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Filed on behalf of: VirnetX Inc.
`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: July 15, 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 IP, LLC,
`Petitioner
`
`v.
`
`VIRNETX INC.,
`Patent Owner
`
`
`
`
`
`
`
`
`Case IPR2015-010471
`Patent 7,490,151
`
`
`
`
`
`
`
`
`Patent Owner’s Sur-Reply
`
`
`1 Apple Inc. and Black Swamp IP, LLC, who filed petitions in IPR2016-00063 and
`IPR2016-00167, respectively, have been joined as a Petitioner in the instant
`proceeding.
`
`
`
`
`
`

`
`
`
`I.
`
`II.
`
`
`
`Case No. IPR2015-01047
`
`TABLE OF CONTENTS
`
`Introduction ...................................................................................................... 1
`
`Petitioners’ Improper New Arguments Fail to Remedy the Petitioners’
`Original Analysis ............................................................................................. 2
`
`A.
`
`B.
`
`C.
`
`Petitioners’ New Position 1 ................................................................... 2
`
`Petitioners’ New Positions 2 and 4 ....................................................... 3
`
`Petitioners’ New Position 3 ................................................................... 8
`
`III. Petitioner Apple Inc.’s Separate Reply Omits Telling Facts.........................10
`
`IV. Conclusion .....................................................................................................11
`
`
`
`i
`
`

`
`
`
`
`
`Case No. IPR2015-01047
`
`TABLE OF AUTHORITIES
`
` Page(s)
`
`Cases
`Intelligent Bio-Sys., Inc. v. Illumina Cambridge Ltd.,
`821 F.3d 1359 (Fed. Cir. 2016) ............................................................................ 1
`
`Statutes
`
`35 U.S.C. § 312(a)(3) ............................................................................................. 1, 8
`
`Other Authorities
`
`37 C.F.R. § 42.23(b) .................................................................................................. 1
`
`Office Patent Trial Practice Guide,
`77 Fed. Reg. 48,756 (Aug. 14, 2012) ................................................................... 1
`
`
`
`ii
`
`

`
`
`
`I.
`
`
`Introduction
`
`
`
`Case No. IPR2015-01047
`
`In an Order dated July 7, 2016, the Board authorized Patent Owner to file a
`
`sur-reply “limited to issues enumerated by Patent Owner in Patent Owner’s
`
`Identification of Improper Arguments in Petitioners’ Consolidated Reply Brief and
`
`Petitioner Apple Inc.’s Separate Reply Filing).” Paper No. 75 at 2. As discussed
`
`below, Petitioners’ new positions (see Paper No. 61 at 1–3) are flawed and fail to
`
`remedy the deficiencies of Petitioners’ original positions. As such, to the extent
`
`the Board considers the substance of Petitioners’ improper new arguments,2 the
`
`Board should enter judgment against Petitioners, confirm the patentability of the
`
`claims, and terminate this proceeding.
`
`
`2 Patent Owner continues to maintain that Petitioners’ new arguments should not
`
`be considered at this late stage. See Intelligent Bio-Sys., Inc. v. Illumina
`
`Cambridge Ltd., 821 F.3d 1359, 1369 (Fed. Cir. 2016) (“Unlike district court
`
`litigation—where parties have greater freedom to revise and develop their
`
`arguments over time and in response to newly discovered material—the expedited
`
`nature of IPRs bring with it an obligation for petitioners to make their case in their
`
`petition to institute.”) (emphasis added); see also 35 U.S.C. § 312(a)(3); 37 C.F.R.
`
`§ 42.23(b); Office Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,767 (Aug.
`
`14, 2012).
`
` 1
`
`
`
`

