Virnetx Inc. v. Apple Inc.
Opinion
*1367
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
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)."
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.
,
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.
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
*1368
'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.
,
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
,
On appeal, we affirmed the jury's finding of no invalidity for all four patents.
VirnetX, Inc. v. Cisco Sys., Inc.
,
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.
*1369 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
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
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.
,
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.
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.
*1370
In 2010, Apple was sued for patent infringement. There is no dispute that in that "civil action arising ... under"
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
,
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 its parallel PTO reexam proceedings.
Apple does not dispute that since it first raised the issue in 2010, it has now lost on invalidity before the jury, the district court, and this court. Nor does it dispute that it allowed the time to petition for certiorari of the validity issues in the first appeal to lapse. Instead, Apple takes the position that there was no final decision due to a hypothetical future appeal.
Apple's argument proceeds as follows. In VirnetX I , we vacated and remanded other issues unrelated to invalidity, including infringement and damages. In Apple's view, after those issues are decided on remand and reviewed in a second appeal, it may choose to file a petition for certiorari of those non-validity issues. In so doing, it may also ask the Supreme Court to look at any issues from the first appeal-including the validity determination.
Thus, the Court might elect to examine the validity issues at some point in the future. The Court has the ability to consider not only those issues " 'before the court of appeals upon the second appeal,' " but also the "questions raised on the first appeal."
Mercer v. Theriot
,
In response, VirnetX contends there is a "final decision" on a party's attempt to prove invalidity after the party fails to petition for certiorari within the 90-day period.
*1371
Two reasons compel the conclusion that there has been a final decision on validity in this case. First, our decision in
Fairchild (Taiwan) Corp. v. Power Integrations, Inc.
,
A
Since the PTO's decision in 2016, we have ruled on this very issue.
Fairchild
directly addressed a situation in which validity was affirmed but other issues in the case were remanded.
Fairchild
holds that if a finding of no invalidity has been affirmed on appeal and remand of other issues will not "have any affect" on validity, the decision is "final" once the 90-day deadline for a certiorari petition on the validity determination has passed.
In
Fairchild
, we began our analysis by restating our earlier holding in
Bettcher
that estoppel "applies when 'all appeals have terminated.' "
As in Fairchild , the district court here entered judgment against Apple on the issue of invalidity, we affirmed the no-invalidity finding on appeal in VirnetX I , and the time to file a petition for certiorari on the issue has long since passed. Under Fairchild , that constitutes "a final decision" under § 317(b) with respect to Apple's failure to prove invalidity.
Resisting this conclusion, Apple argues that if any non-invalidity issues remain in the district court case related to the patent, then the validity decision cannot be final under § 317(b). Since VirnetX I vacated and remanded other issues (i.e., infringement and damages) on both patents at issue, Apple contends that it waited until all the issues with this patent case are decided before bundling it up in a petition for certiorari. Consequently, Apple's position requires resolution of the entire case -or at least all issues on each patent, including infringement, invalidity, and damages-before a validity decision is considered "final."
Fairchild rejected such arguments under almost identical circumstances. There, we had also vacated and remanded other parts of the case for additional proceedings. Id. at 1365 (explaining prior appeal upheld obviousness but reversed jury's findings on infringement, and "remanded for further proceedings unrelated to the '972 patent claims"). In turn, we rejected the argument that this renders the decision not "final" under § 317(b). Id. at 1366. We reasoned:
While it is true that in [the prior appeal] this court vacated and remanded for additional proceedings, we cannot agree with Power Integrations that this renders the decision not "final" for § 317(b) purposes. Critically, those proceedings are unrelated to the '972 patent. By its terms, § 317(b) is concerned with a final decision 'that the party has not sustained *1372 its burden of proving the invalidity of any patent claim.' And here, Power Integrations does not suggest, nor is there any reason to believe, that any unresolved issue on remand would have any effect on the now-final '972 patent validity determinations.
Id.
