`
`
`
`IN THE
`Supreme Court of the United States
`————
`APPLE INC.,
`Petitioner,
`
`v.
`
`VIRNETX INC., LEIDOS, INC.,
`Respondents.
`
`————
`
`On Petition for a Writ of Certiorari
`to the United States Court of Appeals
`for the Federal Circuit
`————
`
`BRIEF IN OPPOSITION
`
`————
`
`DONALD URRABAZO
`URRABAZO LAW, P.C.
`2029 Century Park East
`Suite 400
`Los Angeles, CA 90067
`(310) 388-9099
`durrabazo@ulawpc.com
`
`Counsel for Leidos, Inc.
`
`
`
`JEFFREY A. LAMKEN
`Counsel of Record
`MICHAEL G. PATTILLO, JR.
`RAYINER I. HASHEM
`JAMES A. BARTA
`MOLOLAMKEN LLP
`The Watergate, Suite 660
`600 New Hampshire Ave., N.W.
`Washington, D.C. 20037
`(202) 556-2000
`jlamken@mololamken.com
`
`Counsel for VirnetX Inc.
`
`(Additional Counsel Listed on Inside Cover)
`
`WILSON-EPES PRINTING CO., INC. – (202) 789-0096 – WASHINGTON, D.C. 20002
`
`
`
`JORDAN A. RICE
`MOLOLAMKEN LLP
`300 North LaSalle Street
`Suite 5350
`Chicago, IL 60654
`
`Counsel for VirnetX Inc.
`
`
`
`
`
`
`
`
`
`
`
`
`
`QUESTIONS PRESENTED
`The questions presented are:
`1. Whether
`the expert’s estimate of patent-
`infringement damages satisfied the requirement that
`patent damages must be apportioned to the value
`provided by the infringed patents.
`2. Whether Apple demonstrated intervening circum-
`stances warranting reconsideration of the damages judg-
`ment once the Federal Circuit issued decisions upholding
`the validity of patent claims that Apple infringes, where
`Apple conceded below that those claims fully support the
`entire damages award.
`
`(i)
`
`
`
`ii
`PARTIES TO THE PROCEEDINGS BELOW
`Petitioner Apple Inc. was the defendant in the district
`court and the appellant in the court of appeals. Respon-
`dents VirnetX Inc. and Leidos, Inc., were the plaintiffs in
`the district court and the appellees in the court of
`appeals.
`Cisco Systems, Inc., was a defendant in the district
`court. It did not participate in the proceedings before the
`court of appeals.
`
`
`
`
`
`
`
`
`iii
`CORPORATE DISCLOSURE STATEMENT
`Pursuant to this Court’s Rule 29.6, respondent
`VirnetX Inc. states that it is a subsidiary of VirnetX
`Holdings Corp. and that no other company owns 10% or
`more of its stock. Respondent Leidos, Inc. states that it
`is a subsidiary of Leidos Holdings, Inc. and that no other
`company owns 10% or more of its stock.
`
`
`
`
`
`
`
`iv
`STATEMENT OF RELATED PROCEEDINGS
`There are no related proceedings, within the meaning
`of Rule 14.1(b)(iii), beyond those identified in the petition.
`
`
`
`
`
`
`
`
`TABLE OF CONTENTS
`
`
`Statement ......................................................................
`I.
`Statutory and Regulatory Framework ........
`A. The Patent Act ..........................................
`B. Patent Cancellation in Inter Partes
`Reexamination or Review .......................
`II. Proceedings Below ..........................................
`A. VirnetX’s Patented Technology for
`Secure Internet Communications ..........
`B. The First Trial and Appeal .....................
`C. Retrials in District Court ........................
`D. Parallel PTO Proceedings .......................
`E. The Federal Circuit Affirms the
`District Court’s Judgment But
`Overturns the PTO Decisions in
`Relevant Part ............................................
`1. The Federal Circuit Summarily
`Affirms the District Court’s
`Judgment ............................................
