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VIRNETX INC.,
Appellant,
v.
APPLE INC., CISCO SYSTEMS, INC.,
Appellees.
Appeals from the United States Patent and Trademark Office, Patent Trial and
Appeal Board in Nos.95/001,788, 95/001,789, and 95/001,856
NAVEEN MODI
JOSEPH E. PALYS
IGOR V. TIMOFEYEV
DANIEL ZEILBERGER
PAUL HASTINGS LLP
875 15th Street, NW
Washington, DC 20005
(202) 551-1700
naveenmodi@paulhastings.com
josephpalys@paulhastings.com
igortimofeyev@paulhastings.com
danielzeilberger@paulhastings.com
October 3, 2017 Counsel for Appellant VirnetX Inc.
Case: 17-1591 Document: 65 Page: 2 Filed: 10/03/2017
CERTIFICATE OF INTEREST
Counsel for Appellant VirnetX Inc. certifies the following:
4. The names of all law firms and the partners or associates that appeared for
the party now represented by me in the agency or are expected to appear in this
court (and who have not or will not enter an appearance in this case) are:
5. The title and number of any case known to counsel to be pending in this or
any other court or agency that will directly affect or be directly affected by this
court’s decision in the pending appeal. See Fed. Cir. R. 47.4(a)(5) and 47.5(b).
VirnetX, Inc. v. Apple Inc. (formerly VirnetX, Inc. v. Cisco Sys., Inc.),
No. 6:10-cv-00417 (E.D. Tex.)
(final judgment entered on September 29, 2017);
VirnetX Inc. v. Apple Inc., No. 12-cv-00855 (E.D. Tex.);
TABLE OF CONTENTS
Page
i
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TABLE OF CONTENTS
(continued)
Page
IV. THE BOARD FAILED TO ADDRESS VIRNETX’S ARGUMENTS
REGARDING CLAIM 47 OF THE ’211 PATENT IN THE 856
PROCEEDING. .............................................................................................27
B. The Board Erred in the 788 and 789 Proceedings in Finding that
Provino Discloses the Claimed “Authentication” Limitation. ............36
ii
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TABLE OF CONTENTS
(continued)
Page
VI. VIRNETX PRESERVED THE ISSUE THE SUPREME COURT
WILL CONSIDER IN OIL STATES ENERGY SERVICES FOR
REVIEW. .......................................................................................................38
CONCLUSION ........................................................................................................39
iii
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TABLE OF AUTHORITIES
Page(s)
Cases
In re Abbott Diabetes Care Inc.,
696 F.3d 1142 (Fed. Cir. 2012) ..........................................................................21
In re Cree, Inc.,
818 F.3d 694 (Fed. Cir. 2016) ......................................................................24, 25
iv
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TABLE OF AUTHORITIES
(continued)
Page(s)
Function Media, L.L.C. v. Google Inc.,
708 F.3d 1310 (Fed. Cir. 2013) ............................................................................ 6
Gechter v. Davidson,
116 F.3d 1454 (Fed. Cir. 1997) ....................................................................22, 23
Gutierrez-Brizuela v. Lynch,
834 F.3d 1142 (10th Cir. 2016) ..........................................................................11
In re Imes,
778 F.3d 1250 (Fed. Cir. 2015) ..........................................................................37
In re Jung,
637 F.3d 1356 (Fed. Cir. 2011) ..........................................................................23
v
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TABLE OF AUTHORITIES
(continued)
Page(s)
In re Lee,
277 F.3d 1338 (Fed. Cir. 2002) ..........................................................................25
In re Leithem,
661 F.3d 1316 (Fed. Cir. 2011) ....................................................................31, 32
Mason v. Shinseki,
743 F.3d 1370 (Fed. Cir. 2014) ..........................................................................18
Mercer v. Theriot,
377 U.S. 152 (1964) ..............................................................................................9
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TABLE OF AUTHORITIES
(continued)
Page(s)
Teva Pharms. USA, Inc. v. Sandoz, Inc.,
135 S. Ct. 831 (2015) ..........................................................................................10
Statutes
35 U.S.C.
§ 315(c) (2006) .............................................................................................12, 17
§ 316(a) (2006) ...................................................................................................18
§ 317(a) (2006) ...................................................................................................12
§ 317(b) (2006) ............................................................................................passim
Administrative Decisions
In re Campana,
No. 95/000,020 (P.T.O. Sept. 16, 2005) .............................................................19
Regulations
37 C.F.R.
§ 1.197.................................................................................................................18
§ 1.979.................................................................................................................18
§ 41.67(c)(1)(vii).................................................................................................28
54 Fed. Reg. 29548 (July 13, 1989) .........................................................................18
Other Authorities
18A Charles A. Wright, Arthur R. Miller & Edward H. Cooper,
Federal Practice and Procedure (2d ed. 2002)..............................................8, 14
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TABLE OF AUTHORITIES
(continued)
Page(s)
Manual of Patent Examining Procedure § 2686.04.V.A ........................................17
Stephen M. Shapiro et al., Supreme Court Practice (10th ed. 2013) ..................6, 10
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REPLY BRIEF
Three years ago, this Court held that Apple Inc. (“Apple”) failed to prove
invalidity of the claims at issue in this appeal. VirnetX, Inc. v. Cisco Sys., Inc., 767
F.3d 1308, 1323-24 (Fed. Cir. 2014) (“Cisco”). Under the statutory estoppel
provision, 35 U.S.C. § 317(b) (2006), this Court’s decision should have ended
most of the inter partes reexaminations below. The Patent and Trademark Office
plain text of section 317(b) and this Court’s precedent. Apple attempts to side-step
that precedent, but to no avail. This Court should vindicate section 317(b)’s
Apple and Cisco Systems, Inc. (“Cisco”) fare no better in defending the
Patent Trial and Appeal Board’s (“the Board’s”) faulty unpatentability findings.
new grounds in rejecting the patent claims. The Board also applied defective claim
construction that ignored the patents’ specification, and misread the asserted
findings.
