`Filed: October 21, 2015
`
`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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`35 U.S.C. § 312(a)(2) Requires Consideration of Real Party-in-
`Interest Issues Prior to Consideration of the Merits of a Petition,
`as Numerous Other Panels Have Found ................................................ 3
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`The Office Has Repeatedly Noted the Importance of
`Determining Real Party-in-Interest Issues During the
`Preliminary Stage of a Proceeding ........................................................ 6
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`IV. PATENT OWNER SUGGESTS REHEARING BY AN EXPANDED
`PANEL THAT INCLUDES THE CHIEF JUDGE ......................................... 7
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`V.
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`CONCLUSION ................................................................................................ 9
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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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`Federal Cases
`Apple Inc. v. DSS Technology Management, Inc.,
`IPR2015-00369, Paper No. 14 (August 12, 2015) ............................................... 2
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`Google Inc. v. SimpleAir, Inc.,
`CBM2015-00019, Paper No. 15 (Aug. 19, 2015) ................................................ 8
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`In re Guan, Control No. 95/001,045, Decision Vacating Filing Date
`(Aug. 25, 2008) ..................................................................................................... 7
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`Intellectual Ventures Mgmt., LLC v. Xilinx, Inc.,
`IPR2012-00018, Paper No. 12 (Jan. 24, 2013) (designated
`representative) ....................................................................................................... 3
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`Metrics, Inc. v. Senju Pharm. Co., Ltd.,
`IPR2014-01041, Paper No. 19 (Feb. 19, 2015) .................................................... 3
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`Reflectix, Inc. v. Promethean Insulation Tech. LLC,
`IPR2015-00039, Paper No. 18 (Apr. 24, 2015) .................................... 3, 4, 5, 6, 7
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`TRW Auto. US LLC v. Magna Elecs., Inc.,
`IPR2014-00293, Paper No. 18 (June 27, 2014) (designated
`representative) (expanded panel) .......................................................................... 3
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`Federal Statutes
`35 U.S.C. § 312(a)(2) ........................................................................................passim
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`Rules and Regulations
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`37 C.F.R. § 42.71(c) ................................................................................................... 2
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`37 C.F.R. § 42.71(d) .................................................................................................. 2
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`Amendments to the Rules of Practice for Trials Before the Patent
`Trial and Appeal Board, 80 Fed. Reg. 161 at 50730 (Aug. 20,
`2015) ............................................................................................................. 4, 5, 6
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`ii
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`Office Patent Trial Practice Guide, 77 Fed. Reg. 157 at 48759 (Aug.
`14, 2012) ........................................................................................................... 6, 7
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`Case No. IPR2015-01047
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`Standard Operating Procedure 1, Rev. 14 (May 8, 2015) ..................................... 7, 8
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`iii
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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 October 7, 2015 (“Decision”), instituting an inter partes
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`review of U.S. Patent No. 7,490,151 (“the ’151 patent”). As explained in Patent
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`Owner’s Preliminary Response (Paper No. 9), the Petition (Paper No. 2) should be
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`denied because it fails to properly name all of the real parties-in-interest (“RPIs”),
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`as required by 35 U.S.C. § 312(a)(2).
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`The Decision declined to address the RPI issue at the “preliminary stage”
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`because the “present record does not reflect that Petitioner is precluded from
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`modifying the named real-parties-in-interest to include any of the entities (or
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`subset thereof) cited by Patent Owner [and] the record [does not] indicate that any
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`such modification would result in rendering this proceeding improper.” (Decision
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`at 8.) But the Board’s findings are contrary to section 312(a)(2), which states that
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`“[a] petition filed under section 311 may be considered only if . . . the petition
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`identifies all real parties in interest.” As such, the Board should grant this request
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`and deny the Petition.
