`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
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`THE MANGROVE PARTNERS MASTER FUND, LTD., APPLE INC., and
`BLACK SWAMP IP, LLC,
`Petitioner
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`v.
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`VIRNETX INC.,
`Patent Owner
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`
`
`Case IPR2015-010471
`Patent 7,490,151
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`Patent Owner’s Sur-Reply
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`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.
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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 ...................................................................................................... 1
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`Petitioners’ Improper New Arguments Fail to Remedy the Petitioners’
`Original Analysis ............................................................................................. 2
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`A.
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`B.
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`C.
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`Petitioners’ New Position 1 ................................................................... 2
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`Petitioners’ New Positions 2 and 4 ....................................................... 3
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`Petitioners’ New Position 3 ................................................................... 8
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`III. Petitioner Apple Inc.’s Separate Reply Omits Telling Facts.........................10
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`IV. Conclusion .....................................................................................................11
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`i
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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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`Cases
`Intelligent Bio-Sys., Inc. v. Illumina Cambridge Ltd.,
`821 F.3d 1359 (Fed. Cir. 2016) ............................................................................ 1
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`Statutes
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`35 U.S.C. § 312(a)(3) ............................................................................................. 1, 8
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`Other Authorities
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`37 C.F.R. § 42.23(b) .................................................................................................. 1
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`Office Patent Trial Practice Guide,
`77 Fed. Reg. 48,756 (Aug. 14, 2012) ................................................................... 1
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`
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`ii
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`
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`I.
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`Introduction
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`Case No. IPR2015-01047
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`In an Order dated July 7, 2016, the Board authorized Patent Owner to file a
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`sur-reply “limited to issues enumerated by Patent Owner in Patent Owner’s
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`Identification of Improper Arguments in Petitioners’ Consolidated Reply Brief and
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`Petitioner Apple Inc.’s Separate Reply Filing).” Paper No. 75 at 2. As discussed
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`below, Petitioners’ new positions (see Paper No. 61 at 1–3) are flawed and fail to
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`remedy the deficiencies of Petitioners’ original positions. As such, to the extent
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`the Board considers the substance of Petitioners’ improper new arguments,2 the
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`Board should enter judgment against Petitioners, confirm the patentability of the
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`claims, and terminate this proceeding.
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`2 Patent Owner continues to maintain that Petitioners’ new arguments should not
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`be considered at this late stage. See Intelligent Bio-Sys., Inc. v. Illumina
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`Cambridge Ltd., 821 F.3d 1359, 1369 (Fed. Cir. 2016) (“Unlike district court
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`litigation—where parties have greater freedom to revise and develop their
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`arguments over time and in response to newly discovered material—the expedited
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`nature of IPRs bring with it an obligation for petitioners to make their case in their
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`petition to institute.”) (emphasis added); see also 35 U.S.C. § 312(a)(3); 37 C.F.R.
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`§ 42.23(b); Office Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,767 (Aug.
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`14, 2012).
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` 1
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`II.
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`Case No. IPR2015-01047
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`Petitioners’ Improper New Arguments Fail to Remedy the Petitioners’
`Original Analysis
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`In its Patent Owner’s Response (Paper No. 48, “Patent Owner Resp.”),
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`VirnetX set forth a multitude of reasons why Petitioners’ asserted grounds of
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`unpatentability must fail. In response, Petitioners’ Consolidated Reply Brief
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`(Paper No. 56, “Consol. Rep.”) shifts Petitioners’ positions in at leave four ways.
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`Paper No. 61 at 1–3 (identifying Petitioners’ New Positions 1–4). But these new
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`positions are unsupported attorney arguments and do not actually remedy the
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`problems with Petitioners’ anticipation and obviousness allegations. Each of
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`Petitioners’ new arguments should be rejected.
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`Petitioners’ New Position 1
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`A.
`Each of independent claims 1, 7, and 13 recites, among other things, a
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`“client,” “secure server,” and a “secure channel” or “encrypted channel” “between
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`the client and the secure server.” Petitioners’ Consolidated Reply Brief asserts that
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`“[m]ultiple different aspects of the Kiuchi system meet the ‘client’ and ‘secure
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`server’ elements of the claims,” including “(1) the user agent and origin server
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`[and] (2) the client-side and server-side proxies,” which as discussed in Patent
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`Owner’s Response (at 17–25) do not read on the claims, along with a new
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`mapping: “(3) the user agent and server-side proxies.” Consol. Rep. at 3; see also
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`2
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`Paper No. 61 at 1–2 (identifying Petitioners’ new position).3 Like Petitioners’
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`original mappings, this new mapping fails to support Petitioners’ positions.
