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`UNITED STATES PATENT AND TRADEMARK OFFICE
`___________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`___________________
`
`
`VMWARE, INC.,
`Petitioner
`
`v.
`
`INTELLECTUAL VENTURES I, LLC,
`Patent Owner
`
`___________________
`
`Case IPR2020-00470
`Patent 7,949,752
`___________________
`
`
`
`
`PATENT OWNER’S SUR-REPLY TO PETITIONER’S REPLY BRIEF TO
`PATENT OWNER’S PRELIMINARY RESPONSE
`
`
`
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`
`
`Mail Stop “PATENT BOARD”
`Patent Trial and Appeal Board
`U.S. Patent and Trademark Office
`P.O. Box 1450
`Alexandria, VA 22313-145
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`
`
`
`
`
`
`
`Case No. IPR2020-00470
`U.S. Patent No. 7,949,752
`
`TABLE OF CONTENTS
`INTRODUCTION ............................................................................................... 1
`I.
`II. ALL SIX FINTIV FACTORS SUPPORT DENIAL UNDER
`35 U.S.C § 314(A). .................................................................................................... 1
`A. There is currently no stay in the parallel district court litigation and no
`evidence exists that one will be granted if trial is instituted (Factor 1). ................ 1
`B. The district court trial will be completed before the Board’s projected
`statutory deadline (Factor 2). .................................................................................. 3
`C. The court and the parties have already completed a substantial amount of
`work in the parallel district court litigation (Factor 3). .......................................... 4
`D. The parties’ grounds, arguments, and evidence raised in the Petition are not
`materially different than the parallel proceeding (Factors 4 and 5). ...................... 5
`E. The merits of the Petition are weak and institution does not serve the
`interest of overall system efficiency and integrity (Factor 6). ............................... 7
`III. PETITIONER’S ANALYSIS OF THE MERITS OF PATENT OWNER’S
`ARGUMENTS IS IMPROPER AND SHOULD NOT BE CONSIDERED BY
`THE BOARD. ............................................................................................................ 9
`IV. CONCLUSION .................................................................................................. 10
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`Case No. IPR2020-00470
`U.S. Patent No. 7,949,752
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`I.
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`INTRODUCTION
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`The Board should exercise its discretion under 35 U.S.C. § 314(a) to deny
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`institution based on its precedential decisions in NHK Spring1 and Fintiv.2
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`Duplicating the district court’s efforts in this proceeding would not be an efficient
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`use of the Board’s resources. Further, Petitioner (“VMware”) goes beyond the scope
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`of the Fintiv factors and improperly used its Reply to address the merits of the Patent
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`Owner’s Preliminary Response. The Board should not consider or give any weight
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`to VMware’s attempt to remedy its flawed Petition.
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`II. ALL SIX FINTIV FACTORS SUPPORT DENIAL UNDER
`35 U.S.C § 314(A).
`As discussed below, all six of the Fintiv factors weigh substantially in favor
`
`of the Board exercising its discretion under 35 U.S.C. § 314(a) to deny the Petition.
`
`There is currently no stay in the parallel district court litigation and no
`A.
`evidence exists that one will be granted if trial is instituted (Factor 1).
`The first factor favors denial. There is currently no stay in the parallel district
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`court proceeding. And VMware provides no evidence indicating that the district
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`1 NHK Spring Co., Ltd. v. Intri-Plex Techs., Inc., IPR2018-00752, Paper 8
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`(P.T.A.B. Sept. 12, 2018) (precedential).
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`2 Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (P.T.A.B. Mar. 20, 2020)
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`(precedential).
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`U.S. Patent No. 7,949,752
`court would be inclined to grant a stay if the Petition was instituted. Rather, VMware
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`merely states that no stay has been issued and Factor 1 does not weigh against
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`instituting inter partes review (“IPR”). Paper 9, 8. VMware’s cursory statement fails
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`to address the second consideration in Factor 1—whether a stay is likely to be
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`granted if IPR is instituted.
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`Judge Alan Albright, who is presiding over the parallel proceeding, is unlikely
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`to issue a stay if the IPR is instituted in this case. Judge Albright has previously
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`denied a motion to stay when an IPR was instituted after claim construction was
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`fully briefed and shortly before the claim construction hearing. MV3 Partners LLC
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`v. Roku Inc., 6:18-cv-00308, ECF No. 83 at 53 (W.D. TX July 22, 2019). The current
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`parallel proceeding is even further along than the proceeding in MV3 Partners; the
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`parties have already engaged in discovery and completed claim construction
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`briefing, and the court has conducted a Markman hearing and issued its claim
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`construction order. Additionally, final invalidity and infringement contentions will
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`be served prior to issuance of any institution decision. EX1012, Scheduling Order,
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`6. Judge Albright is therefore highly unlikely to grant a stay if the Petition is
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`instituted, and Factor 1 weighs in favor of denial.
