Virnetx Appeal Estoppel and PTAB

Case: 17-1591 Document: 65 Page: 1 Filed: 10/03/2017
2017-1591, 2017-1592, 2017-1593
United States Court of Appeals

for the Federal Circuit
VIRNETX INC.,
Appellant,
v.
APPLE INC., CISCO SYSTEMS, INC.,
Appellees.
Appeals from the United States Patent and Trademark Office, Patent Trial and
Appeal Board in Nos.95/001,788, 95/001,789, and 95/001,856
REPLY BRIEF OF APPELLANT VIRNETX INC.
NAVEEN MODI
JOSEPH E. PALYS
IGOR V. TIMOFEYEV
DANIEL ZEILBERGER
PAUL HASTINGS LLP
875 15th Street, NW
Washington, DC 20005
(202) 551-1700
naveenmodi@paulhastings.com
josephpalys@paulhastings.com
igortimofeyev@paulhastings.com
danielzeilberger@paulhastings.com
October 3, 2017 Counsel for Appellant VirnetX Inc.
UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
VirnetX Inc. v. Apple Inc., Cisco Systems, Inc.

Case Nos. 2017-1591, -1592, -1593
CERTIFICATE OF INTEREST
Counsel for Appellant VirnetX Inc. certifies the following:
1. Full name of party 2. Name of real party in 3. Parent corporations and

represented by me interest represented by me publicly held companies
that own 10% or more of
stock in the party
VirnetX Inc. VirnetX Inc. VirnetX Inc. is a wholly

owned subsidiary of
VirnetX Holding
Corporation.
4. The names of all law firms and the partners or associates that appeared for
the party now represented by me in the agency or are expected to appear in this
court (and who have not or will not enter an appearance in this case) are:
Paul Hastings LLP:

Chetan R. Bansal
Finnegan, Henderson, Farabow, Garrett, & Dunner, LLP:

Jason Stach
McDermott Will & Emery LLP:

Toby H. Kusmer, Matthew E. Leno, Hasan M. Rashid
5. The title and number of any case known to counsel to be pending in this or
any other court or agency that will directly affect or be directly affected by this
court’s decision in the pending appeal. See Fed. Cir. R. 47.4(a)(5) and 47.5(b).
VirnetX Inc. v. Black Swamp IP, LLC, Nos. 2017-2593, -2594

(Fed. Cir.) (appeals docketed on September 25, 2017);
VirnetX, Inc. v. Apple Inc. (formerly VirnetX, Inc. v. Cisco Sys., Inc.),
No. 6:10-cv-00417 (E.D. Tex.)
(final judgment entered on September 29, 2017);
VirnetX Inc. v. Apple Inc., No. 12-cv-00855 (E.D. Tex.);
VirnetX Inc. v. Apple Inc., No. 13-cv-00211 (E.D. Tex.);
Inter Partes Reexamination, Control No. 95/001,851.
Date: October 3, 2017 /s/Naveen Modi

Naveen Modi
Counsel for Appellant VirnetX Inc.
TABLE OF CONTENTS
Page
REPLY BRIEF ...........................................................................................................1

I. THE BOARD’S REFUSAL TO TERMINATE THE
REEXAMINATION PROCEEDINGS DEFIES 35 U.S.C. § 317(b). ............2
A. A Decision of this Court on a Claim’s Validity Constitutes a

“Final Decision” Under Section 317(b). ...............................................3
1. Statutory Text and this Court’s Precedent Foreclose

Apple’s Construction. .................................................................3
2. Apple’s Construction Contravenes Section 317(b)’s

Purpose, Traditional Estoppel Principles, and
Constitutional Considerations. ....................................................7
B. Bettcher and Fresenius Do Not Establish That the Mere

Prospect of Supreme Court Review—No Matter How
Remote—Renders a Decision Non-Final. ...........................................11
C. Deference to the PTO Is Improper. .....................................................16

II. THE BOARD FAILED TO ADDRESS ADEQUATELY THE
CLAIM CONSTRUCTION OF THE “INDICATION”
LIMITATION. ...............................................................................................19
III. THE BOARD IMPROPERLY SHIFTED THE BURDEN OF

PROVING PATENTABILITY ONTO VIRNETX IN THE 788 AND
789 PROCEEDINGS. ....................................................................................22
A. The Board Failed To Make Adequate Findings, and

Impermissibly Shifted the Burden, with Respect to the
“Indicating” Limitation. ......................................................................24
B. The Board Impermissibly Shifted the Burden with Respect to

the “Connectable” Limitation..............................................................25
C. The Board Impermissibly Shifted the Burden with Respect to

the “Authenticate” Limitation. ............................................................26
i
TABLE OF CONTENTS
(continued)
Page
IV. THE BOARD FAILED TO ADDRESS VIRNETX’S ARGUMENTS
REGARDING CLAIM 47 OF THE ’211 PATENT IN THE 856
PROCEEDING. .............................................................................................27
V. THE BOARD’S FINDINGS REGARDING THE “INDICATING”

AND “AUTHENTICATION” LIMITATIONS INTRODUCED
IMPROPER NEW ARGUMENTS AND LACK SUBSTANTIAL
EVIDENCE. ..................................................................................................29
A. The Board Erred in the 856 Proceeding in Finding that

Lendenmann Disclosed the “Indicating” Limitation. .........................29
1. The Board’s Finding Regarding Dependent Claim 48 Is
Not Applicable to Independent Claim 36. ................................30
2. The Board Impermissibly Introduced a New Ground of

Rejection. ..................................................................................31
a. The Board Introduced a New Argument as to How

Lendenmann’s Returning a Network Address
Satisfies the “Indicating” Limitation. .............................31
b. The Board Introduced a New Argument as to How

Lendenmann’s ACLs Satisfy the “Indicating”
Limitation. ......................................................................32
3. The Board’s Findings Regarding Lendenmann and the

“Indicating” Limitation Lack Substantial Evidence. ................34
a. Lendenmann’s Returning of a Network Address

Does Not Satisfy the “Indicating” Limitation. ...............34
b. Lendenmann’s ACLs Do Not Satisfy the

“Indicating” Limitation...................................................34
B. The Board Erred in the 788 and 789 Proceedings in Finding that
Provino Discloses the Claimed “Authentication” Limitation. ............36
ii
TABLE OF CONTENTS
(continued)
Page
VI. VIRNETX PRESERVED THE ISSUE THE SUPREME COURT
WILL CONSIDER IN OIL STATES ENERGY SERVICES FOR
REVIEW. .......................................................................................................38
CONCLUSION ........................................................................................................39
iii
TABLE OF AUTHORITIES
Page(s)
Cases
In re Abbott Diabetes Care Inc.,
696 F.3d 1142 (Fed. Cir. 2012) ..........................................................................21
Adams Fruit Co. v. Barrett,

494 U.S. 638 (1990) ............................................................................................17
In re Affinity Labs of Tex., LLC,

856 F.3d 902 (Fed. Cir. 2017) .............................................................................. 7
Astrazeneca AB v. Mut. Pharm. Co.,

384 F.3d 1333 (Fed. Cir. 2004) ..........................................................................21
B & B Hardware, Inc. v. Hargis Indus., Inc.,

135 S. Ct. 1293 (2015) ..........................................................................................7
Bettcher Industries, Inc. v. Bunzl USA, Inc.,

661 F.3d 629 (Fed. Cir. 2011) .....................................................................passim
In re Cree, Inc.,
818 F.3d 694 (Fed. Cir. 2016) ......................................................................24, 25
Chevron U.S.A. Inc. v. NRDC, Inc.,

467 U.S. 837 (1984) ............................................................................................16
CSR, PLC v. Skullcandy, Inc.,
594 F. App’x 672 (Fed. Cir. 2014) .....................................................................23
Encino Motorcars, LLC v. Navarro,

136 S. Ct. 2117 (2016) ........................................................................................19
Ethicon, Inc. v. Quigg,

849 F.2d 1422 (Fed. Cir. 1988) ..........................................................................18
Fairchild (Taiwan) Corp. v. Power Integrations, Inc.,

854 F.3d 1364 (Fed. Cir. 2017) ...................................................................passim
Fresenius USA, Inc. v. Baxter International, Inc.,
721 F.3d 1330 (Fed. Cir. 2013) ........................................................11, 13, 14, 18
iv
(continued)
Page(s)
Function Media, L.L.C. v. Google Inc.,
708 F.3d 1310 (Fed. Cir. 2013) ............................................................................ 6
Function Media, L.L.C. v. Kappos,

508 F. App’x 953 (Fed. Cir. 2013) ...........................................................3, 5, 6, 8
Gechter v. Davidson,
116 F.3d 1454 (Fed. Cir. 1997) ....................................................................22, 23
Gutierrez-Brizuela v. Lynch,
834 F.3d 1142 (10th Cir. 2016) ..........................................................................11
Hamilton-Brown Shoe Co. v. Wolf Bros. & Co.,

240 U.S. 251 (1916) ............................................................................................15
Hart Steel Co. v. R.R. Supply Co.,

244 U.S. 294 (1917) ..............................................................................................8
In re Hawkins,
486 F.2d 569 (C.C.P.A. 1973) ............................................................................18
Honeywell Int’l Inc. v. Mexichem Amanco Holding S.A. De C.V.,

