Paper No. 102
`Filed: November 19, 2019
`
`
`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,
`Petitioners,
`
`v.
`
`VIRNETX INC.,
`Patent Owner.
`
`––––––––––––––––––
`
`Case No. IPR2015-010471
`U.S. Patent No. 7,490,151
`
`––––––––––––––––––
`
`PETITIONERS’ OPPOSITION TO PATENT OWNER’S
`NOVEMBER 6, 2019 REQUEST FOR REHEARING
`
`
`
`1 Apple Inc. and Black Swamp IP, LLC, which filed petitions in IPR2016-00063
`and IPR2016-00167, respectively, have been joined as Petitioners in the instant
`proceeding.
`
`
`Filed: November 19, 2019
`
`
`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,
`Petitioners,
`
`v.
`
`VIRNETX INC.,
`Patent Owner.
`
`––––––––––––––––––
`
`Case No. IPR2015-010471
`U.S. Patent No. 7,490,151
`
`––––––––––––––––––
`
`PETITIONERS’ OPPOSITION TO PATENT OWNER’S
`NOVEMBER 6, 2019 REQUEST FOR REHEARING
`
`
`
`1 Apple Inc. and Black Swamp IP, LLC, which filed petitions in IPR2016-00063
`and IPR2016-00167, respectively, have been joined as Petitioners in the instant
`proceeding.
`
`
`
`IPR2015-01047
`
`U.S. Patent No. 7,490,151
`
`TABLE OF CONTENTS
`
`I.
`Introduction ................................................................................................ 1
`Background ................................................................................................. 1
`II.
`III. VirnetX’s Request for Rehearing under a New Panel Should Be Denied 2
`A. Discovery Orders, like Institution Decisions, Do Not Implicate the
`Same Constitutional Concerns as Final Written Decisions .................. 2
`Arthrex Left Intact Multiple Other Non-Final Orders Analogous to the
`Discovery Order Here ......................................................................... 4
`IV. Conclusion ................................................................................................... 5
`
`
`B.
`
`
`
`
`
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`PETITIONERS’ OPP. TO PO’S NOV. 6, 2019 REQ. FOR REH’G
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`IPR2015-01047
`
`U.S. Patent No. 7,490,151
`
`TABLE OF AUTHORITIES
`
` Page(s)
`
`Cases
`Arthrex, Inc. v. Smith & Nephew, Inc.,
`No. 18-2140, 2019 WL 5616010 (Fed. Cir. Oct. 31, 2019) ....................... passim
`Bedgear, LLC v. Fredman Bros. Furniture Co.,
`No. 2018-2082, 2019 WL 5806893 (Fed. Cir. Nov. 7, 2019) ............................. 5
`
`Smith & Nephew, Inc. v. Arthrex, Inc.,
`IPR2017-00275 ................................................................................................. 4
`Statutes
`35 U.S.C. § 141(c) .................................................................................................. 2
`35 U.S.C. § 314 ...................................................................................................... 3
`35 U.S.C. § 316(a)(5) .......................................................................................... 3, 4
`35 U.S.C. § 316(c) .................................................................................................. 4
`35 U.S.C. § 318(a) .............................................................................................. 2, 4
`35 U.S.C. § 319 ...................................................................................................... 2
`Other Authorities
`37 C.F.R. § 42.4(a) ................................................................................................. 3
`37 C.F.R. § 42.51 .................................................................................................... 3
`
`
`
`
`
`ii
`PETITIONERS’ OPP. TO PO’S NOV. 6, 2019 REQ. FOR REH’G
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`IPR2015-01047
`
`I.
`
`Introduction
`
`U.S. Patent No. 7,490,151
`
`Patent Owner VirnetX Inc.’s (“VirnetX”) latest rehearing request argues that
`
`rehearing of the Board’s October 23, 2019 Order (Paper 97, “October 23 Order”) is
`
`“necessary in light of the Federal Circuit’s recent decision Arthrex, Inc. v. Smith &
`
`Nephew, Inc., No. 18-2140, 2019 WL 5616010 (Fed. Cir. Oct. 31, 2019), so that a
`
`new panel could consider VirnetX’s original motion to remove constitutional
`
`concerns.” See Paper 101, 1 (“Reh’g Req.”).
`
`The predicate of VirnetX’s request—that “any action taken” in an IPR
`
`proceeding must now be redone after Arthrex (Reh’g Req. 6)—is simply incorrect.
`
`Instead, the Federal Circuit in Arthrex left intact the institution decision because it
`
`did not implicate the same constitutional concerns as a final written decision, and
`
`maintained other non-final orders. The October 23 Order is a decision that likewise
`
`raises no constitutional concerns. VirnetX’s rehearing request should be denied.2
`
`II. Background
`
`The Federal Circuit’s Arthrex decision held that “APJs have substantial
`
`power to issue final decisions on behalf of the United States without any review by
`
`a presidentially-appointed officer,” reasoning that “[t]here is no provision or
`
`
`
`2 The Board authorized this opposition via email on November 15. Petitioners
`
`previously opposed VirnetX’s other rehearing argument. See Paper 91 at 11–14.
