Patent Office Board Takes a Bite out of Apple's IPR Challenge of VirnetX Patents

In  mid-2013 Apple filed seven inter partes review petitions to challenge four VirnetX patents.  Recently, the Patent Trial and Appeal Board (the Board) denied all seven inter partes review (IPR) petitions.  This outcome demonstrates the Board’s current interpretation of the one-year bar applied in IPR proceedings and its position on joinder of petitions.

Apple’s Interpretation of the One Year Bar

Apple disclosed that its petitions were filed more than a year after service of a complaint asserting infringement of the subject patents, and understood that the petitions might be challenged depending on the Board’s interpretation of 35 U.S.C. § 315(b) (the statute barring IPR petitions filed after certain assertions of infringement):

Petitioner notes it was previously served with a complaint asserting infringement of the ’135 patent in August of 2010, which led to Civil Action No: 6:10-cv-417. During that action, the District Court established an additional civil action, Civil Action No. 6:13-cv-00211-LED, on February 26, 2013 (also pending in the Eastern District of Texas). The August 2010 complaint does not foreclose the present petition, as Patent Owner served a new complaint on Petitioner asserting infringement of the ’135 patent in December of 2012.

Apple Inc. v. VirnetX, Inc., et al., IPR2013-00348, Paper 1 (June 12, 2013), at p. 1 (emphasis in original).  Similar disclosures can be found in the other six related petitions:  IPR2013-00349, -354, 393, -394, -397, and -398.

Apple anticipated that the 2010 complaint service might cause a concern and argued that the 315(b) bar should not apply:

Petitioner submits this conclusion [that the petitions are not barred] is compelled by the plain language of § 315(b). Notably, § 315(b) does not specify a one-year deadline that runs from the date of the first complaint served on a petitioner. Rather, it states “[a]n inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.” Thus, a petition filed within 1 year of the date any complaint alleging infringement of the patent is served on a petitioner is timely under the plain statutory language of § 315(b). This is also the only reading of § 315(b) consistent with the statutory design. Congress designed the IPR authority to be option to contest validity of a patent concurrently with district court proceedings involving the same patent. A timely filed IPR proceeding in any action a patent owner elects to commence is perfectly consistent with this statutory design.

Reading § 315(b) in this manner also is the only way to effectively foreclose gaming of the system by a Patent Owner. Indeed, if § 315(b) were read to foreclose IPR proceedings in a second, independent action for infringement a patent owner elected to commence, it would unfairly foreclose use of the IPR system. For example, a patent owner could assert irrelevant claims in a first action, wait a year, and then assert different claims in a new action that do present risks to a third party. In this scenario, the patent owner would foreclose legitimate use of an IPR to contest validity of the patent claims asserted in the second action based on the third party’s reasonable business decision to not dispute validity of irrelevant claims in the first action. Rather than attempting to decipher which scenarios would be improper, the Board should follow the plain meaning of § 315(b), and find a petition timely if it is filed within 1 year of the date any complaint alleging infringement of the patent is served on a Petitioner.

Finally, reading §315(b) to foreclose this petition based on the August 2010 complaint would be particularly unjust in this case. The 1-year period following service of the August 2010 complaint expired before it was possible to submit an IPR petition – petitions could only be filed on or after September 16, 2012.

Id., Paper 1 at pp. 2-3 (emphasis in original).

But Apple had one more card to play that could avoid the entire issue of the 315(b) bar:  a request for joinder with another IPR proceeding challenging the same patent.

Apple’s Joinder Request

Apple knew that if it could successfully join another IPR proceeding, such joinder under 35 U.S.C. § 315(c) (and  37 C.F.R. § 42.122(b)) would not be subject to the one year bar under the last sentence of 35 U.S.C. § 315(b).  Apple filed its Motion for Joinder on August 21, 2013, requesting joinder to IPR proceedings by New Bay Capital, LLC challenging the VirnetX patents:

Pursuant to the authorization granted by the Panel on August 14, 2013 in Paper No. 6, Petitioner Apple Inc. (“Petitioner” or Apple) moves to have the Board join IPR proceedings IPR2013-00348 & -00349 to each other and with IPR proceeding IPR2013-00375 filed by New Bay Capital, LLC (“NBC”), each of which concerns U.S. Patent No. 6,502,135.

Id., Paper 7 at p. 1.

Apple submits that joinder of the proceedings is fully warranted. See IPR2013-00004, Paper 15 at 4; Dell v. Network-1 Security Solutions, Inc., IPR2013-00385, Paper 17 at 2-3. Joinder is proper under the statutory design of inter partes review, will simplify and reduce the number of issues before the Board and will enable streamlined proceedings (i.e., one coordinated proceeding instead of three separate proceedings). In addition, the Board can manage the joined proceeding in a way that does not impact scheduling or conduct of the proceedings. See Motorola Mobility LLC v. Softview, LLC, IPR2013-00256, Paper 10 at 2-3.

Id., Paper 7 at p. 3.

So, it seemed like Apple had two independent avenues for potential institution of IPR:  (1) an interpretation of 315(b) that would result in no bar of the petitions, and (2) joinder with ongoing IPR proceedings filed by New Bay Capital, regardless of any potential 315(b) bar.

New Bay Capital Terminates its IPRs

On November 6, 2013, New Bay Capital filed unopposed motions to terminate its IPRs (IPR2013-00375, -376, -377, and -378):

Pursuant to 37 C.F.R. §42.73(b)(4) and the Board’s Order of November 1, 2013, Petitioner New Bay Capital, LLC (“New Bay”) moves to terminate the present inter partes review proceeding. Termination is appropriate because New Bay is abandoning this contest, VirnetX does not oppose and a trial has not been instituted.

The Board granted New Bay Capital’s motions and terminated those IPR proceedings on November 12, 2013.

Apple’s IPR Petitions Denied

The Board reviewed the facts of the complaints served on Apple in the past and decided that the 2010 complaint served on Apple barred its IPR petition under 315(b).  The Board also dismissed Apple’s joinder request because the Board had recently terminated the New Bay Capital IPRs:

The timeliness limitation of 35 U.S.C. § 315(b) does not apply to a request for joinder. As such, Petitioner filed a motion to join the instant proceeding with another proceeding, IPR2013-00375, pursuant to 35 U.S.C. 315(c). See Paper 7 (“Petitioner’s Motion for Joinder of Proceedings”). Granting the motion would obviate the time bar under 35 U.S.C. § 315 (b). The IPR2013-00375 proceeding, however, has been terminated. New Bay Capital, LLC v. Virnetx, Inc., IPR2013-00375, Paper 16 (PTAB Nov. 12, 2013). Accordingly, Petitioner’s motion for joinder is dismissed.

Id., Paper 14 at p. 5.

So both of Apple’s avenues for institution of trial in these seven IPR petitions were blocked by the Board.

Reconsideration Still an Option

Even though Apple’s seven IPR petitions were denied, Apple still has the right to request reconsideration and it remains to be seen if it will file requests for rehearing.  Such requests have historically proved to be unlikely to be granted.  Other Petitioners have sought additional avenues for institution that will be discussed in a future post.

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