865 F.3d 1348 (Fed. Cir. 2017) ..........................................................................33
Hughes Tool Co. v. Trans World Airlines,

409 U.S. 363 (1973) ..............................................................................................9
Icon Health & Fitness, Inc. v. Strava, Inc.,

849 F.3d 1034 (Fed. Cir. 2017) ....................................................................23, 25
In re Imes,
778 F.3d 1250 (Fed. Cir. 2015) ..........................................................................37
Impression Prods., Inc. v. Lexmark Int’l, Inc.,

137 S. Ct. 1523 (2017) ........................................................................................10
In re Jung,
637 F.3d 1356 (Fed. Cir. 2011) ..........................................................................23
Lebron v. Nat’l R.R. Passenger Corp.,

513 U.S. 374 (1995) ..............................................................................................7
v
(continued)
Page(s)
In re Lee,
277 F.3d 1338 (Fed. Cir. 2002) ..........................................................................25
In re Leithem,
661 F.3d 1316 (Fed. Cir. 2011) ....................................................................31, 32
Marrese v. Am. Academy of Orthopaedic Surgeons,

470 U.S. 373 (1985) ............................................................................................17
Mason v. Shinseki,
743 F.3d 1370 (Fed. Cir. 2014) ..........................................................................18
Mercer v. Theriot,
377 U.S. 152 (1964) ..............................................................................................9
Nautilus, Inc. v. Biosig Instruments, Inc.,

134 S. Ct. 2120 (2014) ........................................................................................10
Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc.,
843 F.3d 1315 (Fed. Cir. 2016) ............................................................................ 4
Power Integrations, Inc. v. Lee,

797 F.3d 1318 (Fed. Cir. 2015) ..........................................................................22
Rambus Inc. v. Rea,

731 F.3d 1248 (Fed. Cir. 2013) ..............................................................22, 23, 24
SAS Inst., Inc. v. ComplementSoft, LLC,

825 F.3d 1341 (Fed. Cir. 2016),
cert granted sub nom.
SAS Inst. Inc. v. Lee, 137 S. Ct. 2160 (2017) .....................................................10
Semtek Int’l Inc. v. Lockheed Martin Corp.,
531 U.S. 497 (2001) ............................................................................................17
Skidmore v. Swift & Co.,

323 U.S. 134 (1944) ............................................................................................16
Straus v. Am. Publishers’ Ass’n,

201 F. 306 (2d Cir. 1912) .....................................................................................8
vi
(continued)
Page(s)
Teva Pharms. USA, Inc. v. Sandoz, Inc.,
135 S. Ct. 831 (2015) ..........................................................................................10
United States v. Virginia,

518 U.S. 515 (1996) ..............................................................................................9
VirnetX, Inc. v. Cisco Sys., Inc.,

767 F.3d 1308 (Fed. Cir. 2014) ....................................................................1, 4, 9
Yee v. City of Escondido,

503 U.S. 519 (1992) ..............................................................................................7
Statutes
35 U.S.C.
§ 315(c) (2006) .............................................................................................12, 17
§ 316(a) (2006) ...................................................................................................18
§ 317(a) (2006) ...................................................................................................12
§ 317(b) (2006) ............................................................................................passim
Administrative Decisions
In re Campana,
No. 95/000,020 (P.T.O. Sept. 16, 2005) .............................................................19
Regulations
37 C.F.R.
§ 1.197.................................................................................................................18
§ 1.979.................................................................................................................18
§ 41.67(c)(1)(vii).................................................................................................28
54 Fed. Reg. 29548 (July 13, 1989) .........................................................................18
Other Authorities
18A Charles A. Wright, Arthur R. Miller & Edward H. Cooper,
Federal Practice and Procedure (2d ed. 2002)..............................................8, 14
vii
(continued)
Page(s)
Manual of Patent Examining Procedure § 2686.04.V.A ........................................17
Stephen M. Shapiro et al., Supreme Court Practice (10th ed. 2013) ..................6, 10
viii
REPLY BRIEF
Three years ago, this Court held that Apple Inc. (“Apple”) failed to prove
invalidity of the claims at issue in this appeal. VirnetX, Inc. v. Cisco Sys., Inc., 767
F.3d 1308, 1323-24 (Fed. Cir. 2014) (“Cisco”). Under the statutory estoppel
provision, 35 U.S.C. § 317(b) (2006), this Court’s decision should have ended
most of the inter partes reexaminations below. The Patent and Trademark Office
(“the PTO”), however, refused to terminate the reexaminations, in defiance of the
plain text of section 317(b) and this Court’s precedent. Apple attempts to side-step
that precedent, but to no avail. This Court should vindicate section 317(b)’s
purpose of preventing duplicative, harassing litigation, and ensure the preclusive
effect of its decisions.
Apple and Cisco Systems, Inc. (“Cisco”) fare no better in defending the
Patent Trial and Appeal Board’s (“the Board’s”) faulty unpatentability findings.
The Board improperly shifted the burden of proof, unaccountably overlooked or
misconstrued VirnetX Inc.’s (“VirnetX’s”) arguments, and impermissibly relied on
new grounds in rejecting the patent claims. The Board also applied defective claim
construction that ignored the patents’ specification, and misread the asserted
references. This Court should reverse the Board’s erroneous unpatentability
findings.
1
I. THE BOARD’S REFUSAL TO TERMINATE THE

REEXAMINATION PROCEEDINGS DEFIES 35 U.S.C. § 317(b).
The text of section 317(b) is straightforward: It bars the maintenance of an
inter partes reexamination once a court enters “a final decision ‘that the party has
not sustained its burden of proving the invalidity of any patent claim.’ ” Fairchild
(Taiwan) Corp. v. Power Integrations, Inc., 854 F.3d 1364, 1366 (Fed. Cir. 2017)
(quoting 35 U.S.C. § 317(b) (2006)) (emphasis added). By its terms, section
317(b) requires only a “final decision” on the issue of validity—not a final
judgment terminating the entire case. Thus, as this Court recently held, section
317(b) estoppel attaches where—as here—this Court affirms a district court
decision upholding a patent even if litigation continues over other issues.
Fairchild, 854 F.3d at 1365-66.
Apple attempts to engraft a further requirement onto section 317(b)—and
deems one of this Court’s decisions mistaken in the process. According to Apple,
section 317(b) requires not only a “final decision” of this Court, but an end to all
proceedings so there is no prospect—no matter how remote—of Supreme Court
review of the patent’s validity. Apple Br. 32-35, 38-41. But Apple does not
explain how a statute whose text requires only a “final decision,” on a single issue
(invalidity), can be read to require a final judgment on all issues. Apple does not
point to any material difference between this case and cases where this Court
applied section 317(b)’s estoppel. Nor does Apple explain why Congress would
2
have wished to maximize the time during which this Court’s final determination of
a patent’s validity may be overturned by the PTO. And Apple does not dispute
that its position cannot be reconciled with background principles of issue
preclusion or constitutional avoidance. Instead, Apple invokes two cases that do
not purport to address the question here and do not support Apple’s novel theory.
A. A Decision of this Court on a Claim’s Validity Constitutes a

