`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
`
`
`
`
`
`Paper No.
`Filed: February 18, 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
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`
`
`
`
`
`
`
`
`
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`
`
`
`
`
`
`
`
`
`
`THE MANGROVE PARTNERS MASTER FUND, LTD., APPLE INC., AND
`BLACK SWAMP, LLC,
`Petitioner
`
`v.
`
`VIRNETX INC.,
`Patent Owner
`
`
`
`
`
`
`
`
`Case IPR2015-010471
`Patent No. 7,490,151
`
`
`
`
`
`
`
`
`Patent Owner’s Request for Rehearing
`Under 37 C.F.R. § 42.71(d)(1) of Institution Decision in IPR2016-00167
`
`1 Apple Inc. and Black Swamp, LLC, who filed petitions in IPR2016-00063 and
`IPR2016-00167, respectively, have been joined as Petitioners in the instant
`proceeding.
`
`
`
`
`
`
`
`
`
`I.
`
`II.
`
`
`
`Case No. IPR2015-01047
`
`Table of Contents
`
`INTRODUCTION AND PRECISE RELIEF REQUESTED ......................... 1
`
`LEGAL STANDARD ..................................................................................... 2
`
`III. STATEMENT OF REASONS FOR RELIEF REQUESTED ........................ 3
`
`A.
`
`B.
`
`The Decision Is Inconsistent with the Decision in the ’1047 IPR ........ 3
`
`The Decision Is Legally Erroneous Because It Failed to
`Recognize That a Petition With a Joinder Motion Must Warrant
`Institution Before It Can Be Granted and Joined to Another
`Proceeding ............................................................................................. 5
`
`IV. PATENT OWNER REQUESTS REHEARING BY AN EXPANDED
`PANEL THAT INCLUDES THE CHIEF JUDGE ......................................... 8
`
`V.
`
`CONCLUSION ................................................................................................ 9
`
`
`
`
`
`i
`
`
`
`
`
`Case No. IPR2015-01047
`
`TABLE OF AUTHORITIES
`
` Page(s)
`
`Federal Cases
`Alexsam, Inc. v. IDT Corp.,
`715 F.3d 1336 (Fed. Cir. 2013) ............................................................................ 6
`
`Alza Corp. v. Mylan Labs., Inc.,
`464 F.3d 1286 (Fed. Cir. 2006) ............................................................................ 6
`
`Apple Inc. v. DSS Technology Management, Inc.,
`IPR2015-00369, Paper No. 14 (Aug. 12, 2015) ................................................... 2
`
`Butamax Adv. Biofuels LLC v. Gevo, Inc.,
`IPR2014-00581, Paper No. 8 (Oct. 14, 2014) .................................................. 5, 9
`
`Dynamic Drinkware, LLC v. Nat’l Graphics, Inc.,
`800 F.3d 1375 (Fed. Cir. 2015) ............................................................................ 7
`
`Google Inc. v. SimpleAir, Inc.,
`CBM2015-00019, Paper No. 15 (Aug. 19, 2015) ................................................ 8
`
`Koito Mfg. Co., Ltd. v. Turn–Key–Tech, LLC,
`381 F.3d 1142 (Fed. Cir. 2004) ............................................................................ 6
`
`Proveris Scientific Corp. v. Innovasystems, Inc.,
`536 F.3d 1256 (Fed. Cir. 2008) ............................................................................ 6
`
`Schumer v. Lab. Computer Sys., Inc.,
`308 F.3d 1304 (Fed.Cir.2002) .............................................................................. 7
`
`Wyers v. Master Lock Co.,
`616 F.3d 1231 (Fed. Cir. 2010) ............................................................................ 6
`
`Statutes
`
`35 U.S.C. § 315(c) ................................................................................................. 5, 8
`
`Other Authorities
`
`37 C.F.R. § 42.71(c) ................................................................................................... 2
`
`ii
`
`
`
`
`37 C.F.R. § 42.71(d) .................................................................................................. 2
`
`Case No. IPR2015-01047
`
`Standard Operating Procedure 1, Rev. 14 .............................................................. 2, 8
`
`
`
`iii
`
`
`
`
`
`I.