`2. The Federal Circuit Overturns
`the PTO in Critical Part in the
`Cisco Reexamination Appeal ..........
`3. The Federal Circuit Overturns
`the PTO in the Mangrove Appeal ...
`4. The Federal Circuit Overturns
`the PTO in Critical Part Again in
`the Apple/Cisco Reexamination
`Appeal ..................................................
`5. The Federal Circuit Denies
`Apple’s Motion To File a
`Successive Rehearing Petition .........
`
`(v)
`
`Page
`1
`2
`2
`
`3
`4
`
`4
`5
`7
`9
`
`10
`
`10
`
`12
`
`13
`
`13
`
`14
`
`
`
`vi
`TABLE OF CONTENTS—Continued
`
`Reasons for Denying the Petition .............................
`I. The Federal Circuit’s Summary
`Affirmance Presents No Issue
`Warranting Review .........................................
`A. Apple’s Claim That the Federal
`Circuit Has Abandoned
`Garretson’s Apportion
`Requirement Is Meritless .......................
`B. Apple’s Repeated Waivers Make
`This Unpublished Summary
`Affirmance an Exceptionally Poor
`Vehicle........................................................
`II. The Federal Circuit’s Affirmance of the
`Judgment, Where No Asserted Claims
`Have Been Cancelled, Does Not Merit
`Review ...............................................................
`A. Apple’s Fact-Bound Contention
`That the Court Below Erred in
`Applying Established Principles
`Lacks Merit ...............................................
`B. Apple’s Case-Specific Complaints
`Underscore the Absence of Any
`Issue Warranting Review .......................
`Conclusion .....................................................................
`
`Page
`15
`
`15
`
`17
`
`24
`
`27
`
`28
`
`33
`35
`
`
`
`
`
`
`TABLE OF AUTHORITIES
`
` Page(s)
`
`26
`
`31
`
`29
`
`CASES
`Am. Surety Co. v. Baldwin,
`287 U.S. 156 (1932) .............................................
`B&B Hardware, Inc. v. Hargis Indus., Inc.,
`135 S. Ct. 1293 (2015) .........................................
`Catalina Lighting, Inc. v. Lamps Plus, Inc.,
`295 F.3d 1277 (Fed. Cir. 2002) .........................
`Clark v. Wooster,
`119 U.S. 322 (1886) .............................................
`Commonwealth Sci. & Indus. Research
`Organisation v. Cisco Sys., Inc.,
`809 F.3d 1295 (Fed. Cir. 2015) ............... 17, 20, 21
`Cutter v. Wilkinson,
`544 U.S. 709 (2005) .............................................
`Dowagiac Mfg. Co. v. Minn.
`Moline Plow Co.,
`235 U.S. 641 (1915) .......................................... 19, 23
`Elbit Sys. Land & C4I Ltd. v. Hughes
`Network Sys., LLC,
`927 F.3d 1292 (Fed. Cir. 2019) ............... 17, 21, 24
`Ericsson, Inc. v. D-Link Sys., Inc.,
`773 F.3d 1201 (Fed. Cir. 2014) ...................... 19, 23
`Fresenius USA, Inc. v. Baxter Int’l, Inc.,
`721 F.3d 1330 (Fed. Cir. 2013) ...................... 30, 33
`Garretson v. Clark,
`111 U.S. 120 (1884) ....................................... passim
`GPX Int’l Tire Corp. v. United States,
`678 F.3d 1308 (Fed. Cir. 2012) .........................
`
`19
`
`27
`
`33
`
`(vii)
`
`
`
`viii
`TABLE OF AUTHORITIES—Continued
`Page(s)
`
`31
`
`19
`
`24
`
`32
`
`Grogan v. Garner,
`498 U.S. 279 (1991) .............................................
