UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
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`
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`
`
`
`APPLE INC.
`Petitioner
`v.
`MAXELL, LTD.
`Patent Owner
`___________
`
`
`
`Case No. IPR2020-00202
`U.S. Patent No. 10,212,586 B2
`____________
`
`
`PETITONER APPLE INC.’S PRELIMINARY REPLY
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`
`
`
`____________
`
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`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`
`
`
`APPLE INC.
`Petitioner
`v.
`MAXELL, LTD.
`Patent Owner
`___________
`
`
`
`Case No. IPR2020-00202
`U.S. Patent No. 10,212,586 B2
`____________
`
`
`PETITONER APPLE INC.’S PRELIMINARY REPLY
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`TABLE OF CONTENTS
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`I. Fintiv’s and NHK’s Focus on the Trial Date Is Misplaced as a Basis
`for the Board’s Exercise of Its Discretion ............................................................ 1
`II. The Fintiv Factors Favor Institution ............................................................. 6
`Factor 1 – Evidence exists that a stay may be granted if IPR is
`instituted: .......................................................................................................... 6
`Factor 2 – Litigation will continue after the FWD: ........................................ 7
`Factor 3 – The Court has little substantive investment: ................................. 8
`Factor 4 – There is little to no overlap between the IPR and
`Litigation: ......................................................................................................... 8
`Factor 5 – Parties in Litigation and IPR: .......................................................10
`Factor 6 – Other Circumstances:....................................................................10
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`The six factors set forth in Apple v. Fintiv, Inc., IPR2020-00019, Paper 11
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`(PTAB Mar. 20, 2020) (“Fintiv”) strongly favor institution.
`
`I.
`
`Fintiv’s and NHK’s Focus on the Trial Date Is Misplaced as a Basis
`for the Board’s Exercise of Its Discretion
`
`First, Congress explicitly allows petitioners one year to file IPR petitions after
`
`service of a complaint. And this makes sense: the date on which a party is served
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`with a complaint is a known, fixed date. Congress did not choose to set the bar
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`backwards from a scheduled trial date—a date not known for months after a suit
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`begins, and which may vary from court to court and judge by judge and can routinely
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`change once initially set. Exalting a trial date as the benchmark over the statutory
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`filing window contravenes Congressional intent and introduces rank uncertainty.
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`Particularly in cases where a plaintiff asserts multiple patents (ten in this case),
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`the certainty a 1-year window provides is essential to reasonably plan and muster
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`resources to meet a known deadline. Trial-based timing may force accused infringers
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`to forego an IPR entirely because they are in a “fast” court or to hastily file an IPR
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`without opportunity to develop the record, particularly as to which specific claims
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`are asserted because a complaint often does not provide such specificity. See Bell
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`Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).
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`Second, the Board’s improper focus on a trial date as a determining factor on
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`whether to use its discretion to deny institution directly undermines the AIA’s and
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`USPTO’s objectives of improving patent quality. “Congress, concerned about
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`1
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`
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`overpatenting and its diminishment of competition, sought to weed out bad patent
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`claims efficiently.” Thryv, Inc. v. Click-to-Call Techs., LP, __ U.S. __ (Apr. 20,
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`2020) (slip op., at 8); see also Foster v. Hallco Mfg. Co., 947 F.2d 469, 474 (Fed.
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`Cir. 1991) (citing Lear, Inc. v. Adkins, 395 U.S. 653 (1969) (acknowledging a long-
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`standing and broad public policy of eliminating invalid patents)). Congress intended
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`for IPR to “serve as a less-expensive alternative to the courtroom litigation.” 157
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`Cong. Rec. S1352 (March 8, 2011) (Sen. Udall).
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`To achieve this, Congress recognized that litigants should be afforded “access
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`to the expertise of the Patent Office on questions of patentability,” and that IPR
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`should be “the preferred method of examination because a panel of experts is more
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`likely to reach the correct decision on a technical question compared to a jury
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`composed of laypeople.” Id. (emphasis added); see also 157 Cong. Rec. S5319
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`(Sept. 6, 2011) (Sen. Kyle). This matches the long-standing policy of the PTO
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`itself—“[b]y providing for the possibility of amendment of challenged claims, the
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`proposed system would preserve the merited benefits of patent claims better than
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`the win-all or
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`lose-all validity contests
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`in district court.” Patent Quality
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`Improvement: Post-Grant Opposition: Hearing Before the Subcomm. on Courts, the
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`Internet, and Intellectual Property of the H. Comm. on the Judiciary, 108th Cong.
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`10 (2004) (statement of PTO General Counsel James A. Toupin); Aqua Prod., Inc.