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`U.S. Patent No. 7,949,752
`The district court trial will be completed before the Board’s projected
`B.
`statutory deadline (Factor 2).
`The second Fintiv factor favors denial. The trial in the parallel proceeding is
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`currently scheduled to begin and conclude in April 2021, months before the Board’s
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`projected statutory deadline. That trial date has not been changed.
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`VMware argues that the trial court will push back the trial date, which makes
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`it more likely than not that trial will occur after the Board issues a Final Written
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`Decision. Paper 9, 8. VMware’s argument is pure speculation and mischaracterizes
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`the Judge’s statements. According to VMware, during the Markman hearing the
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`Judge suggested trial will be held between June and late December 2021. VMware
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`misstates the Judge’s words. The Judge used “June” and “Christmas 2021” as
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`possible dates that the parties might propose when deciding when to schedule trial.
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`EX1027, Telephonic Transcript (05-14-2020), 64:11-19. Before stating these dates,
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`the Judge explicitly states “I’ll make this up.” Id., 64:11.
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`There is no evidence that the trial date will occur between June and December,
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`or that it will differ significantly from the currently scheduled April trial date. During
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`the Markman hearing, the Judge initially suggested trial may be set for May 2021—
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`a date very close to the currently scheduled date of April 2021. However, due to the
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`large number of patents asserted, the Judge was open to a different date and wanted
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`the parties to begin thinking about dates they thought would be fair. Id., 63:6-20.
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`U.S. Patent No. 7,949,752
`The Board “generally take[s] courts’ trial schedules at face value absent some
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`strong evidence to the contrary.” Apple v. Fintiv Inc., IPR2020-00019, Paper 15, 12
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`(P.T.A.B. May 13, 2020). The district court has not moved the trial at all, let alone
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`to a date that is significantly different from the currently set date of April 2021. And
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`absent strong evidence to the contrary, the Board should proceed as though the trial
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`date will be in April or May 2021, well before the projected statutory deadline for a
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`Final Written Decision. Factor 2 therefore favors denial.
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`The court and the parties have already completed a substantial amount
`C.
`of work in the parallel district court litigation (Factor 3).
`The third Fintiv factor favors denial. The parties and the court have invested
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`considerable time and resources in the district court proceeding. As discussed above,
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`the parties have engaged in discovery, completed claim construction briefing, and
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`the court has held a Markman hearing and issued its claim construction order. The
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`Board in Fintiv explicitly stated, “district court claim construction orders may
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`indicate that the court and parties have invested sufficient time in the parallel
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`proceeding to favor denial.” Apple v. Fintiv, Inc., IPR2020-00019, Paper 11, 10.
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`VMware fails to address the considerable amount of work, particularly with respect
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`to claim construction, that has been completed in the parallel proceeding.
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`While ignoring the substantial time and effort invested in the district court
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`proceeding, VMware attempts to incorrectly reframe the analysis to focus on the
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`amount of work that has yet to be completed. VMware argues that neither the court
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`U.S. Patent No. 7,949,752
`nor the parties will have invested substantial time or effort in determining
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`obviousness by the institution deadline. Paper 9, 2-3. VMware also attempts to move
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`the focus of the inquiry to the deadlines in the parallel proceeding that will not occur
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`until after the August 2020 institution deadline. Id., 3.
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`The proper inquiry, however, is not what work remains to be completed in the
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`parallel proceeding; rather, the proper inquiry is the amount of time the court and
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`the parties have already invested in the proceeding. VMware’s analysis of the work
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`remaining in the parallel proceeding is therefore misguided and irrelevant under
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`Factor 3. The claim construction order is clear evidence that substantial time and
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`resources have been invested in the parallel district court litigation. Factor 3
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`therefore favors denial as “institut[ion] would lead to duplicative costs.” Id., 10.
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`The parties’ grounds, arguments, and evidence raised in the Petition are
`D.
`not materially different than the parallel proceeding (Factors 4 and 5).
`Factors 4 and 5 weigh in favor of denial. As to Factor 4, the Petition includes
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`the same claims and substantially the same grounds, arguments, and evidence as the
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`parallel proceeding. As to Factor 5, Petitioner in the current proceeding is the
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`defendant in the parallel proceeding.
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`VMware tries to argue that there is zero overlap between the proceedings.
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`Paper 9, 2. This is incorrect. While VMware did stipulate that if the Board institutes
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`IPR, it will not pursue invalidity on the same grounds in the district court litigation,
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`this stipulation does not eliminate the overlap between the proceedings and does not
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`U.S. Patent No. 7,949,752
`address substantially similar art that it could raise that would still render the current
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`IPR issues duplicative. Id., 2-3; EX1026, Stipulation of Invalidity Contentions.