`Microsoft Corp. v. i4i Ltd. P’ship,
`564 U.S. 91 (2011) ............................................. 3, 31
`Monsanto Co. v. McFarling,
`488 F.3d 973 (Fed. Cir. 2007) ...........................
`Ohio Willow Wood Co. v. Alps S., LLC,
` 735 F.3d 1333 (Fed. Cir. 2013) ........................
`Pease v. Rathbun-Jones Eng’g Co.,
`243 U.S. 273 (1917) .............................................
`Prism Techs. LLC v. Sprint Spectrum L.P.,
`757 F. App’x 980 (Fed. Cir. 2019) ................. 30, 33
`Prism Techs. LLC v. Sprint Spectrum L.P.,
`849 F.3d 1360 (Fed. Cir. 2017) .........................
`Reeves v. Sanderson Plumbing Prods., Inc.,
`530 U.S. 133 (2000) .............................................
`Rude v. Westcott,
`130 U.S. 152 (1889) .............................................
`Sprint Commc’ns Co. v. Time Warner Cable,
`Inc., 760 F. App’x 977 (Fed. Cir. 2019) ........ 17, 22
`Stevenson v. E.I. DuPont De Nemours
`& Co., 327 F.3d 400 (5th Cir. 2003) ............... 24, 25
`VirnetX Inc. v. Apple Inc.,
`931 F.3d 1363 (Fed. Cir. 2019) ................... passim
`VirnetX Inc. v. Cisco Sys., Inc.,
`776 F. App’x 698 (Fed. Cir. 2019) .............. passim
`VirnetX Inc. v. Mangrove Partners
`Master Fund, Ltd.,
`778 F. App’x 897 (Fed. Cir. 2019) .............. passim
`
`27
`
`19
`
`19
`
`
`
`
`
`ix
`TABLE OF AUTHORITIES—Continued
`Page(s)
`
`31
`
`XY, LLC v. Trans Ova Genetics,
`890 F.3d 1282 (Fed. Cir. 2018) .........................
`STATUTES
`Patent Act, 35 U.S.C. §§ 1 et seq. .................... passim
`35 U.S.C. § 101 ....................................................
`2
`35 U.S.C. § 271(a) ...............................................
`3
`35 U.S.C. § 284 ....................................................
`9
`35 U.S.C. § 311(a) (2006) .................................. 3, 30
`35 U.S.C. § 311(a) ...............................................
`3
`35 U.S.C. § 311(b) ...............................................
`3
`35 U.S.C. § 316(a) (2006) ............................ 3, 30, 31
`35 U.S.C. § 316(b) (2006) ...................................
`30
`35 U.S.C. § 318(b) ............................................. 3, 30
`Leahy-Smith America Invents Act, Pub. L.
`No. 112-29, 125 Stat. 284 (2011) .......................
`American Inventors Protection Act, Pub. L.
`106-113, 113 Stat. 1501 (1999) ...........................
`OTHER AUTHORITIES
`Sup. Ct. R. 10 ........................................................ 27, 28
`Fed. Cir. R. 36 ...................................................... 12, 31
`
`3
`
`3
`
`
`
`
`
`IN THE
`Supreme Court of the United States
`————
`NO. 19-832
`
`
`
`
`
`
`
`
`
`APPLE INC.,
`Petitioner,
`
`v.
`
`
`
`
`
`VIRNETX INC., LEIDOS, INC.,
`
`
`
`Respondents.
`————
`On Petition for a Writ of Certiorari
` to the United States Court of Appeals
`for the Federal Circuit
`————
`BRIEF IN OPPOSITION
`————
`STATEMENT
`VirnetX develops software for establishing secure
`communications over the Internet. It holds U.S. Patent
`Nos. 7,418,504 (’504 patent); 7,921,211 (’211 patent);
`6,502,135 (’135 patent); and 7,490,151 (’151 patent). Apple
`no longer disputes that it incorporated VirnetX’s tech-
`nology into its products, infringing VirnetX’s patents.