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`For instance, with respect to claims 1 and 7, Kiuchi only discloses using
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`encryption in the C-HTTP communication between the client-side proxy and the
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`server-side proxy, and nowhere else. Patent Owner Resp. at 18–19. Therefore,
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`because encryption does not extend to Kiuchi’s user agent (which Petitioners now
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`point to as the claimed “client”), Kiuchi does not disclose an “encrypted channel
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`between the client and the secure server,” as claimed. Id.
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`Petitioners’ New Positions 2 and 4
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`B.
`Petitioners and their expert originally admitted that the hostname in a URL
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`“corresponds to an origin server” that is only “associated with a server-side proxy.”
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`See Paper No. 5 at 21; see also Ex. 1003 at ¶ 22. Based on this then-undisputed
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`operation of Kiuchi (among other things), Patent Owner showed how Kiuchi does
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`not disclose the recited DNS features (e.g., “DNS requests sent by a client”). See
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`Patent Owner Resp. at 15–16. In response, Petitioners now shift gears and contend
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`3 Petitioners argue that this is not a new argument because they pointed to the user
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`agent as being a “client” and the server-side proxy as being a “secure server.”
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`Paper No. 62 at 1. Petitioners miss the point that they did not originally rely on
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`both the user agent and server-side proxy for the claimed “client” and “secure
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`server” in the same claim mapping.
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`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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`appendices. Consol. Rep. at 4; see also Paper No. 61 at 2 (identifying Petitioners’
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`new position).4 Petitioners’ new interpretation of Kiuchi is wrong—worse still,
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`Petitioners’ Consolidated Reply Brief fails to even mention evidence (that at least
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`Apple was aware of) showing Petitioners’ new interpretation of Kiuchi is wrong.
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`In characterizing the hostname as corresponding to a server-side proxy,
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`Petitioner’s point to a “Server-Side-Proxy-Name” field in Kiuchi’s appendices that
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`is allegedly “[u]sed for specifying the hostname of a server side proxy.” Consol.
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`Rep. at 6–7; Ex. 1002 at Appendix 1. But this field actually refers to the URL of
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`4 Petitioners argue that this is not a new argument because Dr. Guerin relied on
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`Kiuchi’s appendices, and that they in turn cited to Dr. Guerin’s declaration. Paper
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`No. 62 at 1–2 (citing Ex. 1003 at ¶ 29). However, Dr. Guerin’s citation to Kiuchi’s
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`appendices has nothing whatsoever to do with whether the hostname in a URL
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`corresponds to an origin server or server-side proxy. Petitioners also argue that
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`they originally “explained that ‘the hostname . . . designates the server side
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`proxy.’” Paper No. 62 at 2 (citing Paper No. 5 at 27) (ellipses original).
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`Petitioners’ use of ellipses is telling—the petition actually said that “the hostname
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`corresponds to an origin server associated with a server-side proxy and designates
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`the server-side proxy.” Paper No. 5 at 27 (emphasis noting the omitted quotation).
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`4
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`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.
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`Kiuchi
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`explains
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`that
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`the
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`URL
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`“http://server.in.current.connection/sample.html=@=6zdDfldfcZLj8V!i” represents
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`a “resource name,” and that when the URL is clicked, “the client-side proxy takes
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`off the connection ID (i.e., “6zdDfldfcZLj8V”) and forwards, the stripped, original
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`resource name to the server . . . .” Ex. 1002 at 8–9, Figs. (b), (c) (reproduced
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`below) (emphases added); Ex. 2038 at ¶ 43.
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`Thus, the Kiuchi’s URL belongs to the resource on the origin server. Interpreting
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`the “Server-Side-Proxy-Name” field as referring to the domain name of the server-
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`side proxy would be inconsistent with Kiuchi’s main text.
