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` UNITED STATES PATENT AND TRADEMARK OFFICE
`
` _________________
`
` BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`Page 1
`
` _________________
`
` APPLE, INC.
`
` Petitioner,
`
` v.
`
` VALENCELL, INC.
`
` Patent Owner.
`
` __________________
`
` Case IPR2017-00319
`
` Case IPR2017-00321
`
` Patent 8,923,941 B2
`
` ___________________
`
` Before BRIAN J. McNAMARA, JAMES B. ARPIN
`
` and SHEILA F. McSHANE,
`
` Administrative Patent Judges
`
` ARPIN, Administrative Patent Judge.
`
` Veritext Legal Solutions
`
` Mid-Atlantic Region
`
` 1250 Eye Street NW - Suite 350
`
` Washington, D.C. 20005
`
`Veritext Legal Solutions
`215-241-1000 ~ 610-434-8588 ~ 302-571-0510 ~ 202-803-8830
`
`APL1072
`Apple v. Valencell
`IPR2017-00319
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` UNITED STATES PATENT AND TRADEMARK OFFICE
`
` _________________
`
` BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`Page 1
`
` _________________
`
` APPLE, INC.
`
` Petitioner,
`
` v.
`
` VALENCELL, INC.
`
` Patent Owner.
`
` __________________
`
` Case IPR2017-00319
`
` Case IPR2017-00321
`
` Patent 8,923,941 B2
`
` ___________________
`
` Before BRIAN J. McNAMARA, JAMES B. ARPIN
`
` and SHEILA F. McSHANE,
`
` Administrative Patent Judges
`
` ARPIN, Administrative Patent Judge.
`
` Veritext Legal Solutions
`
` Mid-Atlantic Region
`
` 1250 Eye Street NW - Suite 350
`
` Washington, D.C. 20005
`
`Veritext Legal Solutions
`215-241-1000 ~ 610-434-8588 ~ 302-571-0510 ~ 202-803-8830
`
`APL1072
`Apple v. Valencell
`IPR2017-00319
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`Page 2
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` APPEARANCES
`
` FOR THE PETITIONER:
`
` STERNE, KESSLER, GOLDSTEIN & FOX
`
` MS. MICHELLE HOLOUBEK
`
` MR. MICHAEL D. SPECHT
`
` 1100 New York Avenue NW, Suite 600
`
` Washington, D.C. 20005
`
` (202) 371-2600
`
` FOR THE PATENT OWNER:
`
` BRAGALONE CONROY, PC
`
` MR. JEFFREY BRAGALONE
`
` MR. JUSTIN B. KIMBLE
`
` MR. WILLIAM KENNEDY
`
` 2200 Ross Avenue 4500 W
`
` Dallas, Texas 75201
`
` (214) 785-6670
`
`Reported by:
`
`Ms. Suzanne Benoist, RPR, CCR-MO, CCR-KS, CSR-IL
`
`Veritext Legal Solutions
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`515 Olive Street, Suite 300
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`St. Louis, MO 63101
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`(314) 203-2987
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`Page 3
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` -oOo-
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` (Whereupon, the hearing began at 1:01 p.m.)
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` JUDGE ARPIN: I'd like to begin with
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`a roll call. Who do we have on the call for
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`petitioner, please?
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` Ms. Holoubek: Good afternoon Your
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`Honor. This is Michelle Holoubek for petitioner
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`Apple and I'm also joined by my co-counsel Mike
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`Specht.
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` JUDGE ARPIN: Thank you. And who do
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`we have on the call for the patent owner?
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` MR. KIMBLE: Your Honor, this is
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`Justin Kimble and also with me is co-counsel Jeff
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`Bragalone and Bill Kennedy.
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` JUDGE ARPIN: Thank you.
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` Do we have court reporter on the call
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`today?
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` MR. KIMBLE: We didn't request one
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`but we understand the petitioner did.
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` MS. HOLOUBEK: Let me jump in and say
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`that we do have a court reporter on the line.
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` JUDGE ARPIN: Since we have a court
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`reporter on the line I'd like to remind the parties
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`that they should not under any circumstances
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`interrupt another speaking during the call, that
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`Page 4
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`will ensure that we have a clear transcript. I
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`would ask also the court reporter not to interrupt
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`any of the speakers unless it is absolutely
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`necessary. I would ask all speakers to identify
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`themselves before they begin speaking so that the
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`court reporter should not have to ask who is
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`speaking.