`This case, pending for more than a decade, has been the
`subject of three trials and two appeals. In each trial, the
`jury found against Apple. The district court found Apple
`had engaged in “gamesmanship” to stall proceedings.
`Pet. App. 63a, 71a-72a. Long ago, the Federal Circuit
`upheld the patents’ validity in a decision Apple nowhere
`
`
`
`
`
`2
`challenges. Pet. App. 102a-103a. And the Federal Circuit
`now has affirmed the entire judgment, in an unpublished,
`one-word, summary order.
`Apple invokes parallel administrative proceedings
`before the Patent and Trademark Office (“PTO”), argu-
`ing that the PTO has “invalidated” the asserted patent
`claims. But Apple elides the fact that—in three separate
`decisions—the Federal Circuit overturned PTO decisions
`purporting to find the asserted claims of the ’135 and ’151
`patents and an asserted claim of the ’504 patent un-
`patentable. None of those claims have been “invalidat-
`ed,” let alone cancelled by the PTO. Critically, Apple
`agreed below that those surviving claims fully support
`the damages award.
`Apple also challenges the apportionment of damages
`as inconsistent with Garretson v. Clark, 111 U.S. 120
`(1884). But Apple prevailed on apportionment argu-
`ments in its first appeal. In this latest appeal, the Fed-
`eral Circuit properly affirmed when Apple failed to raise
`any meritorious or properly preserved apportionment
`challenge. Apple mischaracterizes Federal Circuit pre-
`cedent. Its challenge has nothing to do with apportion-
`ment (i.e., ensuring damages are not awarded on
`unpatented features of products); it concerns the fact-
`bound question of whether the prior licenses introduced
`at trial are reasonable comparators of the proper royalty
`rate. The petition presents no issue warranting review
`and is plagued by fatal defects regardless.
`I. STATUTORY AND REGULATORY FRAMEWORK
`A. The Patent Act
`Under the Patent Act, the inventor of a “new and
`useful process, machine, manufacture, or composition of
`matter” may obtain a patent. 35 U.S.C. § 101. Anyone
`
`
`
`
`
`3
`who, without permission, “makes, uses, offers to sell, or
`sells any patented invention” in the United States is an
`infringer and may be liable for damages, including a
`reasonable royalty. Id. § 271(a).
`Accused infringers may defend by challenging the
`patent’s validity. But invalidity is an affirmative defense
`that must be proved by clear-and-convincing evidence.
`Microsoft Corp. v. i4i Ltd. P’ship, 564 U.S. 91, 95 (2011).
`B. Patent Cancellation in Inter Partes Reexam-
`ination or Review
`Although invalidity can be raised as a defense in
`district court infringement actions, Congress has created
`procedures for challenging and seeking cancellation of
`patents at the PTO. Under the American Inventors Pro-
`tection Act, Pub. L. 106-113, 113 Stat. 1501 (1999), parties
`could “file a request for inter partes reexamination”
`based on certain types of “prior art.” 35 U.S.C. § 311(a)
`(2006). The America Invents Act replaced inter partes
`reexamination with “inter partes review.” See America
`Invents Act, Pub. L. 112-29, 125 Stat. 284 (2011). That
`procedure allows a person to petition the PTO “to cancel
`as unpatentable 1 or more claims of a patent” on specified
`grounds. 35 U.S.C. § 311(a)-(b) (2018).
`Under either procedure, the PTO may issue a “certifi-
`cate canceling any claim of the patent finally determined
`to be unpatentable,” but cannot do so until “the time for
`appeal has expired or any appeal proceeding has termi-
`nated.” 35 U.S.C. § 316(a) (2006); see 35 U.S.C. § 318(b)
`(2018). Thus, patent cancellation occurs only after judi-
`cial review—and will never occur if the PTO’s unpatent-
`ability decision is reversed.
`
`
`
`
`
`4
`
`II. PROCEEDINGS BELOW
`This dispute arises out of Apple’s infringement of Vir-
`netX’s patents for secure communications technologies.
