`Filed: January 4, 2016
`
`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
`
`
`Filed on behalf of: VirnetX Inc.
`By:
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`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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`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.,
`Petitioner
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`v.
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`VIRNETX INC.
`Patent Owner
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`Case IPR2015-01047
`Patent No. 7,490,151
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`Patent Owner’s Request for Rehearing Under 37 C.F.R. § 42.71(d)(1)
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`I.
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`II.
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`Case No. IPR2015-01047
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`Table of Contents
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`INTRODUCTION AND PRECISE RELIEF REQUESTED ......................... 1
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`LEGAL STANDARD ..................................................................................... 2
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`III. STATEMENT OF REASONS FOR RELIEF REQUESTED ........................ 2
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`A.
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`B.
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`The Decision Overlooked the Requirements of an RPI Inquiry ........... 2
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`The Decision Overlooked Several Important Facts and
`Arguments That Should Have Compelled a Finding in Favor of
`Discovery ............................................................................................... 6
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`IV. PATENT OWNER REQUESTS REHEARING BY AN EXPANDED
`PANEL THAT INCLUDES THE CHIEF JUDGE ......................................... 8
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`V.
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`CONCLUSION ................................................................................................ 9
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`Case No. IPR2015-01047
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`TABLE OF AUTHORITIES
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` Page(s)
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`Federal Cases
`Atlanta Gas Light Co. v. Bennett Regulator Guards, Inc.,
`IPR2013-00453, Paper No. 88 (Jan. 6, 2015) ....................................................... 4
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`Galderma S.A. v. Allergan Industrie, SAS,
`IPR2014-01422, Paper No. 14 (Mar. 5, 2015) ............................................. 4, 5, 9
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`Garmin Int’l, Inc. v. Cuozzo Speed Techs. LLC,
`IPR2012-00001, Paper No. 26 (Mar. 5, 2013) ......................................... 2, 5, 7, 9
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`Google Inc. v. SimpleAir, Inc.,
`CBM2015-00019, Paper No. 15 (Aug. 19, 2015) ................................................ 8
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`Reflectix, Inc. v. Promethean Insulation Tech. LLC,
`IPR2015-00039, Paper No. 18 (Apr. 24, 2015) .................................................... 4
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`RPX Corp. v. ParkerVision, Inc.,
`IPR2014-00946, Paper No. 25 (Feb. 20, 2015) .................................................... 5
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`Unified Patents, Inc. v. Clouding IP, LLC,
`IPR2013-00586, Paper No. 12 (Apr. 22, 2014) .................................................... 2
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`ZOLL Lifecor Corp. v. Philips Elec. N. Am. Corp.,
`IPR2013-00606, Paper No. 13 (Mar. 20, 2014) ................................................... 4
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`Rules and Regulations
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`37 C.F.R. § 42.71(d) .................................................................................................. 2
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`Standard Operating Procedure 1, Rev. 14 (May 8, 2015) ..................................... 1, 8
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`ii
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`I.
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`Case No. IPR2015-01047
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`INTRODUCTION AND PRECISE RELIEF REQUESTED
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`Patent Owner VirnetX Inc. requests rehearing of the Patent Trial and Appeal
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`Board’s Decision entered December 21, 2015 (“Decision”), denying Patent
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`Owner’s Motion For Additional Discovery filed December 9, 2015 (Paper No. 22,
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`“Motion”). The Decision denied the Motion because Patent Owner allegedly did
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`not provide sufficient evidence to demonstrate “more than a mere possibility that
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`something useful will be discovered” with respect to various issues. (See, e.g.,
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`Decision at 2, 4, 5.) The Decision should be reversed for at least two reasons.
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`First, the Decision overlooked several important points of law as to a real-party-in-
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`interest (“RPI”) determination in finding the Motion to be speculative. Indeed,
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`certain facts that the Decision found to be so speculative as to not even warrant
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`discovery have been found to be determinative of RPI issues by other panels.
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`Second, the Decision overlooked several important facts and arguments.