`
`
`
`Case No. IPR2015-01047
`
`INTRODUCTION AND PRECISE RELIEF REQUESTED
`
`Patent Owner VirnetX Inc. requests rehearing of the Patent Trial and Appeal
`
`Board’s Institution Decision entered February 4, 2016 (Paper No. 12 in
`
`IPR2016-00167, “Decision”), granting Black Swamp LLC’s petition and
`
`instituting trial in IPR2016-00167 (“the ’167 IPR”) and joining that proceeding
`
`with IPR2015-01047 (“the ’1047 IPR”).
`
`The Decision found institution to be proper “[i]n view of the identity of each
`
`of the challenges in [the ’167 IPR] Petition to at least one challenge presented in
`
`the petition in [the ’1047 IPR].” (Decision at 3.) The Decision “institute[ed] an
`
`inter partes review in [the ’167 IPR] on the same grounds as those on which [the
`
`Board] instituted inter partes review in [the ’1047 IPR].” (Id. at 4.) The Decision
`
`thus did not include any independent analysis of the petition in the ’167 IPR,
`
`instead relying on the analysis conducted when instituting the ’1047 IPR. (See id.
`
`at 3-4.) As explained in more detail below, however, the Board relied on expert
`
`testimony submitted with the ’1047 IPR, whereas no such expert testimony was
`
`submitted with the ’167 IPR petition. Given that the Board relied on expert
`
`testimony in the ’1047 IPR, the Decision does not establish Black Swamp to have
`
`met its burden of demonstrating a reasonable likelihood of prevailing in proving
`
`unpatentability of the challenged claims. As such, institution was improper.
`
`VirnetX requests rehearing by an expanded panel that includes the Chief
`
`1
`
`
`
`
`Judge in deciding this request. Standard Operating Procedure 1, Rev. 14, Section
`
`Case No. IPR2015-01047
`
`III.D (“When a judge, a merits panel, or an interlocutory panel . . . receives a
`
`suggestion for an expanded panel, the judge, merits panel, or interlocutory panel
`
`shall notify the Chief Judge, Deputy Chief Judge, and the Vice Chief Judges of the
`
`suggestion, in writing.”). An expanded panel that includes the Chief Judge is
`
`necessary given that the Decision is inconsistent with the statute and past Board
`
`decisions that require that a petition needs to warrant institution on its own for
`
`joinder to be proper.
`
`II. LEGAL STANDARD
`“A party dissatisfied with a decision may file a request for rehearing.”
`
`37 C.F.R. § 42.71(d). “The request must specifically identify all matters the party
`
`believes the Board misapprehended or overlooked, and the place where each
`
`matter was previously addressed in a motion, an opposition, or a reply.” Id.
`
`Institution decisions are reviewed on rehearing for an abuse of discretion.
`
`See 37 C.F.R. § 42.71(c). An abuse of discretion occurs when a “decision [i]s
`
`based on an erroneous conclusion of law or clearly erroneous factual findings, or
`
`. . . a clear error of judgment.” Apple Inc. v. DSS Technology Management, Inc.,
`
`IPR2015-00369, Paper No. 14 at 3 (Aug. 12, 2015) (citing PPG Indus. Inc. v.
`
`Celanese Polymer Specialties Co., 840 F.2d 1565, 1567 (Fed. Cir. 1988)).