`It spans three district court trials and two Federal Cir-
`cuit appeals. It also involves three related appeals from
`PTO proceedings.
`A. VirnetX’s Patented Technology for Secure
`Internet Communications
`While at Science Applications International Corp., the
`inventors sought to address capacity shortages on U.S.
`military satellites by developing secure systems for using
`civilian satellites. C.A. App. 1256-1257.1 They built “net-
`Eraser,” which created secure “virtual private networks”
`(“VPNs”) over unsecure networks. C.A. App. 1257. The
`netEraser VPN, however, was difficult to use. C.A. App.
`1263-1264. Users had to configure myriad “parameters,”
`such as encryption keys and cryptographic certificates.
`Ibid.
`The innovation at issue here overcame those barriers,
`making secure communications easy to use. C.A. App.
`1263-1265. Ordinary use of the Internet involves typing
`domain names (like www.yahoo.com) into a web browser.
`C.A. App. 1271-1273. Ordinarily, a domain name system
`(“DNS”) translates that “name” into the numerical inter-
`net protocol addresses (“IP addresses”), which compu-
`ters need to send each other data. Ibid. The innovation
`here allows users to enter a domain name. But a separ-
`ate DNS-like system recognizes when secure communica-
`tions are sought, and establishes secure links automatic-
`ally, without further user action.
`
`1 All record citations are to the appendix and docket entries from
`Federal Circuit Case No. 18-1197 unless otherwise noted.
`
`
`
`
`
`5
`The ’135 and ’151 patents disclose a “DNS proxy
`server” that “creates a virtual private network in re-
`sponse to a domain name inquiry.” C.A. App. 348-364.
`When a user types a domain name into a web browser,
`the user’s computer sends a request to the DNS to
`translate that domain name into an IP address that can
`be used for direct data transmission. C.A. App. 364. The
`“DNS proxy server” “intercept[s]” that request, and
`determines whether the user seeks access to a secure
`Internet resource. Ibid. If so, it automatically creates a
`VPN between the user’s computer and that secure
`resource. Ibid.
`The second invention, disclosed in the ’504 and ’211
`patents, is a “technique * * * for establishing a secure
`communication link” between two computers over the
`Internet. C.A. App. 219. Users access a “secure domain
`name service” (“SDNS”). C.A. App. 241-242. But the
`SDNS determines whether it supports establishing a
`secure link with the other computer and, if so, provides
`an indication to that effect. C.A. App. 167; see C.A. App.
`242. The SDNS facilitates exchange of parameters nec-
`essary for establishing secure communications (e.g., a
`secure call over the Internet). C.A. App. 241.
`B. The First Trial and Appeal
`VirnetX filed this infringement action in 2010, alleging
`that the “VPN on Demand” feature of Apple devices,
`which creates VPNs automatically, infringes the ’135 and
`’151 patents. Pet. App. 5a. VirnetX also alleged that
`Apple’s FaceTime, which enables secure voice and video
`calls, infringes the ’504 and ’211 patents. Ibid. In 2012, a
`jury found that the asserted claims were not invalid, and
`that VPN on Demand and FaceTime infringed. Pet. App.
`79a. It awarded $368 million. Ibid.
`
`
`
`
`
`6
`In 2014, the Federal Circuit upheld the patent claims’
`validity, Pet. App. 102a-103a, and found the ’135 and ’151
`patents infringed by VPN on Demand, Pet. App. 79a-80a
`(“VirnetX I”). The court remanded for a new trial on
`FaceTime’s infringement. Pet. App. 85a-92a. It also
`vacated the damages award on apportionment grounds.
`Pet. App. 105a-125a.
` The court surveyed the law,
`starting with Garretson v. Clark, 111 U.S. 120 (1884).
