Trials@uspto.gov Paper 19
`571-272-7822
` Date: November 13, 2015
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`THE MANGROVE PARTNERS MASTER FUND, LTD.,
`Petitioner,
`
`v.
`
`VIRNETX INC.,
`Patent Owner.
`____________
`
`Case IPR2015-01047
`Patent 7,490,151 B2
`____________
`
`Before MICHAEL P. TIERNEY, KARL D. EASTHOM, and
`STEPHEN C. SIU, Administrative Patent Judges.
`
`SIU, Administrative Patent Judge.
`
`
`
`DECISION
`Request for Rehearing
`37 C.F.R. § 42.71(d)
`
`
`
`
`571-272-7822
` Date: November 13, 2015
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`THE MANGROVE PARTNERS MASTER FUND, LTD.,
`Petitioner,
`
`v.
`
`VIRNETX INC.,
`Patent Owner.
`____________
`
`Case IPR2015-01047
`Patent 7,490,151 B2
`____________
`
`Before MICHAEL P. TIERNEY, KARL D. EASTHOM, and
`STEPHEN C. SIU, Administrative Patent Judges.
`
`SIU, Administrative Patent Judge.
`
`
`
`DECISION
`Request for Rehearing
`37 C.F.R. § 42.71(d)
`
`
`
`
`
`
`
`
`
`IPR2015-01047
`Patent 7,490,151 B2
`
`I.
`
`BACKGROUND
`
`VirnetX Inc. (“Patent Owner”), in its Request for Rehearing (“Req.
`Reh’g.” or “Request”), seeks reversal of the Board’s Decision (“Decision”)
`to institute an inter partes review of U.S. Patent 7,490,151 B2 (“the ’151
`Patent,” Ex. 1001). See Req. Reh’g. 1. For the reasons that follow, the
`Board denies the requested relief.
`“When rehearing a decision on petition, a panel will review the
`decision for an abuse of discretion.” 37 C.F.R. § 42.71(c). The applicable
`standard for a request for rehearing is set forth in
`37 C.F.R. § 42.71(d), which provides in relevant part:
`A party dissatisfied with a decision may file a request for
`rehearing, without prior authorization from the Board. The
`burden of showing a decision should be modified lies with the
`party challenging the decision. 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, opposition, or a
`reply.
`
`II. DISCUSSION
`Patent Owner argued previously that Petitioner fails to name all of the
`real parties-in-interest. Prelim. Resp. 2. We previously addressed this
`argument. For example, we stated that, based on the record, it has not been
`established “whether the additional entities are real-parties-in-interest.”
`Decision to Institute 8–9. Patent Owner now argues that “Patent Owner
`demonstrated in its Preliminary Response that the ‘Petition fails to name a
`number of RPIs’.” Req. Reh’g. 4 (citing Prelim. Resp. 2–13). As we stated
`in the Decision, we disagree with Patent Owner’s statement that “Patent
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`IPR2015-01047
`Patent 7,490,151 B2
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`Owner demonstrated in its Preliminary Response that the Petition fails to
`name a number of RPIs.” We provide additional details as to why each of
`Patent Owner’s arguments in support of the contention that additional
`entities are supposedly “real-parties-in-interest” is insufficient to
`demonstrate persuasively that “the ‘Petition fails to name a number of
`RPIs’.”
`Whether a party who is not named as a participant in a given
`proceeding constitutes an RPI is a highly fact dependent question that takes
`into account how courts generally have used the terms to “describe
`relationships and considerations sufficient to justify applying conventional
`principles of estoppel and preclusion.” Office Patent Trial Practice Guide, 77
`Fed. Reg. 48,756, 48,759 (Aug. 14, 2012) (“Trial Practice
`Guide”). Although “rarely will one fact, standing alone, be determinative of
`the inquiry” (id. at 48,760), “[a] common consideration is whether the non-
`party exercised or could have exercised control over a party’s participation
`in a proceeding.” Id. at 48,759. The Office Patent Trial Practice Guide, 77
`Fed. Reg. 48,756, 48,759–60 (Aug. 14, 2012) (“TPG”) cites Taylor v.