(emphasis added) (quoting
Likewise, here, Apple does not point to any issue in the
VirnetX I
remand that substantively bears on the finding of no invalidity. Nor could it. Indeed, the only difference here is that
VirnetX I
remanded some infringement and damages issues related to the '504 and '211 patents. But Apple fails to explain how any of these unresolved issues would "have any effect on the now-final ... validity determinations" involving those patents.
7
Finally, Apple contends
Fairchild
cannot control because no party in that case expressly argued that the Supreme Court might still take up the invalidity issue on a future appeal under
Mercer
. But
Fairchild
's reasoning implicitly forecloses such an argument.
Fairchild
concluded that "
all
appeals" had terminated,
In sum, § 317(b) applies here despite the fact that issues unrelated to invalidity were remanded.
The dissent takes the view that Fairchild is inapplicable. But it relies on reasons that were not material to the outcome in Fairchild . In addition, the dissent's attempt to distinguish Fairchild suffers from several additional infirmities.
According to the dissent, in
Fairchild
"Power Integrations did not appeal the court's favorable ruling
on infringement
because it prevailed on that issue." Opinion concurring in part and dissenting in part ("dissent") at 1382 (emphasis added). In turn, the dissent leaps to the conclusion that Power Integrations could not have realistically pursued certiorari review of the '972 patent's
validity
because it "prevailed" on infringement.
Fundamentally, infringement and invalidity are separate "issues."
Pandrol USA, LP v. Airboss Ry. Prod., Inc.
,
*1373
Moreover, the dissent's position unravels in light of the procedural posture in
Fairchild
. Power Integrations did not simply argue that it did not infringe the '972 patent. Nor did it merely raise invalidity as an affirmative defense to liability. Rather, Power Integrations advanced a separate counterclaim for declaratory judgment that the '972 patent was invalid.
See
Plaintiff's Fourth Amended Answer and Counterclaims at 23,
Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc. et al
, No. 1:08-cv-00309-LPS,
It is black letter law that non-infringement does not moot a counterclaim regarding invalidity. "A party seeking a declaratory judgment of invalidity presents a claim independent of the patentee's charge of infringement."
Cardinal Chem. Co. v. Morton Int'l
,
In addition, the dissent speculates as to
why
the litigant chose not to seek further review. The dissent appears to assume that if a party is found not liable for certain accused products infringing a patent, as in
Fairchild
, that party no longer has the incentive to challenge the underlying property right's validity. Dissent at 1382-83. This assumption fails for several reasons. First, inferring the subjective intent of the litigants-either on remand or in petitioning for certiorari-is inappropriate.
Fairchild
never made such fact findings.
Fairchild
never relied on such inferences either. Put simply,
Fairchild
did not base its decision on speculation as to whether remand would impact a party's subjective "decision" to pursue certiorari review or whether its decisions regarding petitioning were "reasonable,"
But the dissent suffers from a more fundamental flaw. The dissent appears to suggest that in
Fairchild
, "potential future review" by the Supreme Court was not an option.
Finally, the dissent is concerned that the majority opinion somehow "intrudes on the Supreme Court's constitutional prerogative whether to take up the invalidity issue." Id. at 1385. It does not. Like Fairchild , our decision concerns estoppel of duplicative administrative proceedings before the PTO . It has no bearing on the Supreme Court's discretion to accept or reject a petition for certiorari on any issue-nor could it.
In sum, we disagree with the dissent's efforts to rewrite
Fairchild
.
Fairchild
speaks for itself. The controlling statute is trained on a "final decision" that the party has not sustained its "burden of proving the invalidity" of the patent claim.
Fairchild
,
B
Even if Fairchild did not control, the statutory text and purpose of § 317(b) compels us to reject Apple's theory that the entire case must be resolved. Apple essentially asks us to rewrite the statute, triggering estoppel only when there is a "final judgment" on all issues in a case.
But the statute's text is clear. The statute only requires "a final decision" on a precise issue-whether the party has "sustained its burden of proving the invalidity of any patent claim in suit."
This reading of the plain text is further reinforced by the statute's purpose. The statute is intended to protect patent holders against "harassment" from duplicative litigation on the issue of invalidity.