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inter partes reexamination once a court enters “a final decision ‘that the party has
not sustained its burden of proving the invalidity of any patent claim.’ ” Fairchild
(Taiwan) Corp. v. Power Integrations, Inc., 854 F.3d 1364, 1366 (Fed. Cir. 2017)
judgment terminating the entire case. Thus, as this Court recently held, section
deems one of this Court’s decisions mistaken in the process. According to Apple,
section 317(b) requires not only a “final decision” of this Court, but an end to all
review of the patent’s validity. Apple Br. 32-35, 38-41. But Apple does not
explain how a statute whose text requires only a “final decision,” on a single issue
(invalidity), can be read to require a final judgment on all issues. Apple does not
point to any material difference between this case and cases where this Court
applied section 317(b)’s estoppel. Nor does Apple explain why Congress would
2
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have wished to maximize the time during which this Court’s final determination of
a patent’s validity may be overturned by the PTO. And Apple does not dispute
not purport to address the question here and do not support Apple’s novel theory.
judgment terminating the entire case. “By its terms, § 317(b) … concern[s] a final
decision ‘that the party has not sustained its burden of proving the invalidity of any
patent claim.’ ” Fairchild, 854 F.3d at 1366 (quoting 35 U.S.C. § 317(b) (2006))
(emphasis added). Thus, in both Fairchild and Function Media, L.L.C. v. Kappos,
508 F. App’x 953 (Fed. Cir. 2013), this Court held that section 317(b) precluded a
third-party requester from maintaining a reexamination after it lost (or did not
pursue) an appeal of validity issues in a civil case. See VirnetX Br. 28-30. Neither
case involved the entry of a final judgment or the elimination of all prospect for
Apple does not dispute that Fairchild and this case involve almost identical
facts. There, as here, a district court had found patents valid, this Court had
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affirmed, and the challenger had not sought certiorari from this Court’s decision.
Compare Fairchild, 854 F.3d at 1365-66, with Cisco, 767 F.3d at 1323-24. There
as here, the Court left some issues to be addressed on remand, but none of those
854 F.3d at 1366; see also Cisco, 767 F.3d at 1323-24. In Fairchild, this Court
held that its final decision on validity precluded maintenance of the PTO
reexamination. 854 F.3d at 1365-66. That holding applies with equal force here.
Apple argues that in Fairchild the time for seeking certiorari “ha[d] passed,”
whereas Apple claims it can still seek certiorari on invalidity issues after the entry
of a “final judgment” in this case. Apple Br. 36. That does not distinguish
Fairchild. There, as here, this Court remanded the case for additional proceedings
after it upheld the decision on validity. See Power Integrations, Inc. v. Fairchild
Semiconductor Int’l, Inc., 843 F.3d 1315, 1340-42 (Fed. Cir. 2016); Fairchild, 854
precisely the same opportunity to seek Supreme Court review (even of issues
raised in the previous appeal) following final judgment. See Apple Br. 34-35;
Apple responds that the Fairchild Court did not “consider” whether the
requester could “raise the relevant invalidity issue on certiorari from a subsequent
appeal.” Apple Br. 36. That amounts to saying that Fairchild was wrongly
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decided. The mere fact that the Fairchild panel did not expressly reject an
argument does not mean this panel may reach the opposite result on an identical
legal issue and identical facts. Apple surmises that the Fairchild panel was
ignorant about the scope of the Supreme Court’s authority to review this Court’s
judgments. Yet, Apple itself declares it “manifest” that the Supreme Court may
appeals, after final judgment. Apple Br. 34 (citation omitted). It is unlikely this
Apple’s effort to side-step Function Media fares no better. There, this Court
held that a party’s failure to appeal a district court decision upholding patent
validity rendered it “final” for purposes of section 317(b), even though the parties
were still litigating other issues. 508 F. App’x at 956. Apple’s unsuccessful appeal
on validity likewise renders the district court’s decision on that issue final here.
Apple urges that the failure to appeal in Function Media distinguishes it because
the Supreme Court will not review issues that have been waived. Apple Br. 37 &
n.11. The argument is implausible in the extreme (and not merely because waiver
itself is litigable in the Supreme Court). While the Supreme Court often chooses
not to pass upon issues not raised before the court of appeals, it has the power to
address any prior ruling in a case—including district court decisions that were
never appealed. See Stephen M. Shapiro et al., Supreme Court Practice § 2.3, at
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84-85 (10th ed. 2013). Finality under section 317(b) cannot turn on whether this
Court (or the PTO) thinks the Supreme Court would find procedural or
Simply put, Function Media and Fairchild both teach that a decision on
validity becomes “final” when the challenger loses in district court and fails to
obtain relief in this Court (because it forgoes appellate review or loses on appeal).