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`Under VMware’s reasoning, Factor 4 requires 100% overlap between parallel
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`proceedings to weigh in favor of denial. This is incorrect. Under Factor 4, if a
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`petition “includes the same or substantially the same claims, grounds, arguments,
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`and evidence as presented in the parallel proceeding, this fact has favored denial.”
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`Apple v. Fintiv, Inc., IPR2020-00019, Paper 11, 12 (emphasis added). As such,
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`Factor 4 only favors institution where the petition includes “materially different
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`grounds, arguments, and/or evidence.” Id., 12-13 (emphasis added).
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`While VMware may not pursue identical invalidity grounds in the parallel
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`proceeding, it has failed to establish that the other invalidity grounds it will pursue
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`are materially different than the positions presented in the Petition. In its initial
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`invalidity contentions, VMware identified numerous prior art references that it
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`alleges anticipate the challenged claims or render them obvious. EX2002,
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`Preliminary Invalidity Contentions, 5-28. In its Reply, however, VMware has failed
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`to identify a single one of these prior art references that would rely on arguments
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`that are materially different from those raised in its Petition. As such, while the prior
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`art relied on may not be identical, the grounds, arguments, and evidence used in both
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`proceedings will be substantially similar. For example, while the prior art may differ
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`in name, the prior art may be—and will likely be—substantially similar in subject
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`U.S. Patent No. 7,949,752
`matter and application. Therefore, despite VMware’s stipulation, substantial overlap
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`exists between the proceedings and Factor 4 favors denial.
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`The merits of the Petition are weak and institution does not serve the
`E.
`interest of overall system efficiency and integrity (Factor 6).
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`Factor 6 favors denial. If the grounds raised in the petition are strong, the
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`institution of trial “may serve the interest of overall system efficiency and integrity”
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`as it allows resolution of patentability in the event it is not resolved in the parallel
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`proceeding. Apple v. Fintiv, Inc., IPR2020-00019, Paper 11, 15. If the grounds
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`presented are weak, or even merely a “closer call,” this fact has favored denial. Id.
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`In its Preliminary Response, IV has identified numerous weaknesses in
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`VMware’s Petition. Paper 7, 17-29. These weaknesses make the Petition at least a
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`“close call.” Use of Board resources to resolve the patentability question on the
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`grounds asserted in the Petition would therefore not promote system efficiency.
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`Institution would waste the Board’s valuable time and resources on a weak petition.
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`VMware raises two arguments for why Factor 6 favors institution: (1) the
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`Board has already expended resources considering the references in the Petition, and
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`(2) the weakness of IV’s Preliminary Response demonstrates the strength of the
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`Petition’s grounds. Both arguments fail.
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`According to VMware, institution of the Petition promotes an efficient use of
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`Board resources because the grounds in its Petition have been the subject of a prior
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`petition. Paper 9, 4 (citing IPR2016-01431). According to VMware, the Board has
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`U.S. Patent No. 7,949,752
`already expended resources considering these references in the previous petition and
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`it would therefore be efficient to “put those expended resources to use and move
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`forward in this proceeding.” Id. VMware fails to note, however, that not only did the
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`Board never reach the merits of the Petition, but none of the Judges from IPR2016-
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`01431 are on the current panel. See HCC Insurance Holdings, Inc. v. Intellectual
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`Ventures I, LLC, IPR2016-01431, Paper 8 (P.T.A.B. Jan. 17, 2017). The efficiency
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`of this proceeding is therefore not influenced by the previously-filed IPR.
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`VMware next alleges that the merits of the grounds raised in its Petition
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`substantially favor institution. However, VMware fails to address the strength of its
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`own arguments and improperly uses its Reply to attempt to fill the gaps in its original
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`Petition to address IV’s arguments. See Paper 9, 4-8; infra at § III. VMware
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`acknowledges that “it is unusual for a petitioner to have an opportunity to address
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`the arguments raised in the preliminary response of a patent owner.” Paper 9, 4, fn2.
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`But, according to VMware, “the sixth Fintiv factor seems to call for such an
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`analysis.” Id. VMware is incorrect. The Board explicitly stated in Fintiv that Factor
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`6 “is not to suggest that a full merits analysis is necessary to evaluate this factor.”
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`Apple v. Fintiv, Inc., IPR2020-00019, Paper 11, 15.
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`While the Board has stated that a full merits analysis is not necessary, the
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`parties may point out particular “strengths and weaknesses” in the Petition to help
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`the Board decide if the merits tip the balance one way or another. Apple v. Fintiv,
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`U.S. Patent No. 7,949,752
`Inc., IPR2020-00019, Paper 15, 15. The petitioner may “draw attention to particular
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`grounds that it believes are particularly persuasive of unpatentability.” Id., 15-16.
