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
`
`PETITIONER’S OPPOSITION TO PATENT
`OWNER’S MOTION FOR ADDITIONAL
`DISCOVERY
`
`
`
`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
`
`PETITIONER’S OPPOSITION TO PATENT
`OWNER’S MOTION FOR ADDITIONAL
`DISCOVERY
`
`
`
`TABLE OF CONTENTS
`TABLE OF CONTENTS
`
`I. Overview ............................................................................................................... 1
`I. Overview ............................................................................................................. .. 1
`
`II. Response to Alleged “Petitioner Acknowledgements” ................................... 2
`II.
`Response to Alleged “Petitioner Acknowledgements” ................................. .. 2
`
`III. The Garmin Factors Are Not Satisfied ........................................................... 4
`III. The Garmin Factors Are Not Satisfied ......................................................... .. 4
`
`A. Additional Discovery Will Not Uncover Useful Information ........................ 4
`A. Additional Discovery Will Not Uncover Useful Information ...................... .. 4
`
`B. Petitioner’s Litigation Positions....................................................................... 7
`B. Petitioner’s Litigation Positions ..................................................................... .. 7
`
`C. Ability to Generate Equivalent Information by Other Means ..................... 8
`C. Ability to Generate Equivalent Information by Other Means ................... .. 8
`
`D. The Patent Owner’s RFPs Require Clarification........................................... 9
`D. The Patent Owner’s RFPs Require Clarification ......................................... .. 9
`
`E. The Patent Owner’s RFPs are Overreaching and Overly Burdensome to
`E. The Patent Owner’s RFPs are Overreaching and Overly Burdensome to
`Answer...................................................................................................................... 9
`Answer .................................................................................................................... .. 9
`
`i
`
`
`
`TABLE OF AUTHORITIES
`
`Cases
`
`Garmin Int’l Inc. v. Cuozzo Speed Techs. LLC,
`IPR2012-00001, Paper 26 (March 5, 2013)......................................................... 4, 6
`
`ii
`
`
`
`I.
`
`Overview
`
`Desperate to avoid the merits of the invalidity of its patent, Patent
`
`Owner has now submitted its Motion for Additional Discovery (“Motion”) which
`
`is its fourth collateral attempt to attack these proceedings without addressing validity: 1)
`
`Patent Owner asserted the same or similar grounds in its Preliminary Patent Owner
`
`Statement (see Paper 9 at 3-11); 2) rehashed the same grounds in its request for
`
`reconsideration (see Paper 13 at 4-5); 3) raised entirely speculative grounds that RPX
`
`Corp. and/or Apple Corp. were controlling these proceedings in a November 10, 2015
`
`conference call with the Board (Ex. 2037 at 12:4-13:21, 20:7-18); and 4) now
`
`brings the instant Motion. Patent Owner has also threatened to bring separate
`
`litigation in state or Federal court – regardless of any underlying merit to such
`
`claims -- to forestall a determination on the merits of the validity of its patents.
`
`See, e.g., Paper No. 7 at 12-13, n.2.
`
`All Patent Owner has presented in its Motion is that it would like broad
`
`RPI discovery and argued that such discovery likely exists. Patent Owner has
`
`not, however, demonstrated that any such discovery will be useful. Because
`
`Patent Owner’s Motion fails to meet the “necessary in the interests of justice”
`
`standard for any of the additional discovery sought, the Motion should be
`
`denied in its entirety.
`
`1
`
`
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`Case IPR2015-01047
`U.S. Patent No. 7,490,151
`
`II.
`
`Response to Alleged “Petitioner Acknowledgements”
`
`The additional discovery Patent Owner seeks generally falls into two
`
`categories: 1) discovery regarding investors in the Petitioner and 2) discovery
`
`regarding other Mangrove entities, including Mangrove Partners, Mangrove
`
`Partners Fund Ltd., Mangrove Partners Fund LP, Mangrove Capital (collectively
`
`“Mangrove-Named Entities”) and Mr. Nathaniel August. Patent Owner’s attempts
`
`to lump the investors with these other Mangrove-Named Entities and Mr. August,
`
`is both disingenuous and obfuscates the real issues.