See 508 F. App’x at 956; 854 F.3d at 1366. Neither case discussed whether some
potential Supreme Court review; that simply was not relevant to this Court’s
analysis. Indeed, the Court in Function Media observed that, “[r]egardless” of the
the district court’s judgment in full and … adopted its claim constructions.” 508
F. App’x at 956. That eliminated any “argument for maintaining these claims in
§ 317(b).” Id. The Court then gave the district-court decision preclusive effect
only three weeks after affirming—long before the period to seek certiorari had
expired. Compare Function Media, L.L.C. v. Google Inc., 708 F.3d 1310, 1326-27
(Fed. Cir. 2013) (affirming on February 13, 2013), with Function Media, 508
F. App’x at 955-56 (applying section 317(b) on March 7, 2013). That result cannot
be reconciled with Apple’s insistence that a decision is not final for section 317(b)
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Br. 36.
Apple does not dispute that, under traditional principles, issue preclusion applies
once this Court issues a final decision even if the possibility of Supreme Court
review is not foreclosed. 1 Apple instead argues that Congress did not “codify
general principles of issue preclusion” in section 317(b). Apple Br. 38. But
nothing in section 317(b) suggests that Congress meant to create a sui generis type
B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293, 1303 (2015). In fact, this
In re Affinity Labs of Tex., LLC, 856 F.3d 902, 905 (Fed. Cir. 2017).
Court review ordinarily “does not suspend the operation of the judgment as an
1
VirnetX did not forfeit this argument (Apple Br. 37-38). VirnetX argued
preclusion below at length; forfeiture and waiver applies to claims, not supporting
interpretive principles. Lebron v. Nat’l R.R. Passenger Corp., 513 U.S. 374, 378-
79 (1995); Yee v. City of Escondido, 503 U.S. 519, 534 (1992).
7
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estoppel.” Straus v. Am. Publishers’ Ass’n, 201 F. 306, 310 (2d Cir. 1912). A
appellate decision resolving an issue ordinarily has preclusive effect even if one
can theorize the remote possibility of Supreme Court review “at some later stage.”
18A Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice
and Procedure § 4434 (2d ed. 2002). The Supreme Court itself has given an
certiorari to review the validity issue. Hart Steel Co. v. R.R. Supply Co., 244 U.S.
litigation. Apple Br. 40-41. But Apple’s position maximizes the opportunities for
Function Media, 508 F. App’x at 955. In Apple’s view, this Court’s decision
upholding a patent is not final until no “prospect of future Supreme Court review”
remains. Apple Br. 36. That means a party that loses a validity challenge in this
Court, and forgoes the immediate opportunity to seek further review, can maintain
parallel reexamination and civil proceedings up until the moment that nothing is
left to be done in the civil case but enter and enforce the judgment. It also means
that an interlocutory decision of this Court resolving invalidity issues would not be
entitled to preclusive effect even if a party seeks certiorari and the Supreme Court
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denies review. (Despite the prior denial, the Supreme Court still could address that
question in reviewing a final judgment. See, e.g., United States v. Virginia, 518
U.S. 515, 526 (1996); Hughes Tool Co. v. Trans World Airlines, 409 U.S. 363, 365
n.1 (1973); Mercer v. Theriot, 377 U.S. 152, 153-54 (1964).) This case illustrates
the wastefulness of Apple’s proposed rule. The prospect of Supreme Court review
is always remote, and Apple does not argue that this Court’s fact-bound invalidity
holding in Cisco, 767 F.3d at 1323-24, presents a certworthy question. If the PTO
had applied section 317(b) to that decision (as it should have done), the duplicative
Court review is no longer available. Apple Br. 40-41. But Apple offers nothing to
for years on end, even after this Court resolves validity on the merits, until the
intended that result, it would have written section 317(b) to take effect following
unreviewable on direct appeal. Congress would not have written the provision to
take effect once there was a “decision” on the single issue of validity.
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decisions. Apple Br. 41. Not so. The interlocutory posture of a case is no
important and clear-cut issue of law that is fundamental to the further conduct of
the case and that would otherwise qualify as a basis for certiorari.” Shapiro,
Supreme Court Practice § 4.18, at 283. The Supreme Court recently granted
review of a question arising from an inter partes review even though this Court
vacated some of the Board’s findings and remanded the case for a new
patentability analysis. See SAS Inst., Inc. v. ComplementSoft, LLC, 825 F.3d 1341,
1343, 1350-52 (Fed. Cir. 2016), cert granted sub nom. SAS Inst. Inc. v. Lee, 137 S.
Ct. 2160 (2017). Indeed, the Supreme Court routinely grants review of this
Court’s decisions where they present fundamental patent-law questions despite the
Int’l, Inc., 137 S. Ct. 1523 (2017) (certiorari review of a decision on motions to
dismiss); Teva Pharms. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831 (2015) (certiorari
Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120 (2014) (certiorari review of a
to believe that a losing party would forgo seeking certiorari, and opt instead for
review.