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`Moreover, numerous other decisions by the Board have held that section
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`312(a)(2) permits consideration of a petition only if it includes a proper RPI
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`designation. Given the inconsistency between the Decision and the Board’s other
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`decisions on this issue, Patent Owner suggests rehearing by an expanded panel that
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`includes the Chief Judge to secure and maintain uniformity. Rehearing by an
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`expanded panel is also warranted given this is an issue of exceptional
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`importance—the Board’s fundamental statutory authority to consider an IPR
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`petition on the merits without first conducting an RPI analysis.
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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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`Institution decisions are reviewed on rehearing for an abuse of discretion.
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`See 37 C.F.R. § 42.71(c). An abuse of discretion occurs when a “decision [i]s
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`based on an erroneous conclusion of law or clearly erroneous factual findings,
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`or . . . a clear error of judgment.” Apple Inc. v. DSS Technology Management, Inc.,
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`IPR2015-00369, Paper No. 14 at 3 (August 12, 2015) (citing PPG Indus. Inc. v.
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`Celanese Polymer Specialties Co., 840 F.2d 1565, 1567 (Fed. Cir. 1988)).
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`III. STATEMENT OF REASONS FOR RELIEF REQUESTED
`The Decision declined to consider whether the Petition properly identified
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`all of the RPIs because the “present record does not reflect that Petitioner is
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`precluded from modifying the named real-parties-in-interest to include any of the
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`entities (or subset thereof) cited by Patent Owner [and] the record [does not]
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`2
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`indicate that any such modification would result in rendering this proceeding
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`Case No. IPR2015-01047
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`improper.” (Decision at 8.) Patent Owner respectfully requests rehearing of the
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`Decision because under 35 U.S.C. § 312(a)(2), the Petition can only be considered
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`if, and only if, “the petition identifies all real parties in interest.” (See Preliminary
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`Response at 11-13.) Here, the Petition failed to do so and should have been
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`denied. (Id.) It was legal error for the Board to hold otherwise.
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`A.
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`35 U.S.C. § 312(a)(2) Requires Consideration of Real Party-in-
`Interest Issues Prior to Consideration of the Merits of a Petition,
`as Numerous Other Panels Have Found
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`The Board, citing section 312(a)(2), has repeatedly held that a “petition for
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`inter partes review may be considered only if, inter alia, ‘the petition identifies all
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`real parties in interest.’” TRW Auto. US LLC v. Magna Elecs., Inc., IPR2014-
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`00293, Paper No. 18 at 12-13 (June 27, 2014) (designated representative)
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`(expanded panel) (emphasis added); see also Intellectual Ventures Mgmt., LLC v.
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`Xilinx, Inc., IPR2012-00018, Paper No. 12 at 2-3 (Jan. 24, 2013) (designated
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`representative); Metrics, Inc. v. Senju Pharm. Co., Ltd., IPR2014-01041, Paper No.
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`19 at 5 (Feb. 19, 2015) (“We may consider a petition for inter partes review only if
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`it identifies all real parties-in-interest”). The “America Invents Act (‘AIA’) is
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`unequivocal: a petition for inter partes review ‘may be considered only if’ it
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`identifies all RPIs.” Reflectix, Inc. v. Promethean Insulation Tech. LLC, IPR2015-
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`00039, Paper No. 18 at 7 (Apr. 24, 2015) (emphasis in original); see also
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`3
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`Amendments to the Rules of Practice for Trials Before the Patent Trial and Appeal
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`Case No. IPR2015-01047
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`Board, 80 Fed. Reg. 161 at 50730 (Aug. 20, 2015) (“The statute requires a petition
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`to identify all real parties-in-interest without qualification.”). The “determination
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`of whether a petition identifies all real parties-in-interest is a ‘threshold issue,’ on
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`which the Petitioner bears the burden of persuasion.” Reflectix, IPR2015-00039,
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`Paper No. 18 at 8 (citing Atlanta Gas Light Co. v. Bennett Regulator Guards, Inc.,
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`IPR2013-00453, Paper No. 88 at 7-8 (Jan. 6, 2015)).