`
`During multiple meet-and-confer telephone conferences leading up to this
`
`Motion, much of Patent Owner’s inquiries focused on the investors and in
`
`particular, Patent Owner’s speculative – bordering on paranoid – belief that time-
`
`barred entities, namely Apple Corp. or RPX Corp., were investors in the Petitioner
`
`and were controlling these proceedings on behalf of Petitioner. Cf. Ex. 2037 at 12:4-
`
`13:21, 20:7-18. In response, Petitioner informed Patent Owner that neither Apple
`
`Corp. nor RPX Corp. are or were investors and that to best of the Petitioner’s
`
`knowledge, no one affiliated with either entity is now or was ever an investor.
`
`Petitioner also informed Patent Owner that no investors were even aware of the
`
`present proceedings before they were filed and that the Petitioner’s costs were
`
`borne solely by the Petitioner. Petitioner even offered to put all of these facts in a
`
`2
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`Case IPR2015-01047
`U.S. Patent No. 7,490,151
`declaration from Mr. August, but particularly in light of Patent Owner’s threats of
`
`separate litigation, Petitioner would not agree to any depositions. Patent Owner
`
`would not relent on depositions and no agreement was reached.
`
`With respect to the other Mangrove-Named Entities and Mr. August, the
`
`Board has repeatedly recognized that there is no reason that these parties could not
`
`simply be added as RPI’s if appropriate since there is no evidence that any such
`
`entity is time-barred or would otherwise affect the proceedings. See Paper No. 11
`
`at 8-9 ("The present record does not reflect that Petitioner is precluded from
`
`modifying the named real-parties-in-interest to include any of the entities (or subset
`
`thereof) cited by Patent Owner. Nor does the record indicate that any such
`
`modification would result in rendering this proceeding improper.”); Ex. 2042 at
`
`10:9-12:11. In light of these facts, and Petitioner’s firm belief that Patent Owner’s
`
`other challenge with respect to the investors would fail, Petitioner offered to
`
`provide discovery regarding Mr. August and the Mangrove-Named Entities and add
`
`any or all of those as RPI’s that Patent Owner felt was necessary. This was not, as
`
`Patent Owner attempts to characterize it, an admission that any other party should
`
`have been named as an RPI. Rather, it was a recognition that it simply does not
`
`matter. Petitioner offered this discovery voluntarily in exchange for an agreement
`
`that after Patent Owner’s primary challenge with respect to investors failed, the
`
`Patent Owner would not continue its scorched-earth tactics with a separate motion
`
`3
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`Case IPR2015-01047
`U.S. Patent No. 7,490,151
`related to the Mangrove-Named Entities or Mr. August. No agreement was
`
`reached.
`
`III.
`
`The Garmin Factors Are Not Satisfied
`
`In Garmin Int’l Inc. v. Cuozzo Speed Techs. LLC, the PTAB set out the
`
`relevant factors in determining whether additional discovery is “otherwise necessary
`
`in the interest of justice.” 35 U.S.C. § 316(a)(5); see also 37 C.F.R. § 42.51(b)(2).
`
`Each of the Garmin factors is addressed below.
`
`A.
`
`Additional Discovery Will Not Uncover Useful Information
`
`Patent Owner has failed to carry its burden of proof to show that the
`
`discovery it seeks will uncover useful information regarding the investors, the
`
`other Mangrove-Named Entities, or Mr. August. “The mere possibility of
`
`finding something useful, and mere allegation that something useful will be
`
`found, are insufficient to demonstrate that the requested discovery is necessary
`
`in the interests of justice.” Garmin Int’l Inc. v. Cuozzo Speed Techs. LLC,
`
`IPR2012-00001, Paper 26 at 6 (March 5, 2013)
`
`With respect to the investors, the only factual assertion in Patent Owner’s
`
`Motion is that “Petitioner has not disputed that the funds from the investors
`
`were used for this proceeding.” Motion at 2. In particular, what Petitioner
`
`explained is that money from investors, depending upon their geographic
`
`4
`
`
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`Case IPR2015-01047
`U.S. Patent No. 7,490,151
`location, is passed through either Mangrove Partners Fund LP or Mangrove
`
`Partners Fund Ltd. to the Petitioner (Mangrove Partners Master Fund Ltd),
`
`where it is pooled and used for, among other things, investments and the costs
`
`of these proceedings. However, that does not suggest in any way that any
`
`Investor has control over these proceedings. Indeed, as to any discovery
`
`concerning investors, Patent Owner’s Motion effectively admits that it has
`
`nothing more than possibilities or mere allegations. Cf. Paper No. 19 at 9.
