`
`UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND
`DIRECTOR OF THE UNITED STATES PATENT AND TRADEMARK OFFICE
`
`DATE:
`
`June 21, 2022
`
`MEMORANDUM
`
`TO:
`
`FROM:
`
`Members of the Patent Trial and Appeal Board
`
`KatherineK. Vidal ~Q~W>/\'~ l/t:!\ Vt~
`
`1 Property and
`Under Secretary of Commerce "for Inte~
`Director of the United States Patent and Tra e ark Office (USPTO or the Office)
`
`SUBJECT:
`
`INTERIM PROCEDURE FOR DISCRETIONARY DENIALS IN AIA POST(cid:173)
`GRANT PROCEEDINGS WITH PARALLEL DISTRICT COURT
`LITIGATION
`
`Introduction
`
`Congress designed the America Invents Act (AJA) post-grant proceedings "to establish a
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`more efficient and streamlined patent system that will improve patent quality and limit
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`unnecessary and counterproductive litigation costs." H.R. Rep. No. 112- 98, pt. 1, at 40 (2011),
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`2011 U.S.C.C.A.N. 67, 69; see S. Rep. No. 110- 259, at 20 (2008). Parallel district comt and
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`AIA proceedings involving the same parties and invalidity challenges can increase, rather than
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`limit, litigation costs. Based on the USPTO's experience with administering the AIA, the agency
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`has recognized the potential for inefficiency and gamesmanship in AJA proceedings, given the
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`existence of parallel proceedings between the Office and district courts. To minimize potential
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`conflict between the Patent Trial and Appeal Board (PTAB) and district comt proceedings, the
`
`Office designated as precedential Apple Inc. v. Fintiv, Inc. 1 This precedential decision aiticulates
`
`1 See Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB Mar. 20, 2020) (designated
`precedential May 5, 2020).
`
`P .O . Box 1450, Alexandria, Virginia 22313-1450 - WWW.USPTO.GOV
`
`Exhibit 1012
`Cisco v. Orckit – IPR2023-00554
`Page 1 of 9
`
`
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`the following set of nonexclusive factors (the Fintiv factors) that the PT AB considers on a case(cid:173)
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`specific basis in determining whether to institute an AIA post-grant proceeding where there is
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`parallel district comt litigation:
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`1. whether the comt granted a stay or evidence exists that one may be granted if a
`proceeding is instituted;
`
`2. proximity of the court's trial date to the Board's projected statutory deadline for a
`final written decision;
`
`3.
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`investment in the parallel proceeding by the comt and the patties;
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`4. overlap between issues raised in the petition and in the parallel proceeding;
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`5. whether the petitioner and the defendant in the parallel proceeding are the same
`party; and
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`6. other circumstances that impact the Board's exercise of discretion, including the
`merits.
`
`The Office issued a Request for Comments (RFC) 2 on the PTAB's current approaches to
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`exercising discretion on whether to institute an AIA proceeding, including situations involving
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`parallel district comt litigation. The Office received 822 comments from a wide range of
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`stakeholders. In light of the feedback received, the Office is planning to soon explore potential
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`rulemaking on proposed approaches through an Advanced Notice of Proposed Rulemaking. In
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`the meantime, I have dete1mined that several clarifications need to be made to the PTAB's
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`current application of Fintiv to discretionary institution where there is parallel litigation.
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`As explained below, to benefit the patent system and the public good, the PT AB will not
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`rely on the Fintiv factors to discretionai·ily deny institution in view of parallel district comt
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`litigation where a petition presents compelling evidence ofunpatentability. This memorandum
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`also confirms that the precedential imp01t of Fintiv is limited to facts of that case. Namely,
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`Fintiv involved institution of an AIA proceeding with a parallel district comt litigation. The
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`2 Discretion to Institute Trials Before the Patent Trial and Appeal Board, 85 FR 66502 (Oct. 20,
`2020); Discretion to Institute Trials Before the Patent Trial and Appeal Board; Extension of
`Comment Period, 85 FR 73437 (Nov. 18, 2020).
`
`2
`
`Exhibit 1012
`Cisco v. Orckit – IPR2023-00554
`Page 2 of 9
`
`
`
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`
`Exhibit 1012
`Cisco v. Orckit – IPR2023-00554
`Page 3 of 9
`
`
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`system ... will give third parties a quick, inexpensive, and reliable alternative to district court
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`litigation to resolve questions of patent validity"). Congress granted the Office "significant
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`power to revisit and revise earlier patent grants" as a mechanism "to improve patent quality and
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`restore confidence in the presumption of validity that comes with issued patents." Cuozzo Speed
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`Techs., LLC v. Lee, 579 U.S. 261,272 (2016) (quoting H.R. Rep. No. 112-98, pt. 1, at 45, 48).
`
`Given those objectives, compelling, meritorious challenges will be allowed to proceed at the
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`PT AB even where district court litigation is proceeding in parallel. Compelling, meritorious
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`challenges are those in which the evidence, if umebutted in trial, would plainly lead to a
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`conclusion that one or more claims are unpatentable by a preponderance of the evidence. That
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`said, the PT AB retains discretion to deny institution for proceedings where abuse has been
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`demonstrated.