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The PTO’s claimed authority to invalidate a patent—even after a district court has
upheld its validity, even after this Court affirmed that judgment, and even after the
to act “like some sort of super court of appeals.” Gutierrez-Brizuela v. Lynch, 834
F.3d 1142, 1150 (10th Cir. 2016) (Gorsuch, J., concurring). That raises serious
decisions.
actual text, and general preclusion principles, Apple invokes two cases that do not
even address the issue here: Bettcher Industries, Inc. v. Bunzl USA, Inc., 661 F.3d
629 (Fed. Cir. 2011), and Fresenius USA, Inc. v. Baxter International, Inc., 721
F.3d 1330 (Fed. Cir. 2013). Neither decision supports Apple’s tortured reading of
section 317(b).
requirement that “all appeals” be “terminated” is not satisfied until the Supreme
Court can no longer review a case. Apple Br. 32-35, 41-42. Bettcher held no such
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§ 315(c), the PTO’s ruling would have an immediate preclusive effect on civil
litigation “as soon as the examiner finished the reexamination and the Right of
Appeal Notice was sent to the patentee.” 661 F.3d at 636; see also id. at 642-43.
on the judiciary, holding that “the estoppel provision of 35 U.S.C. § 315(c) applies
only after all appeal rights are exhausted, including appeals to this court.” Id. at
648 (emphasis added). The Court had no occasion to consider whether section
315(c) denies PTO rulings preclusive effect even after this Court upholds them
until such time as Supreme Court review becomes unavailable—much less whether
The Court addressed section 317(b) only briefly. It contrasted that provision
with section 317(a), which “is a complete bar on new reexaminations until the
“parallel” structure of those provisions, the Court observed, suggests that section
317(b) “applies only when reexamination and all appeals have terminated.” Id.
Once again, the Court had no occasion to address what is meant by the termination
of all appeals. It rejected only the argument that section 317(b) somehow
id. at 643. The Court’s focus on the term “appeals”—a different procedural
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acknowledged Bettcher’s holding that section 317(b) only “applies when ‘all
appeals have terminated.’” 854 F.3d at 1365 (quoting Bettcher, 661 F.3d at 646).
But, the Court stated, that was “precisely the situation” before it: The “district
court entered judgment,” “this court affirmed,” and “the time to petition for a writ
of certiorari has passed.” Id. at 1365-66 (emphasis added). Nothing more was
that “all appeals” from the district court’s validity judgment be “terminated” does
not require proof there could be no Supreme Court review following remand
proceedings.
concedes that “Fresenius did not construe § 317(b).” Id. at 39. Fresenius
F.3d at 1341-42; see also Apple Br. 39 (recognizing Fresenius concerned the
2
The Court noted that its interpretation of section 317(b) was consistent with the
PTO’s Manual of Patent Examining Procedure (“MPEP”). Bettcher, 661 F.3d at
646. But it saw no need to defer to the MPEP. Id. And in any event, the MPEP is
not contrary to VirnetX’s position. See infra at 17.
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“giving effect to the PTO’s cancellation of claims”). It did not address the very
decision that did not even purport to construe that provision cannot override this
Court’s holdings in Fairchild and Function Media. See VirnetX Br. 36-38.
section 317(b)’s meaning. Apple Br. 39-40. But the cited passage from Fresenius
at 1340-41 (quoting 18A Wright & Miller, Federal Practice and Procedure
§ 4432). This Court did not reject the idea that traditional issue-preclusion
principles can inform an issue-preclusion statute. Nor does that passage suggest
contrary, the treatise cited in Fresenius explains that the preclusive effect of an
appellate decision extends “to the matters actually resolved by the appellate court.”
18A Wright & Miller, Federal Practice and Procedure § 4432; see also id. n.24
application of section 317(b) where the appellate decision leaves some “issues to
be resolved on remand,” unless those issues are “entirely unrelated to the patent at
14
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issue.” Apple Br. 40. But Fairchild does not mention Fresenius, even though the
third-party requester in Fairchild pressed the very argument Apple presses here.
See No. 17-1002, Docket No. 28 at 3-5; see also VirnetX Br. 38. Nor does Apple
explain why its rule makes sense. A losing party can seek Supreme Court review
of any interlocutory appellate decision after the entry of a final judgment, see
supra at 4-5, 10—not just decisions that are somehow related to the issues resolved
Wolf Bros. & Co., 240 U.S. 251, 253-59 (1916) (reviewing, after a second appeal,
the validity of a trademark, even though the trademark infringement claim had
emphasized, “[b]y its terms, § 317(b) is concerned with a final decision ‘that the
party has not sustained its burden of proving the invalidity of the patent claim.’”
854 F.3d at 1366 (citation omitted) (emphasis added). Remand proceedings in the
Apple “does not suggest, nor is there any reason to believe, that any unresolved
issue on remand would have any effect on the now-final [’504 and ’211] patent
15
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Ultimately, Apple rests its argument not on section 317(b)’s text, or even
decisions of this Court applying that provision, but on extrapolations from the
language used in judicial decisions that were not ruling on section 317(b)’s scope.
There is a reason for that: Section 317(b)’s text, traditional preclusion principles,
the rules of statutory construction, and this Court’s precedents point decisively
Inc. v. NRDC, Inc., 467 U.S. 837 (1984), nor Skidmore v. Swift & Co., 323 U.S.
134 (1944), deference is appropriate. For one thing, section 317(b) is “clear.”
Bettcher, 661 F.3d at 646. Its text, structure, and history, as well as traditional
estoppel principles, foreclose deference. VirnetX Br. 28-34; supra at 3-11. Apple
points to nothing in section 317(b)’s text suggesting Congress authorized the PTO
to create a unique estoppel rule that applies only when there is no possibility of
because section 317(b) concerns the preclusive effect of federal court decisions on
matters reviewed and reviewable in federal court. VirnetX Br. 35-36. The
3
Apple does not contest that section 317(b)’s second requirement is satisfied here
because the reexamination proceedings were based on issues that Apple “raised or
could have raised” in district court. See VirnetX Br. 38-40.