`
`
`II.
`
`
`Case No. IPR2015-01047
`
`Petitioners’ Improper New Arguments Fail to Remedy the Petitioners’
`Original Analysis
`
`In its Patent Owner’s Response (Paper No. 48, “Patent Owner Resp.”),
`
`VirnetX set forth a multitude of reasons why Petitioners’ asserted grounds of
`
`unpatentability must fail. In response, Petitioners’ Consolidated Reply Brief
`
`(Paper No. 56, “Consol. Rep.”) shifts Petitioners’ positions in at leave four ways.
`
`Paper No. 61 at 1–3 (identifying Petitioners’ New Positions 1–4). But these new
`
`positions are unsupported attorney arguments and do not actually remedy the
`
`problems with Petitioners’ anticipation and obviousness allegations. Each of
`
`Petitioners’ new arguments should be rejected.
`
`Petitioners’ New Position 1
`
`A.
`Each of independent claims 1, 7, and 13 recites, among other things, a
`
`“client,” “secure server,” and a “secure channel” or “encrypted channel” “between
`
`the client and the secure server.” Petitioners’ Consolidated Reply Brief asserts that
`
`“[m]ultiple different aspects of the Kiuchi system meet the ‘client’ and ‘secure
`
`server’ elements of the claims,” including “(1) the user agent and origin server
`
`[and] (2) the client-side and server-side proxies,” which as discussed in Patent
`
`Owner’s Response (at 17–25) do not read on the claims, along with a new
`
`mapping: “(3) the user agent and server-side proxies.” Consol. Rep. at 3; see also
`
`2
`
`

`
`
`Paper No. 61 at 1–2 (identifying Petitioners’ new position).3 Like Petitioners’
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`Case No. IPR2015-01047
`
`original mappings, this new mapping fails to support Petitioners’ positions.
`
`For instance, with respect to claims 1 and 7, Kiuchi only discloses using
`
`encryption in the C-HTTP communication between the client-side proxy and the
`
`server-side proxy, and nowhere else. Patent Owner Resp. at 18–19. Therefore,
`
`because encryption does not extend to Kiuchi’s user agent (which Petitioners now
`
`point to as the claimed “client”), Kiuchi does not disclose an “encrypted channel
`
`between the client and the secure server,” as claimed. Id.
`
`Petitioners’ New Positions 2 and 4
`
`B.
`Petitioners and their expert originally admitted that the hostname in a URL
`
`“corresponds to an origin server” that is only “associated with a server-side proxy.”
`
`See Paper No. 5 at 21; see also Ex. 1003 at ¶ 22. Based on this then-undisputed
`
`operation of Kiuchi (among other things), Patent Owner showed how Kiuchi does
`
`not disclose the recited DNS features (e.g., “DNS requests sent by a client”). See
`
`Patent Owner Resp. at 15–16. In response, Petitioners now shift gears and contend
`
`3 Petitioners argue that this is not a new argument because they pointed to the user
`
`agent as being a “client” and the server-side proxy as being a “secure server.”
`
`Paper No. 62 at 1. Petitioners miss the point that they did not originally rely on
`
`both the user agent and server-side proxy for the claimed “client” and “secure
`
`server” in the same claim mapping.
`
`3
`
`

`
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`that “the hostname [in Kiuchi] is that of the server-side proxy,” relying on Kiuchi’s
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`Case No. IPR2015-01047
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`appendices. Consol. Rep. at 4; see also Paper No. 61 at 2 (identifying Petitioners’
`
`new position).4 Petitioners’ new interpretation of Kiuchi is wrong—worse still,
`
`Petitioners’ Consolidated Reply Brief fails to even mention evidence (that at least
`
`Apple was aware of) showing Petitioners’ new interpretation of Kiuchi is wrong.
`
`In characterizing the hostname as corresponding to a server-side proxy,
`
`Petitioner’s point to a “Server-Side-Proxy-Name” field in Kiuchi’s appendices that
`
`is allegedly “[u]sed for specifying the hostname of a server side proxy.” Consol.
`
`Rep. at 6–7; Ex. 1002 at Appendix 1. But this field actually refers to the URL of
`
`
`4 Petitioners argue that this is not a new argument because Dr. Guerin relied on
`
`Kiuchi’s appendices, and that they in turn cited to Dr. Guerin’s declaration. Paper
`
`No. 62 at 1–2 (citing Ex. 1003 at ¶ 29). However, Dr. Guerin’s citation to Kiuchi’s
`
`appendices has nothing whatsoever to do with whether the hostname in a URL
`
`corresponds to an origin server or server-side proxy. Petitioners also argue that
`
`they originally “explained that ‘the hostname . . . designates the server side
`
`proxy.’” Paper No. 62 at 2 (citing Paper No. 5 at 27) (ellipses original).
`
`Petitioners’ use of ellipses is telling—the petition actually said that “the hostname
`
`corresponds to an origin server associated with a server-side proxy and designates
`
`the server-side proxy.” Paper No. 5 at 27 (emphasis noting the omitted quotation).
`
`4
`
`