See
145 Cong. Rec. 29,276 (Nov. 9, 1999) (Conference Report on H.R. 1554) ("Subtitle F creates a new section 317 which sets forth certain conditions by which inter partes reexamination is prohibited to guard against harassment of a patent holder.");
see also
Function Media, L.L.C. v. Kappos
,
Apple concedes that § 317(b) was intended to prevent duplicative litigation. Apple's Br. 40-41. Yet Apple's position increases the likelihood duplicative litigation will occur. If no decision on invalidity is "final" until any "prospect of future Supreme Court review" is eliminated, Apple's Br. 36, estoppel will rarely apply. In light of the legislative intent, it is doubtful Congress created an estoppel provision that *1375 would allow a PTO proceeding to press forward even after all appellate deadlines have elapsed merely because there is a potential that the Supreme Court may one day reconsider the invalidity issue-in many cases, years later-while examining the rest of the case. 8
Accordingly, the statutory purpose confirms that "a final decision" triggers estoppel when the invalidity challenge is decided on appeal and the time for petitioning for certiorari has passed-regardless of the fact review of the entire case could occur at some point in the future under Mercer .
C
Apple's remaining arguments against the application of § 317(b) here are unpersuasive. Apple first suggests that Fairchild is inconsistent with Bettcher . Apple's Br. 32-33, 37. In Apple's view, Bettcher held that § 317(b) is not satisfied until the Supreme Court can no longer review a case.
Bettcher
never reached such a holding.
Bettcher
concerned a different estoppel provision, pre-AIA
The panel then rejected the argument that § 317(b) somehow showed that § 315(c) estoppel must apply as soon as the examiner finishes the reexam.
See
Bettcher addressed appeal rights to the Board and the Federal Circuit. It did not analyze how petitions for certiorari impact § 317(b). 10 Moreover, Bettcher did not address *1376 the critical inquiry here as to whether a "final decision" regarding the issue of invalidity under § 317(b) is affected by remand of issues unrelated to invalidity.
By contrast,
Fairchild
did reach these issues.
Fairchild
held that estoppel "applies when 'all appeals' have terminated," meaning after the district court's judgment of no-invalidity was affirmed on appeal and "the time to petition for a writ of certiorari has passed."
Apple's reliance on
Fresenius
fares no better.
Fresenius USA, Inc. v. Baxter Int'l, Inc.
,
In addition,
Fresenius
concerned an entirely different issue involving res judicata from a "final judgment." Even within the distinct realm of res judicata,
Fresenius
took great care to "distinguish between different concepts of finality."
The issue in Fresenius arose due to the fact that while the appeal of an infringement action was pending, we affirmed the PTO reexamination finding the patent claims invalid in In re Baxter . As a result, the PTO canceled the claims. Id. at 1335. Despite the intervening cancellation, the patent owner argued that the district court's judgment was "final" for purposes of res judicata such that the liability finding and past damages award in the pending litigation could not be disturbed. Id. at 1340. We disagreed.
While the district court in 2007 had entered "a judgment final for purposes of appeal," we concluded that it was "not sufficiently final to preclude application of the intervening final judgment in
In re Baxter
."
Id.
at 1341. Moreover, the district court's original judgment had since been set aside and the remand was not sufficiently final for res judicata purposes.
Id.
"To rise to that level, the litigation must be entirely concluded so that [the] cause of action [against the infringer] was merged into a final judgment ... one that 'ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.' "
Id.
(quoting
Mendenhall v. Barber-Greene Co.
,
Fresenius 's analysis of a "final judgment" for purposes of res judicata does not instruct our understanding of a "final decision" for purposes of § 317(b) estoppel. Indeed, it only underscores why we must follow Fairchild . Fairchild found estoppel absent a final judgment. Indeed, after multiple other issues in the litigation, including infringement and damages for certain patents, were remanded, Fairchild concluded nonetheless that there was a "final decision" on the narrow issue of invalidity-which is all that the statute requires to trigger estoppel. The reasoning in *1377 Fairchild , not Fresenius , governs our application of § 317(b).