“Final Decision” Under Section 317(b).
1. Statutory Text and this Court’s Precedent Foreclose
Apple’s Construction.
Section 317(b) requires only a “final decision” on validity—not a final
judgment terminating the entire case. “By its terms, § 317(b) … concern[s] a final
decision ‘that the party has not sustained its burden of proving the invalidity of any
patent claim.’ ” Fairchild, 854 F.3d at 1366 (quoting 35 U.S.C. § 317(b) (2006))
(emphasis added). Thus, in both Fairchild and Function Media, L.L.C. v. Kappos,
508 F. App’x 953 (Fed. Cir. 2013), this Court held that section 317(b) precluded a
third-party requester from maintaining a reexamination after it lost (or did not
pursue) an appeal of validity issues in a civil case. See VirnetX Br. 28-30. Neither
case involved the entry of a final judgment or the elimination of all prospect for
Supreme Court review.
Apple does not dispute that Fairchild and this case involve almost identical
facts. There, as here, a district court had found patents valid, this Court had
3
affirmed, and the challenger had not sought certiorari from this Court’s decision.
Compare Fairchild, 854 F.3d at 1365-66, with Cisco, 767 F.3d at 1323-24. There
as here, the Court left some issues to be addressed on remand, but none of those
issues could have affected the “now-final … validity determinations.” Fairchild,
854 F.3d at 1366; see also Cisco, 767 F.3d at 1323-24. In Fairchild, this Court
held that its final decision on validity precluded maintenance of the PTO
reexamination. 854 F.3d at 1365-66. That holding applies with equal force here.
Apple argues that in Fairchild the time for seeking certiorari “ha[d] passed,”
whereas Apple claims it can still seek certiorari on invalidity issues after the entry
of a “final judgment” in this case. Apple Br. 36. That does not distinguish
Fairchild. There, as here, this Court remanded the case for additional proceedings
after it upheld the decision on validity. See Power Integrations, Inc. v. Fairchild
Semiconductor Int’l, Inc., 843 F.3d 1315, 1340-42 (Fed. Cir. 2016); Fairchild, 854
F.3d at 1365. Consequently, in Fairchild, too, the third-party requester had
precisely the same opportunity to seek Supreme Court review (even of issues
raised in the previous appeal) following final judgment. See Apple Br. 34-35;
VirnetX Br. 32.
Apple responds that the Fairchild Court did not “consider” whether the
requester could “raise the relevant invalidity issue on certiorari from a subsequent
appeal.” Apple Br. 36. That amounts to saying that Fairchild was wrongly
4
decided. The mere fact that the Fairchild panel did not expressly reject an
argument does not mean this panel may reach the opposite result on an identical
legal issue and identical facts. Apple surmises that the Fairchild panel was
ignorant about the scope of the Supreme Court’s authority to review this Court’s
judgments. Yet, Apple itself declares it “manifest” that the Supreme Court may
“ ‘consider questions determined in earlier stages of the litigation,’ ” including prior
appeals, after final judgment. Apple Br. 34 (citation omitted). It is unlikely this
Court was unaware of that black-letter rule.
Apple’s effort to side-step Function Media fares no better. There, this Court
held that a party’s failure to appeal a district court decision upholding patent
validity rendered it “final” for purposes of section 317(b), even though the parties
were still litigating other issues. 508 F. App’x at 956. Apple’s unsuccessful appeal
on validity likewise renders the district court’s decision on that issue final here.
Apple urges that the failure to appeal in Function Media distinguishes it because
the Supreme Court will not review issues that have been waived. Apple Br. 37 &
n.11. The argument is implausible in the extreme (and not merely because waiver
itself is litigable in the Supreme Court). While the Supreme Court often chooses
not to pass upon issues not raised before the court of appeals, it has the power to
address any prior ruling in a case—including district court decisions that were
never appealed. See Stephen M. Shapiro et al., Supreme Court Practice § 2.3, at
5
84-85 (10th ed. 2013). Finality under section 317(b) cannot turn on whether this
Court (or the PTO) thinks the Supreme Court would find procedural or
jurisdictional impediments to its review.
Simply put, Function Media and Fairchild both teach that a decision on
validity becomes “final” when the challenger loses in district court and fails to
obtain relief in this Court (because it forgoes appellate review or loses on appeal).
See 508 F. App’x at 956; 854 F.3d at 1366. Neither case discussed whether some
aspect of their specific procedural posture—both included remands—might affect
potential Supreme Court review; that simply was not relevant to this Court’s
analysis. Indeed, the Court in Function Media observed that, “[r]egardless” of the
patent challenger’s “failure to appeal” the validity determination, it had “affirmed
the district court’s judgment in full and … adopted its claim constructions.” 508
F. App’x at 956. That eliminated any “argument for maintaining these claims in
the inter partes reexamination in light of the clear preclusion in … 35 U.S.C.
§ 317(b).” Id. The Court then gave the district-court decision preclusive effect
only three weeks after affirming—long before the period to seek certiorari had
expired. Compare Function Media, L.L.C. v. Google Inc., 708 F.3d 1310, 1326-27
(Fed. Cir. 2013) (affirming on February 13, 2013), with Function Media, 508
F. App’x at 955-56 (applying section 317(b) on March 7, 2013). That result cannot
be reconciled with Apple’s insistence that a decision is not final for section 317(b)
6
purposes unless there is no “prospect of future Supreme Court review.” Apple
Br. 36.
2. Apple’s Construction Contravenes Section 317(b)’s

Purpose, Traditional Estoppel Principles, and
Constitutional Considerations.
Apple’s position conflicts with the principles animating section 317(b).
Apple does not dispute that, under traditional principles, issue preclusion applies
once this Court issues a final decision even if the possibility of Supreme Court
review is not foreclosed. 1 Apple instead argues that Congress did not “codify
general principles of issue preclusion” in section 317(b). Apple Br. 38. But
nothing in section 317(b) suggests that Congress meant to create a sui generis type
of preclusion in defiance of general principles. Absent such an indication, it makes
sense to construe statutes to reflect well-known principles of preclusion. See B &
B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293, 1303 (2015). In fact, this
Court has looked to issue-preclusion principles in construing section 317(b). See
In re Affinity Labs of Tex., LLC, 856 F.3d 902, 905 (Fed. Cir. 2017).
Issue-preclusion principles are clear: Even an actual request for Supreme
Court review ordinarily “does not suspend the operation of the judgment as an
1
VirnetX did not forfeit this argument (Apple Br. 37-38). VirnetX argued
preclusion below at length; forfeiture and waiver applies to claims, not supporting
interpretive principles. Lebron v. Nat’l R.R. Passenger Corp., 513 U.S. 374, 378-
79 (1995); Yee v. City of Escondido, 503 U.S. 519, 534 (1992).
7
estoppel.” Straus v. Am. Publishers’ Ass’n, 201 F. 306, 310 (2d Cir. 1912). A
fortiori, the hypothetical possibility of a future request does not either. An
appellate decision resolving an issue ordinarily has preclusive effect even if one
can theorize the remote possibility of Supreme Court review “at some later stage.”
18A Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice
and Procedure § 4434 (2d ed. 2002). The Supreme Court itself has given an
appellate decision on validity preclusive effect even though it had granted
certiorari to review the validity issue. Hart Steel Co. v. R.R. Supply Co., 244 U.S.
294, 298-99 (1917).
Apple concedes that section 317(b) was designed to prevent duplicative
litigation. Apple Br. 40-41. But Apple’s position maximizes the opportunities for
duplicative litigation—the very thing that section 317(b) “exist[s] to prevent.”
Function Media, 508 F. App’x at 955. In Apple’s view, this Court’s decision
upholding a patent is not final until no “prospect of future Supreme Court review”
remains. Apple Br. 36. That means a party that loses a validity challenge in this
Court, and forgoes the immediate opportunity to seek further review, can maintain
parallel reexamination and civil proceedings up until the moment that nothing is
left to be done in the civil case but enter and enforce the judgment. It also means
that an interlocutory decision of this Court resolving invalidity issues would not be
entitled to preclusive effect even if a party seeks certiorari and the Supreme Court
8
denies review. (Despite the prior denial, the Supreme Court still could address that
question in reviewing a final judgment. See, e.g., United States v. Virginia, 518
U.S. 515, 526 (1996); Hughes Tool Co. v. Trans World Airlines, 409 U.S. 363, 365
n.1 (1973); Mercer v. Theriot, 377 U.S. 152, 153-54 (1964).) This case illustrates
the wastefulness of Apple’s proposed rule. The prospect of Supreme Court review
is always remote, and Apple does not argue that this Court’s fact-bound invalidity
holding in Cisco, 767 F.3d at 1323-24, presents a certworthy question. If the PTO
had applied section 317(b) to that decision (as it should have done), the duplicative
reexamination proceedings would have ended years ago.
Apple argues that Congress expected parallel proceedings up until Supreme
Court review is no longer available. Apple Br. 40-41. But Apple offers nothing to
support its view that Congress contemplated maximizing duplicative proceedings,
for years on end, even after this Court resolves validity on the merits, until the
remotest possibility of Supreme Court review evaporates. If Congress had
intended that result, it would have written section 317(b) to take effect following
the complete resolution of a civil case, after a final judgment becomes
unreviewable on direct appeal. Congress would not have written the provision to
take effect once there was a “decision” on the single issue of validity.
Apple responds that another rule would “create wasteful litigation” by
encouraging losing parties to seek premature, interlocutory review of this Court’s
9
decisions. Apple Br. 41. Not so. The interlocutory posture of a case is no
impediment to Supreme Court review if the petition in fact presents “some
important and clear-cut issue of law that is fundamental to the further conduct of
the case and that would otherwise qualify as a basis for certiorari.” Shapiro,
Supreme Court Practice § 4.18, at 283. The Supreme Court recently granted
review of a question arising from an inter partes review even though this Court
vacated some of the Board’s findings and remanded the case for a new
patentability analysis. See SAS Inst., Inc. v. ComplementSoft, LLC, 825 F.3d 1341,
1343, 1350-52 (Fed. Cir. 2016), cert granted sub nom. SAS Inst. Inc. v. Lee, 137 S.
Ct. 2160 (2017). Indeed, the Supreme Court routinely grants review of this
Court’s decisions where they present fundamental patent-law questions despite the
decision’s interlocutory posture. See, e.g., Impression Prods., Inc. v. Lexmark
Int’l, Inc., 137 S. Ct. 1523 (2017) (certiorari review of a decision on motions to
dismiss); Teva Pharms. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831 (2015) (certiorari
review of a decision affirming in part, reversing in part, and remanding); Nautilus,
Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120 (2014) (certiorari review of a
decision on motion for summary judgment on invalidity only). There is no reason
to believe that a losing party would forgo seeking certiorari, and opt instead for
years more of expensive litigation, if there is a realistic prospect of Supreme Court
review.
10
Finally, Apple ignores constitutional considerations. See VirnetX Br. 33-34.
The PTO’s claimed authority to invalidate a patent—even after a district court has
upheld its validity, even after this Court affirmed that judgment, and even after the
Supreme Court denies certiorari from an interlocutory appeal—permits the agency
to act “like some sort of super court of appeals.” Gutierrez-Brizuela v. Lynch, 834
F.3d 1142, 1150 (10th Cir. 2016) (Gorsuch, J., concurring). That raises serious
separation-of-powers concerns. Id. There is no reason to exacerbate them by
construing section 317(b) to maximize the PTO’s opportunity to revisit judicial
decisions.
B. Bettcher and Fresenius Do Not Establish That the Mere Prospect