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` And this question is directed to the
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`court reporter: When does the court reporter
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`believe that he or she will be able to have the
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`transcript of this call available?
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` (WHEREUPON, A DISCUSSION WAS HELD OFF THE RECORD)
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` JUDGE ARPIN: I would ask patent
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`owners, or petitioner since you arranged for the
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`court reporter to please give a copy of the court
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`reporter's transcript to the patent owner before
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`filing it so that any errata can be resolved before
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`the transcript is filed.
`
` Is that clear petitioner?
`
` MS. HOLOUBEK: It is. We'll do that.
`
` JUDGE ARPIN: Patent owner?
`
` MR. KIMBLE: Yes, Your Honor.
`
` JUDGE ARPIN: Okay. The purpose of
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`this call is to discuss the potential consequences
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`of the staff's institute ruling on this proceeding
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`and, or these proceedings. As you know we have
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`instituted on I believe all claims and all grounds
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`in the IPR2017-321 case, and as a result I do not
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`believe there are any vast consequences to that, or
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`in that proceeding, but I will hear it if either
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`party believes that I'm mistaken there.
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` With regard to the 319 case, however,
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`petitioner asserted the grounds, 11 grounds against
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`claims 1 through 13, we instituted on claims 1, 2
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`and 6 through 13 on eight of those grounds so this
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`would appear to implicate SAS. I would also remind
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`the parties that we are about one month out from
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`the statutory deadline for issuing a final written
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`decision in these cases. So we do not have a,
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`well, we have a narrowing window of time in which
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`to take action in these cases and so I would like
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`to begin by asking the parties whether they have
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`conferred with each other over the potential
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`consequences of SAS.
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` Patent owner.
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` MR. BRAGALONE: Yes, Your Honor. We
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`have conferred -- this is Jeff Bragalone for patent
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`owner.
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` JUDGE ARPIN: And was any resolution
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`reached as a result of that conference or any
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`proposal as to how the parties believe we should
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`proceed in this case or in the 319 case in light of
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`SAS?
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` MR. BRAGALONE: Well, unfortunately
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`the parties did have differing views as to the
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`appropriate way to proceed on the 319 matter. We
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`did agree that there really was not a SAS issue
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`presented by the 321 matter.
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` JUDGE ARPIN: All right.
`
` Petitioner would you like to respond
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`to what Patent Owner has just said?
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` MS. HOLOUBEK: Yes, Your Honor.
`
` So this is Michelle Holoubek for
`
`petitioner. Again, at the outset we also agree
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`that the 321 doesn't need any change to procedures
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`at this time. For the 319 IPR though our position,
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`which differed from patent owners, was that
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`discovery be allowed to occur. We believe that if
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`a final written decision is going to include a
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`decision on the noninstituted claims then discovery
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`should have been allowed to have been built on
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`those claims. For example, we know from the other
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`IPR that you just mentioned, the 321, that patent
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`owner's own expert agreed that petitioner's
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`proffered claim construction in this IPR, which the
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`Board disagreed with at first, and that's the basis
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`for its noninstitution decision, patent owner's
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`identified expert agrees that petitioner's claim
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`construction was actually the correct one and
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`because the claim wasn't instituted previously
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`petitioner didn't have its opportunity to submit
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`that evidence, but if the Board's going to issue a
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`final written decision on claim 3 at least then the
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`Petitioner shouldn't be denied the opportunity to
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`present evidence from patent owner's own expert as
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`contrary to their own position, so the Board can
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`consider a fully developed record. We think it's
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`the appropriate thing to do in light of SAS.
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` JUDGE ARPIN: Let's take the claims
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`separately. We have claims 3, claims 4 and claims
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`5 which we have not instituted on.
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` MS. HOLOUBEK: Uh-huh.
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` JUDGE ARPIN: Claims 4 and 5 have an
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`issue which petitioner presented in its petition as
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`either an improper designation of the dependency of
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`the claim or a lack of antecedent basis with regard
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`to the term, the application.
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` MS. HOLOUBEK: Uh-huh.
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` JUDGE ARPIN: Those two issues seem
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`to implicate 112, and I would like to hear from
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`petitioner whether that is still its position as it
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`presented in the petition.