Apple also briefly argues that this interpretation of the statute generates duplicative proceedings for the patent challenger. Apple's Br. 41. In Apple's view, it must seek "interlocutory" review rather than waiting for the case to be entirely resolved.
Finally, Apple's arguments based on the PTO's interpretations carry no force. They fail for several reasons.
First, Apple fails to explain why the PTO's interpretations of § 317(b) is entitled to
Chevron
deference. As discussed above, the statutory text and purpose leave no ambiguity. Where "the intent of Congress is clear, that is the end of the matter."
Chevron U.S.A. Inc. v. NRDC, Inc.
,
Second,
Skidmore
deference is not appropriate either. Under
Skidmore
, the weight given to a particular agency interpretation "will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control."
United States v. Mead Corp.
,
Third, regardless of whether deference applies, none of Apple's citations resolve the specific issue at hand. For instance, no *1378 PTO regulation or MPEP section states that a decision is not "final" for purposes of § 317(b) if non-invalidity issues are remanded. Nor do any of these provisions state that a final judgment is required, or that as long as the potential for Supreme Court review from a later petition exists, § 317(b) estoppel does not attach. Indeed, none of these provisions even mention Supreme Court certiorari review. 13
For the reasons above, § 317(b) estoppel applies to the Apple reexams. Accordingly, we vacate and remand with instructions to terminate the Apple reexams with respect to claims 1-35 of the '504 patent and claims 36-59 of the '211 patent. 14
III
We now turn to VirnetX's challenge to the merits of the Apple and Cisco reexams that pertain to the claims not subject to estoppel. The Board affirmed the Examiner's rejection of all claims of the '504 and '211 patents. On appeal, VirnetX takes a kitchen sink approach, arguing that the Board decisions incorrectly construe certain claims, shift the burden to the patent owner to prove patentability, and lack substantial evidence. VirnetX's arguments are unpersuasive. Therefore, we affirm the Board's decision on all remaining claims of both patents in the Apple reexam not subject to § 317(b) estoppel and fully affirm the Board's decision regarding the claims of the '211 patent in the Cisco reexam. 15
VirnetX contends that the Board improperly construed the term "indication" by ignoring its disclaimer argument. VirnetX argued before the Board that the patent disclaimed "conventional" DNS functions-e.g., looking up and returning an IP address or a public key for the requested webpage. In VirnetX's view, such conventional functions therefore do not qualify as "indications" that the system "supports establishing a secure communication link." J.A. 1348, 2892, 4334-41. But the Board expressly acknowledged VirnetX's assertion that the patents "disparaged and disclaimed" systems that use no
*1379
more than "conventional" DNS functions. J.A. 26-30, 49-54, 77-80. It then rejected this argument in a systematic and well-reasoned fashion. "Disavowal requires 'expressions of manifest exclusion or restriction, representing a clear disavowal of claim scope.' "
Epistar Corp. v. ITC
,
Turning to VirnetX's next challenge, VirnetX contends that the Board failed to make adequate findings and impermissibly shifted the burden to VirnetX with respect to three claim limitations of the '504 and '211 patents in the Apple reexams. The limitations are "indicating," "connectable," and "authenticate." Contrary to VirnetX's arguments, the Board's conclusions are well supported by the underlying factual findings made by the Examiner. The Examiner found that Apple had carried its burden of proving unpatentability by "a preponderance of the evidence."
See
Rambus Inc. v. Rea
,
VirnetX further argues that the Board's findings in the Cisco reexam regarding the "indicating" limitations introduced improper new arguments. We disagree. According to VirnetX, the Board relied on a new ground for concluding that Lendenmann's disclosure of "returning a network address" and "access control lists" ("ACLs") meet the claim limitation. The Board's findings constitute a new ground of rejection supporting reopening of prosecution if the Board "finds facts not found by the examiner regarding the differences between the prior art and the claimed invention, and these facts are the principal evidence upon which the Board's rejection was based."