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`Patent Owner requests rehearing by an expanded panel that includes the
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`Chief Judge in deciding this request. Standard Operating Procedure 1, Rev. 14,
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`Section III.D (“When a judge, a merits panel, or an interlocutory panel . . . receives
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`a suggestion for an expanded panel, the judge, merits panel, or interlocutory panel
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`shall notify the Chief Judge, Deputy Chief Judge, and the Vice Chief Judges of the
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`suggestion, in writing.”). An expanded panel that includes the Chief Judge is
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`necessary to secure and maintain uniformity given the large discrepancy in
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`Case No. IPR2015-01047
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`considering RPI issues between the Decision and numerous other panel decisions.
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`II. LEGAL STANDARD
`“A party dissatisfied with a decision may file a request for rehearing.”
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`37 C.F.R. § 42.71(d). “The request must specifically identify all matters the party
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`believes the Board misapprehended or overlooked, and the place where each
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`matter was previously addressed in a motion, an opposition, or a reply.” Id.
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`III. STATEMENT OF REASONS FOR RELIEF REQUESTED
`A. The Decision Overlooked the Requirements of an RPI Inquiry
`In Garmin Int’l, Inc. v. Cuozzo Speed Techs. LLC, IPR2012-00001, Paper
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`No. 26 at 6 (Mar. 5, 2013), the Board explained that “[t]he mere possibility of
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`finding something useful, and mere allegation that something useful will be found,
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`are insufficient to demonstrate that the requested discovery is necessary in the
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`interest of justice.” It stated that “[t]he party requesting discovery should already
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`be in possession of evidence tending to show beyond speculation that in fact
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`something useful will be uncovered.” Garmin, IPR2012-00001, Paper No. 26 at 6
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`(emphasis added). Thus, in the Motion, Patent Owner was only required to present
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`evidence that can serve “as the foundation for taking Patent Owner’s belief out of
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`the realm of mere speculation.” Unified Patents, Inc. v. Clouding IP, LLC,
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`IPR2013-00586, Paper No. 12 at 3 (Apr. 22, 2014). Since the Motion was directed
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`to improperly omitted RPIs in particular, the evidence presented in the Motion only
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`needed to show beyond speculation that something useful would be uncovered as
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`Case No. IPR2015-01047
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`to RPI issues. The Motion certainly met this standard.
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`The Decision found that “[e]ven assuming that ‘Mangrove Partners Hedge
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`Fund has ‘complete discretion’ to control the investments of’ [the US Feeder, the
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`Cayman Feeder, and Petitioner] to be true, as asserted by Patent Owner, Patent
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`Owner does not assert or provide a sufficient showing that Mangrove Partners
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`hedge fund also has ‘complete discretion’ and control over the preparation or filing
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`of the Petition.” (Decision at 2.)1 At the outset, the Decision overlooks that the
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`Petition itself was an investment. As explained in the Motion (and other papers
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`throughout this proceeding), Petitioner is a shell entity that exists for the sole
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`purpose of receiving funding from investors via the US Feeder and Cayman
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`Feeder, making investments directed by the Mangrove Partners Hedge Fund (its
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`investment manager), and paying out profits to investors via the US Feeder and
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`Cayman Feeder. (See, e.g., Motion at 1-4.) Petitioner exists for the purpose of
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`1 The Decision refers to the Mangrove Partners Hedge Fund’s “complete
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`discretion” as only an assertion by Patent Owner. (Decision at 2.) But it is more
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`than an assertion. It is a statement by Mangrove Partners Hedge Fund filed with
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`the United States Securities and Exchange Commission. (Motion at 2 (citing Ex.
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`2001 at 3, 17).)
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`making investments. Thus, the statement in the Decision regarding “complete
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`discretion” is incorrect.
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`At a minimum, the complete discretion of the Mangrove Partners Hedge
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`Fund to control the investments of the US Feeder, the Cayman Feeder, and
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`Petitioner highly suggests that the Mangrove Partners Hedge Fund had actual
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`control over the Petition. Indeed, countless other panels have relied on similar
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`evidence of control by a parent entity (i.e., even where there was no evidence
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`specific to a particular proceeding) to be determinative of RPI. See, e.g., Reflectix,
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`Inc. v. Promethean Insulation Tech. LLC, IPR2015-00039, Paper No. 18 at 9 (Apr.
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`24, 2015); Galderma S.A. v. Allergan Industrie, SAS, IPR2014-01422, Paper No.
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`14 at 9–13 (Mar. 5, 2015); Atlanta Gas Light Co. v. Bennett Regulator Guards,
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`Inc., IPR2013-00453, Paper No. 88 at 2–6 (Jan. 6, 2015); ZOLL Lifecor Corp. v.