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` MS. HOLOUBEK: So Your Honor, of
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`course the claim still hasn't changed, we recognize
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`that there was an antecedent basis concern,
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`however, since we weren't allowed to raise 112 in
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`the initial petition we proposed a construction of
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`that to, you know, to define how best we understood
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`claims 4 and 5 and then we presented prior art
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`ground, I believe it was ground 8, challenging
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`those claims over the art so if the Board agrees
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`that it has enough information, you know, to
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`address those claims in light of the art then, you
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`know, that evidence is already there. I'm not sure
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`what the patent owner's position is on whether
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`those claims are problematic under 112 or not. If
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`they are to be considered with the art is there in
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`the petition to consider it.
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` JUDGE ARPIN: Petitioner though you
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`would agree that an antecedent basis and an
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`improper dependency issue would raise a 112 para 4
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`or a 112 para 2 issue, wouldn't it?
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` MS. HOLOUBEK: Yes Your Honor, we
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`agree with that.
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` JUDGE ARPIN: And we might be forced
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`then to address that in a final written decision,
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`is that correct?
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` MS. HOLOUBEK: That's correct.
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` JUDGE ARPIN: And that would probably
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`be considered a shenanigan by the Supreme Court,
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`wouldn't you also agree?
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` MS. HOLOUBEK: I don't believe that
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`would be considered a shenanigan. We raised it
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`with an interpretation that would allow its
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`consideration. If the Board said that they can't
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`consider it because of the improper dependency I
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`think that is, you know, the statement of why the
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`Board can't consider it. I mean obviously we
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`can't, the Petitioner can't change the words of the
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`claim at this time, or at any point, so I don't
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`think that the Supreme Court would consider the
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`interpretation of the claim as it stands as being,
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`having a 112 issue such that it can't be considered
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`in an IPR, I don't think the Supreme Court would
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`find that a shenanigan.
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` JUDGE ARPIN: Well, right now Counsel
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`we don't have any briefing on any other claim
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`construction because patent owner didn't present it
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`and patent owner didn't know that there was a
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`possibility of having it considered in this
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`proceeding at the time of the decision to
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`institute, and in fact past the hearing in this
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`case there was no knowledge of that so we, as you
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`point out we have no briefing on this issue other
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`than the presentation of the petitioner in the
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`petition.
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` So turning now to claim 3.
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` MS. HOLOUBEK: Uh-huh.
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` JUDGE ARPIN: We also did not, as you
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`noted in your hearing request, we did not define
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`the term application specific interface in our DI,
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`our decision on institution, and so consequently
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`petitioner did not address further, and we have no
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`briefing on that so we have no construction of that
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`term either. I understood from your comment that
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`you were proposing that there should be briefing.
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`What exactly is it that petitioner believes should
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`be followed on briefing here since petitioner has
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`made its presentation in the petition and in a
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`hearing request and patent owner has not made any
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`response to the positions presented by the
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`petitioner at this time.
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` MS. HOLOUBEK: I think Your Honor, so
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`from petitioner's perspective I think the reasons
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`that you gave are exact reasons why briefing should
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`be re-opened on claims 3 and claims 4 through 5.
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`We would propose that, you know, just as if these
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`claims had originally been instituted that patent
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`owner be given the first opportunity to address
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`that institution, or the consideration at this
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`stage, of the claims in the proceeding just as they
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`would normally have done had the claim been
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`instituted originally. You know, SAS tells us that
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`that's the procedure that's going forward. So we
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`would propose that a briefing be available to
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`patent owner and then petitioner, and essentially
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`that briefing would be limited to claims 3, 4 and 5
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`since those are the non-instituted claims and then
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`petitioner would have the chance to respond with I
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`guess a supplemental petitioner's reply, this
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`covering again claims 3, 4 and 5, so that it
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`follows the same course as if those claims had
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`originally been instituted on.
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` JUDGE ARPIN: And what is the timing
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`and page limits that petitioner would suggest in
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`light of the fact that we are supposed to have a
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`decision written and mailed by the 6th of June?
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` MS. HOLOUBEK: So we recognize that
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`the 6th of June, just that one month probably isn't
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`enough time for each party to submit their papers
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`and any evidence on those non-instituted claims,
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`especially if, you know, it would be warranted to
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`either party if expert depositions were to take
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`place. The Board guidance on SAS that came out
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`last week indicated that the SAS changes would be
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`seen as an exceptional circumstance warranting
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`extension past the 12 month deadline, and so we
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`propose that each party be given a month for their
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`response. Patent owner would have a month for
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`preparing a patent owner's response and the
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`petitioner would similarly have a month to prepare
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`the reply, assuming both those are limited in scope
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`to the previously non-instituted claim. We haven't
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`talked over that proposal with patent owner yet
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`because we understand they had a differing opinion
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`as to whether or not these claims should even be
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`brought into the proceeding at all.
