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. IPR2020-00407
`U.S. Patent No. 6,748,317 B2
`____________
`
`
`PETITIONER 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. IPR2020-00407
`U.S. Patent No. 6,748,317 B2
`____________
`
`
`PETITIONER 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 ............................................................. 7
`Factor 1 – Evidence exists that a stay may be granted if IPR is
`instituted: .......................................................................................................... 7
`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: ......................................................................................................... 9
`Factor 5 – Parties in Litigation and IPR: .......................................................10
`Factor 6 – Other Circumstances:....................................................................10
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`Petitioner disputes the statutory authority of the Board to deny institution
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`under NHK/Fintiv. Even if such authority exists, Fintiv is inapplicable here.
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`I.
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`Fintiv’s and NHK’s Focus on the Trial Date Is Misplaced as a Basis
`for the Board’s Exercise of Its Discretion
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`The NHK/Fintiv factors are based on the Board’s belief that it has broad
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`discretion under § 314(a) to deny institution. Apple Inc. v. Fintiv, Inc., IPR2020-
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`00019, Paper 15, at 11 (PTAB May 13, 2020). In Fintiv, the Board ruled that
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`“considerations of efficiency and fairness … can serve as an independent reason to
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`apply discretion to deny institution.” Id. This is misplaced. An agency “literally has
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`no power to act … unless and until Congress confers power upon it.” La. Pub. Serv.
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`Comm’n v. FCC, 476 U.S. 355, 374 (1986). “[A]n agency’s power is no greater than
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`that delegated to it by Congress.” Lyng v. Payne, 476 U.S. 926, 937 (1986). The
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`express language of 35 U.S.C. § 314(a) limits the Director’s decision on institution
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`to whether “there is a reasonable likelihood that the petitioner would prevail with
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`respect to at least 1 of the claims challenged.” This is a substantive analysis on the
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`patentability of the claims— not a subjective assessment of “fairness” as proposed
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`by Fintiv. The fact that § 314(a) is phrased as a prohibition on institution “unless”
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`the “reasonable likelihood” standard is met indicates other statutory provisions
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`impose additional limits on institution. Section 314(a) is not an invitation to create
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`other, non-statutory grounds for denial.
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`The exclusive grounds for denying institution are within the statute. Section
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`1
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`313 states a preliminary response to a petition “sets forth reasons why no inter partes
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`review should be instituted based upon the failure of the petition to meet any
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`requirement of this chapter.” 35 U.S.C. § 313 (emphasis added). If Congress had
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`wanted the Patent Owner and the Board to rely on non-statutory reasons to deny
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`review beyond “any requirement of this chapter,” it would have said so. There is no
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`statutory provision that empowers discretion based on the overlap with litigation or
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`on the basis of “efficiency and fairness.” Fintiv, Paper 15, at 12. The guidance set
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`forth in NHK/Fintiv is beyond the scope of the Board’s statutory authority and, if
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`not, is arbitrary and capricious. 5 U.S.C. §§ 706(2)(A) and (C).
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`Moreover, even if the Director had authority to adopt the NHK/Fintiv factors,
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`the Board has no authority to do so outside of the Director doing so through notice-
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`and-comment rulemaking. “Congress organized the PTO with certain powers
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`delegated to the Director, and others delegated to the Board.” Facebook, Inc. v.
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`Windy City Innovations, LLC, 953 F.3d 1313, 1341 (Fed. Cir. 2020) (additional
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`views of Prost, C.J., and Plager and O’Malley, JJ.). To the Board, Congress
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`delegated merely the power to “conduct each inter partes review.” 35 U.S.C. §
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`316(c); see Facebook, 953 F.3d at 1341 (Congress “delegated the power to
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`adjudicate IPRs to the Board”). That “is not a delegation of authority to issue
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`adjudicative decisions interpreting statutory provisions of the AIA.” Facebook, 953
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`F.3d at 1340. When it comes to the task of “setting forth the standards for the
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`2
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`showing of sufficient grounds to institute a review under section 314(a)” and
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`“establishing and governing inter partes review,” Congress vested that power in the
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`Director. And he must exercise it through notice-and-comment rulemaking: “The
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`Director shall prescribe regulations.” 35 U.S.C. §§ 316(a)(2) & (4). Further,
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`Congress did not authorize the Director “to engage in any rulemaking other than
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`through the mechanism of prescribing regulations,” including “adjudication.”