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`Philips Elec. N. Am. Corp., IPR2013-00606, Paper No. 13 at 8-11 (Mar. 20, 2014).
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`For instance, in Galderma, the Board found that where a President of a parent
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`entity was also at the helm of the parent entity’s subsidiary, this “strongly implies
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`‘an involved and controlling parent corporation representing the unified interests of
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`itself and Petitioner.” Galderma S.A., IPR2014-01422, Paper No. 14 at 12 (citing
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`Zoll Lifecor Corp. v. Philips Elecs. N. Am. Corp., IPR2013-00606, Paper No. 13 at
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`10 (Mar. 20, 2015)). The Board explained in Galderma that it “need not consider
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`whether [a party] did or did not, directly or indirectly, exercise [its] control.” Id.
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`Rather, for purposes of finding that a party is an RPI, it is sufficient that the party
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`had the power “to call the shots.” Id. (citing Gonzalez v. Banco Cent. Corp., 27
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`F.3d 751, 758 (1st Cir. 1994)). The Board in Galderma thus found a parent entity
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`with control over its subsidiary to be an improperly omitted RPI. Id. at 13.
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`Evidence that some panels have found to be determinative of RPI issues should, at
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`a minimum, be viewed as “tending to show beyond speculation that in fact
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`something useful will be uncovered.” Garmin, IPR2012-00001, Paper No. 26 at 6.
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`The Decision’s strict standard for discovery not only contradicts Garmin’s
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`holding that a party seeking additional discovery need only “be in possession of
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`evidence tending to show beyond speculation that in fact something useful will be
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`uncovered,” Garmin, IPR2012-00001, Paper No. 26 at 6, it also contradicts how
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`other panels have applied Garmin. For instance, in RPX Corp. v. ParkerVision,
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`Inc., IPR2014-00946, Paper No. 25 at 3-4 (Feb. 20, 2015), the Board found that
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`evidence regarding a party’s business model (akin to the evidence presented in the
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`Motion regarding the business model of the Mangrove entities) and a formal
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`relationship between a non-party and a party (akin to the evidence presented in the
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`Motion regarding the formal relationship between the Mangrove entities), were
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`important in finding that the “whether something useful will be found” factor of
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`Garmin weighed in favor of granting additional discovery. The Decision thus
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`represents a marked departure from Garmin and its progeny.
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`B.
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`The Decision Overlooked Several Important Facts and
`Arguments That Should Have Compelled a Finding in Favor of
`Discovery
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`The Decision overlooked several facts further demonstrating that discovery
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`as to RPI is warranted. For one, the Decision overlooked that “Petitioner’s counsel
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`indicated that Petitioner had already collected certain material responsive to draft
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`discovery requests provided by Patent Owner.” (Motion at 4.) The existence of
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`those materials is not speculative given that Petitioner has admitted the materials
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`exist.
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`In addition, the Decision overlooked that Ward Dietrich, who has no public
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`role in Petitioner, “held himself out as an ‘authorized person’ to sign the Power of
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`Attorney on behalf of Petitioner” (Motion at 3), and that “Jeffrey Kalicka (the
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`Mangrove Partners Hedge Fund’s Senior Analyst) was involved in the preparation
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`of the petition here, despite the fact that, like Ward Dietrich, he has no public role
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`in Petitioner” (Motion at 4). When taken together with the fact that the Mangrove
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`Partners Hedge Fund has complete discretion to control the investments of the US
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`Feeder, the Cayman Feeder, and Petitioner, this further suggests that the Mangrove
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`Partners Hedge Fund had actual control over the Petition, at least beyond “mere
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`speculation.” (Motion at 6.) Stated another way, even if the Board is of the
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`opinion that a parent entity can have complete control over the investments of an
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`entity that only exists to invest, with the parent entity having its employees
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`participate in the preparation of a petition, and yet still not be an RPI, there is no
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`question that such evidence goes beyond “mere speculation.”