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preclusive effect of a court judgment is determined by the court that issued it. See
Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 507 (2001); Marrese v.
Am. Academy of Orthopaedic Surgeons, 470 U.S. 373, 385 (1985). The preclusive
effect of this Court’s decision on the PTO is thus a matter for this Court to
decide—not the PTO. Adams Fruit Co. v. Barrett, 494 U.S. 638, 649-50 (1990).
Apple argues (at 43) that Bettcher holds otherwise. But that decision
preclusive effect under section 315(c) as soon as the patent examiner issues a Right
of Appeal Notice or only at some later stage. 661 F.3d at 642-43; supra at 11-12.
Bettcher did not address the preclusive effect of a judicial decision of this Court on
that the MPEP interprets section 317(b) to bar estoppel until the time for seeking
Supreme Court review expires, even after remand proceedings. Apple Br. 42-43.
But none of the quotations Apple plucks from the MPEP mentions the Supreme
Court or certiorari. Apple’s leading example (at 42) says a decision is final after
MPEP § 2686.04.V.A. And the PTO’s regulations cut against Apple. The PTO’s
Rules of Practice in Patent Cases state that “[a]n appeal to the U.S. Court of
Appeals for the Federal Circuit, whether from a decision of the Board or a
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judgment in a civil action,” is complete “when the mandate is issued by the Court.”
37 C.F.R. § 1.197(b) (emphasis added); see also 54 Fed. Reg. 29548, 29551-52
(July 13, 1989) (enacting the rule). So, too, does the regulation interpreting pre-
certificate of cancellation “only after all appeals have terminated,” Bettcher, 661
F.3d at 644-45. See 37 C.F.R. § 1.979(b) (“appeal [to this Court] is considered
terminated when the mandate is issued by the Court”). It makes no sense to read
PTO regulations as permitting the PTO to cancel a patent based on its own rulings
at that point, but to require more before an estoppel from judicial decisions
attaches.4
In Apple’s view, the PTO would have the power to issue a certificate of
cancellation as soon as this Court’s mandate issues, even before the 90-day period
for seeking Supreme Court review of this Court’s ruling has expired. That would
bar further civil litigation. See Fresenius, 721 F.3d at 1332. But this Court’s
decisions on invalidity would have no preclusive effect on the PTO even after the
time for seeking that review has lapsed—indeed not until the entire litigation runs
4
To the extent there is any inconsistency between the MPEP and PTO regulations
promulgated through notice and comment, the MPEP is “not controlling.” In re
Hawkins, 486 F.2d 569, 572 (C.C.P.A. 1973); see also Ethicon, Inc. v. Quigg, 849
F.2d 1422, 1425 (Fed. Cir. 1988) (“[t]he MPEP … does not have the force of
law”). Nor can the PTO reinterpret its regulations inconsistently with the
regulations themselves. Mason v. Shinseki, 743 F.3d 1370, 1375 (Fed. Cir. 2014).
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its course. Apple’s interpretation would destroy the symmetry of the inter partes
Apple defends (at 45) the PTO’s position on finality as “[ ]consistent.” But
nowhere does it identify anything from the PTO attempting to reconcile the
agency’s varying statements on when an appeal ends. See supra at 17-18. Nor
does it identify anything reconciling the PTO’s putative position here with its
evaluated finality of this Court’s decision based on its potential to “alter” the
district court’s “original decision,” rather than on the possibility for certiorari. Id.
at 7, 8; see also VirnetX Br. 36. (Apple merely notes (at 45 n.12) that it cited
Campana for a different purpose than VirnetX.) The PTO has not only failed to
for [its] chang[ing]” assertions, much less “show[n] that there are good reasons”
for its choices. Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2125-26
Apple themselves disagree over what the Board concluded the “indication”
limitation meant. According to Apple (at 46-47), the Board adopted the
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what exactly the Board intended. What is certain, however, is that the Board did
Cisco asserts that “the Board dedicated some four pages” to addressing
Appx77-80). Cisco, however, can point to only a single sentence in the 856
decision where the Board even mentioned (but did not consider) the
Br. 25 (quoting Appx79). And that passage only refuted a non-responsive straw
man—the ability of “nefarious listeners” to “intercept[] the DNS REQ and DNS
RESP packets.” Appx79; see also VirnetX Br. 49. Cisco points to nothing in the
functions.
5
Cisco and Apple argue that VirnetX did not challenge the asserted references
under its own construction. Cisco Br. 27; Apple Br. 52. That is flatly incorrect.
VirnetX made these arguments to the Board (Appx1375-1380; Appx2920-2926;
Appx4347-4353), and reiterated them on appeal (VirnetX Br. 42, 59-63).
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Apple likewise asserts that the Board provided “multiple reasons” for
rejecting VirnetX’s disclaimer argument. Apple Br. 47. None of these “reasons,”
the specification (Apple Br. 47)—indeed, if the Board did apply that standard, that
would be legal error. See In re Abbott Diabetes Care Inc., 696 F.3d 1142, 1149
(Fed. Cir. 2012); Astrazeneca AB v. Mut. Pharm. Co., 384 F.3d 1333, 1339-40
(Fed. Cir. 2004). Apple’s emphasis (at 47) on the Board’s observation that not all
VirnetX did not argue that all DNS systems perform more than conventional
functions, but rather that the specification criticizes and disclaims DNS systems
that perform no more than conventional functions. Apple’s argument (at 47) that
the claims are not “limited to the eight allegedly ‘non-conventional’ features …
identified by VirnetX” is also off-base. VirnetX did not argue that the claims were
Appx4333-4339.6
6
Apple makes much of the specification’s discussion of embodiments that
implement conventional DNS functions in addition to non-conventional functions.
