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Virnetx Inc. v. Apple Inc.

United States Court of Appeals, Federal Circuit

August 1, 2019

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, 95/001, 856.

          Stephen Blake Kinnaird, Paul Hastings LLP, Washington, DC, argued for appellant. Also represented by Naveen Modi, Joseph Palys, Igor Victor Timofeyev, Michael Wolfe, Daniel Zeilberger.

          William F. Lee, Wilmer Cutler Pickering Hale and Dorr LLP, Boston, MA, argued for appellee Apple Inc. Also represented by Rebecca A. Bact, Mark Christopher Fleming, Lauren B. Fletcher, Dominic E. Massa; Brittany Blueitt Amadi, Washington, DC; Scott Border, Jeffrey Paul Kushan, Sidley Austin LLP, Washington, DC.

          Theodore M. Foster, Haynes & Boone, LLP, Dallas, TX, argued for appellee Cisco Systems, Inc. Also represented by David L. McCombs, Andrew S. Ehmke, Debra Janece McComas.

          Before Prost, Chief Judge, Moore and Reyna, Circuit Judges.

          OPINION

          PROST, CHIEF JUDGE.

         Appellant VirnetX Inc. ("VirnetX") appeals from decisions of the Patent Trial and Appeal Board ("Board") related to three inter partes reexaminations maintained by Apple Inc. ("Apple") and Cisco Systems, Inc. ("Cisco"). The United States Patent and Trademark Office ("PTO") concluded that Apple was not barred from maintaining its reexams by the estoppel provision of the pre-America Invents Act ("AIA") version of 35 U.S.C. § 317(b) (2006). The Board affirmed the Examiner's determination that the claims of U.S. Patent Nos. 7, 418, 504 ("the '504 patent") and 7, 921, 211 ("the '211 patent") are unpatentable as anticipated or obvious over the prior art of record. For the reasons below, we affirm-in-part, vacate-in-part, and remand.

         Background

         I

         The '504 and '211 patents describe systems and methods for "establishing a secure communication link between a first computer and a second computer over a computer network, such as the Internet." '211 patent col. 6 ll. 36-39. These systems and methods are "built on top of the existing Internet protocol (IP)." Id. at col. 6 ll. 17-20.

         The Internet uses addressing systems for sending data. In such systems, physical computers can be identified by a unique IP address (e.g., 123.345.6.7). VirnetX Inc. v. Apple Inc., 665 Fed.Appx. 880, 882 (Fed. Cir. 2016).

         Each IP address corresponds to a domain name (e.g., www.Yahoo.com). See '211 patent col. 38 ll. 58-61, col. 39 ll. 13-14. A user on one computer can enter a domain name in a web browser to communicate with another computer or server. When the user does so, the computer sends a domain name service ("DNS") request to the domain name server for the IP address corresponding to a given domain name. Id. at col. 38 l. 58-col. 39 l. 3. The domain name server then looks up the IP address of the requested domain name and returns it to the requesting computer. Id. at col. 39 ll. 3-7.

         Both VirnetX patents claim systems, methods, and media for creating secure communication links via DNS systems. For example, claim 1 of the '211 patent recites:

1. A system for providing a domain name service for establishing a secure communication link, the system comprising:
a domain name service system configured and arranged to
[1] be connected to a communication network,
[2] store a plurality of domain names and corresponding network addresses,
[3] receive a query for a network address, and
[4] indicate in response to the query whether the domain name service system supports establishing a secure communication link.

         Independent claims 36 and 60 of the '211 patent are directed to a "machine-readable medium" and a "method," respectively. Otherwise, they mirror the requirements of claim 1. Independent claims 1, 36, and 60 of the '504 patent are similar to the corresponding independent claims of the '211 patent.

         II

         In 2010, VirnetX sued Apple in district court. VirnetX alleged infringement of four patents, including the '504 and '211 patents.[1] VirnetX asserted claims 1, 2, 5, 16, 21, and 27 of the '504 patent and claims 36, 37, 47, and 51 of the '211 patent. VirnetX Inc. v. Apple Inc., 925 F.Supp.2d 816, 824-25 (E.D. Tex. 2013).

         In October 2011, Apple filed requests for inter partes reexamination of the '504 and '211 patents with the PTO. In Apple's Reexam Nos. 95/001, 788 ("788 case") and 95/001, 789 ("789 case") (collectively, "Apple reexams"), Apple challenged all claims as anticipated by the Provino reference or rendered obvious by Provino in view of other prior art.[2]

         The district court action proceeded to trial in late 2012. A jury found the asserted claims infringed and not invalid. The jury awarded VirnetX $368 million in damages. VirnetX, 925 F.Supp.2d at 825. The district court denied Apple's motion for judgment as a matter of law ("JMOL") or a new trial on these issues. Apple appealed.

         On appeal, we affirmed the jury's finding of no invalidity for all four patents. VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1323-24 (Fed. Cir. 2014) ("VirnetX I"). We also affirmed the jury's finding of infringement for many of the claims of the two patents not related to the present appeal ('135 and '151 patents).[3] Id. at 1320-22. We reversed the district court's construction of the "secure communication link" claim term, vacated the related infringement finding for the two patents in this appeal ('504 and '211 patents), and vacated the damages award. Id. at 1317-19, 1319, 1323-24, 1325-34. We then remanded for further proceedings.[4] Id. at 1334.