`
`Similarly, Patent Owner’s Motion fails to carry its burden of proof that
`
`discovery related to the other Mangrove-Named Entities or Mr. August will
`
`produce useful information for two reasons. First, as explained above, it simply
`
`doesn’t matter. As the Board repeatedly recognized and Patent Owner does not
`
`dispute, none of these entities are time-barred and any or all of them could
`
`simply be added as RPI’s if warranted. Second, Patent Owner has produced
`
`nothing beyond speculation with respect to any of these additional parties being
`
`an RPI.
`
`Patent Owner’s theories with respect to the other Mangrove-Named
`
`Entities are focused on the allegation that they have “in the past acted as a
`
`collective, referring to themselves as ‘Mangrove.’” Motion at 2. However,
`
`reference to a collective “Mangrove” in another context does not suggest that
`
`any other parties are real parties in interest. As Patent Owner’s own
`
`5
`
`
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`Case IPR2015-01047
`U.S. Patent No. 7,490,151
`organizational chart shows (see Paper No. 9 at 3), the central entity is the
`
`Petitioner Mangrove Partners Master Fund Ltd. As previously explained, it is
`
`central because “that is where all the money is.” Indeed Patent Owner’s own
`
`motion shows that Mangrove Partners Fund LP and Mangrove Partners Fund
`
`Ltd. are mere pass-through entities (Motion at 2 (“Pursuant to a master-feeder
`
`structure, the investments would be fed into the US Feeder or the Cayman
`
`Feeder, and in turn funneled to Petitioner.”) and Mangrove Capital “serves as a
`
`general partner” to Mangrove Partners Fund LP. Motion at 2, n. 1. There is
`
`nothing beyond mere speculation that any of these parties funded or controlled
`
`the IPRs.
`
`As Patent Owner points out, Mangrove Partners (which it refers to as the
`
`“Hedge Fund”) acts as the “Investment Manger” for Petitioner Mangrove
`
`Partners Master Fund Ltd. As the Investment Manager, Mangrove Partners acts
`
`as an agent of the Petitioner and on its behalf subject to fiduciary duties, as
`
`acknowledged by Patent Owner. See Paper No. 9 at 4-5. As such, all
`
`decisions, whether on investments or in filing these IPRs are made for the
`
`benefit of the Petitioner. Whether these agents act as consultants for a fee, or
`
`direct employees of Petitioner is immaterial. See, e.g., Restatement (Second) of
`
`Agency (1958), § 387.
`
`With respect to Mr. August, all of his actions in connection with this
`
`6
`
`
`
`Case IPR2015-01047
`U.S. Patent No. 7,490,151
`proceeding have been in his capacity as an agent of Petitioner. Patent Owner
`
`acknowledges that Mr. August is subject to fiduciary duties to Petitioner and
`
`through Petitioner to the various investors. See, e.g., Paper No. 9 at 4-6, 11.
`
`A finding that Mr. August himself is a real party in interest would require a
`
`finding that he subjugated those fiduciary duties to his own personal interest –
`
`in effect piercing the corporate veil. Patent Owner’s Motion presents no facts
`
`that would warrant such a determination and its discovery requests with respect
`
`to Mr. August are based on nothing more than speculation.
`
`B.
`
`Petitioner’s Litigation Positions
`
`Petitioner does not have any current litigation positions related to the
`
`subject IPR; however, the Patent Owner has threatened to bring separate
`
`litigation in state or Federal court related to this IPR against one or more of the
`
`Petitioner, the other Mangrove-Named Entities, Mr. August and the investors.
`
`See, e.g., Paper No. 7 at 12-13, n.2. In particular, Patent Owner submitted as an
`
`exhibit (Exhibit 2021) a complaint filed by Allergan Inc. in Federal District
`
`Court and intimated that it intended to file a similar complaint. Id.