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`In the case at hand, Patent Owner demonstrated in its Preliminary Response
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`that the “Petition fails to name a number of RPIs, including at least (1) the
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`Mangrove Partners Hedge Fund; (2) Nathaniel August (President and majority
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`owner of the Mangrove Partners Hedge Fund); (3) The Mangrove Partners Fund,
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`L.P. (‘the US Feeder’); (4) The Mangrove Partners Fund (Cayman), Ltd. (‘the
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`Cayman Feeder’); (5) Mangrove Capital (the General Partner of the US Feeder);
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`and (6) the unnamed investors in the US Feeder and the Cayman Feeder.” See
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`Preliminary Response at 2; see also id. at 3-13. For example, extensive evidence
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`was presented establishing that the Mangrove Partners Hedge Fund and Nathaniel
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`August have complete control over Petitioner’s conduct and funding. (See id. at 4-
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`8.) Similarly, extensive evidence was presented that the US Feeder, the Cayman
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`Feeder, and Mangrove Capital have repeatedly acted as a single entity with the
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`Mangrove Partners Hedge Fund and Petitioner, establishing that they too have an
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`4
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`actual measure of control over this proceeding. (See id. at 8-10.) And with respect
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`to the unnamed investors, evidence was presented with respect to a special
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`fiduciary duty that compels a finding that the investors are RPIs. (See id. at 10-
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`11.)
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`In view of the above, Patent Owner respectfully submits that the Board
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`legally erred in finding that it was not required to determine, in the Decision,
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`whether the Petition failed to properly identify the RPIs. As the Board itself has
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`previously recognized, section 312(a)(2) is unequivocal: a petition for inter partes
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`review may be considered only if it identifies all RPIs. Reflectix, IPR2015-00039,
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`Paper No. 18 at 7; see also 80 Fed. Reg. 161 at 50730.
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`In addition, the Decision’s observation that “Petitioner has not had the
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`opportunity to either provide evidence whether the additional entities are real-
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`parties-in-interest and/or modify the named real-parties-in interest if it is
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`determined that any of the additional entities are, in fact, real-parties-in-interest”
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`does not negate the legal error in the Decision. (Decision at 8-9.) To the contrary,
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`the Decision overlooks that Petitioner had the initial burden to investigate this
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`factual issue and would have been privy to facts regarding whether any other entity
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`was a RPI at the time Petitioner filed the Petition. See, e.g., Reflectix, IPR2015-
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`00039, Paper No. 18 at 8 (citing Atlanta Gas Light Co. v. Bennett Regulator
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`Guards, Inc., IPR2013-00453, Paper No. 88 at 7-8 (Jan. 6, 2015)); see also 80 Fed.
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`5
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`Reg. 161 at 50730. Indeed, not only did Petitioner have the “opportunity” to
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`Case No. IPR2015-01047
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`identify such an entity in its Petition, it had nearly three months to raise the issue to
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`the Board after reviewing Patent Owner’s Preliminary Response. Neither occurred
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`here and Petitioner should not be permitted to “correct” its RPI designation at this
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`time. The Petition should be denied.
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`B.