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`In fact, in raising its new argument, Petitioners did not inform the Board
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`(even though at least Apple was aware) that a 1996 slide presentation
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`accompanying Kiuchi, presented to the Institute of Electrical and Electronics
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`5
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`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
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`between VirnetX and Apple nearly four years ago.5 See Kiuchi Slide Presentation,
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`Ex. 2063; see also Transcript of Trial, Morning Session, VirnetX, Inc. v. Apple,
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`Inc., Case No. 6:10-CV-417 (E.D. Tex. Nov. 5, 2012), Ex. 2041 at 68:13–69:14;
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`Transcript of Trial, Afternoon Session, VirnetX, Inc. v. Apple, Inc., Case No. 6:10-
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`CV-417 (E.D. Tex. Nov. 5, 2012), Ex. 2064 at 39:20–41:20, 104:24–106:17.6 For
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`example, slide 9 of the presentation explains that the C-HTTP name server “keeps”
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`“resource names.” Ex. 2063 at 9. Additionally, slide 17 illustrates that a C-HTTP
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`name request includes a “RESOURCE-NAME,” (id. at 17), while slide 20 shows
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`that the C-HTTP name response that follows includes a “SERVER-SIDE-PROXY-
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`IP [address],” (id. at 20). Indeed, expert testimony at trial confirmed that the
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`Kiuchi system would not work if the URL did not refer to the resource on the
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`origin server. See, e.g., Ex. 2064 at 40:15–20 (“Q. Would the Kiuchi system work
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`if the client-side proxy requested a domain name for the server-side proxy from
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`5 This discussion and the presentation was part of the record before the Federal
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`Circuit, which found Kiuchi not to anticipate the claims of the ’151 patent.
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`VirnetX Inc. v. Cisco Sys., 767 F.3d 1308, 1324 (Fed. Cir. 2014).
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`6 Patent Owner submits Exhibits 2063 and 2064 with this paper, each of which is
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`being relied upon because of Petitioners’ new arguments.
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`6
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`C-HTTP? A. No. The way Kiuchi has to work is that what’s being requested is
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`the resource that’s on the origin server. That’s where the data is.”).
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`Relatedly, Petitioners asserted for the first time in their Consolidated Reply
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`Brief that RFC 1945 “defin[es] HTTP/1.0 used in Kiuchi” and that RFC 1945
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`“explains the ‘host’ is the domain name component of an HTTP URL.” Consol.
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`Rep. at 6–7; see also Paper No. 61 at 2–3 (identifying Petitioners’ new position).7
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`Petitioners are incorrect. For one, there is no evidence—only attorney argument—
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`that RFC 1945 “defin[es] HTTP/1.0 used in Kiuchi.” In any event, RFC 1945 does
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`not support Petitioners’ suggestion that only a domain name from a URL (e.g.,
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`server.in.connection) will be sent to the C-HTTP name server. To the contrary, as
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`discussed above, Kiuchi’s URL that is provided to the C-HTTP name server
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`belongs to the resource on the origin server. See also Ex. 2038 at ¶ 43.
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`Therefore, because the hostname in a URL corresponds to an origin server,
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`Kiuchi does not disclose the claimed DNS features. See Patent Owner Resp. at
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`7 Petitioners argue that this is not a new argument, referencing paragraph 18 of Dr.
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`Guerin’s declaration. Paper No. 62 at 3. But paragraph 18 of Dr. Guerin’s
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`declaration only refers to RFC 1945 as “describing proxy as an ‘intermediary
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`program which acts as both a server and a client for the purpose of making requests
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`on behalf of other clients,’” which has nothing to do with Petitioners’ new position.
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`See Ex. 1003 at ¶ 18.
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`7
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`15–16; see also Patent Owner Resp. at 13–16 (discussing generally why Kiuchi
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`does not disclose the claimed DNS features).
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`Petitioners’ New Position 3
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`C.
`Petitioners assert for the first time in their Consolidated Reply Brief that “the
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`client-side proxy and C-HTTP name server ‘determin[e]’ whether access to a
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`secure website was requested” and work “together” to make this determination.
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`Consol. Br. at 8; see also Paper No. 61 at 2 (identifying Petitioners’ new position).
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`Petitioners’ new position ignores the requirements of the claims in the context of
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`the ’151 patent.
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`In alleging anticipation, Petitioners rely on Kiuchi’s client-side proxy for the
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`“domain name server (DNS) proxy module” recited in claims 1 and 7, and the
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`“domain name server (DNS) module” recited in claim 13. See, e.g., Paper No. 5 at
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`25, 32–33.8 It is the DNS proxy module or DNS module that must perform the
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`claimed “determining.” By relying on operations of both the client-side proxy and
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`8 In their Identification of Reply Arguments, Petitioners rely on ambiguity in their
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`original positions to suggest that the client-side proxy and C-HTTP name server
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`may collectively map to the DNS proxy module or DNS module recited in the
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`claims. See Paper No. 62 at 2. But any ambiguity should not go to the benefit of
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`Petitioners, especially in light of the “particularity” requirement of 35 U.S.C. §
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`312(a)(3).
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`8
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`C-HTTP name server for the claimed “determining,” Petitioners have not shown
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`Case No. IPR2015-01047
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`that the claimed DNS proxy module or DNS module (i.e., the client-side proxy in
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`Petitioners’ mapping) performs the claimed “determining” limitation.
