IP Law Daily Prior decision on validity of patent claims barred further reexamination proceedings
Friday, August 2, 2019

Prior decision on validity of patent claims barred further reexamination proceedings

By John W. Scanlan, J.D.

The Federal Circuit’s prior decision was "final" as to findings of no invalidity; there were no issues on remand that could affect these findings, and the time to file a petition for a writ of certiorari had passed.

A decision by the Federal Circuit upholding the validity of certain challenged patent claims was a "final decision" pursuant to the pre-America Invents Act version of 35 U.S.C. §317(b), requiring the USPTO to terminate inter partes reexamination proceedings involving the validity of those claims, the U.S. Court of Appeals for the Federal Circuit held. The court vacated in part a decision by the Patent Trial and Appeal Board to continue those reexaminations. However, the court also upheld the Board’s ruling that the remaining claims not subject to estoppel were unpatentable as anticipated or obvious (VirnetX Inc. v. Apple Inc., August 1, 2019, Prost, S.).

VirnetX owns U.S. Patent Nos. 7,418,504 (the ’504 patent) and 7,921,211 (the ’211 patent), which relate to systems and methods that establish a secure communications link between two computers over the Internet. In 2010, VirnetX sued Apple Inc. for infringement of these patents and two others. In 2011, Apple filed requests for inter partes reexamination of these patents, challenging all claims as anticipated or obvious. The matter went to trial, and a jury found in November 2012 that the asserted claims were not invalid and had been infringed and awarded VirnetX $368 million. On appeal, the Federal Circuit in September 2014 affirmed the jury’s findings of validity for all four patents, as well as the finding of infringement for many of the claims for the other two patents. However, the court vacated the infringement findings for the ’504 and ’211 patents and the damage award and remanded the matter to the district court. Apple did not request rehearing on any of the court’s rulings or seek review by the U.S. Supreme Court during the 90-day period to file for a writ of certiorari. Separately, the examiner in the USPTO’s reexamination proceedings found all claims of the ’504 and ’211 patents unpatentable. VirnetX appealed to the Patent Trial and Appeal Board and petitioned the USPTO to terminate the reexaminations as being estopped by Section 317(b); this petition was denied in 2015. The following year, the Board affirmed the examiner’s rulings. VirnetX appealed to the Federal Circuit, arguing that the Federal Circuit’s 2014 opinion was a final decision on invalidity, and, therefore, the USPTO should have terminated the reexaminations.

In December 2011, Cisco Systems also challenged the validity of 60 of the claims of the ’211 patent. The examiner ruled in 2015, and the Board affirmed in 2017, that nearly half of the challenged claims were invalid as either anticipated or obvious. VirnetX appealed this decision as well.

Final decision. The Federal Circuit’s 2014 decision was a "final decision" for purposes of Section 317(b) under controlling case law, the plain statutory language, and the intent of Congress; therefore, the USPTO was required to terminate the inter partes reexaminations, the court held. Apple argued that there had been no final decision due to the possibility of a future appeal. It asserted that the Federal Circuit had vacated and remanded issues in the case other than invalidity and that Apple was entitled to wait until those issues were decided on remand and subsequent appeal, and then file a petition for certiorari on those issues. Because the High Court may consider issues raised on the first appeal as well as the second appeal, Apple said, the decision will not be final until there is no potential for the U.S. Supreme Court to examine the issue of invalidity.

However, the Federal Circuit pointed out that it had ruled in 2017 in Fairchild (Taiwan) Corp. v. Power Integrations, Inc. that if a finding of no invalidity is affirmed on appeal and remand of other issues will not affect validity, the decision is final once the 90-day period to file for a writ of certiorari has passed, despite the potential for future Supreme Court review. Estoppel applies when all appeals have terminated, and because Apple had not petitioned for certiorari on the issue of validity, the Federal Circuit’s decision was final for purposes of Section 317(b) estoppel. Apple’s argument that Section 317(b) cannot apply until all issues for each patent are resolved on appeal was inconsistent with Fairchild as none of the issues on remand could impact the validity ruling.

Furthermore, Apple’s position was inconsistent with the plain language of Section 317(b). The statutory language requires a party to stop challenging invalidity when there was been a final decision on whether the party has "sustained its burden on providing the invalidity of any patent claim in suit." It does not require resolution of any other patent-related issue or of the entire case, the Federal Circuit found. Congress’ purpose in enacting this provision was to prevent the use of duplicative litigation to harass patent holders, but the estoppel provision would apply rarely if it allowed litigation until there was no possibility of future review by the Supreme Court even if all deadlines for appeal had passed. The USPTO’s interpretations of Section 317(b) were not entitled to Chevron deference because there was no ambiguity in the provision’s text or purpose. They were not entitled to Skidmore deference because the applicable considerations were not present. Even if deference were appropriate, none of Apple’s citations resolved the question at issue.

Remaining claims. The court affirmed the Board’s decision upholding the ruling by the examiner to reject the remaining claims not subject to estoppel. Among other rulings, the Board properly found that VirnetX had not clearly disclaimed "conventional" DNS functions in its claims. The Board also had not improperly shifted the burden to VirnetX regarding three claim limitations of the ’504 and ’211 patents; because the examiner found that Apple had carried its burden of proving unpatentability by a preponderance of the evidence, VirnetX was required to identify before the Board what the examiner did wrong, and the Board considered VirnetX’s arguments and properly rejected them as being without merit. VirnetX argued that the Board relied upon a new ground in finding the existence of prior art, but the court found that VirnetX had a fair opportunity to react to the evidence. VirnetX’s arguments that the reexaminations were unconstitutional were moot because they were based upon the assertion that the question would be resolved by the U.S. Supreme Court in a case involving the constitutionality of inter partes review, but the Supreme Court rejected the arguments for finding IPRs unconstitutional.

Concurrence/dissent. In an opinion that concurred in part and dissented in part, Judge Reyna argued that reexamination was not precluded because Apple still could appeal the Federal Circuit’s affirmance of no invalidity as there had been no final decision under Section 317(b). According to Judge Reyna, the majority opinion misinterpreted Fairchild as meaning that the appellate process terminates once the court issues a decision on any issue and no appeal immediately takes place. It was reasonable for Apple not to appeal the validity ruling after the first decision because a decision in favor of Apple on infringement on remand would have removed Apple’s reason for appeal, and Apple’s choice was reasonable and consistent with the law. The majority’s interpretation of Fairchild also was inconsistent with prior caselaw and principles of judicial economy, Reyna stated.

This case is Nos. 2017-1591, 2017-1592, and 2017-1593.

Attorneys: Stephen Blake Kinnaird (Paul Hastings LLP) for VirnetX Inc. William F. Lee (Wilmer Cutler Pickering Hale And Dorr LLP) for Cisco Systems, Inc. Theodore M. Foster (Haynes & Boone, LLP) for Apple Inc.

Companies: VirnetX Inc.; Cisco Systems, Inc.; Apple Inc.

MainStory: TopStory Patent FedCirNews

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