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`v. Matal, 872 F.3d 1290, 1298 (Fed. Cir. 2017) (noting General Counsel Toupin’s
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`
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`2
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`
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`quote for PTO policy); see Ex. 1042 (excerpts of legislative history discussion).
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`More simply, Congress did not intend for the PTAB to use a trial date to deny IPR,
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`and doing so now “would be arbitrary and capricious [because the PTAB] has relied
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`on factors which Congress has not intended it to consider.” Motor Vehicle Mfrs.
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`Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).
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`Third, the NHK/Fintiv factors’ myopic focus on a trial date ignores that IPR
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`proceedings not only may stop trials on invalid patents, but also may eliminate the
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`injustice of infringement verdicts rendered on invalid patents. The Federal Circuit
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`has embraced this significant benefit of post-grant proceedings. In Fresenius v.
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`Baxter, it explained that a final, post-grant decision of invalidity renders a patent
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`void ab initio and, unless final, overrides any corresponding district court finding.
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`721 F.3d 1330 (Fed. Cir. 2013). A district court’s decision is not “final” until it “ends
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`the litigation on the merits and leaves nothing for the court to do but execute the
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`judgment.” Id. at 1341. Accordingly, focusing on the trial date is short-sighted.
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`Fourth, looking speculatively at the time delta between a current trial date
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`and FWD ignores the practical realities of shifting litigation dockets. Over 40% of
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`cases have their initial trial dates continued by more than four months, some even
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`longer.1 Ironically, the Board’s reliance on a trial date putatively six months prior to
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`the FWD in NHK was misplaced. The trial that led the Board to deny institution was
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`1 (Ex. 1043, trial date statistics).
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`3
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`ultimately delayed more than eight months. If the Board had instituted, the FWD
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`would have issued several months before the trial. Because trial dates are far more
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`fluid than statutory timelines, considering the former at institution will ensure the
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`unfair result in NHK will not be an anomaly. And that assumes a case normally
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`progresses to trial. For example, in cases where a motion to transfer venue is filed,
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`over 51% of those requests were granted in 2019 (Ex. 1044, Transfer Statistics) and,
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`once transferred, a new trial date is set and the new judge will have a different view
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`on stays pending IPRs. Thus, even considering stay precedent is entirely speculative.
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`Fintiv’s focus on trial also allows so-minded courts to artificially influence
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`institution. For example, J. Albright (W.D.Tex.) recently denied a motion to stay
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`pending IPR pre-institution and sua sponte shortened the time to trial such that the
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`new trial date now precedes the FWD’s expected statutory deadline, implicating
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`NHK/Fintiv. The Board’s guidelines should not allow district courts to manipulate
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`the availability of IPRs. (Ex. 1049, minute entry moving trial to May 10, 2021); (Ex.
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`1050, scheduling order showing trial previously in July 2021); see also IPR2020-
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`00140 (filing date of May 14, 2020, with anticipated FWD on May 14, 2021).
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`Fifth, trial is not the end of the economies that can be beneficially gained
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`through IPRs. Post-trial motions, new trials, mistrials, appeals, reversals, and
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`remands may take years. But the PTAB cancelling invalid claims through IPR can
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`short circuit all of this. In Fresenius, the trial concluded, an appeal was filed, the
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`4
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`Federal Circuit remanded, and while the case was pending on remand, the Patent
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`Office in a parallel proceeding found all asserted claims invalid, thus avoiding
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`another round of appeals. The Federal Circuit noted that “when a claim is cancelled,
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`the patentee loses any cause of action based on that claim, and any pending litigation
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`in which the claims are asserted becomes moot.” Id. at 1340. The Fresenius facts
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`highlight the error in thinking a fast-approaching trial is more “efficient” and will
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`“save resources.” 2 Trial is not the end of litigation and IPR will conserve many post-
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`trial resources. Considering the lengthy process before district court litigation is
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`deemed “final,” the statutory 18-month deadlines governing PTAB proceedings
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`ensure IPR proceedings should conclude first.
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`Sixth, considering a trial date as a threshold of institution ignores the scenario,
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`contemplated by Congress, of obtaining a district court stay based on institution. See,
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`e.g., IOENGINE, LLC v. PayPal Holdings, Inc., 2019 U.S. Dist. LEXIS 141545, at
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`*9-10 (D. Del. Aug. 21, 2019) (J. Bryson); 157 Cong. Rec. S1363 (daily ed. Mar. 8,
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`2011) (Sen. Schumer); H. Rep. No. 112- 98, Part I, at 48 (2011). A perverse situation
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`emerges where a district court may set a relatively short initial time to trial, the Board
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`denies an IPR based on that quick trial date, and the district court denies a stay based
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`2 The judge denied multiple requests to stay the case, which became moot after the
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`PTO canceled the claims thus wasting significant resources. Id., at 1335.