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`Facebook, 953 F.3d at 1340, 1342. Even if Congress had, the Director cannot use
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`precedential opinions to establish rules for the institution of IPRs in circumvention
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`of the requirement of notice-and-comment rulemaking by the Director. Cf. N.L.R.B.
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`v. Bell Aerospace Co. Div. of Textron, 416 U.S. 267, 294 (1974) (Board could
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`announce new rules through adjudication because it “had both adjudicative and rule-
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`making powers”).
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`The Fintiv factors also are misplaced. First, Congress explicitly allows
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`petitioners one year to file IPR petitions after service of a complaint. Congress did
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`not choose to set the bar backwards from a scheduled trial date—a date not known
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`for months after a suit begins, and which may vary and change.
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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 meet the deadline. Trial-based
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`timing forces defendants to forego an IPR or hastily file an IPR without opportunity
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`to develop the record. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).
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`3
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`Second, the Board’s focus on overlap with trial directly undermines the AIA’s
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`objectives of improving patent quality. “Congress, concerned about overpatenting
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`and its diminishment of competition, sought to weed out bad patent claims
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`efficiently.” Thryv, Inc. v. Click-to-Call Techs., LP, __ U.S. __ (Apr. 20, 2020) (slip
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`op., at 8); see also Foster v. Hallco Mfg. Co., 947 F.2d 469, 474 (Fed. Cir. 1991).
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`Congress intended for IPRs to “serve as a less-expensive alternative to the courtroom
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`litigation.” 157 Cong. Rec. S1352 (March 8, 2011) (Sen. Udall).
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`To achieve this, Congress gave litigants “access to the expertise of the Patent
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`Office on questions of patentability” and noted IPRs should be “the preferred method
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`of examination because a panel of experts is more likely to reach the correct
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`decision.” Id; see also 157 Cong. Rec. S5319 (Sept. 6, 2011) (Sen. Kyle). There is
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`no doubt Congress was aware of the overlap between litigation and IPRs. The
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`Supreme Court also was aware of the overlap and noted it was inherent to Congress’s
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`design. Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2146 (2016) (“This
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`possibility, however, has long been present in our patent system, which provides
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`different tracks—one in the Patent Office and one in the courts—for the review and
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`adjudication of patent claims. [] These different evidentiary burdens mean that the
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`possibility of inconsistent results is inherent to Congress’s regulatory design.”).
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`There simply is no basis to use overlap as a basis of denial.
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`4
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`Third, the NHK/Fintiv factors’ 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.1 The Federal Circuit
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`has embraced this significant benefit. In Fresenius v. Baxter, it explained that a final,
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`post-grant decision of invalidity renders a patent void ab initio and, unless final,
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`overrides any corresponding district court finding. 721 F.3d 1330 (Fed. Cir. 2013).
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`Fourth, looking speculatively at a trial date ignores the practical realities of
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`shifting litigation dockets. Over 40% of cases have their initial trial dates continued
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`by more than four months, some even longer.2 Post-trial motions may continue for
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`months after the verdict. Ironically, the trial date in NHK was extended more than
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`eight months. If the Board had instituted, the FWD would have issued several
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`months before the trial. And that assumes a case normally progresses to trial. In cases
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`where a motion to transfer venue is filed, over 51% of those requests were granted
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`in 2019 (Ex. 1044, Transfer Statistics) and, once transferred, a new trial date is set,
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`and the new judge will have a different view on stays pending IPRs.
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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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`1 (Ex. 1055, stay statistics, showing stays granted 74+% of the time).
`2 (Ex. 1043, trial date statistics).
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`5
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`new trial date now precedes the FWD’s expected statutory deadline. The Board’s
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`guidelines should not allow manipulation. (Ex. 1049, minute entry moving trial to
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`5/10/21); (Ex. 1050, scheduling order showing trial previously in July 2021); see
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`also IPR2020-00140 (filing date of 5/14/2020, with anticipated FWD on 5/14/2021).
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`Fifth, economies exist well after trial. Post-trial events may take years.