`Sturgell, 553 U.S. 880 (2008), as informing real party-in-interest
`determinations and states, for example, that a “real party-in-interest” may be
`“the petitioner itself, and/or it may be the party or parties at whose behest the
`petition has been filed” or “whether the non-party exercised or could have
`exercised control over a party’s participation in a proceeding.” TPG 48,759.
`Taylor, 553 U.S. at 893–895 lists six categories that create an exception to
`the common law rule that normally forbids nonparty preclusion in litigation.
`Id. In the present case, Patent Owner has failed to demonstrate sufficiently
`that any of the additional parties are “parties at whose behest the petition has
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`IPR2015-01047
`Patent 7,490,151 B2
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`been filed” or “exercised control over a party’s participation in a
`proceeding.”
`Rather, Patent Owner argues that the Preliminary Response
`supposedly contained “extensive evidence” that “the US Feeder, the Cayman
`Feeder, and Mangrove Capital have repeatedly acted as a single entity with
`the Mangrove Partners Hedge fund and Petitioner.” Req. Reh’g 4.
`Presumably, Patent Owner argues that “the US Feeder, the Cayman Feeder,
`and Mangrove Capital” “exercised control” over “the preparation or filing of
`the Petition.” Patent Owner previously based this contention on the
`allegation that “the US Feeder, the Cayman Feeder, and Mangrove Capital”
`“[a]ll . . . have a ‘shared investment objective . . . [to] compound their net
`worth while minimizing the chances of a permanent loss of capital” and that
`“the Mangrove Partners Hedge Fund has ‘complete discretion regarding the
`investment of . . . assets in accordance with the investment objectives,
`policies and parameters set forth in the applicable offering documents of
`each Fund.” Prelim. Resp. 4 (citing Ex. 2001, 3, 4, 17).
`We are not persuaded by Patent Owner’s arguments because Patent
`Owner does not explain sufficiently how any of these statements, even if
`assumed to be true, demonstrate or even suggest that any of the cited
`additional entities “exercised control over a party’s participation in” the
`preparation or filing of the Petition. Indeed, the fact that other funds have a
`common objective to “minimiz[e] the chances of a permanent loss of
`capital” does not appear to relate to whether or not the other funds exercised
`control over any aspect of the filing of the present Petition or not. Nor does
`Patent Owner explain sufficiently any possible relationship. Also, even
`assuming that the Mangrove Partners Hedge Fund has “complete discretion”
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`IPR2015-01047
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`regarding investment objectives of the Funds, as Patent Owner contends,
`Patent Owner does not demonstrate that the Mangrove Partners Hedge Fund
`also has “complete discretion” over the preparation or filing of the Petition
`to the extent of exercising control over the preparation or filing of the
`Petition.
`Patent Owner also argued that “[t]he Mangrove Partners Hedge Fund
`views itself as having a ‘fiduciary duty’ to invest in a manner that increases
`profits for its investors.” Prelim. Resp. 4 (citing Ex. 2001, 13). Even
`assuming that the Mangrove Partners Hedge Fund seeks to increase profits
`for its investors under a “fiduciary duty,” as Patent Owner alleges, Patent
`Owner does not demonstrate persuasively that the Mangrove Partners Hedge
`Fund also exercised control over any aspect of the preparation or filing of
`the present Petition. Indeed, it is assumed that many funds in existence
`would also seek to increase profits for its investors but are not real-parties-
`in-interest in the present matter (i.e., “exercised control” over the preparation
`or filing of the Petition) merely by virtue of the fact that these funds seek to
`increase profits.
`Patent Owner argues that “the Mangrove Partners Hedge Fund held a
`short position of 270,000 shares of [VirnetX Holding Corporation] stock.”
