Trials@uspto.gov
`571-272-7822
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`Paper 26
`Date: December 21, 2015
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`UNITED STATES PATENT AND TRADEMARK OFFICE
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`_____________
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`____________
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`THE MANGROVE PARTNERS MASTER FUND, LTD.,
`Petitioner,
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`v.
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`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.
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`SIU, Administrative Patent Judge.
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` A
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`
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`DECISION
`Denying Motion for Additional Discovery
`37 C.F.R. § 42.51
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` conference call in the above proceeding was held on November 24, 2015,
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`among respective counsel for The Mangrove Partners Master Fund, Ltd.
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`(“Petitioner”) and VirnetX Inc. (“Patent Owner”), and Judges Tierney, Easthom,
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`and Siu. During the conference call, Patent Owner was authorized to file a Motion
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`

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`IPR2015-01047
`Patent 7,490,151 B2
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`for Additional Discovery (subsequently filed December 9, 2015, Paper 22,
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`“Motion”) regarding whether additional parties should have been named as a real
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`party-in-interest in this inter partes review proceeding and Petitioner was
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`authorized to file an Opposition to Patent Owner’s Motion for Additional
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`Discovery (subsequently filed December 14, 2015, Paper 25, “Opposition”).
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`Patent Owner “requests discovery that will further show that Mangrove
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`Partners, Nathaniel August, the US Feeder, the Cayman Feeder, Mangrove Capital,
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`and the investors (collectively, ‘the other Mangrove entities’), are RPIs” because,
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`according to Patent Owner, “Patent Owner’s discovery requests meet the factors
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`set forth in Garmin Int’l, Inc. v. Cuozzo Speed Techs, LLC, IPR2012-00001, Paper
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`No. 26 (Mar. 5, 2013).” Motion 4–5. We disagree with Patent Owner’s
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`contention. For example, Patent Owner does not demonstrate sufficiently that
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`Patent Owner’s request for additional discovery shows more than a mere
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`possibility that something useful will be discovered. Garmin Int’l, Inc. v. Cuozzo
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`Speed Techs, LLC, IPR2012-00001, Paper No. 26 (Mar. 5, 2013). Hence, Patent
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`Owner has failed to demonstrate that additional discovery is “necessary in the
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`interest of justice.” 35 U.S.C. § 316(a)(5).
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`Patent Owner argues that “Nathaniel August is President and majority owner
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`of the Mangrove partners Hedge Fund” and that “the Mangrove Partners Hedge
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`Fund has ‘complete discretion’ to control the investments of the US Feeder, the
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`Cayman Feeder, and Petitioner.” Motion 1–2 (citing Ex. 2001, 3, 17; Ex. 2002, 1–
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`2). Even assuming that “Mangrove Partners Hedge Fund has ‘complete discretion’
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`to control the investments of” various entities to be true, as asserted by Patent
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`Owner, Patent Owner does not assert or provide a sufficient showing that
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`Mangrove Partners hedge fund also has “complete discretion” and control over the
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`preparation or filing of the Petition. Patent Owner relies on a “Uniform
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`2
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`IPR2015-01047
`Patent 7,490,151 B2
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`Application for Investment Adviser Registration” and cites evidence that states that
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`“Mangrove Partners . . . provides investment management services on a
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`discretionary basis to the Funds” and that “Mangrove has discretionary authority to
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`manage the assets of each Fund.” Ex. 2001, 3, 17; Ex. 2002, 1–2. None of these
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`documents appear to pertain or even refer to the Petition. Hence, the evidence
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`does not show beyond speculation that in fact something useful will be uncovered.
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`Patent Owner argues that “funds from . . . investors were used for this
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`proceeding.” Motion 2 (citing Ex. 2001, 3–4, 6; Ex. 2036, 6–10, Ex. 2015, 34–35).
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`Upon review of the evidence relied upon by Patent Owner, we do not identify (nor
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`does Patent Owner point out) support for Patent Owner’s contention that “funds
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`from . . . investors were used for this proceeding.” In the cited evidence, a
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`“Mangrove Partners” brochure (Ex. 2001) merely states that “Mangrove Partners .