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`Cancelling claims through IPR prevents this. In Fresenius, the trial concluded, an
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`appeal was filed, and while the case was pending on remand, the Patent Office found
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`all asserted claims invalid, thus avoiding more appeals. This highlights the error in
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`thinking a fast-approaching trial is more “efficient” and will “save resources.” 3
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`Sixth, considering a trial date as a threshold of institution ignores Congress’s
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`desire to obtain a district court stay based on institution. See, e.g., IOENGINE, LLC
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`v. PayPal Holdings, Inc., 2019 U.S. Dist. LEXIS 141545, at *9-10 (D. Del. Aug. 21,
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`2019) (J. Bryson); 157 Cong. Rec. S1363 (daily ed. Mar. 8, 2011) (Sen. Schumer).
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`A perverse situation emerges where a district court sets a relatively short initial time
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`to trial, the Board denies an IPR based on that trial date, and the district court then
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`denies a stay. This self-fulfilling prophecy will deprive significant numbers of
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`petitioners what is otherwise available to them by statute.
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`3 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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`6
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`Finally, by focusing on a putative trial date, the Board encourages patent
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`owners to forum shop. If the mere possibility of a district court trial before an FWD
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`is a de facto bar on institution, the PTAB’s doors will be closed to any defendant in
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`a jurisdiction that is “fast,” and the public interest in eliminating invalid patents will
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`be harmed. No statute supports allowing litigation venue to carry such sway.
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`The Fintiv Factors Favor Institution
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`II.
`Factor 1 – The Court will revisit a stay if an IPR is instituted: Apple
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`moved to stay the underlying litigation. (Ex. 1045, District Court Docket, Dkt. 239).
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`The Court denied but noted that a renewed motion after institution may be granted.
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`(Ex. 1052, District Court Docket, Dkt. 298). This favors Apple because institution
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`will increase the chance of a stay being granted. “If [the Board] were to institute trial
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`and reach a final written decision [], we would likely simplify, if not resolve entirely,
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`the invalidity issues the district court must address.” Cisco Sys., Inc. v. Ramot at Tel
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`Aviv Univ. Ltd., IPR2020-00122, Paper 14, Dissent at 5.
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`Factor 2 – Trial may be moved based on this Board’s decision: Trial is
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`currently scheduled for October 26, 2020,4 and the FWD is expected by August 12,
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`2021. But “the consideration of the ‘proximity’ of the trial date cannot be as simple
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`as comparing two dates on the calendar and determining which is first.” Id. at 7.
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`4 This date assumes there will be no changes due to COVID-19, which is unlikely.
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`7
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`“Obviously, if the litigation is stayed [upon a renewed motion] … the trial date in
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`[October] of this year will necessarily be pushed back, and will occur after the
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`issuance of [the Board’s] final written decision.” Id. And if the IPRs are successful,
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`there will be no need for a trial and significant resources will be saved for all parties.
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`Moreover, the deadlines in this case highlight the problems with focusing on
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`trial. Maxell filed suit alleging infringement of 10 patents on March 15, 2019.
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`(Petition, Paper 1, at 8-10). To guarantee FWDs before the current trial date, Apple
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`would have needed to file all 10 of its petitions in April 2019, less than one month
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`after it was sued. Requiring Apple to locate art for 10 different patents and 132
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`possibly-asserted claims, and then prepare and file petitions in less than 30 days is
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`completely unreasonable. See 157 Cong. Rec. S5429 (Sept. 8, 2011) (Sen. Kyl)
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`(“High-technology companies … are often sued by defendants asserting multiple
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`patents with large numbers of vague claims …. [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: This factor should
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`only favor denial if the forward-looking investment from the Court outweighs the
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`investment done in the past. Cisco, IPR2020-00122, Paper 14, Dissent at 8. The
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`Board must consider “the investment that will be required of the parties and the
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`court” as the cases moves to trial. No briefing on dispositive issues or pre-trial efforts
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`8
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`have begun, and the Court has not made any rulings on the merits. This outweighs
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`the limited work the Court has done on Markman, which does not favor denial. The
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`Board’s own rules contemplate taking up an IPR after a district court has construed
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`the claims. Id. at FN.3; 37 C.F.R. § 42.100(b). Nor did the litigation give Apple a
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`tactical advantage. Maxell did not substantively respond to Apple’s invalidity
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`contentions, and Apple could not have used any substantive insight 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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`Congress expected the PTAB to provide its expertise and even provided a different
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`standard (rather than the clear and convincing standard in district courts) to evaluate
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`patents. Instead, Congress anticipated overlap and provided estoppel in the district
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`court to account for any such overlap. Thus, overlap between the litigation favors
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`institution because it will ultimately create simplification and efficiencies through
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`the estoppel. Id. at 10. And, if instituted, the overlap will be resolved, or Petitioner
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`will be constrained by estoppel. Thus, “overlapping issues are unlikely, and
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`Congress’ goal of providing an efficient alternative venue for resolving questions of
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`patentability is achieved.” Cisco, IPR2020-00122, Paper 14, Dissent, at 10.