Apple Br. 49-50. VirnetX’s argument below, however, was that a DNS system
that performs no more than conventional DNS functions is disclaimed. Appx1349-
1351; Appx2893-2895; Appx4334-4337.
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[the Board’s] decision to reject [the claims].” Power Integrations, Inc. v. Lee, 797
F.3d 1318, 1325 (Fed. Cir. 2015); see also VirnetX Br. 49. As VirnetX explained,
VirnetX Br. 50-53. Cisco’s and Apple’s response arguments on the merits of
analysis. Cisco never cites the Board’s 856 decision and Apple cites the 788 and
789 decisions only once (at 48, for the self-evident proposition that the claims do
not “expressly require” VirnetX’s disclaimer). See Cisco Br. 27-33; Apple Br. 47-
52. The Board’s unpatentability findings in all three proceedings are predicated on
“erroneously placed the burden on [VirnetX] to prove that its claims were not
obvious.” Rambus Inc. v. Rea, 731 F.3d 1248, 1255 (Fed. Cir. 2013). The Board
compounded its error by failing to set out the bases for its unpatentability holdings,
with “specific fact findings for each contested limitation and satisfactory
explanations for such findings.” Gechter v. Davidson, 116 F.3d 1454, 1460 (Fed.
Cir. 1997).
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Apple’s main defense of the Board’s faulty decisions is that, “as an appellate
body,” the Board need not make its own findings but can simply “agree with the
Examiner’s findings that the claims are unpatentable.” Apple Br. 53-54 & n.13.
Apple misses the point. The question is why did the Board agree with the
Examiner—if the Board did so because VirnetX purportedly did not meet a burden
to prove nonobviousness of its claims, that would be improper. Rambus, 731 F.3d
at 1255; see also In re Jung, 637 F.3d 1356, 1365-66 (Fed. Cir. 2011) (while “the
applicant must identify to the Board what the examiner did wrong, … the examiner
retains the burden to show invalidity”). Contrary to Apple’s suggestion (at 53 &
n.13), this rule applies fully in inter partes reexamination proceedings. Icon
Health & Fitness, Inc. v. Strava, Inc., 849 F.3d 1034, 1046-47 (Fed. Cir. 2017);
CSR, PLC v. Skullcandy, Inc., 594 F. App’x 672, 678 (Fed. Cir. 2014) (applying
Board made its own findings that ‘differed from those of the examiner.’” Apple
Br. 54 n.14 (quoting Rambus, 731 F.3d at 1254). This Court’s decision was not so
limited. In Rambus, this Court found that “the Board committed multiple errors”
and addressed each error separately. 731 F.3d at 1255-58. The Court’s holding
that the Board committed impermissible burden-shifting did not depend on its
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separate holding that the Board erred “when it supplied its own reasons” for
This is not a case where the Board carefully considered VirnetX’s arguments
but “agreed with the examiner’s reasoning” and expressly “incorporate[ed] … the
examiner’s answer into its opinion.” In re Cree, Inc., 818 F.3d 694, 698 (Fed. Cir.
2016). Here, the Board failed to address VirnetX’s arguments regarding the
instead required VirnetX to “demonstrate sufficiently” that the prior art did not
render the claims unpatentable. See VirnetX Br. 40-46 & n.8.
argument: the Board did not need to consider the merits of VirnetX’s arguments,
divorced from the claim language.” Apple Br. 56. Apple misunderstands the
Board’s responsibility. “[T]he Board must not only assure that the requisite
findings are made, based on the evidence of record, but must also explain the
reasoning by which the findings are deemed to support the agency’s conclusion.”
7
Moreover, with respect to the “authenticate” limitation of claims 5, 23, and 47,
the Board also relied on an improper (and unsupported) new argument. See
VirnetX Br. 45; infra at 26, 36-37.
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of the “indicating” limitation (on which Apple and Cisco themselves cannot agree,
see supra at 19-20), the Board failed to make the requisite findings regarding the
“indicating” limitation. In re Cree, 818 F.3d at 698. In essence, the Board said
that whatever the “indicating” limitation means, VirnetX did not do enough to
accepts the prevailing argument.” Icon, 849 F.3d at 1046 (internal quotation marks
VPN 15, and therefore is not “connectable” to a VPN. See VirnetX Br. 44.
Apple argues that this challenge “is moot” because the Board’s finding
Apple Br. 58-59. But the Board, in discussing the “connectable” limitation, made
only a passing reference to what “[o]ne of skill in the art would have understood”
regarding firewall 30 and nameserver 32, and cited no record evidence. Appx37;
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Appx61. 8 The Board’s finding regarding the “connectable” limitation was not
(which would have been insufficient to support the finding in any event). See
Appx37-38; Appx61-62.
nameserver 17” satisfied the “connectable” limitation. Apple Br. 59. It did not.
The Board’s decision only faulted VirnetX for not proving that the claims required
shifting.
“authenticating” limitation, and found that limitation met solely based on a new
Apple incorrectly asserts that “VirnetX did not dispute the Examiner’s
finding that Provino discloses a system that authorizes the requesting device
8
Apple, by contrast, cites Provino, see Apple Br. 58 (citing Appx6218-6219 (2:66-
3:1))—evidence not mentioned or relied upon by the Board. See Appx36-38;
Appx61-62.