`
`
`the resource on the origin server being requested; it does not refer to the domain
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`Case No. IPR2015-01047
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`name of the server-side proxy.
`
`Kiuchi
`
`explains
`
`that
`
`the
`
`URL
`
`“http://server.in.current.connection/sample.html=@=6zdDfldfcZLj8V!i” represents
`
`a “resource name,” and that when the URL is clicked, “the client-side proxy takes
`
`off the connection ID (i.e., “6zdDfldfcZLj8V”) and forwards, the stripped, original
`
`resource name to the server . . . .” Ex. 1002 at 8–9, Figs. (b), (c) (reproduced
`
`below) (emphases added); Ex. 2038 at ¶ 43.
`
`
`
`
`
`Thus, the Kiuchi’s URL belongs to the resource on the origin server. Interpreting
`
`the “Server-Side-Proxy-Name” field as referring to the domain name of the server-
`
`side proxy would be inconsistent with Kiuchi’s main text.
`
`In fact, in raising its new argument, Petitioners did not inform the Board
`
`(even though at least Apple was aware) that a 1996 slide presentation
`
`accompanying Kiuchi, presented to the Institute of Electrical and Electronics
`
`5
`
`

`
`
`Engineers (“IEEE”) by Dr. Kiuchi (the author of the Kiuchi reference), confirms
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`Case No. IPR2015-01047
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`this understanding on C-HTTP—a presentation that was discussed at length at trial
`
`between VirnetX and Apple nearly four years ago.5 See Kiuchi Slide Presentation,
`
`Ex. 2063; see also Transcript of Trial, Morning Session, VirnetX, Inc. v. Apple,
`
`Inc., Case No. 6:10-CV-417 (E.D. Tex. Nov. 5, 2012), Ex. 2041 at 68:13–69:14;
`
`Transcript of Trial, Afternoon Session, VirnetX, Inc. v. Apple, Inc., Case No. 6:10-
`
`CV-417 (E.D. Tex. Nov. 5, 2012), Ex. 2064 at 39:20–41:20, 104:24–106:17.6 For
`
`example, slide 9 of the presentation explains that the C-HTTP name server “keeps”
`
`“resource names.” Ex. 2063 at 9. Additionally, slide 17 illustrates that a C-HTTP
`
`name request includes a “RESOURCE-NAME,” (id. at 17), while slide 20 shows
`
`that the C-HTTP name response that follows includes a “SERVER-SIDE-PROXY-
`
`IP [address],” (id. at 20). Indeed, expert testimony at trial confirmed that the
`
`Kiuchi system would not work if the URL did not refer to the resource on the
`
`origin server. See, e.g., Ex. 2064 at 40:15–20 (“Q. Would the Kiuchi system work
`
`if the client-side proxy requested a domain name for the server-side proxy from
`
`5 This discussion and the presentation was part of the record before the Federal
`
`Circuit, which found Kiuchi not to anticipate the claims of the ’151 patent.
`
`VirnetX Inc. v. Cisco Sys., 767 F.3d 1308, 1324 (Fed. Cir. 2014).
`
`6 Patent Owner submits Exhibits 2063 and 2064 with this paper, each of which is
`
`being relied upon because of Petitioners’ new arguments.
`
`6
`
`

