IP Law Daily Court reinstates two VirnetX patents invalidated by PTAB on anticipation grounds
Tuesday, July 9, 2019

Court reinstates two VirnetX patents invalidated by PTAB on anticipation grounds

By Brian Craig, J.D.

PTAB improperly invalidated claims of two VirnetX patents infringed by Apple’s VPN On Demand and FaceTime features.

Concluding the Patent Trademark and Appeal Board erred in its analysis regarding discovery, anticipation, and claim construction, the U.S. Court of Appeals of Appeals for the Federal Circuit has reversed two Board decisions invalidating two of VirnetX Inc.’s patents a Texas jury previously had found to be infringed by Apple Inc.’s VPN On Demand and FaceTime features. The Federal Circuit found the Board abused its discretion in denying VirnetX’s request for additional discovery, erred in its analysis because substantial evidence does not support the Board’s finding of anticipation based on prior art, and improperly construed certain claims (VirnetX Inc. v. The Mangrove Partners Master Fund, Ltd., July 8, 2019, Moore, K.).

VirnetX is the owner of U.S. Patent Nos. 6,502,135 (the ’135 patent) and 7,490,151 (the ’151 patent). These patents have been the subject of ongoing litigation since 2010 between VirnetX and Apple Inc., along with other parties, concerning Apple’s virtual private network (VPN) On Demand and FaceTime features. In 2017, the federal district court in Texas affirmed a jury verdict in favor of VirnetX, and awarding over $302 million. In two inter partes review decisions, the Board ruled certain claims of the ’135 patent and the ’151 patent unpatentable. VirnetX raised multiple challenges in appealing the Board’s decisions of unpatentability.

Procedural challenges. The Federal Circuit first addressed VirnetX’s procedural challenges. The panel found no error with Apple’s joinder in the inter parties review. VirnetX failed to demonstrate prejudice in Apple’s continued involvement, but the court left open the question of whether prejudice could arise later. Next, the Federal Circuit found substantial evidence supported the Board’s finding that Mangrove Partners was not a real party in interest. The Federal Circuit, however, found the Board abused its discretion in denying VirnetX’s request for authorization to file a motion for additional discovery. Because 37 C.F.R. § 42.51(b)(2)(i) authorizes a motion for additional discovery, the Board abused its discretion in denying VirnetX the ability to even file a motion.

Anticipation. The Federal Circuit also found the Board erred because substantial evidence did not support the Board’s finding of anticipation of certain claims based on prior art. The Board relied on only the C-HTTP name server to perform the functions of the DNS proxy module. But the Board could not have found that the client-side proxy corresponds to the claimed "client" and is also a part of the DNS proxy module, as the claim makes clear that these are separate components. The C-HTTP name server does not forward a DNS request to a DNS function, but rather sends an error message back to what the Board relied on as the claimed "client."

Claim construction. Additionally, the Board erred in its construction of certain claims of the ’135 patent. The panel found that the Board improperly construed the claim "VPN between the client computer and the target computer." The statements VirnetX made during reexamination constituted disclaimer. VirnetX described a system in which a client computer communicates with an intermediate server via a singular, point-to-point connection. Because the Board erred in construing this term, which impacts both its anticipation finding and obviousness determination involving a question of fact, the Federal Circuit reversed and remanded for further proceedings.

The Federal Circuit also awarded costs to VirnetX. The decision by the Federal Circuit opened the door for VirnetX to potentially recover the original verdict along with interest and additional costs.

This case is No. 17-1368.

Attorneys: Naveen Modi (Paul Hastings LLP) for VirnetX Inc. Mark Christopher Fleming (Wilmer Cutler Pickering Hale and Dorr LLP) for The Mangrove Partners Master Fund, Ltd. and Apple Inc.

Companies: VirnetX Inc.; The Mangrove Partners Master Fund, Ltd.; Apple Inc.

MainStory: TopStory Patent TechnologyInternet FedCirNews

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