`
`2
`
`
`
`Case No. IPR2015-01047
`
`
`III. STATEMENT OF REASONS FOR RELIEF REQUESTED
`A. The Decision Is Inconsistent with the Decision in the ’1047 IPR
`When the Board instituted trial in the ’1047 IPR, the Board relied on expert
`
`testimony. IPR2015-01047, Paper No. 11 (October 7, 2015). In particular, in
`
`instituting anticipation and obviousness grounds identical to the grounds proposed
`
`in the ’167 IPR, the Board “reviewed the evidence Petitioner cite[d] . . . and
`
`[found] that evidence persuasive of a reasonable likelihood that Petitioner would
`
`prevail with respect to the asserted ground of unpatentability.” Id. at 6, 8. This
`
`evidence included expert testimony (Ex. 1003 in IPR2015-01047), which was cited
`
`by the Board to allegedly support every single one of its determinations as to
`
`anticipation and obviousness. See id. at 6-8.
`
`On the other hand, in instituting trial in the ’167 IPR, the Decision neither
`
`relied on expert testimony nor explained how it could make up for its prior reliance
`
`on expert testimony in the ’1047 IPR. In particular, the Decision states “[i]n view
`
`of the identity of each of the challenges in the instant Petition to at least one
`
`challenge presented in the petition in [the ’1047 IPR], we institute an inter partes
`
`review in this proceeding on the same grounds as those on which we instituted
`
`inter partes review in [the ’1047 IPR].” (Decision at 3-4; see also id. at 7.)
`
`But the two challenges proposed in the ’167 IPR are identical to the
`
`challenges in the ’1047 IPR only at face value. The underlying analysis in the
`
`3
`
`
`
`
`’1047 IPR relies heavily on expert testimony which, as noted above, the Board
`
`Case No. IPR2015-01047
`
`relied on to institute a trial. IPR2015-01047, Paper No. 11 at 6-8. The petition in
`
`the ’167 IPR is entirely devoid of any supporting expert testimony, and
`
`consequently, the Board could not have relied on such testimony in instituting trial
`
`in the ’167 IPR. IPR2016-00167, Paper No. 1 at 26 (Petitioner’s analysis under the
`
`proposed obviousness ground); see also id. at 11-25 (Petitioner’s analysis under
`
`the proposed anticipation ground). The Decision appears to acknowledge the
`
`absence of expert testimony in the ’167 IPR, but alleges that “Patent Owner does
`
`not demonstrate sufficiently that reliance on expert testimony is required or that the
`
`absence of expert testimony alone indicates the failure to demonstrate a reasonable
`
`likelihood of prevailing in proving unpatentability of a challenged claim.”
`
`(Decision at 4.) However, the Decision does not include any explanation regarding
`
`how the Board, in instituting trial in the ’167 IPR, makes up for its prior reliance
`
`on expert testimony in the ’1047 IPR.2
`
`
`2 To be clear, VirnetX does not admit that the expert testimony submitted with
`
`Mangrove’s petition is sufficient, supports invalidity, or should be given any
`
`weight. VirnetX plans to challenge that testimony in the Mangrove proceeding, as
`
`appropriate.
`
`4
`
`
`
`
`
`Case No. IPR2015-01047
`
`B.
`
`The Decision Is Legally Erroneous Because It Failed to Recognize
`That a Petition With a Joinder Motion Must Warrant Institution
`Before It Can Be Granted and Joined to Another Proceeding
`
`The Board may only join a party to a proceeding if that party “properly files
`
`a petition under section 311 that the Director . . . determines warrants the
`
`institution of an inter partes review under section 314.” 35 U.S.C. § 315(c). The
`
`Board has explained that this statutory requirement means that, “if the Board
`
`determines that [a] second petition [filed by a party] does not warrant institution,”
`
`it “do[es] not have the discretion to join [the] party.” See, e.g., Butamax Adv.
`
`Biofuels LLC v. Gevo, Inc., IPR2014-00581, Paper No. 8 at 7 (Oct. 14, 2014)
`
`(emphasis in original). Accordingly, with respect to the ’167 IPR, the Board
`
`should have first determined that the Petition warranted institution prior to
`
`permitting joinder. As Patent Owner explained in the Preliminary Response,
`
`however, the Petition does not warrant institution at least because it does not rely
`
`on any expert testimony to support Petitioner’s unpatentability theories. (Prelim.