`
`
`C-HTTP? A. No. The way Kiuchi has to work is that what’s being requested is
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`Case No. IPR2015-01047
`
`the resource that’s on the origin server. That’s where the data is.”).
`
`Relatedly, Petitioners asserted for the first time in their Consolidated Reply
`
`Brief that RFC 1945 “defin[es] HTTP/1.0 used in Kiuchi” and that RFC 1945
`
`“explains the ‘host’ is the domain name component of an HTTP URL.” Consol.
`
`Rep. at 6–7; see also Paper No. 61 at 2–3 (identifying Petitioners’ new position).7
`
`Petitioners are incorrect. For one, there is no evidence—only attorney argument—
`
`that RFC 1945 “defin[es] HTTP/1.0 used in Kiuchi.” In any event, RFC 1945 does
`
`not support Petitioners’ suggestion that only a domain name from a URL (e.g.,
`
`server.in.connection) will be sent to the C-HTTP name server. To the contrary, as
`
`discussed above, Kiuchi’s URL that is provided to the C-HTTP name server
`
`belongs to the resource on the origin server. See also Ex. 2038 at ¶ 43.
`
`Therefore, because the hostname in a URL corresponds to an origin server,
`
`Kiuchi does not disclose the claimed DNS features. See Patent Owner Resp. at
`
`7 Petitioners argue that this is not a new argument, referencing paragraph 18 of Dr.
`
`Guerin’s declaration. Paper No. 62 at 3. But paragraph 18 of Dr. Guerin’s
`
`declaration only refers to RFC 1945 as “describing proxy as an ‘intermediary
`
`program which acts as both a server and a client for the purpose of making requests
`
`on behalf of other clients,’” which has nothing to do with Petitioners’ new position.
`
`See Ex. 1003 at ¶ 18.
`
`7
`
`

`
`
`15–16; see also Patent Owner Resp. at 13–16 (discussing generally why Kiuchi
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`Case No. IPR2015-01047
`
`does not disclose the claimed DNS features).
`
`Petitioners’ New Position 3
`
`C.
`Petitioners assert for the first time in their Consolidated Reply Brief that “the
`
`client-side proxy and C-HTTP name server ‘determin[e]’ whether access to a
`
`secure website was requested” and work “together” to make this determination.
`
`Consol. Br. at 8; see also Paper No. 61 at 2 (identifying Petitioners’ new position).
`
`Petitioners’ new position ignores the requirements of the claims in the context of
`
`the ’151 patent.
`
`In alleging anticipation, Petitioners rely on Kiuchi’s client-side proxy for the
`
`“domain name server (DNS) proxy module” recited in claims 1 and 7, and the
`
`“domain name server (DNS) module” recited in claim 13. See, e.g., Paper No. 5 at
`
`25, 32–33.8 It is the DNS proxy module or DNS module that must perform the
`
`claimed “determining.” By relying on operations of both the client-side proxy and
`
`8 In their Identification of Reply Arguments, Petitioners rely on ambiguity in their
`
`original positions to suggest that the client-side proxy and C-HTTP name server
`
`may collectively map to the DNS proxy module or DNS module recited in the
`
`claims. See Paper No. 62 at 2. But any ambiguity should not go to the benefit of
`
`Petitioners, especially in light of the “particularity” requirement of 35 U.S.C. §
`
`312(a)(3).
`
`8
`
`

`
`
`C-HTTP name server for the claimed “determining,” Petitioners have not shown
`
`Case No. IPR2015-01047
`
`that the claimed DNS proxy module or DNS module (i.e., the client-side proxy in
`
`Petitioners’ mapping) performs the claimed “determining” limitation.
`
`Moreover, the problems with Petitioners’ new position cannot be resolved
`
`by viewing the client-side proxy and C-HTTP name server as collectively mapping
`
`to the claimed DNS proxy module or DNS module. The client-side proxy and C-
`
`HTTP name server play distinct roles in Kiuchi’s system. See, e.g., Ex. 1002 at 7,
`
`11. Petitioners have not established, for example, how Kiuchi’s server-side proxy
`
`could “ask[] the C-HTTP name server whether the client-side proxy is an
`
`appropriate member of the closed network,” before the server-side proxy even has
`
`the IP address of the client-side proxy, if the C-HTTP name server was itself a part
`
`of the same component as the client-side proxy, which is the result of Petitioners’
`
`new mapping. See Ex. 1002 at 8–9. Indeed, Kiuchi explains that “C-HTTP-based
`
`communication is made possible” with three distinct components: “1) a client-side
`
`proxy on the firewall of one institution, 2) a server-side proxy on the firewall of
`
`another institution and 3) a C-HTTP name server, which manages a given C-
`
`HTTP-based network and the information for [] all proxies.” Id. at 7, § 2.1.
`
`Kiuchi’s C-HTTP protocol and processes rely on the separation of functionality
`
`between these components. Id. at 7–8, § 2.2, 8–10, § 2.3. Kiuchi’s C-HTTP name
`
`server is centralized (see, e.g., id. at 11–12, § 4.3), but Petitioners’ new mapping
`
`9
`
`