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`Moreover, the problems with Petitioners’ new position cannot be resolved
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`by viewing the client-side proxy and C-HTTP name server as collectively mapping
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`to the claimed DNS proxy module or DNS module. The client-side proxy and C-
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`HTTP name server play distinct roles in Kiuchi’s system. See, e.g., Ex. 1002 at 7,
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`11. Petitioners have not established, for example, how Kiuchi’s server-side proxy
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`could “ask[] the C-HTTP name server whether the client-side proxy is an
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`appropriate member of the closed network,” before the server-side proxy even has
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`the IP address of the client-side proxy, if the C-HTTP name server was itself a part
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`of the same component as the client-side proxy, which is the result of Petitioners’
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`new mapping. See Ex. 1002 at 8–9. Indeed, Kiuchi explains that “C-HTTP-based
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`communication is made possible” with three distinct components: “1) a client-side
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`proxy on the firewall of one institution, 2) a server-side proxy on the firewall of
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`another institution and 3) a C-HTTP name server, which manages a given C-
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`HTTP-based network and the information for [] all proxies.” Id. at 7, § 2.1.
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`Kiuchi’s C-HTTP protocol and processes rely on the separation of functionality
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`between these components. Id. at 7–8, § 2.2, 8–10, § 2.3. Kiuchi’s C-HTTP name
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`server is centralized (see, e.g., id. at 11–12, § 4.3), but Petitioners’ new mapping
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`9
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`attempts to distort the functionality of Kiuchi’s arrangement by merging the
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`Case No. IPR2015-01047
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`C-HTTP name server functionalities with the client-side proxy’s functionalities.
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`Petitioners do not explain how such an arrangement would accommodate the
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`C-HTTP name server’s role as disclosed in Kiuchi, especially with respect to the
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`server-side proxy that must also communicate with the C-HTTP name server for
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`C-HTTP communications to work. See, e.g., id. at 8–10.
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` Petitioner Apple Inc.’s Separate Reply Omits Telling Facts III.
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`Apple tries to make much of certain administrative petitions filed by
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`VirnetX in pending inter partes reexamination Control Nos. 95/001,682 (“the
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`1,682 proceeding”) and 95/001,697 (“the 1,697 proceeding”), accusing VirnetX of
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`“paralyz[ing]” those proceedings. See Paper No. 59 at 3–5. VirnetX has not
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`delayed resolution of those reexaminations in any way.
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`In the 1,682 proceeding, Apple filed an approximately 400-page request for
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`reexamination (containing over 200 pages of analysis, accompanied by an
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`additional over 200 pages of claim charts). Similarly, in the 1,697 proceeding,
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`Apple filed an approximately 400-page request for reexamination (containing just
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`under 200 pages of analysis, accompanied by an additional over 200 pages of
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`claim charts). Given the extreme size of Apple’s requests—which would have
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`been impermissible in today’s inter partes review practice—VirnetX has
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`occasionally requested modest extensions of time and increased page limits to try
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`10
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`to level the playing field. In fact, Apple fails to mention that the Office has largely
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`Case No. IPR2015-01047
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`agreed with VirnetX’s positions in the petitions that Apple now complains of. On
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`the other hand, when Apple sought to preclude VirnetX from making use of these
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`procedural safeguards, the Office rejected Apple’s request as one that “could
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`prejudice [VirnetX] and place unwarranted administrative burden on the Office.”
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`See, e.g., Decision Dismissing Petition to Align Schedules, Ex. 2065 at 10.9
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`Apple’s discussion of the 1,682 and 1,697 proceedings is a red herring that
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`should have no impact on the proceeding at hand.
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` Conclusion IV.
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`In sum, the Petitioners’ new, improper arguments do nothing to correct the
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`defects in their original analysis. As such, for the reasons discussed above and in
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`Patent Owner’s Response, Petitioners have failed to establish that any of the
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`challenged claims are unpatentable. Therefore, for at least these reasons, the Board
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`should confirm the claims and enter judgment against the Petitioners.
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`9 Patent Owner submits Exhibit 2065 with this paper, which is being relied upon
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`because of Petitioner Apple Inc.’s new argument.
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`11
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`Dated: July 15, 2016
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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
`Counsel for VirnetX Inc.
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`12
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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 Petitioners a true and correct copy of the foregoing Patent Owner’s
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`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
`
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`Respectfully submitted,
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`
`
` /Joseph E. Palys/
`Joseph E. Palys
`Counsel for VirnetX Inc.
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`
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`record:
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`Dated: July 15, 2016