of Supreme Court Review—No Matter How Remote—Renders a
Decision Non-Final.
Ignoring this Court’s actual section 317(b) precedents, section 317(b)’s
actual text, and general preclusion principles, Apple invokes two cases that do not
even address the issue here: Bettcher Industries, Inc. v. Bunzl USA, Inc., 661 F.3d
629 (Fed. Cir. 2011), and Fresenius USA, Inc. v. Baxter International, Inc., 721
F.3d 1330 (Fed. Cir. 2013). Neither decision supports Apple’s tortured reading of
section 317(b).
1. Apple construes Bettcher as holding that, for section 317(b), the
requirement that “all appeals” be “terminated” is not satisfied until the Supreme
Court can no longer review a case. Apple Br. 32-35, 41-42. Bettcher held no such
11
thing. It concerned whether, under a different estoppel provision, 35 U.S.C.
§ 315(c), the PTO’s ruling would have an immediate preclusive effect on civil
litigation “as soon as the examiner finished the reexamination and the Right of
Appeal Notice was sent to the patentee.” 661 F.3d at 636; see also id. at 642-43.
This Court refused to make unreviewed agency decisions immediately preclusive
on the judiciary, holding that “the estoppel provision of 35 U.S.C. § 315(c) applies
only after all appeal rights are exhausted, including appeals to this court.” Id. at
648 (emphasis added). The Court had no occasion to consider whether section
315(c) denies PTO rulings preclusive effect even after this Court upholds them
until such time as Supreme Court review becomes unavailable—much less whether
section 317(b) imposes that result.
The Court addressed section 317(b) only briefly. It contrasted that provision
with section 317(a), which “is a complete bar on new reexaminations until the
reexamination certificate is issued in the pending reexamination.” Id. at 646. The
“parallel” structure of those provisions, the Court observed, suggests that section
317(b) “applies only when reexamination and all appeals have terminated.” Id.
Once again, the Court had no occasion to address what is meant by the termination
of all appeals. It rejected only the argument that section 317(b) somehow
demonstrated that section 315(c) applied as soon as a reexamination finishes. See
id. at 643. The Court’s focus on the term “appeals”—a different procedural
12
mechanism than a writ of certiorari—confirms as much. 2
Fairchild dispels any notion that Bettcher interpreted section 317(b) to
require no possibility for Supreme Court review. The Fairchild Court
acknowledged Bettcher’s holding that section 317(b) only “applies when ‘all
appeals have terminated.’” 854 F.3d at 1365 (quoting Bettcher, 661 F.3d at 646).
But, the Court stated, that was “precisely the situation” before it: The “district
court entered judgment,” “this court affirmed,” and “the time to petition for a writ
of certiorari has passed.” Id. at 1365-66 (emphasis added). Nothing more was
required: This Court’s “decision” on invalidity was final. Bettcher’s requirement
that “all appeals” from the district court’s validity judgment be “terminated” does
not require proof there could be no Supreme Court review following remand
proceedings.
2. Apple alternatively invokes Fresenius. Apple Br. 38-41. Apple
concedes that “Fresenius did not construe § 317(b).” Id. at 39. Fresenius
examined whether the district court judgment in an infringement litigation is
“sufficiently final” to be “immune” from a patent’s intervening cancellation. 721
F.3d at 1341-42; see also Apple Br. 39 (recognizing Fresenius concerned the
2
The Court noted that its interpretation of section 317(b) was consistent with the
PTO’s Manual of Patent Examining Procedure (“MPEP”). Bettcher, 661 F.3d at
646. But it saw no need to defer to the MPEP. Id. And in any event, the MPEP is
not contrary to VirnetX’s position. See infra at 17.
13
“giving effect to the PTO’s cancellation of claims”). It did not address the very
different question presented in Fairchild and Function Media as to what counts as
a “final decision” on a discrete issue (validity) for purposes of section 317(b). A
decision that did not even purport to construe that provision cannot override this
Court’s holdings in Fairchild and Function Media. See VirnetX Br. 36-38.
Apple reads Fresenius as suggesting that preclusion principles cannot inform
section 317(b)’s meaning. Apple Br. 39-40. But the cited passage from Fresenius
merely states that “‘[d]efinitions of finality’” for purposes of the final-judgment
rule “‘cannot automatically be carried over … to preclusion problems.’” 721 F.3d
at 1340-41 (quoting 18A Wright & Miller, Federal Practice and Procedure
§ 4432). This Court did not reject the idea that traditional issue-preclusion
principles can inform an issue-preclusion statute. Nor does that passage suggest
that an intermediate appellate decision cannot have preclusive effect. To the
contrary, the treatise cited in Fresenius explains that the preclusive effect of an
appellate decision extends “to the matters actually resolved by the appellate court.”
18A Wright & Miller, Federal Practice and Procedure § 4432; see also id. n.24
(citing issue-preclusion cases).
According to Apple, “Fairchild suggests” that Fresenius precludes the
application of section 317(b) where the appellate decision leaves some “issues to
be resolved on remand,” unless those issues are “entirely unrelated to the patent at
14
issue.” Apple Br. 40. But Fairchild does not mention Fresenius, even though the
third-party requester in Fairchild pressed the very argument Apple presses here.
See No. 17-1002, Docket No. 28 at 3-5; see also VirnetX Br. 38. Nor does Apple
explain why its rule makes sense. A losing party can seek Supreme Court review
of any interlocutory appellate decision after the entry of a final judgment, see
supra at 4-5, 10—not just decisions that are somehow related to the issues resolved
on remand from an interlocutory appeal. See, e.g., Hamilton-Brown Shoe Co. v.
Wolf Bros. & Co., 240 U.S. 251, 253-59 (1916) (reviewing, after a second appeal,
the validity of a trademark, even though the trademark infringement claim had
been conclusively resolved in the first appeal).
Apple’s attempted distinction ignores section 317(b)’s objective. The
estoppel provision is designed to prevent re-litigation, through inter partes
reexamination, of federal court decisions on a patent claim’s validity. As Fairchild
emphasized, “[b]y its terms, § 317(b) is concerned with a final decision ‘that the
party has not sustained its burden of proving the invalidity of the patent claim.’”
854 F.3d at 1366 (citation omitted) (emphasis added). Remand proceedings in the
litigation concern infringement and damages, not validity. Just as in Fairchild,
Apple “does not suggest, nor is there any reason to believe, that any unresolved
issue on remand would have any effect on the now-final [’504 and ’211] patent
validity determinations.” Id.
15
Ultimately, Apple rests its argument not on section 317(b)’s text, or even
decisions of this Court applying that provision, but on extrapolations from the
language used in judicial decisions that were not ruling on section 317(b)’s scope.
There is a reason for that: Section 317(b)’s text, traditional preclusion principles,
the rules of statutory construction, and this Court’s precedents point decisively
against Apple’s position. Section 317(b) must be applied, not evaded. 3
C. Deference to the PTO Is Improper.