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`VMware, going against the Board’s statements, used its analysis of Factor 6 to
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`improperly try to rebut IV’s arguments rather than point out the strengths of its
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`grounds. Absent such evidence, Factor 6 favors denial.
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`III. PETITIONER’S ANALYSIS OF THE MERITS OF PATENT
`OWNER’S ARGUMENTS IS IMPROPER AND SHOULD NOT BE
`CONSIDERED BY THE BOARD.
`
`VMware improperly used its analysis of Fintiv Factor 6 as an opportunity to
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`rebut the arguments IV raised in its Preliminary Response. Addressing the merits of
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`IV’s Preliminary Response is improper for a Fintiv analysis and VMware attempts
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`to mischaracterize Fintiv to give itself the opportunity to address arguments raised
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`in the Preliminary Response and cure deficiencies in its Petition. VMware alleges
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`that Fintiv calls for its analysis of IV’s Preliminary Response and that the reply brief
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`filed in Fintiv includes a similar analysis of the merits of the Preliminary Response.
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`Paper 9, 4, fn2. VMware is wrong. Fintiv does not call for a full analysis of the
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`merits. See supra at § II(E). VMware also mischaracterizes the analysis in the Fintiv
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`Reply Brief. The merits analysis in the Fintiv Reply was limited to 8 lines. Apple v.
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`Fintiv, Inc., IPR2020-00019, Paper 12, 10 (P.T.A.B. Mar. 27, 2020). This is in sharp
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`contrast to the 4 pages VMware used to address IV’s Preliminary Response.
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`Case No. IPR2020-00470
`U.S. Patent No. 7,949,752
`VMware used its Reply, authorized by the Board to specifically address the
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`Fintiv factors, to gain the improper opportunity to respond to IV’s arguments before
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`the Board issues its institution decision. VMware provided little to no analysis for
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`five of the six Fintiv factors and utilized half of its Reply to provide an in-depth
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`analysis of IV’s Preliminary Response. VMware used its Reply to inappropriately
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`address the merits of IV’s arguments, instead of addressing discretionary denial
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`under the Fintiv factors—if institution will promote system efficiency, fairness, and
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`patent quality. Apple v. Fintiv, Inc., IPR2020-00019, Paper 11, 5. The Board should
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`not condone, and certainly not reward, such behavior. At the very least, the Board
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`should not consider VMware’s improper merits arguments when reaching an
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`institution decision; a more proper result would be to strike the Reply in its entirety
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`for going beyond the Board’s plain instructions
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`IV. CONCLUSION
`All six Fintiv factors weigh substantially in favor of denying institution. The
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`parallel proceeding is unlikely to be stayed, will be resolved prior to the issuance of
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`a Final Written Decision in this case, a substantial amount of work has been done in
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`the parallel proceeding, there is a significant amount of overlap between the
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`proceedings, and the merits of VMware’s Petition are weak. For at least these
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`reasons, IV requests the Board disregard VMware’s arguments on the merits of the
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`Preliminary Response and exercise its discretion to deny inter partes review.
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`Case No. IPR2020-00470
`U.S. Patent No. 7,949,752
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`Respectfully submitted,
`STERNE, KESSLER, GOLDSTEIN & FOX P.L.L.C.
`
`/Lestin Kenton/
`
`Lestin L. Kenton, Jr.
`Registration No. 72,314
`Attorney for Patent Owner
`
`
`Date: June 12, 2020
`1100 New York Avenue, NW
`Washington, D.C. 20005
`(202) 371-2600
`
`
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`Case No. IPR2020-00470
`U.S. Patent No. 7,949,752
`CERTIFICATION OF SERVICE (37 C.F.R. § 42.6(e))
`
`The undersigned hereby certifies that the above-captioned PATENT
`
`OWNER’S SUR-REPLY TO PETITIONER’S REPLY BRIEF TO PATENT
`
`OWNER’S PRELIMINARY RESPONSE was served electronically in its entirety
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`on June 12, 2020, upon the following parties by email:
`
`Katherine A. Vidal (Lead Counsel) kvidal@winston.com
`Louis L. Campbell (Back-up Counsel) llcampbell@winston.com
`Michael A. Tomasulo (Back-up Counsel) mtomasulo@winston.com
`WINSTON & STRAWN LLP
`VMware-IV-PTAB@winston.com
`
`
`
`Respectfully submitted,
`STERNE, KESSLER, GOLDSTEIN & FOX P.L.L.C.
`
`/Lestin Kenton/
`
`Lestin L. Kenton, Jr.
`Registration No. 72,314
`Attorney for Patent Owner
`
`Date: June 12, 2020
`1100 New York Avenue, NW
`Washington, D.C. 20005
`(202) 371-2600
`
`
`
`
`
`
`
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