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`Fintiv factor six reflects that the PT AB considers the merits of a petitioner's challenge
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`when determining whether to institute a post-grant proceeding in view of parallel district court
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`litigation. Where the information presented at the institution stage is merely sufficient to meet
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`the statutory institution threshpld,5 the PTAB has the authority, where warranted, to exercise
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`discretion to deny institution in view of the other Fintiv factors. In contrast, where the PTAB
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`determines that the information presented at the institution stage presents a compelling
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`5 Institution of an IPR is authorized by statute only when "the information presented in the
`petition ... and any response ... shows that there is a reasonable likelihood that the petitioner
`would prevail with respect to at least 1 of the claims challenged in the petition." 35 U.S.C.
`§ 314(a) (2018). Similarly, institution of a PGR, including a CBM, is authorized only when "the
`information presented in the petition ... , if such information is not rebutted, would demonstrate
`that it is more likely than not that at least 1 of the claims challenged in the petition is
`unpatentable" Id. § 324(a).
`
`4
`
`Exhibit 1012
`Cisco v. Orckit – IPR2023-00554
`Page 4 of 9
`
`
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`unpatentability challenge, that determination alone demonstrates that the PT AB should not
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`discretionarily deny institution under Fintiv. 6
`
`This clarification strikes a balance among the competing concerns of avoiding potentially
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`conflicting outcomes, avoiding overburdening patent owners, and strengthening the patent
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`system by eliminating patents that are not robust and reliable. Consistent with Congress's giving
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`the Office the authority to revisit issued patents, the PT AB will not deny institution based on
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`Fintiv if there is compelling evidence of unpatentability. This approach "allows the proceeding
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`to continue in the event that the parallel proceeding settles or fails to resolve the patentability
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`question presented in the PTAB proceeding." Fintiv, Paper 11 at 15. The patent system and the
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`public good benefit from instituting compelling unpatentability challenges.
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`ITC and Fi11tiv
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`In 2018, the PT AB issued a decision in NHK Spring. 7 There, the PT AB held that the
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`advanced state of a parallel district court litigation involving similar validity disputes could be a
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`factor weighing in favor of denying institution of an IPR because of concerns over the inefficient
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`6 The compelling evidence test affirms the PT AB' s current approach of declining to deny
`institution under Fintiv where the evidence of record so far in the case would plainly lead to a
`conclusion that one or more claims are unpatentable. See, e.g., 11/umina Inc. v. Trs. of Columbia
`Univ., IPR2020-00988, Paper 20 (PTAB Dec. 8, 2020) (declining to deny under Fintiv in light of
`strong evidence on the merits even though four factors weighed in favor of denial and remaining
`factor was neutral); Synthego Corp. v. Agilent Techs., Inc., IPR2022-00402, Paper 11 (May 31,
`2022) (granting institution as efficiency and integrity of the system would not be served by
`denying institution of petition with particularly strong evidence on the merits); Samsung Elecs.
`Co. v. Scramoge Tech., Ltd., IPR2022-00241, Paper 10 (June 13, 2022) (Fintiv analysis
`concludes that "very strong" evidence on the merits outweigh concurrent litigation involving
`earlier scheduled trial date and significant overlap in proceedings).
`
`7 NHK Spring Co. v. Intri-Plex Techs., Inc., IPR2018-00752, Paper 8 (PTAB Sept. 12, 2018)
`(precedential). This decision also based the denial of institution on Director discretion under 35
`U.S.C. § 325(d).
`
`5
`
`Exhibit 1012
`Cisco v. Orckit – IPR2023-00554
`Page 5 of 9
`
`
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`use of PTAB's resources. NHK Spring, Paper 8 at 19- 20. Later, in 2020, the PTAB announced
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`the Fintiv factors, which the PT AB considers when a patent owner raises an argument for
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`discretionary denial under NHK Spring due to an earlier trial date. Fintiv, Paper 11 at 5- 6. The
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`Fintiv factors focus on the interplay between IPRs and district court litigation. Through that
`
`focus, the Fintiv factors seek to avoid duplicative efforts between the PT AB and federal district
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`comis. For example, Fintiv factor one asks whether the "comt" has granted a stay or if one may
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`be granted. Similarly, Fintiv factor two looks at the proximity of the "comt" trial date.
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`Likewise, Fintiv factor three concerns the amount of investment in the parallel proceeding by the
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`"comt" and the parties. Fintiv factors five and six refer to the same parallel proceeding
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`described in factor three.