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` JUDGE ARPIN: I would like to point
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`out one thing to both parties before I turn the
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`floor over to patent owner to respond to what
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`petitioner has just said. I would point out that
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`this panel, no panel as the Board, has authority to
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`extend the deadline, only the chief judge has
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`authority to do that, and, so that would involve a
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`request and a presentation to the chief judge
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`showing good cause for this extension for these
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`claims, which as we've discussed have 112 issues
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`which may be something we can't address at all.
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` So as I understand it you're talking
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`about taking a month to do, if patent owner even
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`chooses to respond, if patent owner files something
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`within a month then petitioner would have another
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`month to file a reply to that. Is that correct
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`petitioner?
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` MS. HOLOUBEK: Yes, Your Honor,
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`that's correct.
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` JUDGE ARPIN: All right. I'm going
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`to turn the floor over to the patent owner to hear
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`their response to petitioner's comments and
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`proposal.
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` MR. BRAGALONE: Thank you Your Honor.
`
`This is Mr. Bragalone.
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` First of all, I would echo the
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`Court's comments regarding claims 4 and 5. The
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`Board found that those presented a Section 112
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`issue and nothing in the SAS institute decision
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`compels the Board to disregard the statutory limits
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`on the types of invalidity challenge that may be
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`adjudicated in an IPR. We believe that 35 USC
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`Section 311(b) limits the Board's authority period
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`if it believes as it found that there's a 112
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`issue. Now, we don't need to agree that there's a
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`112 issue to agree that the Court doesn't have
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`jurisdiction. The Board doesn't have jurisdiction
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`once it finds that there is a 112 issue. So you
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`would have to I think disregard the actual import
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`of the petition, which is that there's a lack of
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`antecedent basis issue in order to allow
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`institution in claim construction briefing. So
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`from patent owner's perspective we don't have a
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`response and we don't intend to present a response
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`on this issue. The Board has already found that
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`this is not within the purview of an IPR and
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`there's nothing that additional briefing can add to
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`that in order to change the fundamental
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`jurisdictional failure.
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` So that's our position on claims 4
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`and 5.
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` Did the Board have any question on
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`that?
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` JUDGE ARPIN: No, I'm going to let
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`you finish your presentation patent owner and if we
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`have questions at the end of that I'll make them at
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`once. I don't want to interrupt your presentation.
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`I think you've done 4 and 5, are you going to turn
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`to 3 now?
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` MR. BRAGALONE: Yes, thank you,
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`Judge.
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` So as to claim 3 the Board's guidance
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`as to the implementation of SAS stated that the
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`statutory deadline may be extended on a case by
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`case basis, if required, to afford all parties a
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`full and fair opportunity to be heard, and we
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`believe that in this case the petitioner has had at
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`least a full and fair opportunity to be heard. Not
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`only were there several pages of the Court's
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`institution decision on the claim 3 issue but then
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`there was a 12 page motion to reconsider solely on
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`claim 3 as to the issue as to whether or not the
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`petition actually presented a proper claim
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`construction, and that of course was refuted point
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`by point in a 12 page decision denying the motion
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`to reconsider. So specifically while we do
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`disagree completely with the allegation as to what
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`our expert said, that that's just not accurate, and
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`moreover, that claim construction issue simply
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`wasn't presented in the IPR so it was not even a
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`topic for the parties at that time, but, we believe
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`that there's been a full and fair opportunity for
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`the petitioner to present its position with respect
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`to the issue. Patent owner does not intend to
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`present a response. Frankly there's nothing that
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`we could add to Judge Arpin's opinion where he I
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`think very thoroughly pointed out why the petition
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`failed as to claim 3. Being that we couldn't say
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`it any better than what the Board has already
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`articulated it, we don't believe we need to present
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`any briefing on that claim construction issue.
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` I would correct one thing the
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`petitioner said, we're not saying that this should
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`not be addressed in the final written decision, but
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`we believe that the Board has before it adequate
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`briefing from the parties on this issue from which
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`it may issue a final written decision on all
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`claims, especially given the fact that we're 30
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`days from the end of the statutory deadline.
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`We don't believe that this situation presents the
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`type of situation, for example that was presented
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`in Minerva Surgical where there must be an
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`emergency extension of the statutory deadline. So
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`we believe that petitioner has had a full and fair
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`opportunity to present its position on claim 3 and
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`we believe that the Board without briefing from the
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`parties may proceed to a final written decision
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`that includes these issues.