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`. . provides investment management services on a discretionary basis to the
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`Funds,” that the “Funds’ shared investment objective is to organically compound
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`their net worth while minimizing the chances of a permanent loss of capital,” and
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`that “[a] minimum initial investment of $1,000,000 is generally required to invest
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`in any of [the] private funds.” Ex. 2001, 3–4, 6. An excerpt from “Hedge Fund
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`Regulation” entitled “Form Over Substance: Hedge Fund Structures” (Ex. 2015)
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`describes “[a]n alternative approach is to use a ‘master-feeder’ structure” in which
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`“the domestic partnership and offshore corporation are established to raise capital
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`from their respective investor constituencies and then ‘feed’ their capital into a
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`‘master fund’ where the investment portfolio is held and managed” and provides a
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`diagram in what appears to illustrate this process. Ex. 2015, 34–35. A “Uniform
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`Application for Investment Adviser Registration (FORM ADV) (Ex. 2036)
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`indicates, for example, that a “related person” is not “exempt from registration,” is
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`not registered “with a foreign financial regulatory authority,” and shares both a
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`3
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`IPR2015-01047
`Patent 7,490,151 B2
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`“supervised person” and a “physical location.” Ex. 2014, 6. Patent Owner has not
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`shown sufficiently how any of the evidence relied upon support or even suggest
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`that “funds from . . . investors were used for this proceeding,” much less that any
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`specific investor played any role in controlling the preparation or filing of the
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`Petition. Indeed, none of the statements appear to be related to the Petition in any
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`way. In addition, Patent Owner’s theory, carried to its logical limit, incorrectly
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`would capture as a real party-in-interest every major (or relatively minor)
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`shareholder who invests in a corporation or fund. Hence, Patent Owner does not
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`provide sufficient evidence to demonstrate more than a mere possibility that
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`something useful will be discovered.
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`Patent Owner argues that “The Mangrove Partners Hedge Fund and
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`Nathaniel August have repeatedly signed documents on behalf of Petitioner, the
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`US Feeder, the Cayman Feeder, and Mangrove Capital” and the entities have
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`“acted as a collective, referring to themselves as ‘Mangrove.’” Motion 2 (citing
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`Ex. 2007, 11–12; Ex. 2008, 12; Ex. 2009, 11; Ex. 2010, 11; Ex 2011, 11; Ex. 2012,
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`11; Ex. 2013, 5, 11; Ex. 2014, 1, 3–4). We are not persuaded by these arguments.
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`Even if Patent Owner’s argument that various individuals allegedly “signed
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`documents” (none of which appear to pertain to the preparation or filing of the
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`Petition – see, e.g., Exs. 2007–2014) or that the entities referred to themselves as
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`“Mangrove,” Patent Owner does not explain more than a mere possibility that
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`something useful will be discovered. Hence, the evidence (e.g., Exs. 2007–2014)
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`does not show beyond speculation that in fact something useful will be uncovered.
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`Patent Owner argues that “Petitioner has never denied involvement of the
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`other Mangrove entities in this proceeding” and “file[d] a ‘contingent motion to
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`amend the real parties in interest.’” Motion 3. Even if “Petitioner has never
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`denied” that the other Mangrove entities are real parties-in-interest, as Patent
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`4
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`IPR2015-01047
`Patent 7,490,151 B2
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`Owner appears to contend, we are not persuaded that Patent Owner has
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`demonstrated sufficiently more than a mere possibility that something useful will
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`be discovered. For example, Patent Owner has not demonstrated adequately how
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`Petitioner’s alleged silence regarding this matter or Petitioner’s filing of a
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`contingent motion pertains to any alleged control exercised by the other Mangrove
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`entities over the preparation or filing of the Petition in this matter. Nor do the
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`alleged actions (or inaction) of Petitioner indicate more than a mere possibility that
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`something useful will be discovered.
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`Patent Owner argues that “Petitioner’s counsel indicated that Petitioner was
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`willing to name all of the entities discussed [in the Motion], other than the
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`investors, as RPIs,” “if Patent Owner agreed to waive its right to challenge
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`Petitioner’s failure to properly identify the RPIs.” Motion 3–4. Based on this
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`alleged discussion, Patent Owner argues that “Petitioner’s willingness to negotiate
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`. . . shows that [Petitioner] . . . recognizes that there is an issue.” Id. at 4. Patent
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`Owner does not demonstrate sufficiently that Petitioner’s alleged “willingness to
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`negotiate” constitutes more than a mere possibility that something useful will be
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`discovered. For example, it is entirely possible that Petitioner is merely willing to
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`negotiate in order to resolve the issue raised by Patent Owner.
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`In considering the parties’ arguments, we determine that Patent Owner has
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`not met its burden in showing additional discovery is in the interests of justice as
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`required under 37 C.F.R. § 42.51(b)(2).
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`Accordingly, it is:
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`ORDERED that Patent Owner’s Motion for Additional Discovery is denied.
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`5
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`IPR2015-01047
`Patent 7,490,151 B2
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`PETITIONER:
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`Abraham Kasdan
`James T. Bailey
`WIGGIN AND DANA LLP
`akasdan@wiggin.com
`jtb@jtbaileylaw.com
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`PATENT OWNER:
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`Joseph E. Palys
`Naveen Modi
`PAUL HASTINGS LLP
`josephpalys@paulhastings.com
`naveenmodi@paulhastings.com
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`6