`Prelim. Resp. 5 (citing Ex. 2004, 2, Ex. 2005, 3). Hence, Patent Owner
`argues that The Mangrove Partners Hedge Fund is a real-party-in-interest in
`the present matter because “The Mangrove Partners Hedge Fund”
`supposedly held stock in VirnetX Holding Corporation. We are not
`persuaded by Patent Owner’s argument, even assuming to be true, Patent
`Owner’s contention that “The Mangrove Partners Hedge Fund,” in fact, held
`stock in VirnetX Holding Corporation. Patent Owner does not demonstrate
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`IPR2015-01047
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`sufficiently that merely holding stock in VirnetX Holding Corporation
`demonstrates that The Mangrove Partners Hedge fund exercised control over
`the preparation or filing of the present Petition. Indeed, it is presumed that
`there are many shareholders in existence that own stock in VirnetX Holding
`Corporation but are not real-parties-in-interest in the present matter merely
`by virtue of the fact that these shareholders own stock.
`Patent Owner argues that “The Mangrove Partners Hedge Fund [or
`Nathaniel August] . . . exercises total control over Petitioner” and that these
`entities (or individual) “have signed . . . every single public document
`associated with Petition that is available in the U.S. Securities and Exchange
`Commission’s EDGAR database.” Prelim. Resp. 5–6 (citing Ex. 2002, 1–2,
`Ex. 2007, 12; Ex. 2008, 12; Ex. 2009, 11; Ex. 2010,11; Ex. 2011, 11; Ex.
`2012, 11; Ex. 2013, 5). We are not persuaded by Patent Owner’s argument,
`even assuming to be true, Patent Owner’s contention that “The Mangrove
`Partners Hedge Fund” or Nathaniel August, in fact, signed various public
`documents stored in the “EDGAR database.” Patent Owner does not
`demonstrate sufficiently that merely signing documents in the “EDGAR
`database” demonstrates that either “The Mangrove Partners Hedge fund” or
`Nathaniel August exercised control over the preparation or filing of the
`present Petition. For example, Patent Owner does not assert or demonstrate
`sufficiently that any of the alleged documents in the “EDGAR database,”
`allegedly signed by “The Mangrove Partners Hedge Fund” or Nathaniel
`August, are even related to the present Petition much less demonstrate that
`“The Mangrove Partners Hedge Fund” or Nathaniel August exercised
`control over the preparation or filing of the present Petition.
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`Patent Owner argues that “Petitioner issued a press release” and
`“nominated Nathaniel August . . . and . . . issued the press release on behalf
`of ‘The Mangrove Partners Master Fund, Ltd. [and others] . . . referring
`itself ‘together with the other participant named herein [as] collectively,
`‘Mangrove’.” Prelim. Resp. 6 (citing Ex. 2014, 1, 3, 4). We are not
`persuaded by Patent Owner’s argument, even assuming to be true, Patent
`Owner’s contention that “Petitioner issued a press release” and referred to
`itself “together with the other [alleged real-party-in-interest]” as
`“Mangrove.” Patent Owner does not demonstrate sufficiently that a real-
`party-in-interest relationship with another party with respect to the
`preparation or filing of the Petition is shown or even suggested merely by a
`reference (by the name “Mangrove”) in a press release of the other party.
`For example, Patent Owner does not allege or demonstrate sufficiently that
`the “press release” also states that “the Mangrove Partners Master Fund,
`Ltd.” (or others) exercised control over the preparation or filing of the
`Petition. Indeed, Patent Owner does not assert that the “press release” refers
`to the Petition at all.
`Patent Owner argues that “[t]he US Feeder and the Cayman Feeder
`‘are constituents of a ‘master-feeder’ structure” that are “allocated initially
`to the Cayman Master [that] is ‘owned by the US Feeder and the Cayman
`Feeder.’” Prelim. Resp. 8–9 (citing Ex. 2001, 3–4, 15). As previously
`described for Patent Owner’s other contentions, this contention, even if
`assumed to be true, is insufficient to demonstrate that any of “the US
`Feeder” or “the Cayman Feeder” played any role in the preparation or filing
`of the Petition (i.e., controlled the preparation or filing of the Petition).