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`The Office Has Repeatedly Noted the Importance of Determining
`Real Party-in-Interest Issues During the Preliminary Stage of a
`Proceeding
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`The Office recently recognized that “it is important to resolve real party-in-
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`interest and privity issues as early as possible, preferably in the preliminary stage
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`of the proceeding prior to institution, to avoid unnecessary delays and to minimize
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`cost and burden on the parties and the resources of the Office.” 80 Fed. Reg. 161
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`at 50729 (emphasis added). The statute and the Office require proper identification
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`of the RPIs before the merits of a petition are considered for good reason. For
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`instance, “[t]he Board relies on petitioner’s identification of the RPI to determine
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`conflicts of interest for the Office [and] the credibility of evidence presented in a
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`proceeding.” Reflectix, IPR2015-00039, Paper No. 18 at 8 (citing GEA Process
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`Eng’g Inc. v. Steuben Foods, Inc., IPR2014-00041, Paper No. 140 at 24 (Feb. 11,
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`2015)); see also Office Patent Trial Practice Guide, 77 Fed. Reg. 157 at 48759
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`(Aug. 14, 2012) (same). In addition, the other “core function” of the “‘real party-
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`in-interest’ and ‘privies’ requirement . . . [is] to assure proper application of the
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`6
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`statutory estoppel provisions,” which “seek[] to protect patent owners from
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`Case No. IPR2015-01047
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`harassment via successive petitions by the same or related parties, to prevent
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`parties from having a ‘second bite at the apple,’ and to protect the integrity of both
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`the USPTO and Federal Courts by assuring that all issues are promptly raised and
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`vetted.” 77 Fed. Reg. 157 at 48759; see also In re Guan, Control No. 95/001,045,
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`Decision Vacating Filing Date (Aug. 25, 2008) (finding that the goal of requiring
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`the identification of RPIs is to ensure that the estoppel requirements are not “easily
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`circumvented by naming a straw man if every first request for inter partes
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`reexamination filed against a patent could avoid identifying the actual real party in
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`interest.”).
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`Petitioner’s incorrect RPI identification here goes directly to the concerns
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`raised by the Board and the Office. For instance, Petitioner’s incorrect
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`identification of RPI does not allow the Board to determine conflict issues. It also
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`should cause the evidence presented in the Petition to be viewed with less
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`credibility. See Reflectix, IPR2015-00039, Paper No. 18 at 8; Office Patent Trial
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`Practice Guide, 77 Fed. Reg. 157 at 48759; see also Preliminary Response at 11-
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`13. Finally, it also prevents proper application of the statutory estoppel provisions.
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`IV. PATENT OWNER SUGGESTS REHEARING BY AN EXPANDED
`PANEL THAT INCLUDES THE CHIEF JUDGE
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`Patent Owner suggests 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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`7
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`(May 8, 2015), Section III.C; see also Google Inc. v. SimpleAir, Inc., CBM2015-
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`Case No. IPR2015-01047
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`00019, Paper No. 15 at 8 (Aug. 19, 2015) (considering a suggestion for expanded
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`panel review under Standard Operating Procedure 1, Rev. 14). Patent Owner is
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`making this suggestion because (1) the Decision “involves an issue of exceptional
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`importance,” see Standard Operating Procedure 1, Rev. 14, Section III.A, and (2)
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`“[c]onsideration by an expanded panel is necessary to secure and maintain
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`uniformity of the Board’s decisions, such as where different panels of the Board
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`render conflicting decisions on issues of statutory interpretation . . ., or a
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`substantial difference of opinion among judges exists on issues of statutory
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`interpretation,” see id.
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`This request involves an issue of exceptional importance because it involves
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`the Board’s fundamental statutory authority to consider an IPR petition on the
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`merits without first conducting an analysis of RPI, as required by section
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`312(a)(2). See supra Section III. Consideration by an expanded panel is also
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`required to secure and maintain uniformity of the Board’s decisions because
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`numerous panels have interpreted section 312(a)(2), contrary to the Decision’s
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`findings, to require an analysis of RPI prior to consideration of a petition on the
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`merits. See id.
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`8
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`V. CONCLUSION
`As discussed above, proper identification of the RPIs associated with a
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`petition plays a fundamental role in inter partes review practice for numerous
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`reasons. Even putting aside those reasons, the statute states that a petition shall
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`only be considered if it identifies all RPIs. Accordingly, the Board should have
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`determined, in the Decision, whether the parties identified in the Preliminary
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`Response were improperly omitted RPIs. For these reasons, VirnetX respectfully
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`requests rehearing of the Decision and denial of the Petition because it fails to
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`Respectfully submitted,
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`
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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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`identify all the RPIs.
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`Dated: October 21, 2015
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`9
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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: October 21, 2015