         Apple did not file a request for rehearing on the invalidity or infringement issues affirmed in VirnetX I. Our mandate issued on December 23, 2014. Apple did not seek Supreme Court review. The 90-day period to file a petition for a writ of certiorari expired.

         Meanwhile, in the parallel PTO reexamination proceedings, the Examiner had found all claims of the '504 and '211 patents unpatentable. The Examiner issued Right of Appeal Notices ("RANs") in May 2014. VirnetX appealed the Examiner's decisions to the Board.

         VirnetX also petitioned the PTO to terminate the Apple reexams based on the estoppel provision of § 317(b). The PTO denied VirnetX's petition in June 2015. J.A. 1659-67, 3138-48.

         In September 2016, the Board affirmed the Examiner's findings that all claims of the '504 and '211 patents were unpatentable. The Board denied VirnetX's requests for rehearing.

         After appealing the Board's decisions in the Apple reexams to this court, VirnetX moved to remand. It argued that this court's 2014 opinion was a "final decision" on Apple's attempt to prove invalidity under § 317(b). ECF No. 27. In June 2017, a motions panel denied the motion and directed the parties to address the issue in their merits briefing. ECF No. 36.

         III

         In December 2011, Cisco also filed a request for inter partes reexamination with the PTO.[5] Cisco's Reexam No. 95/001, 856 ("856 case" or "Cisco reexam") challenged claims 1-60 of the '211 patent based on multiple grounds of invalidity. Cisco based several of its arguments on the Lendenmann reference.[6]

         After extensive proceedings, the Examiner issued a RAN in January 2015. The RAN rejected claims 36-60 of the '211 patent as either anticipated or obvious. VirnetX appealed to the Board. In September 2017, the Board affirmed the Examiner, finding claims 36-54 and 57-60 anticipated by Lendenmann and claims 55 and 56 obvious over Lendenmann and another reference. J.A. 88. VirnetX moved for rehearing, which was denied. VirnetX then appealed.

         We have jurisdiction under 28 U.S.C. § 1295(a)(4)(A).

         Discussion

         I

         VirnetX's appeal proceeds in two parts. First, VirnetX argues as a threshold matter that Apple was estopped from maintaining its reexams under the pre-AIA version of 35 U.S.C. § 317(b) (2006). Second, VirnetX challenges the merits of the Board's conclusions in both the Apple and Cisco reexams that the '504 and '211 patents are invalid. We address each in turn.

         II

         VirnetX contends that Apple's reexams were barred by § 317(b). The PTO refused to terminate Apple's reexams based on the conclusion that the provision did not apply. In VirnetX's view, the PTO's decision was inconsistent with controlling case law, the statutory text, and Congress's intent. We agree.

         The applicability of § 317(b) is a question of statutory interpretation. See Bettcher Indus., Inc. v. Bunzl USA, Inc., 661 F.3d 629, 639, 642-48 (Fed. Cir. 2011). Statutory interpretation is an issue of law we review de novo. Unwired Planet, LLC v. Google Inc., 841 F.3d 1376, 1379 (Fed. Cir. 2016).

         The Patent Act requires that the PTO terminate a reexamination once there has been a final decision on the patent challenger's invalidity case in federal court. 35 U.S.C. § 317(b) (2006). Specifically, pre-AIA § 317(b) provides:

Once a final decision has been entered against a party in a civil action arising in whole or in part under section 1338 of title 28, that the party has not sustained its burden of proving the invalidity of any patent claim in suit . . . then neither that party nor its privies may thereafter request an inter partes reexamination of any such patent claim on the basis of issues which that party or its privies raised or could have raised in such civil action or inter partes reexamination proceeding, and an inter partes reexamination requested by that party or its privies on the basis of such issues may not thereafter be maintained by the Office, notwithstanding any other provision of this chapter.

         The issue here is very narrow. Apple does not dispute the underlying procedural facts relevant to § 317(b), which highlight the advanced stage of these proceedings.

         In 2010, Apple was sued for patent infringement. There is no dispute that in that "civil action arising . . . under" 28 U.S.C. § 1338, Apple raised an affirmative defense of invalidity on multiple grounds. 35 U.S.C. § 317(b). Thus, Apple had the "burden of proving the invalidity" of the asserted claims of both the '504 and '211 patents. Id.

         In 2012, Apple presented its invalidity defenses to a jury. After a week-long trial, the jury concluded Apple failed to sustain its burden of proving the invalidity of any asserted claim of the '504 or '211 patent.

         In 2013, the district court determined that in light of the record at trial, substantial evidence supported the jury's finding. The district court entered final judgment.

         In 2014, Apple pursued an appeal of that decision here. Specifically, Apple argued that "the asserted claims are anticipated by the Kiuchi reference." VirnetX I, 767 F.3d at 1323. After considering Apple's challenges, we affirmed the district court's decision on the issue of invalidity. Id. at 1323-24. Apple did not file a request for rehearing. Apple elected not to seek Supreme Court review. The 90-day period to file a petition for certiorari expired.

         In 2015, VirnetX petitioned the PTO to terminate Apple's pending reexaminations based on the estoppel provision of § 317(b). The PTO refused, accepting Apple's argument that there was not yet a final decision on validity. J.A. 1661-63.

         On appeal, the sole issue is whether there has been a "final decision" entered against Apple that it "has not sustained its burden of proving" invalidity, triggering estoppel of ...


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