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`IPR2015-01047
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`Patent Owner also argues that “the US Feeder and the Cayman Feeder
`control Petitioner’s activities” because “the US Feeder and the Cayman
`Feeder fund all of the activities of Petitioner.” Prelim. Resp. 9 (citing Ex.
`2001, 1, 15). We are not persuaded by Patent Owner at least because Patent
`Owner has not demonstrated sufficiently that “the US Feeder and the
`Cayman Feeder,” in fact, funds all of the activities of the Petitioner,
`including the preparation or filing of the present Petition to the extent of
`exercising control over the preparation or filing of the present Petition.
`Patent Owner argues that “the Cayman Feeder shares a common
`mailing address and registration address with Petitioner in the Cayman
`islands” and “the US Feeder and Mangrove Capital share a common mailing
`address with the Mangrove Partners Hedge Fund in New York City.”
`Prelim. Resp. 9 (citing Ex. 2016, 1, Ex. 2017, 1, Ex. 2018, 1, Ex. 2019, 1,
`Ex. 2020, 1–2). We are not persuaded by Patent Owner at least because
`Patent Owner has not demonstrated sufficiently that a real-party-in-interest
`relationship with another entity is established merely by sharing a common
`mailing and registration address, even assuming Patent Owner’s contention
`to be correct that the entities, in fact, share a common mailing and
`registration address.
`Patent Owner argues that “the President (Nathaniel August), Chief
`Operating Officer (Ward Dietrich), and Senior Analyst (Jeffrey Kalicka) [of
`Mangrove Capital] are identical to those of the Mangrove Partners Hedge
`Fund.” Prelim. Resp. 9–10 (citing Ex. 2002, 2). To the extent that Patent
`Owner argues that having a common President, Chief Operating Officer, and
`Senior Analyst with another entity establishes a real-party-in-interest
`relationship with that entity with respect to the filing of the Petition, we
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`IPR2015-01047
`Patent 7,490,151 B2
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`disagree with Patent Owner’s contention. Patent Owner provides
`insufficient evidence to support the theory that sharing the same President,
`Chief Operating Officer, and Senior Analyst, without more, demonstrates a
`real-party-in-interest relationship with respect to exercising control in the
`preparation or filing of a Petition.
`Patent Owner argues that there is “a ‘minimum initial investment of
`$1,000,000’” for “the Mangrove Partners Hedge Fund” and therefore,
`according to Patent Owner, “the [unnamed] investors would have each
`provided substantial funding for the Petition.” Prelim. Resp. 10 (citing Ex.
`2001, 6). However, Patent Owner does not demonstrate persuasively that
`any specific investor provided a “minimum initial investment of $1,000,000”
`to exercise control over the preparation or filing of the Petition (or that any
`specific investor was even aware of the Petition) or that any of the alleged
`“minimum initial investment of $1,000,000” was, in fact, used to exercise
`control over the preparation or filing of the Petition on behalf of any specific
`investor.
`Hence, as previously stated, Patent Owner fails to establish
`persuasively “whether the additional entities are real-parties-in-interest.”
`Decision to Institute 8.
`
`
`
`
`
`III. CONCLUSION
`Based on the foregoing discussion, Patent Owner’s Request is granted
`to the extent that the Board has reconsidered the Decision, but Patent
`Owner’s requested relief for a reversal of the Decision is denied because
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`Patent Owner has not shown that the Decision overlooks or misapprehends a
`material point.
`
`IV. ORDER
`For the reasons given, it is
`ORDERED that the Request for Rehearing is denied.
`
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`PETITIONER:
`Abraham Kasdan
`James T. Bailey
`WIGGIN AND DANA LLP
`akasdan@wiggin.com
`jtb@jtbaileylaw.com
`
`PATENT OWNER:
`
`Joseph E. Palys
`Naveen Modi
`PAUL HASTINGS LLP
`josephpalys@paulhastings.com
`naveenmodi@paulhastings.com
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