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`Regardless, there are differences between the IPR and litigation. First, this
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`IPR challenges different claims based on different art. Maxell asserts only claims 1
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`and 17 in the litigation. Ex. 1053, Maxell’s Final Election of Asserted Claims, at 1.
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`9
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`The Petition challenges claims 1-3, 5, 10-15, 17, and 18. Second, this IPR presents
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`different grounds. Ground 1 advances Hayashida in view of the knowledge of a
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`PHOSITA and Ground 2 advances Hayashida in view of Abowd. Paper 1, 5. Neither
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`of these grounds remains in the litigation. There, two of the four remaining
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`obviousness grounds rely on NavTalk as a base reference, a product not at issue in
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`the IPR. Ex. 1047, Apple’s Final Election of Prior Art, 2. A third remaining obvious
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`ground combines Hayashida with Maruyama, which is not in the IPR. Id. The final
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`obvious ground in the litigation relies on the CyberGuide system modified pursuant
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`to Hayashida. Id. But this ground is materially different from Ground 2 in the IPR.
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`The CyberGuide reference relied upon in the litigation is system prior art, only some
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`pertinent details of which are described in the Abowd publication. Also, Ground 2 in
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`the IPR proposes Hayashida modified in view of Abowd’s teachings, whereas the
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`litigation ground depends on CyberGuide as a base reference that is modified in view
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`of Hayashida. Accordingly, not only will the motivations to combine be different,
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`but the proposed modified system will be significantly different.
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`Factor 5 – Parties in Litigation and IPR: This factor is only relevant when
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`the district court defendant and the petitioner are unrelated. In cases such as this, the
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`factor is neutral. Cisco, IPR2020-00122, Paper 14, Dissent at 11.
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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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`10
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`III. Maxell Misinterprets Abowd’s “Do Not Circulate” Stamp
`To establish the public availability of Abowd, Petitioner submitted a
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`declaration from librarian expert, Jacob Munford. Ex. 1009. Mr. Munford discussed
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`Appendix AB01, which is a scanned copy of the Abowd reference contained within
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`a bound collection of Wireless Networks. Ex. 1009, ¶¶ 6-7. AB01 and its MARC
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`record, AB02, demonstrate that the University of Pittsburgh began cataloguing
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`Wireless Networks in 1995 and sent a collection of issues (including the October
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`1997 issue containing Abowd) to a book bindery between January and March of
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`1998—all of which occurred more than one year before the priority date. Id.
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`Without support, Maxell argues that a “Do Not Circulate” stamp on AB01
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`“indicate[s] that it was not meant for public use.” Paper 6, 47. The specific
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`transaction Mr. Munford conducted with AB01, however, demonstrates that
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`Maxell’s interpretation cannot be correct. Ex. 1054, Supp. Munford Dec. Namely,
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`Mr. Munford requested AB01 via the library’s public catalog. Id. He was permitted
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`to directly access AB01 in a special collections room and photocopy without
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`restriction. Consistent with common practice in library sciences to preserve archived
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`references, the “Do Not Circulate” stamp simply means the reference cannot be
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`removed from the premises, not that it is inaccessible to the public. Id.
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`Respectfully submitted,
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`ERISE IP, P.A.
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`BY: /s/Adam P. Seitz
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`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
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`
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`Paul R. Hart, Reg. No. 59,646
`5299 DTC Blvd., Suite 1340
`Greenwood Village, CO 80111
`P: (913) 777-5600
`F: (913) 777-5601
`paul.hart@eriseip.com
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`ATTORNEYS FOR PETITIONER
`APPLE INC.
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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 June 4, 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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`13
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