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`5
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`
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`on the Board’s discretionary denial. IPRs would thus be unavailable in such a “fast”
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`district. This self-fulfilling prophecy will deprive significant numbers of petitioners
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`what is otherwise available to them by statute.
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`Finally, by focusing its discretionary analysis on a putative trial date, the
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`Board encourages patent owners to forum shop to effectively foreclose IPRs. If the
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`mere possibility of a district court trial before a FWD is a de facto bar on institution,
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`the PTAB’s doors will be closed to all defendants in any jurisdiction that is “fast,”
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`and the public interest in eliminating invalid patents at the PTO will be harmed. No
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`statute supports the Board allowing litigation venue to carry such sway. Congress
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`envisioned IPRs as a litigation alternative to petitioning parties; it did not afford
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`patent owners an option to self-select out of IPR proceedings by shopping for “fast”
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`forums. The AIA should provide petitioners a fair shake regardless of the forum.
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`The Fintiv Factors Favor Institution
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`II.
`Factor 1 – Evidence exists that a stay may be granted if IPR is instituted:
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`Apple moved to stay the underlying litigation on March 24, 2020. (Ex. 1045, District
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`Court Docket, Dkt. 239). On April 27, 2020, the Court denied the stay (Ex. 1052,
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`District Court Docket, Dkt. 298), which is inconsistent with Congress’ intent
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`“district courts to be liberal” in granting stays pending PTAB proceedings.
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`IOENGINE at 10-11; 157 Cong. Rec. S1363 (Mar. 8, 2011) (Sen. Schumer)
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`(Congress placed “a very heavy thumb on the scale in favor of a stay being granted”).
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`6
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`The Court, however, refused Maxell’s request to deny the motion with prejudice.
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`Apple will have the opportunity to re-file its motion and the Court expressly noted
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`that a renewed motion after institution may allow for simplification of issues.
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`Factor 2 – Litigation will continue after the FWD: Trial is currently-
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`scheduled for October 26, 2020, and the FWD is expected by June 23, 2021. While
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`a litigation appeal would likely not be decided before 2022, focusing on the trial date
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`is the wrong analysis as noted above. Given the COVID-19 pandemic, trials are
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`being impacted (especially as criminal trials take precedence), and the parties have
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`already received multiple extensions. The impact of these delays may impact the
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`trial date case as well. Additionally, Apple has filed a writ of mandamus with the
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`Federal Circuit addressing the district court’s denial of transfer. (Ex. 1046, Fed. Cir.
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`Docket, Dkt. 2). If granted, the transferee court will undoubtedly set a new trial date
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`and may have a different view on stays pending IPRs.
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`Apple moved as quickly as possible to locate art, prepare invalidity
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`contentions, and file ten IPRs after Maxell filed suit on March 15, 2019. (Petition,
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`Paper 1, at 8-10). To guarantee FWDs before the current trial date, Apple would
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`have needed to file all 10 of its petitions in April 2019, less than one month after
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`it was sued. Requiring Apple to locate art for 10 different patents on 132 possibly-
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`asserted claims, and then prepare and file petitions covering those claims in less than
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`30 days is completely unreasonable. This highlights the fallacy of focusing on trial
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`7
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`
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`dates. See 157 Cong. Rec. S5429 (Sept. 8, 2011) (Sen. Kyl) (“High-technology
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`companies … are often sued by defendants asserting multiple patents with large
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`numbers of vague claims, making it difficult to determine in the first few months of
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`the litigation which claims will be relevant. . . . [I]t is important that the section
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`315(b) deadline afford defendants a reasonable opportunity to identify and
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`understand the patent claims that are relevant to the litigation.”)
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`Factor 3 – The Court has little substantive investment: Apart from the
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`Markman proceedings, the district court has not invested other substantive efforts
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`and the litigation is not “advanced.” Summary judgment is still months away, and it
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`is unlikely the court will tackle invalidity until trial. Fact discovery and depositions
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`are ongoing. The bulk of the parties’ work lies ahead. See IOENGINE at *14.
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`Nor did the litigation give Apple a tactical advantage. Because Maxell did not
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`substantively respond to Apple’s invalidity contentions, Apple could not have used
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`any substantive insight gained in the litigation in its IPR filings.
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`Factor 4 – There is little to no overlap between the IPR and Litigation:
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`As the legislative history makes clear, Congress was not concerned with overlap
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`between the IPR and the litigation. Congress expected the PTAB to provide its
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`expertise and even provided a different standard at the PTAB (rather than the clear
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`and convincing standard in district courts) to take a second look at issued patents. In
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`any event, this IPR presents very different grounds than those in the litigation.