Apple urges (at 42-45) deference to the PTO. But neither Chevron U.S.A.
Inc. v. NRDC, Inc., 467 U.S. 837 (1984), nor Skidmore v. Swift & Co., 323 U.S.
134 (1944), deference is appropriate. For one thing, section 317(b) is “clear.”
Bettcher, 661 F.3d at 646. Its text, structure, and history, as well as traditional
estoppel principles, foreclose deference. VirnetX Br. 28-34; supra at 3-11. Apple
points to nothing in section 317(b)’s text suggesting Congress authorized the PTO
to create a unique estoppel rule that applies only when there is no possibility of
Supreme Court review.
Deferring to the PTO’s interpretation would be inappropriate, moreover,
because section 317(b) concerns the preclusive effect of federal court decisions on
matters reviewed and reviewable in federal court. VirnetX Br. 35-36. The
3
Apple does not contest that section 317(b)’s second requirement is satisfied here
because the reexamination proceedings were based on issues that Apple “raised or
could have raised” in district court. See VirnetX Br. 38-40.
16
preclusive effect of a court judgment is determined by the court that issued it. See
Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 507 (2001); Marrese v.
Am. Academy of Orthopaedic Surgeons, 470 U.S. 373, 385 (1985). The preclusive
effect of this Court’s decision on the PTO is thus a matter for this Court to
decide—not the PTO. Adams Fruit Co. v. Barrett, 494 U.S. 638, 649-50 (1990).
Apple argues (at 43) that Bettcher holds otherwise. But that decision
concerned whether a PTO decision upholding the validity of a patent is entitled to
preclusive effect under section 315(c) as soon as the patent examiner issues a Right
of Appeal Notice or only at some later stage. 661 F.3d at 642-43; supra at 11-12.
Bettcher did not address the preclusive effect of a judicial decision of this Court on
the propriety of agency proceedings.
Apple, moreover, misreads even the PTO’s pronouncements. Apple argues
that the MPEP interprets section 317(b) to bar estoppel until the time for seeking
Supreme Court review expires, even after remand proceedings. Apple Br. 42-43.
But none of the quotations Apple plucks from the MPEP mentions the Supreme
Court or certiorari. Apple’s leading example (at 42) says a decision is final after
the time for seeking “reconsideration” of a “Federal Circuit” decision passes.
MPEP § 2686.04.V.A. And the PTO’s regulations cut against Apple. The PTO’s
Rules of Practice in Patent Cases state that “[a]n appeal to the U.S. Court of
Appeals for the Federal Circuit, whether from a decision of the Board or a
17
judgment in a civil action,” is complete “when the mandate is issued by the Court.”
37 C.F.R. § 1.197(b) (emphasis added); see also 54 Fed. Reg. 29548, 29551-52
(July 13, 1989) (enacting the rule). So, too, does the regulation interpreting pre-
AIA section 316(a), 37 C.F.R. § 1.979—which permits the PTO to issue a
certificate of cancellation “only after all appeals have terminated,” Bettcher, 661
F.3d at 644-45. See 37 C.F.R. § 1.979(b) (“appeal [to this Court] is considered
terminated when the mandate is issued by the Court”). It makes no sense to read
PTO regulations as permitting the PTO to cancel a patent based on its own rulings
at that point, but to require more before an estoppel from judicial decisions
attaches.4
In Apple’s view, the PTO would have the power to issue a certificate of
cancellation as soon as this Court’s mandate issues, even before the 90-day period
for seeking Supreme Court review of this Court’s ruling has expired. That would
bar further civil litigation. See Fresenius, 721 F.3d at 1332. But this Court’s
decisions on invalidity would have no preclusive effect on the PTO even after the
time for seeking that review has lapsed—indeed not until the entire litigation runs
4
To the extent there is any inconsistency between the MPEP and PTO regulations
promulgated through notice and comment, the MPEP is “not controlling.” In re
Hawkins, 486 F.2d 569, 572 (C.C.P.A. 1973); see also Ethicon, Inc. v. Quigg, 849
F.2d 1422, 1425 (Fed. Cir. 1988) (“[t]he MPEP … does not have the force of
law”). Nor can the PTO reinterpret its regulations inconsistently with the
regulations themselves. Mason v. Shinseki, 743 F.3d 1370, 1375 (Fed. Cir. 2014).
18
its course. Apple’s interpretation would destroy the symmetry of the inter partes
reexamination estoppel provisions, which confer no greater preclusive effect on the
PTO’s decisions than a court’s.
Apple defends (at 45) the PTO’s position on finality as “[ ]consistent.” But
nowhere does it identify anything from the PTO attempting to reconcile the
agency’s varying statements on when an appeal ends. See supra at 17-18. Nor
does it identify anything reconciling the PTO’s putative position here with its
statements in In re Campana, No. 95/000,020 (P.T.O. Sept. 16, 2005), which
evaluated finality of this Court’s decision based on its potential to “alter” the
district court’s “original decision,” rather than on the possibility for certiorari. Id.
at 7, 8; see also VirnetX Br. 36. (Apple merely notes (at 45 n.12) that it cited
Campana for a different purpose than VirnetX.) The PTO has not only failed to
establish a consistent construction; it has never “provide[d] a reasoned explanation
for [its] chang[ing]” assertions, much less “show[n] that there are good reasons”
for its choices. Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2125-26
(2016). No deference under any standard is warranted.
II. THE BOARD FAILED TO ADDRESS ADEQUATELY THE CLAIM

CONSTRUCTION OF THE “INDICATION” LIMITATION.
Indicative of the Board’s confusing claim construction analysis, Cisco and
Apple themselves disagree over what the Board concluded the “indication”
limitation meant. According to Apple (at 46-47), the Board adopted the
19
Examiner’s interpretation of indication, “a visible message or signal to a user that
the DNS system supports establishing a secure communication link.” Appx1227.
Cisco, by contrast, contends that “there is no such requirement recited in the
claim.” Cisco Br. 43. As this disagreement reveals, it is impossible to discern
what exactly the Board intended. What is certain, however, is that the Board did
not address VirnetX’s claim construction.5
Cisco asserts that “the Board dedicated some four pages” to addressing
VirnetX’s “conventional v. non-conventional argument.” Cisco Br. 25 (citing
Appx77-80). Cisco, however, can point to only a single sentence in the 856
decision where the Board even mentioned (but did not consider) the
specification—which formed the basis of VirnetX’s disclaimer argument. Cisco
Br. 25 (quoting Appx79). And that passage only refuted a non-responsive straw
man—the ability of “nefarious listeners” to “intercept[] the DNS REQ and DNS
RESP packets.” Appx79; see also VirnetX Br. 49. Cisco points to nothing in the
Board’s decision that actually considered VirnetX’s disclaimer argument—that the
specification clearly disavows DNS systems that perform only “conventional”
functions.
5
Cisco and Apple argue that VirnetX did not challenge the asserted references
under its own construction. Cisco Br. 27; Apple Br. 52. That is flatly incorrect.
VirnetX made these arguments to the Board (Appx1375-1380; Appx2920-2926;
Appx4347-4353), and reiterated them on appeal (VirnetX Br. 42, 59-63).
20
Apple likewise asserts that the Board provided “multiple reasons” for
rejecting VirnetX’s disclaimer argument. Apple Br. 47. None of these “reasons,”
however, addresses VirnetX’s argument. For instance, Apple cites no legal
authority for the proposition that a disclaimer requires an “explicit definition” in
the specification (Apple Br. 47)—indeed, if the Board did apply that standard, that
would be legal error. See In re Abbott Diabetes Care Inc., 696 F.3d 1142, 1149
(Fed. Cir. 2012); Astrazeneca AB v. Mut. Pharm. Co., 384 F.3d 1333, 1339-40
(Fed. Cir. 2004). Apple’s emphasis (at 47) on the Board’s observation that not all
DNS systems “perform more than … conventional functions,” is irrelevant.
VirnetX did not argue that all DNS systems perform more than conventional
functions, but rather that the specification criticizes and disclaims DNS systems
that perform no more than conventional functions. Apple’s argument (at 47) that
the claims are not “limited to the eight allegedly ‘non-conventional’ features …
identified by VirnetX” is also off-base. VirnetX did not argue that the claims were
limited to eight non-conventional features. See Appx1348-1355; Appx2892-2899;
Appx4333-4339.6
Because the Board failed to adequately evaluate VirnetX’s claim
6
Apple makes much of the specification’s discussion of embodiments that
implement conventional DNS functions in addition to non-conventional functions.
Apple Br. 49-50. VirnetX’s argument below, however, was that a DNS system
that performs no more than conventional DNS functions is disclaimed. Appx1349-
1351; Appx2893-2895; Appx4334-4337.
21
construction argument, there is an “inadequate predicate upon which to evaluate
[the Board’s] decision to reject [the claims].” Power Integrations, Inc. v. Lee, 797
F.3d 1318, 1325 (Fed. Cir. 2015); see also VirnetX Br. 49. As VirnetX explained,
moreover, the Board’s putative construction cannot be sustained on the merits.
VirnetX Br. 50-53. Cisco’s and Apple’s response arguments on the merits of
VirnetX’s construction only further demonstrate the deficiency of the Board’s
analysis. Cisco never cites the Board’s 856 decision and Apple cites the 788 and
789 decisions only once (at 48, for the self-evident proposition that the claims do
not “expressly require” VirnetX’s disclaimer). See Cisco Br. 27-33; Apple Br. 47-
52. The Board’s unpatentability findings in all three proceedings are predicated on
its erroneous claim construction analysis; reversal, or at least vacatur, is required.
III. THE BOARD IMPROPERLY SHIFTED THE BURDEN OF

PROVING PATENTABILITY ONTO VIRNETX IN THE 788 AND
789 PROCEEDINGS.
In addressing three key limitations of the ’504 and ’211 patents, the Board
“erroneously placed the burden on [VirnetX] to prove that its claims were not
obvious.” Rambus Inc. v. Rea, 731 F.3d 1248, 1255 (Fed. Cir. 2013). The Board
compounded its error by failing to set out the bases for its unpatentability holdings,
with “specific fact findings for each contested limitation and satisfactory
explanations for such findings.” Gechter v. Davidson, 116 F.3d 1454, 1460 (Fed.
Cir. 1997).
22
Apple’s main defense of the Board’s faulty decisions is that, “as an appellate
body,” the Board need not make its own findings but can simply “agree with the
Examiner’s findings that the claims are unpatentable.” Apple Br. 53-54 & n.13.
Apple misses the point. The question is why did the Board agree with the
Examiner—if the Board did so because VirnetX purportedly did not meet a burden
to prove nonobviousness of its claims, that would be improper. Rambus, 731 F.3d
at 1255; see also In re Jung, 637 F.3d 1356, 1365-66 (Fed. Cir. 2011) (while “the
applicant must identify to the Board what the examiner did wrong, … the examiner
retains the burden to show invalidity”). Contrary to Apple’s suggestion (at 53 &
n.13), this rule applies fully in inter partes reexamination proceedings. Icon
Health & Fitness, Inc. v. Strava, Inc., 849 F.3d 1034, 1046-47 (Fed. Cir. 2017);
CSR, PLC v. Skullcandy, Inc., 594 F. App’x 672, 678 (Fed. Cir. 2014) (applying
Gechter, 116 F.3d at 1457, 1460).
Apple (in a footnote) tries to confine Rambus to situations where “‘the
Board made its own findings that ‘differed from those of the examiner.’” Apple
Br. 54 n.14 (quoting Rambus, 731 F.3d at 1254). This Court’s decision was not so
limited. In Rambus, this Court found that “the Board committed multiple errors”
(burden shifting, new fact-finding, failure to properly consider record evidence),
and addressed each error separately. 731 F.3d at 1255-58. The Court’s holding
that the Board committed impermissible burden-shifting did not depend on its
23
separate holding that the Board erred “when it supplied its own reasons” for
unpatentability that differed from the Examiner’s. Id. at 1255-56.7
This is not a case where the Board carefully considered VirnetX’s arguments
but “agreed with the examiner’s reasoning” and expressly “incorporate[ed] … the
examiner’s answer into its opinion.” In re Cree, Inc., 818 F.3d 694, 698 (Fed. Cir.
2016). Here, the Board failed to address VirnetX’s arguments regarding the
Examiner’s rejections, failed to adequately explain its own conclusions, and
instead required VirnetX to “demonstrate sufficiently” that the prior art did not
render the claims unpatentable. See VirnetX Br. 40-46 & n.8.
A. The Board Failed To Make Adequate Findings, and