`
`Resp. at 8-10.) While the Decision appears to disagree as to the need for expert
`
`testimony (Decision at 4), the Decision relies on its analysis in the ’1047 IPR
`
`where expert testimony was present. (See supra Section III.A.) Expert testimony
`
`(which may or may not be sufficient for any given case) was required in this case
`
`given the complexity of the technology at issue and given the Decision’s failure to
`
`make an analysis specific to the ’167 IPR.
`
`5
`
`
`
`
`
`Case No. IPR2015-01047
`
`As explained in the Preliminary Response, the patent-at-issue (U.S. Patent
`
`No. 7,490,151, “the ’151 patent”) is not directed to simple technology. For
`
`example, the ’151 patent discloses embodiments relating to initiating encrypted
`
`channels between a user’s computer 2601 and a target 2604 connected to a
`
`network. (Prelim. Resp. at 9, citing Ex. 1001 at Figs. 26 and 27.) One
`
`embodiment includes methods and systems for establishing encrypted channels
`
`between a user’s computer 2601—e.g., a “client” in the claims—and a secure
`
`server when a domain name server (DNS) proxy module intercepts a DNS request
`
`sent by the client and determines that the DNS request corresponds to a secure
`
`server. (Id., citing Ex. 1001 at 37:50-38:21; Fig. 26.)
`
`The Federal Circuit has repeatedly explained that when the technology, like
`
`that in the ’151 patent, is complex, “[e]xpert testimony [is] required.” See, e.g.,
`
`Alexsam, Inc. v. IDT Corp., 715 F.3d 1336, 1348 (Fed. Cir. 2013). In fact, “‘expert
`
`testimony regarding matters beyond the comprehension of laypersons is sometimes
`
`essential,’ particularly in cases involving complex technology.” Wyers v. Master
`
`Lock Co., 616 F.3d 1231, 1240 (Fed. Cir. 2010) (quoting Centricut, LLC v. Esab
`
`Group, Inc., 390 F.3d 1361, 1369-1370 (Fed. Cir. 2004)); see also Proveris
`
`Scientific Corp. v. Innovasystems, Inc., 536 F.3d 1256, 1267 (Fed. Cir. 2008);
`
`Koito Mfg. Co., Ltd. v. Turn–Key–Tech, LLC, 381 F.3d 1142, 1152 n. 4 (Fed. Cir.
`
`2004); Alza Corp. v. Mylan Labs., Inc., 464 F.3d 1286, 1294–95 (Fed. Cir. 2006);
`
`6
`
`
`
`
`Schumer v. Lab. Computer Sys., Inc., 308 F.3d 1304, 1315 (Fed.Cir.2002).
`
`Case No. IPR2015-01047
`
`Neither the Board nor the Petitioner established that the ’151 patent was
`
`directed to simple technology, which would have been necessary given the absence
`
`of expert testimony in the ’167 IPR. Rather, the Decision’s reliance on expert
`
`testimony to institute trial in the ’1047 IPR suggests the Board agrees the
`
`technology at hand is complex. But without any expert testimony supporting the
`
`Petitioner’s proposed grounds in the ’167 IPR, the Board did not have any
`
`evidence that it could properly rely on to warrant institution. In fact, the Decision
`
`in the ’167 IPR did not include any analysis showing that the Petition warrants
`
`institution, and at most, seems to have improperly supplemented the record with
`
`evidence from the ’1047 IPR. (Decision at 3-4.)