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` MS. HOLOUBEK: Your Honor, may I
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`respond?
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` JUDGE ARPIN: One second please, I'd
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`like to make some comments and ask a few questions
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`before I turn the floor back over to the
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`petitioner.
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` So my understanding patent owner is
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`that you do not intend at this time to respond, if
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`given the opportunity you would not file a
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`supplemental patent owner response addressing
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`claims 3, 4 or 5, is that correct patent owner?
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` MR. BRAGALONE: Yes, Your Honor.
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`It's our view that if we do not provide a response
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`then the petitioner does not have a right to reply
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`to our response and I believe the Court indicated
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`that previously when it suggested if the patent
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`owner chooses to respond. So as you know it's our
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`prerogative not to respond, we do not intend to
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`respond. Obviously if the Court indicates that
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`there will be briefing irrespective of our desires
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`and the deadline coming up then we would certainly
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`evaluate our decision in light of that, but as it
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`stands right now our position is we do not need to
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`file a response.
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` JUDGE ARPIN: I'd like to ask patent
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`owner one other question.
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` What is patent owner's position on
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`the voluntary withdrawal of claims 3, 4 and 5 and
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`the associated grounds from this proceeding prior
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`to the issuance of final written decision?
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` MR. BRAGALONE: Are you asking
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`whether patent owner would voluntarily withdraw or
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`petitioner?
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` JUDGE ARPIN: Whether patent owner,
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`I'll ask petitioner in a moment to clarify their
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`position, but I'd like to know right now whether
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`since you've been speaking patent owner, whether
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`patent owner would be willing to voluntarily
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`withdraw claims 3, 4 and 5 and the associated
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`grounds from this proceeding and have the Board
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`continue to draft a final written decision
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`addressing only the claims on which they were, on
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`which review was instituted.
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` MR. BRAGALONE: So Your Honor, from
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`patent owner's perspective we would consent to that
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`were petitioner obviously be willing to withdraw
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`that.
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` JUDGE ARPIN: Thank you patent owner.
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` I'm going to turn the floor over to
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`petitioner now and petitioner I'd like you in
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`particular to comment with regard to patent owner's
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`indication that they would not be filing any
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`further briefing in this case and to their
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`indication that they would be willing to agree to a
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`agreed upon withdrawal of the non-instituted claims
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`and associated grounds from this proceeding.
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` MS. HOLOUBEK: Certainly Your Honor,
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`I'll address each of those in turn.
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` First I want to address the comment
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`that Mr. Bragalone just made. First of all SAS
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`tells us that if the petition is instituted then it
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`should be instituted on all claims. Patent owner
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`just agreed that a claim construction wasn't
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`presented in the IPR because we didn't have the
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`opportunity, and so we don't believe that there has
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`been a full and fair opportunity because discovery
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`was not allowed to develop, and if that discovery
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`had been allowed to develop certainly relevant
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`evidence that we've seen from the pending 321 IPR
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`relevant evidence did develop and we weren't
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`allowed to submit it in this proceeding because IPR
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`had not been instituted on claim 3.
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` Regarding the patent owner's comment
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`that they do not intend to present a response on
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`claim 3 and so they didn't think that petitioner
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`would be able to file a reply. I believe the Board
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`in a webinar earlier this week indicated that the
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`petitioner's reply may be also responsive to the
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`institution decision in case there was anything in
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`there that was an issue. Obviously not
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`supplementing the petition as it were but we think
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`that evidence contrary to the patent owner's
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`position from the patent owner's own expert is
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`certainly relevant information that the Board
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`should be aware of and so that's why we don't
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`believe a full and fair opportunity to present all
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`the evidence was given regarding claim 3.
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` Regarding the patent owner consent to
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`withdraw these claims I'm a little bit confused as
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`to what that constitutes because in our
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`understanding a withdrawal of the claim is an
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`adverse, you know, by the patent owner, is
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`essentially a request for adverse decision on this
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`claim such that those claims can no longer be
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`enforced, and if the patent owner is willing to say
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`that they're canceling those claims such that those
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`claims are no longer enforceable outside of the
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`patent office then I think that's something that
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`petitioner would agree to. But if patent owner
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`intends to withdraw those claims from the
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`proceeding and still maintain all right of
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`enforcement after the proceeding then I think that
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`is contrary to exactly why those claims were
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`challenged in the first place.