Impermissibly Shifted the Burden, with Respect to the
“Indicating” Limitation.
Apple’s lengthy response as to the “indicating” limitation boils down to one
argument: the Board did not need to consider the merits of VirnetX’s arguments,
and so there is no improper burden shifting, because VirnetX’s arguments “were
divorced from the claim language.” Apple Br. 56. Apple misunderstands the
Board’s responsibility. “[T]he Board must not only assure that the requisite
findings are made, based on the evidence of record, but must also explain the
reasoning by which the findings are deemed to support the agency’s conclusion.”
7
Moreover, with respect to the “authenticate” limitation of claims 5, 23, and 47,
the Board also relied on an improper (and unsupported) new argument. See
VirnetX Br. 45; infra at 26, 36-37.
24
In re Lee, 277 F.3d 1338, 1344 (Fed. Cir. 2002).
Here, particularly in view of the Board’s tortured explanation of the meaning
of the “indicating” limitation (on which Apple and Cisco themselves cannot agree,
see supra at 19-20), the Board failed to make the requisite findings regarding the
“indicating” limitation. In re Cree, 818 F.3d at 698. In essence, the Board said
that whatever the “indicating” limitation means, VirnetX did not do enough to
establish patentability. An affirmance of this faulty decision would be antithetical
to the Board’s responsibility as an administrative agency to “explain why [it]
accepts the prevailing argument.” Icon, 849 F.3d at 1046 (internal quotation marks
and citation omitted).
B. The Board Impermissibly Shifted the Burden with Respect to the

“Connectable” Limitation.
The Board, citing no evidence, unaccountably dismissed VirnetX’s
argument that nameserver 17 never interacts with any component of Provino’s
VPN 15, and therefore is not “connectable” to a VPN. See VirnetX Br. 44.
Apple argues that this challenge “is moot” because the Board’s finding
rested on two alternative Provino components—firewall 30 and nameserver 32.
Apple Br. 58-59. But the Board, in discussing the “connectable” limitation, made
only a passing reference to what “[o]ne of skill in the art would have understood”
regarding firewall 30 and nameserver 32, and cited no record evidence. Appx37;
25
Appx61. 8 The Board’s finding regarding the “connectable” limitation was not
based on this cursory unexplained reference to Provino’s two other components
(which would have been insufficient to support the finding in any event). See
Appx37-38; Appx61-62.
Apple also contends that the Board “separately explained why
nameserver 17” satisfied the “connectable” limitation. Apple Br. 59. It did not.
The Board’s decision only faulted VirnetX for not proving that the claims required
nameserver 17 to “interact with” the VPN, instead of making a finding as to why
nameserver 17 is “connectable.” Appx37; Appx62. That was improper burden-
shifting.
C. The Board Impermissibly Shifted the Burden with Respect to the

“Authenticate” Limitation.
The Board improperly placed the burden on VirnetX with respect to the
“authenticating” limitation, and found that limitation met solely based on a new
(and unsupported) argument that “authenticating” is a necessary precursor to
“authorizing.” See VirnetX Br. 45.
Apple incorrectly asserts that “VirnetX did not dispute the Examiner’s
finding that Provino discloses a system that authorizes the requesting device
8
Apple, by contrast, cites Provino, see Apple Br. 58 (citing Appx6218-6219 (2:66-
3:1))—evidence not mentioned or relied upon by the Board. See Appx36-38;
Appx61-62.
26
(device 12(m)) prior to the creation of a secure tunnel.” Apple Br. 60. VirnetX
challenged the Examiner’s finding because it applies an inconsistent mapping
(query to firewall 30 for the independent claims, query to nameserver 32 for the
dependent claims). See infra at 37-38. VirnetX also challenged the examiner’s
finding of unpatentability regarding claims 5, 23, and 47 due to the distinct
meanings of “authentication” (claimed) and “authorization” (in Provino), based on
undisputed expert testimony. See Appx35 (citing Appx4677 (¶ 39)); Appx59
(same); VirnetX Br. 45.
Instead of addressing VirnetX’s challenge, the Board faulted VirnetX for not
“demonstrat[ing] a sufficient distinction between ‘authenticating’ and
‘authorizing.’” Appx35; Appx59. That, too, was improper burden-shifting.
IV. THE BOARD FAILED TO ADDRESS VIRNETX’S ARGUMENTS

REGARDING CLAIM 47 OF THE ’211 PATENT IN THE 856
PROCEEDING.
Cisco does not dispute that the Board ignored VirnetX’s arguments that
(1) the ACLs in Lendenmann the Examiner relied on to address claim 47 are a
functionality of the DCE Security Service, rather than the CDS alleged to
correspond to the claimed “domain name service system,” and (2) while the
Examiner had relied on the “RPC model of communication” to address claim 47,
in Lendenmann the CDS does not use the RPC model of communication. VirnetX
Br. 46. Instead, Cisco (at 21-23) urges waiver based on 37 C.F.R.
27
§ 41.67(c)(1)(vii).
Cisco misunderstands section 41.67(c)(1)(vii). That provision applies where
a party appealing to the Board fails to “separately argue claims which appellant has
grouped.” 37 C.F.R. § 41.67(c)(1)(vii). Thus, if a patent owner groups two claims
together (e.g., an independent claim and a dependent claim), and only presents
arguments for one of the claims (e.g., the independent claim), the patent owner
waives “any argument that the Board must consider the patentability of” the other
claim (e.g., the dependent claim). This rule makes sense—an argument not raised
is waived. But it does not apply here.
Cisco is incorrect that “VirnetX grouped the rejection of claim 47 together
with the independent claims.” Cisco Br. 22. VirnetX argued claim 47 separately
under its own subheading. Appx4353. 9 In doing so, VirnetX followed section
41.67(c)(1)(vii)’s instruction that “[a]ny claim argued separately should be placed
under a subheading identifying the claim by number.”
VirnetX had good reason to argue claim 47 separately. For example, in
addressing claim 36, the Examiner relied on multiple alternative theories, one of
9
Although VirnetX’s brief to the Board inadvertently contained an incorrect cross-
reference, Cisco acknowledges (at 22 n.2) it understood what VirnetX intended to
cite.
28
which involved the RPC model of communication. Appx4221-4227. 10 In contrast,
for claim 47, the Examiner specifically relied on the RPC model of communication
(i.e., not as an alternative). Appx4227-4228. By ignoring the Examiner’s
alternative theory for claim 36 that rested on the RPC model of communication,
and by simultaneously ignoring VirnetX’s challenge to claim 47, the Board never
addressed the specific argument directed to claim 47 (namely, whether the
Examiner’s reliance on the RPC model of communication was proper). Appx68-
89.
V. THE BOARD’S FINDINGS REGARDING THE “INDICATING” AND

“AUTHENTICATION” LIMITATIONS INTRODUCED IMPROPER
NEW ARGUMENTS AND LACK SUBSTANTIAL EVIDENCE.
A. The Board Erred in the 856 Proceeding in Finding that
Lendenmann Disclosed the “Indicating” Limitation.
Cisco initially contends that the Board’s analysis of an unrelated dependent
claim “moot[s]” “VirnetX’s arguments about the ‘indicating’ limitation.” Cisco
Br. 33-34. Cisco then misapplies the law to suggest the Board did not introduce
improper new arguments, and applies a tortured analysis of the Lendenmann
reference. Id. at 35-43. The Board’s findings as to the “indicating” limitation,
which permeate through all of the claims at issue, should be reversed.
10
Although the Examiner nominally referred to claim 1, both VirnetX and Cisco
understood that the Examiner intended to refer to the actually-pending independent
claims, i.e., claims 36 and 60. See Appx4347; Appx4412.
29
1. The Board’s Finding Regarding Dependent Claim 48 Is Not