In re Leithem
,
VirnetX also contends that the Board's findings that Lendenmann teaches the "indicating" element lack substantial evidence. However, the Board found Lendenmann's disclosure of "returning a network address," "ACLs," and certain domain names teach the limitation. Based on the record here, there is substantial evidence to support the Board's conclusion that this limitation is taught.
As for the "authenticating" limitation, VirnetX contests the Board's determination that Provino discloses a DNS system configured "to authenticate the query," as recited in dependent claims 5, 23, and 47. VirnetX's arguments do not unsettle the *1380 Board's conclusions that Provino's system-including its "query" and "firewall 30"-teach this limitation. Furthermore, contrary to VirnetX's view, no material aspect of the Board's analysis of the relationship between authorization and "authentication" was new or improper. Based on the record developed before the Examiner and reviewed by the Board, substantial evidence supports the Board's conclusions regarding the "authenticating" limitation.
Next, VirnetX argues that the Board failed to address arguments it made in the Cisco reexam as to why dependent claim 47 of the '211 patent is patentable over Lendenmann. There is little indication that VirnetX properly argued claim 47's patentability separately from independent claims 36 and 60. The Board was therefore justified in concluding "Patent Owner does not provide additional arguments in support of" claim 47. J.A. 88. Regardless, the record confirms that based on the Examiner's findings, the Board properly concluded claim 47 was unpatentable.
Finally, VirnetX also argues that the reexams here are unconstitutional. VirnetX took the position that its challenge would be resolved by the Supreme Court's decision regarding the constitutionality of inter partes review ("IPR") in
Oil States Energy Services, LLC v. Greene's Energy Group, LLC
, --- U.S. ----,
We have considered VirnetX's remaining arguments and find them unpersuasive.
CONCLUSION
For the foregoing reasons, we vacate the Board's decisions in the Apple reexams with respect to claims 1-35 of the '504 patent and claims 36-59 of the '211 patent and remand with instructions to terminate. However, we affirm the Board's decisions in the Apple reexams that claims 36-60 of the '504 patent and claims 1-35 and 60 of the '211 patent are unpatentable. We further affirm the Board's decision in the Cisco reexam that claims 36-60 of the '211 patent are unpatentable.
AFFIRMED-IN-PART, VACATED-IN-PART, AND REMANDED
COSTS
The parties shall bear their own costs.
Reyna, Circuit Judge, concurring-in-part and dissenting-in-part.
This appeal involves the Supreme Court's authority to take appeals involving U.S. patents under Article III of the U.S. Constitution.
The majority holds that Apple's petitions for
inter partes
reexaminations are barred under
I.
This dispute has reached this court once before. In 2010, VirnetX Inc. ("VirnetX") sued Apple Inc. ("Apple") in district court,
*1381
alleging infringement of four patents, including the two at issue in this appeal, U.S. Patent Nos. 7,418,504 ("the '504 patent") and 7,921,211 ("the '211 patent"). Apple defended on grounds that the patents were invalid. After trial, the jury entered verdicts against Apple that the patents were infringed and not invalid. Apple appealed. We affirmed the jury's finding of no invalidity.
VirnetX, Inc. v. Cisco Sys., Inc.
,
During the initial district court litigation, Apple filed requests for inter partes reexamination of the '504 and '211 patents. After several years of reexamination proceedings, the Examiner found all claims of the '504 and '211 patents invalid, and the Patent Trial and Appeal Board ("Board") affirmed. VirnetX now appeals from the Board's final written decisions 1 on the basis that reexamination of the '504 and the '211 patents was barred under § 317(b).
Section 317(b) provides in relevant part:
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 ..., an inter partes reexamination requested by that party or its privies on the basis of [issues which that party or its privies raised or could have raised in such civil action] may not thereafter be maintained by the Office ...."
In this appeal, we are required to determine whether our prior decision that affirmed the jury's finding of no invalidity is a "final decision" under § 317(b), such that reexamination of the two patents is barred.
II.