`
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`PETITIONERS’ OPP. TO PO’S NOV. 6, 2019 REQ. FOR REH’G
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`IPR2015-01047
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`U.S. Patent No. 7,490,151
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`procedure providing the Director the power to single-handedly review, nullify or
`
`reverse a final written decision issued by a panel of APJs.” Arthrex at *5, *4; see
`
`also 35 U.S.C. §§ 141(c), 318(a), 319. Because this meant the current structure of
`
`the Board had violated the Appointments Clause, the court vacated the final written
`
`decision and remanded the case for hearing by a new panel. Arthrex at *8-10.
`
`The court, however, clearly limited the remedy it ordered: only the Board’s
`
`final written decision was vacated and remanded to a new panel. As the court
`
`stated, “[t]o be clear, on remand the decision to institute is not suspect; we see no
`
`constitutional infirmity in the institution decision as the statute clearly bestows
`
`such authority on the Director pursuant to 35 U.S.C. § 314.” Id. at *12. The court
`
`also saw “no error in the new panel proceeding on the existing written record …,”
`
`id., which included three non-final orders, none of which were vacated. See Smith
`
`& Nephew, Inc. v. Arthrex, Inc., IPR2017-00275, Papers 8, 16, 26.
`
`III. VirnetX’s Request for Rehearing under a New Panel Should Be Denied
`
`A. Discovery Orders, like Institution Decisions, Do Not Implicate the
`Same Constitutional Concerns as Final Written Decisions
`
`VirnetX’s request for rehearing by a new panel ignores the narrow remedy
`
`actually ordered in Arthrex. See Reh’g Req. 5–9. In that case, the Federal Circuit
`
`limited the decisions that required rehearing by a new panel to those implicating
`
`the same constitutional concerns as final written decisions. Discovery orders like
`
`the Board’s October 23 Order are not such decisions.
`
`2
`PETITIONERS’ OPP. TO PO’S NOV. 6, 2019 REQ. FOR REH’G
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`IPR2015-01047
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`U.S. Patent No. 7,490,151
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`Most notably, the Court found “no constitutional infirmity in the institution
`
`decision as the statute clearly bestows such authority on the Director pursuant to 35
`
`U.S.C. § 314.” Arthrex at 12; 35 U.S.C. § 314(a) (“The Director may not authorize
`
`an inter partes review to be instituted unless …”). The Director has delegated his
`
`authority to decide whether to institute inter partes reviews to the Board, but
`
`retains the ability to promulgate regulations. See 37 C.F.R. § 42.4(a). Because it
`
`did not implicate the same constitutional concerns as final decisions, Arthrex’s
`
`institution decision was thus not vacated and will remain in effect upon remand.
`
`The statute likewise provides the Director with the authority to promulgate
`
`regulations governing discovery in an inter partes review. Section 316(a) states
`
`that “[t]he Director shall prescribe regulations— … (5) setting forth standards and
`
`procedures for discovery of relevant evidence ….” 35 U.S.C. § 316(a)(5)
`
`(emphasis added). The rules promulgated to define these “procedures for
`
`discovery” currently give the Board the authority to decide motions for additional
`
`discovery, 37 C.F.R. § 42.51, but nothing in the statute precludes alternative
`
`procedures that would give the Director the authority to review Board discovery
`
`orders.3 The Director could, even though he has not, give himself “the power to
`
`
`
`3 The statute requires that “[t]he Patent Trial and Appeal Board … conduct each
`
`inter partes review instituted under this chapter,” but that conduct is regulated
`
`3
`PETITIONERS’ OPP. TO PO’S NOV. 6, 2019 REQ. FOR REH’G
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`IPR2015-01047
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`U.S. Patent No. 7,490,151
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`single-handedly review, nullify or reverse a [discovery] decision issued by a panel
`
`of APJs” by enacting procedures for discovery that include such authority. See
`
`Arthrex at *4. The Board’s October 23 Order is therefore more like an institution
`
`decision than a final written decision within Arthrex’s framework.
`
`Because the Director retains the authority to promulgate regulations such as
`
`a final review for discovery orders, discovery orders under § 316(a)(5) do not
`
`implicate the same constitutional concerns as final written decisions under
`
`§ 318(a). Thus, Arthrex cannot be read to require that the Board’s October 23
`
`Order be reheard by a new panel.
`
`B. Arthrex Left Intact Multiple Other Non-Final Orders Analogous
`to the Discovery Order Here
`
`The Board’s October 23 Order should be maintained for another reason.