`
`
`attempts to distort the functionality of Kiuchi’s arrangement by merging the
`
`Case No. IPR2015-01047
`
`C-HTTP name server functionalities with the client-side proxy’s functionalities.
`
`Petitioners do not explain how such an arrangement would accommodate the
`
`C-HTTP name server’s role as disclosed in Kiuchi, especially with respect to the
`
`server-side proxy that must also communicate with the C-HTTP name server for
`
`C-HTTP communications to work. See, e.g., id. at 8–10.
`
` Petitioner Apple Inc.’s Separate Reply Omits Telling Facts III.
`
`
`Apple tries to make much of certain administrative petitions filed by
`
`VirnetX in pending inter partes reexamination Control Nos. 95/001,682 (“the
`
`1,682 proceeding”) and 95/001,697 (“the 1,697 proceeding”), accusing VirnetX of
`
`“paralyz[ing]” those proceedings. See Paper No. 59 at 3–5. VirnetX has not
`
`delayed resolution of those reexaminations in any way.
`
`In the 1,682 proceeding, Apple filed an approximately 400-page request for
`
`reexamination (containing over 200 pages of analysis, accompanied by an
`
`additional over 200 pages of claim charts). Similarly, in the 1,697 proceeding,
`
`Apple filed an approximately 400-page request for reexamination (containing just
`
`under 200 pages of analysis, accompanied by an additional over 200 pages of
`
`claim charts). Given the extreme size of Apple’s requests—which would have
`
`been impermissible in today’s inter partes review practice—VirnetX has
`
`occasionally requested modest extensions of time and increased page limits to try
`
`10
`
`

`
`
`to level the playing field. In fact, Apple fails to mention that the Office has largely
`
`Case No. IPR2015-01047
`
`agreed with VirnetX’s positions in the petitions that Apple now complains of. On
`
`the other hand, when Apple sought to preclude VirnetX from making use of these
`
`procedural safeguards, the Office rejected Apple’s request as one that “could
`
`prejudice [VirnetX] and place unwarranted administrative burden on the Office.”
`
`See, e.g., Decision Dismissing Petition to Align Schedules, Ex. 2065 at 10.9
`
`Apple’s discussion of the 1,682 and 1,697 proceedings is a red herring that
`
`should have no impact on the proceeding at hand.
`
` Conclusion IV.
`
`
`In sum, the Petitioners’ new, improper arguments do nothing to correct the
`
`defects in their original analysis. As such, for the reasons discussed above and in
`
`Patent Owner’s Response, Petitioners have failed to establish that any of the
`
`challenged claims are unpatentable. Therefore, for at least these reasons, the Board
`
`should confirm the claims and enter judgment against the Petitioners.
`
`
`
`
`9 Patent Owner submits Exhibit 2065 with this paper, which is being relied upon
`
`because of Petitioner Apple Inc.’s new argument.
`
`11
`
`

`
`
`
`Dated: July 15, 2016
`
`Case No. IPR2015-01047
`
`Respectfully submitted,
`
`By: /Joseph E. Palys/
`Joseph E. Palys
`Registration No. 46,508
`Counsel for VirnetX Inc.
`
`
`
`12
`
`

`
`
`
`
`
`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 Petitioners a true and correct copy of the foregoing Patent Owner’s
`
`Sur-Reply by electronic means on the date below at the following address of
`
`Abraham Kasdan (akasdan@wiggin.com)
`Wiggin and Dana LLP
`450 Lexington Avenue
`New York, NY 10017
`IP@wiggin.com
`
`James T. Bailey (jtb@jtbaileylaw.com)
`504 W. 136th St. #1B
`New York, NY 10031
`
`Jeffrey P. Kushan
`Scott Border
`Thomas A. Broughan III
`Sidley Austin LLP
`1501 K Street NW
`Washington, DC 20005
`iprnotices@sidley.com
`
`Thomas H. Martin
`Wesley C. Meinerding
`Martin & Ferraro, LLP
`1557 Lake O’Pines Street, NE
`Hartville, Ohio 44632
`tmartin@martinferraro.com
`docketing@martinferraro.com
`
`
`Respectfully submitted,
`
`
`
` /Joseph E. Palys/
`Joseph E. Palys
`Counsel for VirnetX Inc.
`
`
`
`record:
`
`Dated: July 15, 2016

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