The majority relies on this court's decision in
Fairchild (Taiwan) Corp. v. Power Integrations, Inc.
to hold that " 'a final decision' triggers estoppel when the invalidity challenge is decided on appeal and the time for petitioning for certiorari has passed." Maj. Op. 1375;
see also
The majority interprets
Fairchild
to mean that the appellate process terminates once this court issues a decision on any issue and an appeal is not immediately taken. That is not what we held in
Fairchild
. Rather, we held that § 317(b) 's "restriction applies when 'all appeals have terminated.' "
Fairchild
,
*1382
Fairchild
involved a second appeal in a long-running dispute between Power Integrations and Fairchild. In the first appeal of that litigation, we affirmed the jury's finding of no invalidity and found in favor of Power Integrations on infringement.
Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc.
,
Power Integrations' decision not to petition for certiorari all but foreclosed the possibility that the invalidity issue could be subject to potential future review by the Supreme Court. 2 Stated differently, once Power Integrations prevailed on infringement, the case against it was concluded because the only issues remaining pertained to a cross-appeal involving a different patent. Hence, all of its appeals terminated at that point. 3 That is not the case here.
In
VirnetX I
, this court vacated the jury's finding of infringement and remanded for a new trial on damages and infringement under the correct claim construction.
VirnetX I
,
Apple, however, lost on infringement on remand.
VirnetX Inc. v. Apple Inc.
,
Indeed, in this case the issues on remand (infringement and damages) involved the same patent the jury found, and we affirmed, to be not invalid. But in
Fairchild,
the remand concerned a counterclaim unrelated to the patent claims challenged in the reexamination proceeding, a fact this court found to be "critical[ ]" to its conclusion that the invalidity decision in
Power Integrations
was final.
Fairchild
,
Apple's decision to delay its petition for certiorari to the Supreme Court until resolution of the new trial on infringement was reasonable because Apple can now appeal the issues of infringement and invalidity together. Whether Apple's decision was based on litigation strategy or a desire to conserve resources is not at issue. This court should not dictate to Apple when or whether it should appeal. A party should be free to develop its litigation strategy within the bounds of the law without this court's interference, and nothing in Fairchild suggests otherwise. To the extent that Apple decided to delay its appeal until the outcome of its trial on remand, that decision was both reasonable and consistent with the law and principles of judicial economy.
III.
The majority's interpretation of
Fairchild
is at odds with this court's decisions in
Bettcher Industries, Inc. v. Bunzl USA, Inc.
,
In Bettcher , we stated that § 317(b) "prevents further reexamination proceedings once parallel federal court proceedings have reached their resolution." Bettcher , 661 F.3d at 646. In other words, § 317(b) "attaches only after there has been a final resolution [of the invalidity issue] ... in federal court," and is not triggered "if there remains any time for an appeal." Id. (second portion quoting Manual of Patent Examining Procedure § 2686.04 ). The court further explained in Bettcher that the legislative history "confirm[s] that § 317(b) applies [only] 'after any appeals.' " Id. (quoting 145 Cong. Rec. 29,276 (Nov. 9, 1999); 145 Cong. Rec. 29,973 (Nov. 17, 1999)). The majority's decision that Apple's reexaminations are barred by § 317(b) is inconsistent with *1384 Bettcher because time remains for Apple to file a petition for a writ of certiorari. 4
The majority's interpretation of
Fairchild
is also inconsistent with
Fresenius
. This court stated in
Fresenius
that a decision is not final if it "leaves open the question of damages or other remedies."
Fresenius
,
In deciding
Fresenius
, this court relied on the Supreme Court's decision in
Simmons Co. v. Grier Brothers Co.
,
IV.
Other Supreme Court precedent supports the conclusion that Apple has not exhausted its appellate rights. Although Apple did not petition for certiorari on the issue of invalidity after its first appeal, Supreme Court precedent establishes that it can do so now.
See
Major League Baseball Players Ass'n v. Garvey
,
*1385
Bhd. of Locomotive Firemen & Enginemen v. Bangor & Aroostook R.R. Co.