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(device 12(m)) prior to the creation of a secure tunnel.” Apple Br. 60. VirnetX
(query to firewall 30 for the independent claims, query to nameserver 32 for the
dependent claims). See infra at 37-38. VirnetX also challenged the examiner’s
Instead of addressing VirnetX’s challenge, the Board faulted VirnetX for not
(1) the ACLs in Lendenmann the Examiner relied on to address claim 47 are a
functionality of the DCE Security Service, rather than the CDS alleged to
correspond to the claimed “domain name service system,” and (2) while the
Examiner had relied on the “RPC model of communication” to address claim 47,
in Lendenmann the CDS does not use the RPC model of communication. VirnetX
Br. 46. Instead, Cisco (at 21-23) urges waiver based on 37 C.F.R.
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§ 41.67(c)(1)(vii).
a party appealing to the Board fails to “separately argue claims which appellant has
together (e.g., an independent claim and a dependent claim), and only presents
arguments for one of the claims (e.g., the independent claim), the patent owner
waives “any argument that the Board must consider the patentability of” the other
claim (e.g., the dependent claim). This rule makes sense—an argument not raised
with the independent claims.” Cisco Br. 22. VirnetX argued claim 47 separately
under its own subheading. Appx4353. 9 In doing so, VirnetX followed section
addressing claim 36, the Examiner relied on multiple alternative theories, one of
9
Although VirnetX’s brief to the Board inadvertently contained an incorrect cross-
reference, Cisco acknowledges (at 22 n.2) it understood what VirnetX intended to
cite.
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for claim 47, the Examiner specifically relied on the RPC model of communication
alternative theory for claim 36 that rested on the RPC model of communication,
and by simultaneously ignoring VirnetX’s challenge to claim 47, the Board never
89.
Br. 33-34. Cisco then misapplies the law to suggest the Board did not introduce
10
Although the Examiner nominally referred to claim 1, both VirnetX and Cisco
understood that the Examiner intended to refer to the actually-pending independent
claims, i.e., claims 36 and 60. See Appx4347; Appx4412.
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“indication” limitation of dependent claim 48. Appx80. The Board discussed (and
cited) only analysis dealing with dependent claim 48. Appx80 (citing Appx4354;
Appx4228-4229). This fact alone indicates the Board limited its analysis to that
claim.
The Board also used terminology from dependent claim 48. Specifically,
dependent claim 48 recites that “at least one of the domain names [recited in claim
36] includes an indication that the domain name service system supports the
Mirroring the language of dependent claim 48, the Board considered whether
“Lendenmann fails to disclose ‘at least one of the plurality of domain names’
comprises ‘an indication that the domain name service system supports
analysis, simply agreeing with the Examiner “for at least the previously stated
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are the ones VirnetX addressed fully in its opening brief. See VirnetX Br. 46-62.
Cisco’s attempt to shield the Board’s faulty analysis from review is unavailing.
in Lendenmann as the reexamination request and the Right of Appeal Notice, there
was “no ‘new ground of rejection’” by the Board. Cisco Br. 35-40. Cisco
overlooks the new reasoning provided by the Board as to how the limitation is met,
reliance on the same statutory basis and the same prior art references, alone, is
insufficient to avoid making a new ground of rejection when the Board relies on
new facts and rationales not previously raised to the applicant by the examiner.” In
when the Board’s findings (and not the Examiner’s) “are the principal evidence
11
According to Cisco, the Board did not even apply the Examiner’s construction of
“indicating,” (i.e., “a visible message or signal to a user,” Appx4205; see also
VirnetX Br. 63). See Cisco Br. 43 (“there is no such requirement recited in the
claim”).
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upon which the Board’s rejection was based.” Leithem, 661 F.3d at 1320. Here,
the Board’s sole basis for finding that Lendenmann’s returning a network address
Appx73—a fact not found by the Examiner and not argued by Cisco below. See
“indicating” limitation. Cisco Br. 35-36. But this does not account for the shifting
positions underlying how such an action satisfies the claim language—i.e., the
thrust of the rejection. Cisco’s assertion that “VirnetX seeks to confuse the issue,”
Cisco Br. 37, is refuted by its own quotation of the Board’s decision, which states
that “‘[b]y providing the requested network address, the CDS, in fact, establishes
portion of the Board’s decision that does not even mention the Examiner’s
decision. Cisco Br. 39 (citing Appx74). At best, the Board nominally agreed with
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“the Requester,” i.e., Cisco—but the question is whether the Board changed the
thrust of the rejection as propounded by the Examiner. See Honeywell Int’l Inc. v.
Mexichem Amanco Holding S.A. De C.V., 865 F.3d 1348, 1358 (Fed. Cir. 2017).