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`8
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`First, this IPR challenges different claims based on different art than from the
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`underlying litigation. Maxell only asserts one independent claim (16) and two
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`dependent claims (7 and 17) in the litigation. The Petition challenges claims 1-2, 6-
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`7, 9-10, 13-14, and 16-18. It is hardly the case of overlapping claims when Maxell
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`fails to even assert the challenged independent claims.
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`Second, this IPR presents different grounds than in the litigation:
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`Ground of Unpatentability in IPR
`Claims 1, 6-7, 9, 13-14, 16, 18: Kirkup
`(§ 103)
`Claims 2, 6, 10, 13, 17, 18: Kirkup in
`view of de la Huerga (§ 103)
`
`Invalidity Asserted in Litigation
`Claims 7, 16, 17: Schiffer (§ 102 / §
`103)
`Claims 7, 16, 17: Schiffer in view of
`Kirkup (§ 103)
`
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`(Paper 1, at 9; Ex. 1047, Apple’s Final Election of Prior Art, at 3; Ex. 2009, Maxell’s
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`Final Election of Asserted Claims, at 1). Maxell states “[i]n the District Court
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`Action, Apple prominently uses Kirkup as a primary reference.” Id. at 13. This is
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`incorrect; Apple’s litigation election relies upon Kirkup only as an alternative
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`secondary reference in combination with Schiffer. Thus, it is disingenuous for
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`Maxell to say “the very same issues will be decided by a jury at the trial.” Id. Maxell
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`also incorrectly states the IPR relies on Schiffer, which is not used for any ground in
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`the IPR. Id. at 14. Maxell also argues (with no explanation) that “no meaningful
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`distinction” can be made between Schiffer and Kirkup. Id. It is insufficient to merely
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`argue references teach the same limitation—of course they do. Without more,
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`Maxell’s argument should fail. Finally, these are separate references with different
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`9
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`teachings. The motivations to combine will be different and, therefore, will present
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`unique grounds to the Board not in the litigation. This case is similar to the Board’s
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`decision in Facebook, where different art and claims were asserted, unlike NHK. See
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`Facebook, Inc. v. Blackberry Ltd., IPR2019-00899, Paper 15 at 11-12 (Oct. 8, 2019).
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`Factor 5 – Parties in Litigation and IPR: The parties are the same.
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`Factor 6 – Other Circumstances: See Section I. Additionally, this case does
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`not involve serial or parallel petitions, which also favors institution.
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`Finally, the ’586 Patent illustrates another reason the Fintiv focus on trial date
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`is misplaced. The ’586 Patent issued on Feb. 19, 2019, and is a transitional
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`application under the AIA. (Ex. 1001, at (45); Paper 1, at fn. 3). An IPR could not
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`have been filed before November 19, 2019. 37 C.F.R. §42.102(a)(1). If working
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`backwards from the currently scheduled trial date is the benchmark for denying
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`institution, Apple would be barred from filing any IPR on the ’586 Patent because
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`the petition should have been filed in April 2019. Patent Owners could thus
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`manipulate the system by asserting newly issued patents in any forum marginally
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`faster than the nationwide median time to trial. (Ex. 1051, Time-to-Trial Statistics
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`(showing 30.7-month median, and 36 month average, time-to-trial)). Such
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`manipulation by patent owners for newly issued transitional patents was not
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`contemplated by Congress. And any ruling by the Board as such would be arbitrary
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`and capricious.
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`Respectfully submitted,
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`ERISE IP, P.A.
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`BY: /s/Adam P. Seitz
`
`
`Adam P. Seitz, Reg. No. 52,206
`Jennifer C. Bailey Reg. No. 52,583
`Robin A. Snader, Reg. No 66,085
`7015 College Blvd., Suite 700
`Overland Park, KS 66211
`P: (913) 777-5600
`F: (913) 777-5601
`adam.seitz@eriseip.com
`jennifer.bailey@eriseip.com
`robin.snader@eriseip.com
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`
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`ATTORNEYS FOR PETITIONER
`APPLE INC.
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`11
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`CERTIFICATE OF SERVICE ON PATENT OWNER
`UNDER 37 C.F.R. § 42.6
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`Pursuant to 37 C.F.R. § 42.6(e), the undersigned certifies that on April 23,
`2020 the foregoing Petitioner Apple Inc.’s Preliminary Reply was served via
`electronic filing with the Board and via Electronic Mail on the following
`practitioners of record for Patent Owner:
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`Robert G. Pluta (rpluta@mayerbrown.com)
`Maxell-Apple-Service@mayerbrown.com
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`/s/ Adam P. Seitz
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`Adam P. Seitz, Reg. No. 52,206
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`ATTORNEY FOR PETITIONER
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`12
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