,
The majority asserts that § 317(b) concerns only "the finality of a particular issue, rather than finality of the entire case." Maj. Op. 1375 n.8;
see also
id.
at 20-21,
The majority also suggests that Supreme Court review does not qualify as an "appeal" for purposes of § 317(b) 's estoppel provision because there is no right to Supreme Court review. Maj. Op. 1375 n.10. This suggestion is inconsistent with Article III of the U.S. Constitution, which states that, aside from cases implicating the Supreme Court's original jurisdiction, the Supreme Court "shall have appellate Jurisdiction, both as to Law and Fact." U.S. Const. art. III. In any case, Apple has a right to
petition
for a writ of certiorari.
See
Durham v. United States
,
V.
The majority's decision also intrudes on long established principles of judicial economy because it fosters piecemeal litigation. Under the majority's approach, once this court decides an issue of invalidity on appeal, a party is required to immediately petition for certiorari to the Supreme Court-regardless of the status of the other issues in the case. This approach stands in stark contrast to "the general judicial bias against piecemeal litigation."
*1386
Arizona v. San Carlos Apache Tribe of Arizona
,
In
McLish v. Roff
, the Supreme Court explained that "[f]rom the very foundation of our judicial system the object and policy ... have been to save the expense and delays of repeated appeals in the same suit, and to have the whole case and every matter in controversy in it decided in a single appeal."
The majority contends that to hold that § 317(b) does not apply in this case will itself lead to duplicative litigation because waiting "until any prospect of future Supreme Court review is eliminated" will cause § 317(b) "estoppel [to] rarely apply." Maj. Op. 1374 (internal citation and quotation marks omitted). But not every appeal that reaches this court results in a remand, and even if that were the case, estoppel would still apply once all appeals are terminated. It is not rare that the Supreme Court denies a party's last petition for certiorari and litigation concludes. But that step is for the Supreme Court to take-not this court.
VirnetX also alleged that Apple infringed certain claims of U.S. Patent Nos. 6,502,135 ("the '135 patent") and 7,490,151 ("the '151 patent").
We reversed the district court's conclusion related to the doctrine of equivalents for one claim of the '151 patent.
See
On remand in 2016, a jury found that Apple infringed claims 1, 2, 5, and 27 of the '504 patent and claims 36, 47, and 51 of the '211 patent, and awarded damages.
VirnetX Inc. v. Apple Inc.
,
In 2010, VirnetX also sued Cisco in district court, alleging inter alia infringement of claim 1 of the '211 patent.
Rolf Lendenmann, Understanding OSF DCE 1.1 for AIX and OS/2, IBM International Technical Support Organization , pp. 1-45 (Oct. 1995) ("Lendenmann").
At oral argument, Apple could not point to a single example illustrating how an aspect of the infringement remand might meaningfully affect or implicate the invalidity ruling this court affirmed in 2014 in VirnetX I . Instead, Apple offered only speculation. Its argument boiled down to the general conjecture that the district court "could" have a motion to set aside a validity determination even after the mandate issues based on arguments made about infringement. Oral Argument at 29:20-51, No. 2017-1591, http://www.cafc.uscourts.gov/oral-argument-recordings.
Moreover, there is no indication that Congress considered the type of review contemplated in Mercer as part of the definition of a regular appeals process for reaching a "final decision" on invalidity. This is of no surprise given the statute is trained on the finality of a particular issue, rather than finality of the entire case.
Section 315(c) concerns estoppel in the opposite direction: when the PTO's determination in a reexam estops a party from asserting invalidity in a civil action. Id. at 643.
Bettcher
concluded that the estoppel provision of § 315 attaches when all appeal
rights
are exhausted. As the panel observed, the opening sections of the statute list those appeal "rights" for both the patent owner and the third-party requestor, § 315(a) -(b), which consist of appeals from (1) the examiner to the Board, and (2) the Board to this court.
Id.
at 644 ("The estoppel provision of subsection (c) thus falls immediately following the establishment of both parties' rights of appeal, including appeal to this court.").