The record makes clear that that the Board changed the thrust of the rejection. See
The Examiner reasoned that “the CDS clerks and servers must [] perform []
access checking” because “ACL management software [is] incorporated into all
CDS clerks and servers.” Appx4223. The Board, on the other hand, argued that
because the CDS is integrated into the security service, and all of the services run
on “one machine,” the DCE, the access checking of the security service can be
attributed to the CDS. Appx74-76. The issue here is not whether the Examiner
and the Board interpreted Lendenmann in a consistent manner (as Cisco appears to
suggest, at 39-40), but rather that the Board’s rationale for why Lendenmann
Contrary to Cisco’s assertion (at 40), the Board’s “one machine” rationale
was not dicta. It was the Board’s sole rationale for how the ACLs in Lendenmann
are purportedly attributable to the CDS, even though the ACLs are a part of a
are a function of the security service, not the CDS, and thus do not satisfy the
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“indicating” limitation).
on its erroneous assumption that the CDS’s returning of the network address in fact
establishes the SCL. Appx73. Cisco does not contest that the CDS’s returning of a
network address does not establish the SCL. Cisco Br. 40-41. Nor could it, as that
would conflict with Cisco’s reexamination request, which asserted that a separate
step (a remote procedure call) is used to establish the SCL. See VirnetX Br. 60.
same way as the ’211 specification.” Cisco Br. 41. That argument is not tied to
return of a network address. In any event, the Board did not advance this
to defend.
“another component” (the DCE Security Service), but argues this is irrelevant. But
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while the claims “do[] not preclude the involvement of another component during
the actual establishment of the [SCL],” Cisco Br. 41, they do require that the
Cisco further contends that “the cell directory service (CDS) and the security
service are ‘integrated.’” Cisco Br. 42. The Board, however, did not rely on a
rationale that the CDS and security service are merely “integrated,” but instead that
the “CDS ‘is integrated into the security service.’” Appx75-76 (emphasis added).
The ACLs (a function of the security service) are not attributable to the CDS
merely because the CDS is integrated into the security service. See VirnetX
Br. 62. Cisco’s argument is akin to saying that gasoline burning (a function of a
car) is attributable to a cup-holder because the cup holder is integrated into a car.
Finally, the Board’s finding that the ACLs satisfy the claimed “indicating”
or signal to a user”). VirnetX Br. 63 (citing 4205). Cisco responds by stating that
“there is no such requirement recited in the claim.” Cisco Br. 43. But either the
arguments that were based on that construction (VirnetX Br. 63)—or the Board
departed from the Examiner’s construction in some unspecified way and failed to
explain why the claims remained unpatentable under this modified construction.
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B. The Board Erred in the 788 and 789 Proceedings in Finding that
Provino Discloses the Claimed “Authentication” Limitation.
Apple suggests that the Board’s findings as to the “authentication” limitation
of dependent claims 5, 23, and 47 may be affirmed because the Examiner found
that “Provino discloses a system that ‘authorizes’ the requesting device.” Apple
Br. 61 (citing Appx1254; Appx2791). But these claims do not recite a system that
authorizes a client device; instead, they require the system to “authenticate the
56:59-61, 58:23-25).
Apple then argues that the Board did not introduce a new argument because
the Board, in denying rehearing, asserted that “it merely ‘reiterated the Examiner’s
cannot obscure the fact that it did advance a new argument. VirnetX Br. 63-64.
“‘verif[ying] that the identity of a user’ results in determining that ‘the user has
Appx109-110)—is backwards from what the Board needed to show, namely that
Moreover, the Board cited no evidence to support its new argument that
(at 63) points to a hodgepodge of evidence, but none of it actually supports the
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Apple also asserts that the Board did not ignore VirnetX’s argument that the
Provino for the same claimed “query.” Apple Br. 63-64. Apple initially merely
parrots the Board’s flawed analysis. See VirnetX Br. 65-66. Apple then changes
tack and argues (contrary to its position below, Appx1477; Appx3014; see also
infra) that “there are not different ‘queries’ as VirnetX contends, but that the same
‘query’ propagates through these components within the single DNS system.”
Apple Br. 65. Where, as here, this post hoc “rationale was not articulated by the
examiner or the Board,” this Court “will not consider it for the first time on
The Examiner did not erase all distinction between the different queries in
Provino, but instead found that “each query is part of the same sequence that
not a finding that the same query propagates, but rather that “each query” is part of
a larger sequence. Similarly, in its brief to the Board, Apple argued that “when a
query is sent to name server 17, it triggers a series of queries to entities in the DNS
Appx3014.
Finally, Apple does not dispute that the Board ignored VirnetX’s argument
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that firewall 30 does not authenticate or authorize the query to name server 32 (as
asserted by the Examiner). Apple Br. 65; see also VirnetX Br. 6. Apple asserts
instead that the Board did not need to reach this argument, relying on the Board’s
finding that “the query is ‘authenticated before name server 32 receives the secure
domain name and resolves it into an IP address.’” Apple Br. 65 (emphasis altered).
But “the query” the Board was referring to was “a query … to name server 17,”
challenged the substance of the Examiner’s rejection, applying the Examiner’s own
Either the Board applied a new mapping to which VirnetX should be given an
beside the point. The Board should have considered and made findings on
granted patent previously upheld by a court. But this Court’s binding precedent
currently forecloses the argument. VirnetX could only preserve the issue in light
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of the Supreme Court’s impending decision in Oil States Energy Services, LLC v.
Greene’s Energy Group, LLC, No. 16-712, which might overturn those precedents
or require their reconsideration. See VirnetX Br. 67. There is no reason to brief
CONCLUSION
This Court should remand appeal Nos. 17-1591 and 17-1592 with instruction
/s/Naveen Modi
Naveen Modi
Joseph E. Palys
Igor V. Timofeyev
Daniel Zeilberger
PAUL HASTINGS LLP
875 15th St., N.W.
Washington, D.C. 20005
(202) 551-1700
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