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` I will say regarding claims 4 and 5
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`that, you know, those, if the Board has determined
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`that those claims are not patentable because of 112
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`issues then we, I agree that we don't see any
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`reason to open up briefing on those, but for claim
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`3 there are no 112 issues that have been alleged
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`regarding claim 3 in this proceeding and there is
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`relevant evidence out there for the Board to have
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`an opportunity to serve and so unless patent owner
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`is willing to fully, you know, request an adverse
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`decision on that claim we believe that that claim
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`should be reopened for briefing.
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` JUDGE ARPIN: Counselor, you
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`mentioned the webinar. I'm going to clarify
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`because I think that, and I'm not going to put
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`words into patent owner's mouth, but when I
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`suggested and asked patent owner whether or not it
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`would be willing to do a voluntary withdrawal of
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`those claims it was from the proceeding, not from
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`the patent. The webinars we've had have made clear
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`that if the parties agree to voluntarily withdraw
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`non-instituted claims and the associated grounds
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`from a proceeding then we would be willing to do
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`that and then proceed without those claims. We
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`would probably require the parties to submit some
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`kind of statement to us saying that they agree to
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`the withdrawal for the record and then the
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`proceeding would go on, our proceeding would go on
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`without those claims. The rights and
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`responsibilities of the parties with regard to the
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`claims outside of our proceeding, unfortunately we
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`have no control over that. So that, with that
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`clarification I will eventually give patent owner
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`the opportunity to confirm that that was their
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`understanding when they spoke but I don't think
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`they were asking for adverse judgment and I didn't
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`understand them to be making a request for adverse
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`judgment.
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` With regard to the new evidence and
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`arguments the patent owner does raise an important
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`point that not only did petitioner file a petition
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`where it presented its argument, it filed a request
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`for rehearing arguing that we had overlooked or
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`misunderstood some of those arguments and we ruled
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`on that at the hearing request. If the patent
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`owner does not file a patent owner response and
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`leaves, or leaves arguments out of the patent owner
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`response our scheduling order is relatively clear
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`that those arguments are waived, that the burden of
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`persuasion rests on and remains with the petitioner
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`with regards to all the grounds and all the claims
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`that they assert. So if the patent owner does not
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`respond to an issue generally speaking under our
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`rules, and I think you'll see this at Rule 42.23,
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`the petitioner's options in a reply are limited to
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`responding to arguments and issues raised by the
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`patent owner. So I'm going to, before I go back to
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`the patent owner I will let you to clarify anything
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`that you've said about the need for a response
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`petitioner.
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` MS. HOLOUBEK: Thank you, Your Honor.
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` So SAS indicates and SAS requires
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`that if some claims are instituted on then all
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`claims should be instituted on and the proceeding
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`should be allowed to develop as it otherwise would,
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`recognizing that maybe some arguments in the
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`petition are stronger than others, but discovery
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`should be allowed to develop as with any other, you
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`know, claim in the proceeding. Our petitioner
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`reply even if, you know, for example you mentioned
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`that patent owner may waive all arguments in
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`response to our assertions on claim 3, we think
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`it's important that our petition reply would be
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`responsive to the Board's view on claim
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`construction and captured in an institution
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`decision. We have a right to respond to that, it's
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`a new claim construction, not raised, it wasn't
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`addressed in our petition because it couldn't have
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`been, and we believe we have a right to respond to
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`a new claim construction that we were never given
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`the opportunity to address. Now, we can, you know,
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`focus our response of, you know, in a very limited
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`manner in this particular regard, we focus on the
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`contradictory position of their expert, that
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`information's already been obtained. I mean we
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`could if patent owner doesn't want to file a brief
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`we could file within just a few days evidence with
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`their expert's contradictory testimony so the Board
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`could consider it. At the time of the institution
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`decision, at the time of the hearing request the
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`Board did not have in any event discovery evidence
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`and the whole point of the proceeding I think is so
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`that the evidence develops as it should and because
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`the claim construction issue was so key in the
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`noninstitution decision we think that evidence from
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`the patent owner itself is relevant to that.
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` JUDGE ARPIN: Counselor, before I go
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`back to the patent owner I am going to point out in
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`your hearing request though you noted that we did
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`not define that term, so I'm a little confused as
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`to where there was a construction made by the Board
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`as to the term, application specific interface. I
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`do not believe we construed that term and so I'm a
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`little bit confused as to where the need to respond
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`to a construction we didn't make comes from.
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` MS. HOLOUBEK: Your Honor, I believe
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`it was
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