Bettcher
did not address whether petitions for certiorari are considered "appeals," or whether certiorari review by the Supreme Court is a "right." In VirnetX's view, an appeal as of right is a different procedural mechanism than a writ of certiorari. VirnetX Reply Br. 12-13;
see also
City & Cty. of San Francisco, Calif. v. Sheehan
, --- U.S. ----,
Apple also suggests that Bettcher requires deference. Not so. Bettcher concluded the statute was unambiguous. Bettcher , 661 F.3d at 646 ("[W]e believe that § 317(b) is clear ...."). Nonetheless, Apple points to Bettcher 's subsequent discussion of the deference it "would" give the MPEP had it reached the issue. Id. Apple's reliance on a single line of dicta from Bettcher is unavailing. Even if it were not dicta, Bettcher 's statement concerned deference to the Manual of Patent Examining Procedure ("MPEP") § 2686.04. Id. As explained later, that section of the MPEP does not resolve the issue at hand.
Apple also suggests the underlying PTO denial of the petition to terminate here is entitled to
Chevron
deference. In support of this position, Apple cites only to
In re Affinity Labs of Texas, LLC
,
Other PTO regulations suggest appeals terminate when our mandate issues.
See, e.g.
,
Apple appears not to dispute that estoppel extends to the dependent claims here. Section 317(b) bars maintaining a reexam based on issues which that party "raised" or "could have raised" in the civil action. The PTO found that Apple "was aware of all prior art raised prior to October 31, 2012 in the present reexamination proceeding with respect to claims 1-35 [of the '504 patent ], and could have raised issues with respect to that prior art in the litigation." J.A. 1666, 3147 (same regarding claims 36-59 of the '211 patent ). No new prior art was added after October 31, 2012, when trial began in the litigation. Indeed, Apple never amended or supplemented its original October 18, 2011 reexamination requests to add new prior art.
The parties filed supplemental briefing regarding the relationship between this case and other recently decided matters. ECF Nos. 95, 96, 105. Apple primarily argues that collateral estoppel renders various claims of the '504 and '211 patents invalid. As an initial matter, Apple's arguments are mooted in part by our holding in the present matter affirming the Board's decision that certain claims of the '504 and '211 patent are unpatentable. Otherwise, Apple's arguments are unpersuasive. Apple has failed to show why collateral estoppel is appropriate under these circumstances.
In a companion case, Apple also appealed from the judgment of the district court in the trial on remand, in which a jury once again found that Apple infringed the '504 and '201 patents. See VirnetX Inc. v. Cisco Sys., Inc. , No. 2018-1197 (Fed. Cir.) (" VirnetX II ").
The
Power Integrations
case is still proceeding at the district court on remand.
See
Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc.
, No. 1:08-cv-00309-LPS (D. Del.). Yet the theoretical possibility that Power Integrations would appeal its unfavorable invalidity ruling was not even argued to this court in
Fairchild
.
See
Power Integrations' Opposition to Fairchild's Motion to Remand at 2-3,
Fairchild
,
The majority asserts that the case against Power Integrations did not conclude at this point because the invalidity issue was separate from the infringement issue, and arose as a counterclaim by Power Integrations for declaratory judgment against Fairchild. Maj. Op. 1372-73. This is incorrect. Power Integrations raised invalidity of the relevant patent as both an affirmative defense to infringement and as a counterclaim.
See
Plaintiff's Fourth Amended Answer and Counterclaims at 10, 23,
Power Integrations
, No. 1:08-cv-00309,
The majority distinguishes
Bettcher
on the grounds that it dealt with estoppel under pre-AIA
In responding to the above line of Supreme Court cases, the majority again confirms that the Court can still review the invalidity issue in VirnetX I , thus further undercutting its insistence that the issue was finally decided in that case. See Maj. Op. 1373-74.
Reference
- Full Case Name
- VIRNETX INC., Appellant v. APPLE INC., Cisco Systems, Inc., Appellees
- Cited By
- 12 cases
- Status
- Published