`
`Patent Owner’s threat is particularly troubling since it knew, or should
`
`have known, that an Allergan-type complaint had no merit. A required element
`
`of each of the causes of action pled in the Allergan complaint was that the
`
`underlying IPR petition was “objectively baseless.” Ex. 2021 at ¶¶61, 75(d),
`
`7
`
`
`
`Case IPR2015-01047
`U.S. Patent No. 7,490,151
`78(b). While we now know definitively that Patent Owner cannot allege that the
`
`IPR petition was “objectively baseless” for the simple reason that it was
`
`instituted on all grounds (see Paper No. 11 at 12), that fact was also known or
`
`should have been known to Patent Owner when it made the threat because a
`
`petition filed by Microsoft, Inc. on very similar grounds had previously been
`
`instituted. See Paper No. 1 at 2; Microsoft Corp. v. VirnetX Inc., IPR2014-00610
`
`Paper No. 9 at 16 (Oct. 15, 2014).
`
`Patent Owner’s willingness to threaten baseless corollary litigation raises
`
`legitimate concerns that the true focus of the requested discovery is actually
`
`related to trying to manufacture grounds for a different litigation. At an even
`
`broader level, these threats can be seen as part of Patent Owner’s broader
`
`scorched-earth tactics. Patent Owner is trying to avoid by any means, including
`
`threatening baseless and harassing litigation, an objective examination of the
`
`validity of its patents.
`
`C.
`
`Ability to Generate Equivalent Information by Other Means
`
`As explained above, Patent Owner has already been able to generate
`
`through public information and meet and confers with Petitioner information to
`
`show that there are no unnamed RPIs. Moreover, Patent Owner was offered an
`
`affidavit to this effect, but, as previously explained, it refused to accept one if as a
`
`condition it would otherwise be precluded from deposing Mr. August, during
`
`8
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`
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`Case IPR2015-01047
`U.S. Patent No. 7,490,151
`which time it would likely be preparing to sue him elsewhere.
`
`D.
`
`The Patent Owner’s RFPs Require Clarification
`
`Petitioner has proposed changes to Patent Owner’s RFPs and interrogatories
`
`(see Exhibits 1025 and 1026) to address both clarity and overbreadth.
`
`The Patent Owner’s RFPs are Overreaching and Overly
`E.
`Burdensome to Answer
`
`For the reasons discussed in Section III.A, the Patent Owner’s RFPs,
`
`interrogatories and deposition are not likely to generate useful information. In
`
`addition, those requests are not narrowly tailored as required by Garmin. For
`
`example, Patent Owner’s document requests and interrogatories seek detailed
`
`confidential information regarding Investors to no purpose. Furthermore, many
`
`of the requests explicitly seek privileged or work-product information and are
`
`overly burdensome in requesting detailed explanation of all verbal
`
`communications related in any way to this IPR (See, e.g., Interrogatory #1)
`
`In view of the foregoing, Petitioner respectfully requests that the Board deny
`
`Patent Owner’s Motion for Additional Discovery in its entirety.
`
`9
`
`
`
`Dated: December 14, 2015
`
`Case IPR2015-01047
`U.S. Patent No. 7,490,151
`
`Respectfully submitted,
`
`/Abraham Kasdan/
`Abraham Kasdan
`Reg. No. 32,997
`WIGGIN & DANA LLP
`
`/ /
`James T. Bailey
`Reg. No. 44,518
`THE LAW OFFICE OF JAMES T.
`BAILEY
`
`10
`
`
`
`Case IPR2015-01047
`U.S. Patent No. 7,490,151
`
`CERTIFICATE OF SERVICE
`
`Pursuant to 37 C.F.R. § 42.6(e), the undersigned certifies service of
`
`PETITIONERS’ OPPOSITION TO PATENT OWNER’S MOTION FOR
`
`ADDITIONAL DISCOVERY on the counsel of record for the Patent Owner by
`
`filing this document through the Patent Review Processing System as well as
`
`delivering a copy via electronic mail to the following addresses:
`
`Joseph Palys
`josephpalys@paulhastings.com
`
`Naveen Modi
`naveenmodi@paulhastings.com
`
`Dated: December 14, 2015
`
`25003/1/3390809.1
`
`/Abraham Kasdan/
`Abraham Kasdan
`Reg. No. 32,997
`
`11
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