`
`Arthrex saw “no error in the new panel proceeding on the existing written record
`
`….” Arthrex at *12. That “existing written record” included three non-final orders,
`
`none of which were vacated. See Smith & Nephew, Inc. v. Arthrex, Inc., IPR2017-
`
`00275, Papers 8 (scheduling order), 16 (order granting motions for PHV), 26
`
`(order defining the scope of the oral hearing). Like the discovery order at issue
`
`
`
`through the “standards and procedures for discovery” promulgated by the Director,
`
`which could encompass a final review by the Director. See 35 U.S.C. § 316(c).
`
`4
`PETITIONERS’ OPP. TO PO’S NOV. 6, 2019 REQ. FOR REH’G
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`IPR2015-01047
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`U.S. Patent No. 7,490,151
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`here, these orders are part of the “significant authority” exercised by APJs, see
`
`Arthrex at *3 (identifying, e.g., overseeing discovery and hearing oral arguments as
`
`examples), yet were maintained and not vacated by the court in Arthrex.
`
`VirnetX’s theory that “any action taken by a principal officer whose
`
`appointment does not comport with the requirements of the Appointment Clause is
`
`constitutionally infirm under the Federal Circuit’s reasoning in Arthrex” and must
`
`be reheard (Reh’g Req. 6) thus conflicts with the remedy actually ordered in
`
`Arthrex, which did not require non-final orders be reheard by a new panel.
`
`IV. Conclusion
`
`For the foregoing reasons, VirnetX’s request for a rehearing under a
`
`different panel should be denied.4
`
`
`
`
`
`4 VirnetX’s request to dramatically expand the remedy ordered by the Federal
`
`Circuit in Arthrex—from final written decisions to “any action taken” (Reh’g Req.
`
`6)—is further undercut by recent negative treatment of even the narrow remedy
`
`ordered in that case. E.g., Bedgear, LLC v. Fredman Bros. Furniture Co., No.
`
`2018-2082, 2019 WL 5806893, at *5 (Fed. Cir. Nov. 7, 2019) (Dyk, J., concurring)
`
`(suggesting that “Arthrex was wrongly decided on the issue of remedy. As a result
`
`of the Arthrex construction, APJs were properly appointed by the Secretary of
`
`Commerce and their prior decisions are not invalid.”).
`
`5
`PETITIONERS’ OPP. TO PO’S NOV. 6, 2019 REQ. FOR REH’G
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`IPR2015-01047
`
`U.S. Patent No. 7,490,151
`
`Dated: November 19, 2019
`
`Respectfully Submitted,
`
`/Jeffrey P. Kushan/
`Jeffrey P. Kushan
`Reg. No. 43,401
`Sidley Austin LLP
`1501 K Street, N.W.
`Washington, D.C. 20005
`T: 202-736-8000
`Attorney for Petitioner Apple Inc.
`
`/James T. Bailey/
`James T. Bailey
`Reg. No. 44,518
`The Law Office of James. T. Bailey
`504 W. 136th St. #1B
`New York, NY 10031
`T: 917-626-1356
`Attorney for Petitioner Mangrove
`
`/Thomas H. Martin/
`Thomas H. Martin
`Reg. No. 34,383
`Martin & Ferraro, LLP
`Attorney for Petitioner Black Swamp
`
`
`
`6
`PETITIONERS’ OPP. TO PO’S NOV. 6, 2019 REQ. FOR REH’G
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`IPR2015-01047
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`U.S. Patent No. 7,490,151
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`CERTIFICATE OF SERVICE
`
`Pursuant to 37 C.F.R. § 42.6(e), I hereby certify that on this 19th day of
`
`November, 2019, I caused to be served a true and correct copy of the foregoing by
`
`electronic mail on the following counsel:
`
`Joseph E. Palys
`josephpalys@paulhastings.com
`
`Naveen Modi
`Naveenmodi@paulhastings.com
`
`
`
`Dated: November 19, 2019
`
`Respectfully Submitted,
`
`/Jeffrey P. Kushan/
`Jeffrey P. Kushan
`Reg. No. 43,401
`Sidley Austin LLP
`1501 K Street, N.W.
`Washington, D.C. 20005
`T: 202-736-8000
`Attorney for Petitioner Apple Inc.
`
`/Thomas H. Martin/
`Thomas H. Martin
`Reg. No. 34,383
`Martin & Ferraro, LLP
`Attorney for Petitioner Black Swamp
`
`/James T. Bailey/
`James T. Bailey
`Reg. No. 44,518
`The Law Office of James. T. Bailey
`504 W. 136th St. #1B
`New York, NY 10031
`T: 917-626-1356
`Attorney for Petitioner Mangrove
`
`
`
`
`
`7
`PETITIONERS’ OPP. TO PO’S NOV. 6, 2019 REQ. FOR REH’G
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`
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