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`Although the Fintiv factors are directed to district court litigation and not ITC
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`proceedings, 8 the PTAB has, in the past, denied AIA reviews based on parallel ITC
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`investigations. 9 Imp01tant differences, however, distinguish ITC investigations from patent
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`invalidity trials in federal district courts. Unlike district comis, the ITC lacks authority to
`
`invalidate a patent and its invalidity rulings are not binding on either the Office or a district
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`court. See Tandon C01p. v. U.S.1T.C., 831 F.2d 1017, 1019 (Fed. Cir. 1987). Therefore, an ITC
`
`determination cannot conclusively resolve an assertion of patent invalidity, which instead
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`requires either district court litigation or a PTAB proceeding to obtain patent cancellation. Thus,
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`denying institution because of a parallel ITC investigation will not necessarily minimize
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`8 Fintiv refers to ITC proceedings in discussing factor one. Fintiv, Paper 11 at 8- 9. Addressing
`the situation where district court litigation is stayed pending an ITC investigation, Fintiv states in
`dicta that "it is difficult to maintain a district comt proceeding on patent claims determined to be
`invalid at the ITC." Id. at 9.
`9 See, e.g., Philip Morris Prods. S.A. v. Rai Strategic Holdings, Inc., IPR2020-00919, Paper 9
`(PTAB Nov. 16, 2020).
`
`6
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`Exhibit 1012
`Cisco v. Orckit – IPR2023-00554
`Page 6 of 9
`
`
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`potential conflicts between PTAB proceedings and district court litigation. For the foregoing
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`reasons, the PT AB no longer discretionarily denies petitions based on applying Fintiv to a
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`parallel ITC proceeding. This memorandum memorializes that practice. The PT AB will not
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`discretionarily deny petitions based on applying Fintiv to a parallel ITC proceeding.
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`Solera Stipulations
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`Fintiv factor four looks at the overlap between the issues raised in the IPR petition and in
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`the parallel proceeding in order to evaluate "concerns of inefficiency and the possibility of
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`conflicting decisions." Fintiv, Paper 11 at 12. If the petition includes the same or substantially
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`the same claims, grounds, arguments, and evidence as presented in the parallel proceeding, this
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`fact has favored denial. Id. at 12. Conversely, if the petition includes materially different
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`grounds, arguments, and/or evidence than those presented in the district court, this fact has
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`tended to weigh against exercising discretion to deny institution. Id. at 12- 13.
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`When a petitioner stipulates not to pursue in a parallel district court proceeding the same
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`grounds as in the petition or any grounds that could have reasonably been raised in the petition, it
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`mitigates concerns of potentially conflicting decisions and duplicative efforts between the district
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`court and the PT AB. See Solera, Paper 12 at 18- 19. With such a stipulation, if an IPR or PGR
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`is instituted, the grounds the PTAB resolves will differ from those present in the parallel district
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`comi litigation. For these reasons, the PTAB will not discretionarily deny institution of an IPR
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`or PGR in view of parallel district court litigation where a petitioner stipulates not to pursue in a
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`parallel district court proceeding the same grounds as in the petition or any grounds that could
`
`have reasonably been raised in the petition. This clarification avoids inconsistent outcomes
`
`7
`
`Exhibit 1012
`Cisco v. Orckit – IPR2023-00554
`Page 7 of 9
`
`
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`between the PT AB and the district court and allows the PTAB to review grounds that the parallel
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`district court litigation will not resolve.
`
`Trial Date
`
`Fintiv factor two considers the proximity of the comt's trial date to the Board's projected
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`statutory deadline for a final written decision. When applying this factor, the PT AB has taken
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`the "comts' trial schedules at face value absent some strong evidence to the contrary." 10 Thus,
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`the PT AB has generally weighed this factor in favor of exercising discretion to deny institution if
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`the trial date is scheduled before the projected statutory deadline for a final written decision.
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`In response to the RFC, a number of commenters expressed concern with the use of trial
`
`dates as a factor. 11 Stakeholders correctly noted that scheduled trial dates are umeliable and
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`often change. A court's scheduled trial date, therefore, is not by itself a good indicator of
`
`whether the district court trial will occur before the statutory deadline for a final written decision.
`
`Accordingly, when analyzing the proximity of the comt's trial date under factor two of
`
`Fintiv, when other relevant factors weigh against exercising discretion to deny institution or are
`
`neutral, the proximity to trial should not alone outweigh all of those other factors. See In re
`
`Genentech, Inc., 566 F.3d 1338, 1347 (Fed Cir. 2009). Paities may present evidence regarding
`
`the most recent statistics on median time-to-trial for civil actions in the district comt in which the
`
`10 Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 15 at 13 (May 13, 2020) (informative)
`(applying the Fintiv factors articulated in the precedential Fintiv decision).
`11 See USPTO Executive Summa,y of Public Views on Discretionary Institution of AJA
`Proceedings (Jan. 2021) (available at https://www.uspto.gov/sites/default/files/documents/
`USPTOExecutiveSummaryofPublicViewsonDiscretionarylnstitutiononAIAProceedingsJanuary2
`021.pdf).
`
`8
`
`Exhibit 1012
`Cisco v. Orckit – IPR2023-00554
`Page 8 of 9
`
`
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`Exhibit 1012
`Cisco v. Orckit – IPR2023-00554
`Page 9 of 9
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`