appointed and confirmed, as there currently is no officer who can issue a final
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`decision. In United States v. Arthrex, Inc., 141 S. Ct. 1970, 1980, 1987 (2021), the
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`Supreme Court held that inferior officers “lack[] the power under the Constitution
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`to finally resolve” patentability questions, and “must be ‘directed and supervised . . .
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`by others who were appointed by Presidential nomination with the advice and
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`consent of the Senate.’” “Only an officer properly appointed to a principal office
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`may issue a final decision binding the Executive Branch.” Id. at 1985. The Court
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`thus held that a properly appointed principal officer—namely, “the Director”—must
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`have an opportunity “to review decisions rendered by APJs.” Id. at 1988.
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`Currently, there is “no principal officer” who can direct and supervise other
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`Board members and “issue a final decision binding the Executive.” Id. at 1980,
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`1985. The Senate-confirmed post of Director is vacant. While Commissioner of
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`Patents Hirshfeld is temporarily performing certain functions and duties of the
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`Director, he was not “appointed to a principal office” by the President and Senate.
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`Id. at 1985 (emphasis added). As Commissioner, he was appointed to an inferior
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`office by the Secretary of Commerce—just like the other Board members who,
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`Arthrex held, “lacked the power under the Constitution to finally resolve the matter
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`within the Executive Branch.” Id. at 1987; see 35 U.S.C. §§3(b)(2)(A), (6)(a). Nor
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`is Mr. Hirschfeld exercising authority delegated by a principal officer under that
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`officer’s supervision: The Directorship is vacant, so there is no one who could
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`revoke the delegation or supervise the exercise of delegated authority.
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`Arthrex’s passing reference to a “remand to the Acting Director,” 141 S. Ct.
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`at 1987, is not to the contrary. In Arthrex, neither the parties nor the Court addressed
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`Mr. Hirshfeld’s status or appointment; whether he qualifies as “Acting Director”; or
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`whether a non-Senate-confirmed officer could fill that role. The Office does not
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`even assert Mr. Hirshfeld is “Acting Director.” Construing a stray line to permit
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`someone appointed as an inferior officer to have the final say would be defy the
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`Court’s express holding that “[o]nly an officer properly appointed to a principal
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`office may issue a final decision.” Id. at 1985 (emphasis added).
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`The Federal Vacancies Reform Act (“FVRA”) also precludes Mr. Hirshfeld
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`from exercising the Director’s review authority. When a principal office is vacant,
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`any functions or duties “required by statute to be performed by the [principal] officer
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`(and only that officer)” may be performed only by “the first assistant to the office”
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`or someone directed by “the President (and only the President)” to perform them.
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`5 U.S.C. §§3345(a), 3348(a)-(b); see id. §3347. Final review of Board decisions is
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`a function or duty only the Director may perform. After Arthrex, the Patent Act
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`permits “the Director” to singlehandedly “review final PTAB decisions.” 141 S. Ct.
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`at 1987. But the Act’s prohibition on anyone else doing so “remains operative as to
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`the other [PTAB] members”—including the Commissioner. Id. The FVRA thus
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`would allow only “the first assistant” (Deputy Director), or someone so-directed by
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`“the President,” to exercise the Director’s review authority. 5 U.S.C. §3345(a).
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`Because Mr. Hirschfeld is neither—he is performing the Director’s functions and
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`duties in accordance with the succession plan promulgated by the Secretary of
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`Commerce—any attempted exercise of that authority would be “of no force or
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`effect.” Id. §3348(d)(1).
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`Dated: September 20, 2021
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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.
`15
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`Case No. IPR2015-01046
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`CERTIFICATE OF SERVICE
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`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 Petitioners a true and correct copy of the foregoing Patent Owner’s
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`Request for Director Rehearing by electronic means on the date below at the
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`following address of record:
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`Abraham Kasdan
`Wiggin and Dana LLP
`akasdan@wiggin.com
`IP@wiggin.com
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`James T. Bailey
`jtb@jtbaileylaw.com
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`Jeffrey P. Kushan
`Scott Border
`Thomas A. Broughan III
`Sidley Austin LLP
`iprnotices@sidley.com
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`Dated: September 20, 2021
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`Respectfully submitted,
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` /Joseph E. Palys/
`Joseph E. Palys
`Counsel for VirnetX Inc.
`
`
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