Applicable to Independent Claim 36.
Cisco argues that the Board’s finding regarding the “indicating” limitation of
the independent claims is supported by an alternative ground that VirnetX
supposedly “does not challenge.” Cisco Br. 33-34. Cisco is wrong.
The Board’s discussion on which Cisco relies dealt with a separate
“indication” limitation of dependent claim 48. Appx80. The Board discussed (and
cited) only analysis dealing with dependent claim 48. Appx80 (citing Appx4354;
Appx4228-4229). This fact alone indicates the Board limited its analysis to that
claim.
The Board also used terminology from dependent claim 48. Specifically,
dependent claim 48 recites that “at least one of the domain names [recited in claim
36] includes an indication that the domain name service system supports the
establishment of a secure communication link.” Appx280 (57:38-46, 58:26-29).
Mirroring the language of dependent claim 48, the Board considered whether
“Lendenmann fails to disclose ‘at least one of the plurality of domain names’
comprises ‘an indication that the domain name service system supports
establishing a secure communication link’ as recited.” Appx80 (citations omitted).
Moreover, even if the Board’s analysis of dependent claim 48 were
somehow applicable to the independent claims, the Board provided no new
analysis, simply agreeing with the Examiner “for at least the previously stated
30
reasons with respect to Lendenmann.” Appx80. The “previously stated reasons”
are the ones VirnetX addressed fully in its opening brief. See VirnetX Br. 46-62.
Cisco’s attempt to shield the Board’s faulty analysis from review is unavailing.
2. The Board Impermissibly Introduced a New Ground of

Rejection.
Cisco suggests that because the Board relied on some of the same elements
in Lendenmann as the reexamination request and the Right of Appeal Notice, there
was “no ‘new ground of rejection’” by the Board. Cisco Br. 35-40. Cisco
overlooks the new reasoning provided by the Board as to how the limitation is met,
which significantly modified the thrust of the Examiner’s rejection. “Mere
reliance on the same statutory basis and the same prior art references, alone, is
insufficient to avoid making a new ground of rejection when the Board relies on
new facts and rationales not previously raised to the applicant by the examiner.” In
re Leithem, 661 F.3d 1316, 1319 (Fed. Cir. 2011).11
a. The Board Introduced a New Argument as to How

Lendenmann’s Returning a Network Address
Satisfies the “Indicating” Limitation.
As Cisco acknowledges (at 35), the Board creates a new ground or rejection
when the Board’s findings (and not the Examiner’s) “are the principal evidence
11
According to Cisco, the Board did not even apply the Examiner’s construction of
“indicating,” (i.e., “a visible message or signal to a user,” Appx4205; see also
VirnetX Br. 63). See Cisco Br. 43 (“there is no such requirement recited in the
claim”).
31
upon which the Board’s rejection was based.” Leithem, 661 F.3d at 1320. Here,
the Board’s sole basis for finding that Lendenmann’s returning a network address
discloses the “indicating” limitation of independent claim 36 is that “the CDS, in
fact, establishes the [SCL]” by providing the requested network address,
Appx73—a fact not found by the Examiner and not argued by Cisco below. See
Appx4413; Appx4483-4485; VirnetX Br. 55-56.
Cisco’s argument to the contrary is based on the fact that Lendenmann’s
“returning a network address” had been previously asserted to satisfy the
“indicating” limitation. Cisco Br. 35-36. But this does not account for the shifting
positions underlying how such an action satisfies the claim language—i.e., the
thrust of the rejection. Cisco’s assertion that “VirnetX seeks to confuse the issue,”
Cisco Br. 37, is refuted by its own quotation of the Board’s decision, which states
that “‘[b]y providing the requested network address, the CDS, in fact, establishes
the secure communication link,’” Cisco Br. 36 (quoting Appx73). Any
“confusion” is due to the Board’s shifting rationale, not VirnetX’s arguments.
b. The Board Introduced a New Argument as to How

Lendenmann’s ACLs Satisfy the “Indicating”
Limitation.
Cisco asserts that the “Board affirmed the Examiner’s analysis,” but cites a
portion of the Board’s decision that does not even mention the Examiner’s
decision. Cisco Br. 39 (citing Appx74). At best, the Board nominally agreed with
32
“the Requester,” i.e., Cisco—but the question is whether the Board changed the
thrust of the rejection as propounded by the Examiner. See Honeywell Int’l Inc. v.
Mexichem Amanco Holding S.A. De C.V., 865 F.3d 1348, 1358 (Fed. Cir. 2017).
The record makes clear that that the Board changed the thrust of the rejection. See
VirnetX Br. 57-59.
The Examiner reasoned that “the CDS clerks and servers must [] perform []
access checking” because “ACL management software [is] incorporated into all
CDS clerks and servers.” Appx4223. The Board, on the other hand, argued that
because the CDS is integrated into the security service, and all of the services run
on “one machine,” the DCE, the access checking of the security service can be
attributed to the CDS. Appx74-76. The issue here is not whether the Examiner
and the Board interpreted Lendenmann in a consistent manner (as Cisco appears to
suggest, at 39-40), but rather that the Board’s rationale for why Lendenmann
purportedly satisfied the claim limitation is fundamentally different from the
Examiner’s reasoning. VirnetX Br. 57-59.
Contrary to Cisco’s assertion (at 40), the Board’s “one machine” rationale
was not dicta. It was the Board’s sole rationale for how the ACLs in Lendenmann
are purportedly attributable to the CDS, even though the ACLs are a part of a
separate security service. Appx74-76; Appx4348-4349 (explaining that the ACLs
are a function of the security service, not the CDS, and thus do not satisfy the
33
“indicating” limitation).
3. The Board’s Findings Regarding Lendenmann and the

“Indicating” Limitation Lack Substantial Evidence.
a. Lendenmann’s Returning of a Network Address Does

Not Satisfy the “Indicating” Limitation.
The Board’s finding regarding “returning a network address” rested solely
on its erroneous assumption that the CDS’s returning of the network address in fact
establishes the SCL. Appx73. Cisco does not contest that the CDS’s returning of a
network address does not establish the SCL. Cisco Br. 40-41. Nor could it, as that
would conflict with Cisco’s reexamination request, which asserted that a separate
step (a remote procedure call) is used to establish the SCL. See VirnetX Br. 60.
As such, substantial evidence does not support the Board’s findings.
Cisco’s only argument is that Lendenmann supposedly “functions in the
same way as the ’211 specification.” Cisco Br. 41. That argument is not tied to
the claims. It is even unclear whether Cisco is still relying on Lendenmann’s
return of a network address. In any event, the Board did not advance this
“function”-based test—the Board relied on erroneous findings that Cisco declines
to defend.
b. Lendenmann’s ACLs Do Not Satisfy the “Indicating”

