Court Opinion

ID: 4348868
Source: CourtListenerOpinion
Date Created: 2018-12-10 16:03:22.063861+00
Date Added: 2024-06-11T07:49:42.616701
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
               ______________________

                   VIRNETX INC.,
                      Appellant

                          v.

                   APPLE, INC.,
                      Appellee
               ______________________

                2017-2490, 2017-2494
               ______________________

   Appeals from the United States Patent and Trade-
mark Office, Patent Trial and Appeal Board in No.
IPR2016-00331.
               ______________________

             Decided: December 10, 2018
               ______________________

    IGOR VICTOR TIMOFEYEV, Paul Hastings LLP, Wash-
ington, DC, argued for appellant. Also represented by
NAVEEN MODI, STEPHEN BLAKE KINNAIRD, JOSEPH PALYS,
MICHAEL WOLFE, DANIEL ZEILBERGER.

   JOHN C. O'QUINN, Kirkland & Ellis LLP, Washington,
DC, argued for appellee. Also represented by NATHAN S.
MAMMEN; SCOTT BORDER, JEFFREY PAUL KUSHAN, Sidley
Austin LLP, Washington, DC.
                ______________________
2                                VIRNETX INC. v. APPLE, INC.

 Before NEWMAN, O’MALLEY, and CHEN, Circuit Judges.
O’MALLEY, Circuit Judge.
     VirnetX Inc. (“VirnetX”) appeals from two final writ-
ten decisions of the Patent Trial and Appeal Board
(“Board”) finding that Apple Inc. (“Apple”) had demon-
strated by a preponderance of the evidence that claims 1–
11, 14–25, and 28–30 of U.S. Patent No. 8,504,696 (“the
’696 patent”) were unpatentable as obvious. VirnetX Inc.
v. Apple Inc., No. IPR2016-00331 (P.T.A.B. June 22, 2017)
(“331 Board Decision”); VirnetX Inc. v. Apple Inc., No.
IPR2016-00332 (P.T.A.B. June 22, 2017) (“332 Board
Decision”). Because VirnetX is collaterally estopped from
relitigating the threshold issue of whether prior art
reference RFC 2401 1 was a printed publication and be-
cause VirnetX did not preserve the only remaining issue
of whether inter partes review procedures apply retroac-
tively to patents that were filed before Congress enacted
the America Invents Act (“AIA”), we affirm.
                I. PROCEDURAL HISTORY
    In December 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 obvi-
ous over U.S. Patent No. 6,496,867 and RFC 2401. In the
second petition, Apple challenged these same claims,
except claim 29, as obvious over various other combina-
tions also involving RFC 2401. The Board instituted inter
partes review in both proceedings. VirnetX filed patent
owner responses in which it argued, as a threshold mat-
ter, that RFC 2401 was not a printed publication under
§ 102(b) as of November 1998. In its final written deci-

    1   S. Kent & R. Atkinson, “RFC 2401, Security Ar-
chitecture for the Internet Protocol” (November 1998)
(J.A. 2268).
VIRNETX INC. v. APPLE, INC.                               3

sions, the Board found that RFC 2401 was a printed
publication and concluded that the ’696 patent was un-
patentable as obvious. VirnetX appeals.
    During the pendency of VirnetX’s appeal in this case,
this court 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 deci-
sions in which the Board found that RFC 2401, in combi-
nation 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. On March 16, 2018, we summarily affirmed
the Board’s decisions pursuant to Federal Circuit Rule 36.
VirnetX I, 715 F. App’x at 1024.
    After the mandate issued in VirnetX I, Apple submit-
ted a notice of supplemental authority in this case, notify-
ing the court of the relevance of our Rule 36 judgment in
VirnetX I to the present appeal. The issue was also
discussed by the parties during oral argument. According
to Apple, VirnetX is collaterally estopped by our judgment
in VirnetX I from relitigating the printed publication
issue. VirnetX responds that it is not collaterally es-
topped, and, even if it were, such a finding would not
resolve all issues in this appeal because VirnetX pre-
served a separate constitutional challenge in its opening
brief.   We have jurisdiction pursuant to 28 U.S.C.
§ 1295(a)(4).
                       II. DISCUSSION
    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 identi-
4                                 VIRNETX INC. v. APPLE, INC.