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`The Decision also overlooked several arguments in the Motion—in fact, the
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`Decision’s analysis was limited to the Background section of the Motion, not
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`analyzing any of the discovery requests in the Motion or the arguments explaining
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`why the Garmin factors are satisfied. (Decision at 1-5.) For example, the Decision
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`did not consider any of the following arguments:
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`• “[T]he material sought in Request For Production (“RFP”) No. 1 is
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`likely to exist given the legal relationships between the Mangrove
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`entities and the involvement of Ward Dietrich and Jeffrey Kalicka in
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`the preparation and filing of the petition in this proceeding (despite
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`the fact that neither is officially affiliated with Petitioner).” (Motion at
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`6.)
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`• “The material sought in RFP No. 2 is likely to exist given that, by its
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`very nature as a master fund, Petitioner is only intended to profit on
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`behalf of others (i.e., the US Feeder and the Cayman Feeder, and, in
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`turn, the investors in the US Feeder and the Cayman Feeder), and thus
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`arrangements as to funds, stock, stock options, or other consideration
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`are likely to exist.” (Motion at 6.)
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`• “The material sought in RFP Nos. 3-4 is almost certain to exist given
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`that, for example, law firms enter into engagement agreements or
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`retainer agreements prior to commencing work, and generate invoices
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`as work is performed, and are likely to be highly probative of whether
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`Petitioner or the other Mangrove entities engaged the counsel listed in
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`the petition for this proceeding and who is funding the proceeding.”
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`(Motion at 6.)
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`IV. PATENT OWNER REQUESTS REHEARING BY AN EXPANDED
`PANEL THAT INCLUDES THE CHIEF JUDGE
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`Patent Owner requests that an expanded panel that includes the Chief Judge
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`consider this request for rehearing. See Standard Operating Procedure 1, Rev. 14
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`(May 8, 2015), Section III.C; see also Google Inc. v. SimpleAir, Inc., CBM2015-
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`00019, Paper No. 15 at 8 (Aug. 19, 2015) (considering a request for expanded
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`panel review under Standard Operating Procedure 1, Rev. 14). Patent Owner is
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`making this request because “[c]onsideration by an expanded panel is necessary to
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`secure and maintain uniformity of the Board’s decisions, such as where different
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`panels of the Board render conflicting decisions on issues of statutory
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`interpretation . . ., or a substantial difference of opinion among judges exists on
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`issues of statutory interpretation.” Standard Operating Procedure 1, Rev. 14,
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`Section III.A. In particular, as discussed above in Section III.A, numerous panels
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`have interpreted the requirements for discovery and for an RPI determination that
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`is in significant contradiction with that of the Decision. The standard applied in
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`the Decision contradicts Garmin’s requirement that a party seeking additional
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`discovery need only “be in possession of evidence tending to show beyond
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`speculation that in fact something useful will be uncovered,” Garmin, IPR2012-
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`00001, Paper No. 26 at 6, by faulting Patent Owner for not providing certainty that
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`something useful will be uncovered. Demonstrative of the large departure from
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`past Board precedent, the Decision does not permit additional discovery as to RPI
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`despite the fact that other panels have relied on similar evidence to that presented
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`in the Motion to conclude that a party was in fact an improperly omitted RPI, like
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`in Galderma. Therefore, an expanded panel review is necessary to resolve these
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`differences, and clarify the standard for additional discovery.
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`V. CONCLUSION
`The Decision found that Patent Owner allegedly did not provide sufficient
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`evidence to warrant discovery. But in doing so, the Decision improperly analyzed
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`the requirements for an RPI determination, and overlooked several important facts
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`and arguments in the Motion. For these reasons, VirnetX respectfully requests
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`rehearing of the Decision and the grant of additional discovery.
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`Case No. IPR2015-01047
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`Respectfully submitted,
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`By: /Joseph E. Palys/
`Joseph E. Palys
`Registration No. 46,508
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`Counsel for VirnetX Inc.
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`Dated: January 4, 2016
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`Case No. IPR2015-01047
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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 Petitioner a true and correct copy of the foregoing Patent Owner’s
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`Request for Rehearing Under 37 C.F.R. § 42.71(d)(1) 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)
`Wiggin and Dana LLP
`450 Lexington Avenue
`New York, NY 10017
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`James T. Bailey (jtb@jtbaileylaw.com)
`504 W. 136th St. #1B
`New York, NY 10031
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`IP@wiggin.com
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`By: /Joseph E. Palys/
`Joseph E. Palys
`Registration No. 46,508
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`Counsel for VirnetX Inc.
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`Dated: January 4, 2016