Limitation.
Cisco seemingly concedes that the ACLs in Lendenmann are part of
“another component” (the DCE Security Service), but argues this is irrelevant. But
34
while the claims “do[] not preclude the involvement of another component during
the actual establishment of the [SCL],” Cisco Br. 41, they do require that the
“domain name service system” performs the “indicating.” Appx280 (57:38-46).
Cisco further contends that “the cell directory service (CDS) and the security
service are ‘integrated.’” Cisco Br. 42. The Board, however, did not rely on a
rationale that the CDS and security service are merely “integrated,” but instead that
the “CDS ‘is integrated into the security service.’” Appx75-76 (emphasis added).
The ACLs (a function of the security service) are not attributable to the CDS
merely because the CDS is integrated into the security service. See VirnetX
Br. 62. Cisco’s argument is akin to saying that gasoline burning (a function of a
car) is attributable to a cup-holder because the cup holder is integrated into a car.
Finally, the Board’s finding that the ACLs satisfy the claimed “indicating”
fails to meet the Examiner’s construction of “indicating” (i.e., “a visible message
or signal to a user”). VirnetX Br. 63 (citing 4205). Cisco responds by stating that
“there is no such requirement recited in the claim.” Cisco Br. 43. But either the
Board applied the Examiner’s construction—and should have addressed VirnetX’s
arguments that were based on that construction (VirnetX Br. 63)—or the Board
departed from the Examiner’s construction in some unspecified way and failed to
explain why the claims remained unpatentable under this modified construction.
35
B. The Board Erred in the 788 and 789 Proceedings in Finding that
Provino Discloses the Claimed “Authentication” Limitation.
Apple suggests that the Board’s findings as to the “authentication” limitation
of dependent claims 5, 23, and 47 may be affirmed because the Examiner found
that “Provino discloses a system that ‘authorizes’ the requesting device.” Apple
Br. 61 (citing Appx1254; Appx2791). But these claims do not recite a system that
authorizes a client device; instead, they require the system to “authenticate the
query.” Appx202-203 (55:65-67, 57:1-3, 58:33-35); Appx279-280 (55:55-57,
56:59-61, 58:23-25).
Apple then argues that the Board did not introduce a new argument because
the Board, in denying rehearing, asserted that “it merely ‘reiterated the Examiner’s
position.’” Apple Br. 62 (citing Appx92; Appx110). The Board’s protestation
cannot obscure the fact that it did advance a new argument. VirnetX Br. 63-64.
Even the Board’s (incorrect) understanding of the Examiner’s position—that
“‘verif[ying] that the identity of a user’ results in determining that ‘the user has
permission to access,’” i.e., authentication results in authorization (Appx91-92;
Appx109-110)—is backwards from what the Board needed to show, namely that
authorization (in Provino) necessarily “results in” authentication (as claimed).
Moreover, the Board cited no evidence to support its new argument that
“authenticate” is a necessary predicate to “authorize.” Appx35-36; Appx59. Apple
(at 63) points to a hodgepodge of evidence, but none of it actually supports the
36
Board’s finding, nor did the Board rely on any of it.
Apple also asserts that the Board did not ignore VirnetX’s argument that the
Examiner applied an inconsistent mapping by pointing to different queries in
Provino for the same claimed “query.” Apple Br. 63-64. Apple initially merely
parrots the Board’s flawed analysis. See VirnetX Br. 65-66. Apple then changes
tack and argues (contrary to its position below, Appx1477; Appx3014; see also
infra) that “there are not different ‘queries’ as VirnetX contends, but that the same
‘query’ propagates through these components within the single DNS system.”
Apple Br. 65. Where, as here, this post hoc “rationale was not articulated by the
examiner or the Board,” this Court “will not consider it for the first time on
appeal.” In re Imes, 778 F.3d 1250, 1253 (Fed. Cir. 2015).
The Examiner did not erase all distinction between the different queries in
Provino, but instead found that “each query is part of the same sequence that
results in establishment of the secure connection.” Appx1254; Appx2791. This is
not a finding that the same query propagates, but rather that “each query” is part of
a larger sequence. Similarly, in its brief to the Board, Apple argued that “when a
query is sent to name server 17, it triggers a series of queries to entities in the DNS
system that are mediated by device 12(m).” Appx1477 (emphasis added);
Appx3014.
Finally, Apple does not dispute that the Board ignored VirnetX’s argument
37
that firewall 30 does not authenticate or authorize the query to name server 32 (as
asserted by the Examiner). Apple Br. 65; see also VirnetX Br. 6. Apple asserts
instead that the Board did not need to reach this argument, relying on the Board’s
finding that “the query is ‘authenticated before name server 32 receives the secure
domain name and resolves it into an IP address.’” Apple Br. 65 (emphasis altered).
But “the query” the Board was referring to was “a query … to name server 17,”
which applies a new (and inconsistent) mapping. Appx36; Appx60. VirnetX
challenged the substance of the Examiner’s rejection, applying the Examiner’s own
inconsistent mapping (query to name server 32 for “authenticate” limitation).
Either the Board applied a new mapping to which VirnetX should be given an
opportunity to respond, or it relied on the Examiner’s mapping and should have
addressed VirnetX’s arguments based on that mapping.
Apple’s response (at 66) regarding the substance of VirnetX’s argument is
beside the point. The Board should have considered and made findings on
VirnetX’s argument, but did not. A remand is required.
VI. VIRNETX PRESERVED THE ISSUE THE SUPREME COURT WILL

CONSIDER IN OIL STATES ENERGY SERVICES FOR REVIEW.
Apple (at 66-67) chastises VirnetX for not presenting more argument on
whether the PTO, in inter partes proceedings, may constitutionally invalidate a
granted patent previously upheld by a court. But this Court’s binding precedent
currently forecloses the argument. VirnetX could only preserve the issue in light
38
of the Supreme Court’s impending decision in Oil States Energy Services, LLC v.
Greene’s Energy Group, LLC, No. 16-712, which might overturn those precedents
or require their reconsideration. See VirnetX Br. 67. There is no reason to brief
for the panel issues currently foreclosed to it.
CONCLUSION
This Court should remand appeal Nos. 17-1591 and 17-1592 with instruction
to terminate reexamination of claims subject to 35 U.S.C. § 317(b) (2006), and
reverse or, at a minimum, vacate the Board’s remaining findings of unpatentability.
October 3, 2017 Respectfully submitted,
/s/Naveen Modi
Naveen Modi
Joseph E. Palys
Igor V. Timofeyev
Daniel Zeilberger
PAUL HASTINGS LLP
875 15th St., N.W.
Washington, D.C. 20005
(202) 551-1700
Counsel for Appellant VirnetX Inc.
39
CERTIFICATE OF SERVICE
I, Naveen Modi, hereby certify that on October 3, 2017, the foregoing
reply brief was filed using the Court’s CM/ECF system and a copy served on the
parties’ counsel of record via ECF.
Date: October 3, 2017 BY: /s/Naveen Modi

Naveen Modi
Paul Hastings LLP
875 15th Street, N.W.
Tel.: (202) 551-1700
Fax: (202) 551-1705
CERTIFICATE OF COMPLIANCE WITH TYPE-VOLUME

LIMITATION, TYPEFACE REQUIREMENTS, AND TYPE STYLE
REQUIREMENTS
1. This brief complies with the type-volume limitation of Federal Circuit
Rule 32(a) and this Court’s order entered on September 7, 2017.
The brief contains 8,999 words, excluding the parts of the brief
exempted by Federal Rule of Appellate Procedure 32(a)(f) and
Federal Circuit Rule 32(b).
2. This brief complies with the typeface requirements of Federal Rule of
Appellate Procedure 32(a)(5) and the type style requirements of Federal Rule of
Appellate Procedure 32(a)(6).
The brief has been prepared in a proportionally spaced typeface using

MS Word 2013 in a 14-point Times New Roman font.
Date: October 3, 2017 BY: /s/Naveen Modi

Naveen Modi
Paul Hastings LLP
875 15th Street, N.W.
Tel.: (202) 551-1700
Fax: (202) 551-1705

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Case: 17-1591 Document: 65 Page: 1 Filed: 10/03/2017

2017-1591, 2017-1592, 2017-1593

United States Court of Appeals

REPLY BRIEF OF APPELLANT VIRNETX INC.

UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

VirnetX Inc. v. Apple Inc., Cisco Systems, Inc.

1. Full name of party 2. Name of real party in 3. Parent corporations and

VirnetX Inc. VirnetX Inc. VirnetX Inc. is a wholly

Paul Hastings LLP:

Finnegan, Henderson, Farabow, Garrett, & Dunner, LLP:

McDermott Will & Emery LLP:

VirnetX Inc. v. Black Swamp IP, LLC, Nos. 2017-2593, -2594

VirnetX Inc. v. Apple Inc., No. 13-cv-00211 (E.D. Tex.);

Inter Partes Reexamination, Control No. 95/001,851.

Date: October 3, 2017 /s/Naveen Modi

REPLY BRIEF ...........................................................................................................1

A. A Decision of this Court on a Claim’s Validity Constitutes a

1. Statutory Text and this Court’s Precedent Foreclose

2. Apple’s Construction Contravenes Section 317(b)’s

B. Bettcher and Fresenius Do Not Establish That the Mere

C. Deference to the PTO Is Improper. .....................................................16

III. THE BOARD IMPROPERLY SHIFTED THE BURDEN OF

A. The Board Failed To Make Adequate Findings, and

B. The Board Impermissibly Shifted the Burden with Respect to

C. The Board Impermissibly Shifted the Burden with Respect to

V. THE BOARD’S FINDINGS REGARDING THE “INDICATING”

A. The Board Erred in the 856 Proceeding in Finding that

2. The Board Impermissibly Introduced a New Ground of

a. The Board Introduced a New Argument as to How

b. The Board Introduced a New Argument as to How

3. The Board’s Findings Regarding Lendenmann and the

a. Lendenmann’s Returning of a Network Address

b. Lendenmann’s ACLs Do Not Satisfy the

Adams Fruit Co. v. Barrett,

In re Affinity Labs of Tex., LLC,

Astrazeneca AB v. Mut. Pharm. Co.,

B & B Hardware, Inc. v. Hargis Indus., Inc.,

Bettcher Industries, Inc. v. Bunzl USA, Inc.,

Chevron U.S.A. Inc. v. NRDC, Inc.,

Encino Motorcars, LLC v. Navarro,

Ethicon, Inc. v. Quigg,

Fairchild (Taiwan) Corp. v. Power Integrations, Inc.,

Function Media, L.L.C. v. Kappos,

Hamilton-Brown Shoe Co. v. Wolf Bros. & Co.,

Hart Steel Co. v. R.R. Supply Co.,

Honeywell Int’l Inc. v. Mexichem Amanco Holding S.A. De C.V.,

Hughes Tool Co. v. Trans World Airlines,

Icon Health & Fitness, Inc. v. Strava, Inc.,

Impression Prods., Inc. v. Lexmark Int’l, Inc.,

Lebron v. Nat’l R.R. Passenger Corp.,

Marrese v. Am. Academy of Orthopaedic Surgeons,

Nautilus, Inc. v. Biosig Instruments, Inc.,

Power Integrations, Inc. v. Lee,

Rambus Inc. v. Rea,

SAS Inst., Inc. v. ComplementSoft, LLC,

Skidmore v. Swift & Co.,

Straus v. Am. Publishers’ Ass’n,

United States v. Virginia,

VirnetX, Inc. v. Cisco Sys., Inc.,

Yee v. City of Escondido,

(“the PTO”), however, refused to terminate the reexaminations, in defiance of the

purpose of preventing duplicative, harassing litigation, and ensure the preclusive

effect of its decisions.

The Board improperly shifted the burden of proof, unaccountably overlooked or