`
`The Decision goes further and places the burden on Patent Owner by stating
`
`that “Patent Owner does not demonstrate sufficiently that reliance on expert
`
`testimony is required or that the absence of expert testimony alone indicates the
`
`failure
`
`to demonstrate a reasonable
`
`likelihood of prevailing
`
`in proving
`
`unpatentability of a challenged claim.” But it is the Petitioner that has the initial
`
`and the ultimate burden, not Patent Owner. As the Federal Circuit has noted, a
`
`Petitioner has both the “initial burden of production” and “the burden of persuasion
`
`to prove unpatentability by a preponderance of the evidence, [which] never
`
`shift[s].” Dynamic Drinkware, LLC v. Nat’l Graphics, Inc., 800 F.3d 1375, 1379
`
`7
`
`
`
`
`(Fed. Cir. 2015).
`
`Case No. IPR2015-01047
`
`As such, Patent Owner respectfully requests that no trial be instituted in
`
`IPR2016-00167 due to Petitioner’s failure to provide sufficient evidence
`
`supporting its proposed grounds of rejection.
`
`IV. PATENT OWNER REQUESTS REHEARING BY AN EXPANDED
`PANEL THAT INCLUDES THE CHIEF JUDGE
`
`Patent Owner requests that an expanded panel that includes the Chief Judge
`
`consider this request for rehearing. See Standard Operating Procedure 1, Rev. 14
`
`(May 8, 2015), Section III.C; see also Google Inc. v. SimpleAir, Inc., CBM2015-
`
`00019, Paper No. 15 at 8 (Aug. 19, 2015) (considering a request for expanded
`
`panel review under Standard Operating Procedure 1, Rev. 14). Patent Owner is
`
`making this request because “[c]onsideration by an expanded panel is necessary to
`
`secure and maintain uniformity of the Board’s decisions, such as where different
`
`panels of the Board render conflicting decisions on issues of statutory
`
`interpretation . . ., or a substantial difference of opinion among judges exists on
`
`issues of statutory interpretation.” Standard Operating Procedure 1, Rev. 14,
`
`Section III.A.
`
`As discussed above, 35 U.S.C. § 315(c) requires, as other panels of the
`
`Board have held, that a petition must warrant institution on its own merits before
`
`the Board may consider whether a request for joinder should be granted. (See
`
`supra Section III.) “[I]f the Board determines that [a] second petition [filed by a
`
`8
`
`
`
`
`party] does not warrant institution,” it “do[es] not have the discretion to join [the]
`
`Case No. IPR2015-01047
`
`party.” See, e.g., Butamax Adv. Biofuels LLC v. Gevo, Inc., IPR2014-00581, Paper
`
`No. 8 at 7 (Oct. 14, 2014) (emphasis in original). The Decision, however, is not
`
`consistent with the statute or these other decisions given it granted joinder without
`
`determining whether the petition warrants institution on its own merits.
`
`V. CONCLUSION
`For the foregoing reasons, Patent Owner requests that the Board deny
`
`institution of trial in IPR2016-00167.
`
`
`
`Respectfully submitted,
`
`
`
`By: /Joseph E. Palys/
`Joseph E. Palys
`Registration No. 46,508
`
`Counsel for VirnetX Inc.
`
`Dated: February 18, 2016
`
`9
`
`
`
`
`
`
`
`Case No. IPR2015-01047
`
`CERTIFICATE OF SERVICE
`
`Pursuant to 37 C.F.R. § 42.6(e), I certify that I caused to be served on the
`
`counsel for Petitioner a true and correct copy of the foregoing Patent Owner’s
`
`Request for Rehearing Under 37 C.F.R. § 42.71(d)(1) of Institution Decision in
`
`IPR2016-00167 by electronic means on the date below at the following addresses
`
`of record:
`
`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
`
`Thomas H. Martin
`Wesley C. Meinerding
`tmartin@martinferraro.com
`docketing@martinferraro.com
`
`
`Dated: February 18, 2016
`
`By: /Joseph E. Palys/
`Joseph E. Palys
`Registration No. 46,508
`
`Counsel for VirnetX Inc.