IP Law Daily VirnetX collaterally estopped from rearguing printed publication status in patent review
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Monday, December 10, 2018

VirnetX collaterally estopped from rearguing printed publication status in patent review

By Peter Reap, J.D., LL.M.

VirnetX was collaterally estopped from relitigating the issue of whether a prior art reference was a printed publication in its appeal from two final written decisions of the Patent Trial and Appeal Board finding that Apple Inc. ("Apple") had demonstrated by a preponderance of the evidence that claims 1–11, 14–25, and 28–30 of VirnetX’s network security patent, U.S. Patent No. 8,504,696 ("the ’696 patent"), were unpatentable as obvious, the U.S. Court of Appeals for the Federal Circuit has ruled. Further, VirnetX did not preserve the only remaining issue of whether inter partes review procedures apply retroactively to patents that were filed before Congress enacted the America Invents Act (AIA). Therefore, the appellate court affirmed the two final written decisions of the PTAB (VirnetX Inc. v. Apple, Inc., December 10, 2018, O'Malley, K.).

In 2015, Apple filed two petitions for inter partes review of the ’696 patent. In the first petition, Apple challenged claims 1–11, 14–25, and 28–30 as obvious over U.S. Patent No. 6,496,867 and a document, S. Kent & R. Atkinson, "RFC 2401, Security Architecture for the Internet Protocol" (November 1998) ("RFC 2401"). In the second petition, Apple challenged these same claims, except claim 29, as obvious over various other combinations also involving RFC 2401. VirnetX argued, as a threshold matter, that RFC 2401 was not a printed publication under Section 102(b) as of November 1998. In its final written decisions, the Board found that RFC 2401 was a printed publication and concluded that the ’696 patent was unpatentable as obvious. VirnetX appealed.

During the pendency of VirnetX’s appeal in this case, the Federal Circuit decided VirnetX Inc. v. Apple, Inc., No. 17-1131, 715 F. App’x 1024 (Fed. Cir. Mar. 16, 2018) ("VirnetX I"). In VirnetX I, VirnetX appealed seven final written decisions in which the Board found that RFC 2401, in combination with other references, rendered obvious a number of patents related to the ’696 patent. In relevant part, VirnetX argued to the Board that RFC 2401 was not a printed publication as of November 1998. The Board disagreed. The Federal Circuit summarily affirmed the Board’s decisions under Federal Circuit Rule 36.

Collateral estoppel. A party is collaterally estopped from relitigating an issue if: (1) a prior action presents an identical issue; (2) the prior action actually litigated and adjudged that issue; (3) the judgment in that prior action necessarily required determination of the identical issue; and (4) the prior action featured full representation of the estopped party. This is no different in the context of a Rule 36 judgment, the court noted.

VirnetX is collaterally estopped by the Rule 36 judgment in VirnetX I from relitigating the question of whether RFC 2401 was a printed publication, the appellate court held. The parties disputed only the question of whether the issue was necessary or essential to the judgment in VirnetX I. It was, because each ground of unpatentability that VirnetX appealed in VirnetX I relied on RFC 2401. In three of the seven final written decisions appealed in VirnetX I, the only issue raised was whether RFC 2401 was a printed publication. Thus, by affirming all seven of the Board’s decisions, this court in VirnetX I necessarily found that RFC 2401 was a printed publication. Even if the court were to reach the merits, it would likely reach the same conclusion in this appeal as it did in VirnetX I. the court said.

Retroactivity of inter partes review. VirnetX next argued that it preserved in its opening brief the separate issue of whether inter partes review procedures apply retroactively to patents that were filed before Congress enacted the AIA. VirnetX pointed to a single paragraph in its Opening Brief, filed prior to the Supreme Court’s decision in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 138 S. Ct. 1365 (2018). In this paragraph, VirnetX asked this court to "set aside the Board’s IPR decision" "[i]f the Supreme Court decides [, in Oil States,] that the Seventh Amendment and Article III of the Constitution preclude the Board from invalidating patents through IPR proceedings."

VirnetX in no way provided any arguments specifically preserving the retroactivity issue, the Federal Circuit decided. It even conceded at oral argument that it "didn’t specifically brief" the retroactivity issue, the court observed. It attempted to justify this failure by arguing that Federal Circuit precedent prior to Oil States generally upheld the constitutionality of inter partes review proceedings and thus, foreclosed the argument. But the Federal Circuit has never decided this issue, and, even if it had, VirnetX never sought to provide supplemental briefing or to otherwise develop this argument following the Supreme Court’s decision in Oil States. Thus, VirnetX did not preserve the issue of whether inter partes review procedures apply retroactively to patents that were filed before Congress enacted the AIA.

This case is Nos. 17-2490 and 17-2494.

Attorneys: Igor Victor Timofeyev (Paul Hastings LLP) for VirnetX Inc. John C. O'Quinn (Kirkland & Ellis LLP) for Apple, Inc.

Companies: VirnetX Inc.; Apple, Inc.

MainStory: TopStory Patent FedCirNews

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