    cal issue; and (4) the prior action featured full
    representation of the estopped party.
Stephen Slesinger, Inc. v. Disney Enterprises, Inc., 702
F.3d 640, 644 (Fed. Cir. 2012). Collateral estoppel or
“issue preclusion applies where the[se] . . . [elements] of
collateral estoppel are carefully observed.” B & B Hard-
ware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293, 1306
(2015) (quotations omitted). This is no different in the
context of a Rule 36 judgment. Phil-Insul Corp. v. Airlite
Plastics Co., 854 F.3d 1344, 1356 (Fed. Cir. 2017). While
not all Rule 36 judgments will “satisfy those ordinary
elements, that does not mean none will.” See B & B
Hardware, 135 S. Ct. at 1306. Accordingly, we have held
that a Rule 36 judgment may serve as a basis for collat-
eral estoppel so long as these elements—including the
element that the resolution of the issue was essential or
necessary to the Rule 36 judgment—are carefully ob-
served. Phil-Insul, 854 F.3d at 1356–57.
    Here, Apple is correct that VirnetX is collaterally es-
topped by our Rule 36 judgment in VirnetX I from reliti-
gating the question of whether RFC 2401 was a printed
publication. The parties dispute only the question of
whether the issue was necessary or essential to the judg-
ment in VirnetX I. We find that it was. Each ground of
unpatentability that VirnetX appealed in VirnetX I relied
on RFC 2401. Even VirnetX conceded during oral argu-
ment that the printed publication issue was a threshold
issue in VirnetX I.           See Oral Arg. at 5:04,
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=
2017-2490.mp3 (“[T]he finding that RFC 2401 was a
printed publication was indeed a threshold issue [in
VirnetX I] so I think, under that analysis, the court would
have addressed that question.” (emphasis added)). Indeed,
in three of the seven final written decisions appealed in
VirnetX I, the only issue raised was whether RFC 2401
was a printed publication. Accordingly, by affirming all
seven of the Board’s decisions, this court in VirnetX I
VIRNETX INC. v. APPLE, INC.                                 5

necessarily found that RFC 2401 was a printed publica-
tion. Therefore, VirnetX is collaterally estopped by our
Rule 36 judgment in VirnetX I from relitigating the issue
in this appeal.
    Even if VirnetX were not collaterally estopped, we
would affirm the Board’s conclusion that RFC 2401 was a
printed publication as of November 1998. This is because,
as VirnetX admits, “this appeal presents a similar record
with respect to RFC 2401’s status as a printed publication
as [VirnetX I],” and thus, if we reached the merits, we
would be “likely to reach the same conclusion in this
appeal as [we] did in [VirnetX I].” VirnetX’s Resp. to
Apple’s Notice, ECF No. 43.
    VirnetX next argues that RFC 2401’s status as a
printed publication is not dispositive of all issues raised in
this appeal because 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. To demonstrate that it pre-
served this issue, VirnetX points 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 para-
graph, VirnetX asks 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.” Appellant’s Br. at 54.
This paragraph explicitly raises the specific question later
decided in Oil States of whether the “IPR process violates
the Constitution by extinguishing private property rights
through a non-Article III forum without a jury.” Appel-
lant’s Br. at 54 (internal quotations omitted). And, under
a very generous reading, the paragraph also arguably
raises a general challenge under the Seventh Amendment.
But, we find that it in no way provides any arguments
specifically preserving the retroactivity issue.
6                                  VIRNETX INC. v. APPLE, INC.

    Indeed, VirnetX conceded at oral argument that it
“didn’t specifically brief” the retroactivity issue. See Oral
Arg.                          at                       18:01,
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
17-2490.mp3. It attempts to justify this failure by argu-
ing that our precedent prior to Oil States generally upheld
the constitutionality of inter partes review proceedings
and thus, foreclosed the argument. But we have never
decided this issue, and, even if we had, VirnetX never
sought to provide supplemental briefing or to otherwise
develop this argument following the Supreme Court’s
decision in Oil States. Rather, VirnetX insists it pre-
served this issue by way of a single, generic paragraph. It
did so only after Apple filed its notice of supplemental
authority identifying our Rule 36 judgment in VirnetX I,
which VirnetX acknowledges significantly weakens an
otherwise dispositive issue in this appeal. 2 All of this
suggests that VirnetX’s insistence is likely less than
sincere. Thus, we conclude that VirnetX did not preserve
the issue of whether inter partes review procedures apply
retroactively to patents that were filed before Congress
enacted the AIA and that, therefore, our conclusion that
VirnetX is collaterally estopped from raising the printed
publication issue resolves all other issues in this appeal. 3

    2    Despite acknowledging this, VirnetX chose to pur-
sue this appeal through oral argument. But on November
28, 2018, VirnetX filed an opposed motion to dismiss this
appeal in which it expressly admitted for the first time
that our Rule 36 judgment in VirnetX I has collateral
estoppel effect in this case and any future cases in which
this issue is raised. We denied the motion.
    3    The other issues VirnetX raises on appeal are is-
sues appealed from the 332 Board Decision. Our finding
of collateral estoppel disposes of those issues even though
VIRNETX INC. v. APPLE, INC.                               7

                         CONCLUSION
    Because VirnetX is collaterally estopped from raising
a threshold question in this case and because that issue is
dispositive of all issues preserved on appeal, we affirm the
Board’s conclusion that claims 1–11, 14–25, and 28–30 of
the ’696 patent were unpatentable as obvious.
                         AFFIRMED
                              COSTS
    Costs to Appellee.

they do not relate to RFC 2401 or to its status as a print-
ed publication. This is because, in the 331 Board Deci-
sion, the Board found unpatentable every claim that it
found unpatentable in the 332 Board Decision. And, the
only issue VirnetX appeals from the 331 Board Decision is
the printed publication issue, which we now uphold.
Because we affirm the Board’s ultimate conclusion in the
331 Board Decision that the challenged claims are un-
patentable as obvious, we need not address any additional
issues VirnetX raises in its appeal from the 332 Board
Decision regarding those same claims.