`Pet. App. 107a-112a. It found that the jury instructions
`erroneously suggested that patent royalties could be
`based on the entire price of an infringing device if the
`device “constitutes the smallest salable unit containing
`the patented feature.” Pet. App. 110a.
`The Federal Circuit found that VirnetX’s damages
`evidence had a similar defect. Pet. App. 113a. VirnetX
`had calculated damages based on prior licenses for its
`patents. Pet. App. 105a. VirnetX’s expert had analyzed
`those licenses, and determined that prior licensees had
`paid about 1% of the price of their product as a royalty.
`Pet. App. 116a-117a. VirnetX’s expert therefore esti-
`mated that, in a hypothetical negotiation, Apple and
`VirnetX would have agreed to a royalty rate of 1% of the
`price of Apple’s infringing devices. Ibid.
`On appeal, Apple did not argue that the Apple device
`features that use VirtnetX’s technology somehow employ
`it differently than the prior licensees. Apple Br. 61-63 in
`No. 13-1489 (Fed. Cir.). Nor had it made any such argu-
`ment in seeking to exclude VirnetX’s damages expert
`under Daubert in district court. See D. Ct. Dkt. 445 at 2-
`10 in No. 10-cv-417 (E.D. Tex.). It argued that applying
`the naked percentage rate derived from prior licenses to
`Apple’s more expensive and more heavily featured
`devices awarded damages (a royalty) on Apple device
`features that are not covered by, and do not infringe, Vir-
`
`
`
`
`
`7
`netX’s patents. Pet. App. 113a-115a; Apple Br. 56-58 in
`No. 13-1489 (Fed. Cir.). The Federal Circuit agreed. Be-
`cause that percentage method risked imposing a royalty
`on “the vast number of non-patented features contained
`in the accused products,” Pet. App. 115a-116a, the
`methodology did not “comport[ ] with settled principles of
`apportionment,” Pet. App. 113a.
`Apple also argued that the six prior licenses VirnetX
`relied on “were not sufficiently comparable to the
`license” Apple would have negotiated. Pet. App. 116a.
`Apple argued that some prior licenses conveyed more
`rights—covering more patents, or granting a software
`license—than what Apple would have sought. Pet. App.
`116a-117a. Apple did not argue, however, that prior li-
`censees used the technology so differently than Apple’s
`infringing features that the licenses could not be used to
`calculate royalty rates. It did not contend that the
`licenses’ origins in litigation settlements made them in-
`apposite. Apple Br. 61-63 in No. 13-1489 (Fed. Cir.).
`The Federal Circuit rejected Apple’s challenge to reli-
`ance on the licenses. Pet. App. 119a. It observed that, of
`the six licenses VirnetX relied on, four “relate[d] to the
`actual patents-in-suit, while the others were drawn to
`related technology.” Pet. App. 117a-118a. It also found
`that “the other differences that Apple complain[ed]” of
`did not render the licenses so dissimilar as to preclude
`reliance on them. Ibid. Those differences had been
`properly “presented to the jury, allowing the jury to fully
`evaluate the relevance of the licenses.” Pet. App. 118a.
`C. Retrials in District Court
`In 2016, the district court held a second trial on re-
`mand issues (and additional infringement claims against
`newer versions of Apple’s products). Pet. App. 6a.
`VirnetX relied on a new damages model that eliminated
`
`
`
`
`8
`the prior apportionment defect. VirnetX’s expert identi-
`fied the licensed products most similar to Apple’s de-
`vices—mainly, “IP phones” supporting secure voice and
`video calls over the Internet like Apple’s FaceTime and
`VPN-on-Demand features—and accounted for differ-
`ences in license terms (such as cross-licenses). C.A. App.
`1784-1785; see D. Ct. Dkt. 542-2 at ¶¶ 116-120. However,
`he did not calculate a percentage royalty based on the
`price of Apple’s products, avoiding the risk of imposing a
`royalty on Apple features that do not utilize VirnetX’s
`patents. Instead, he used prior licenses to estimate the
`“dollar value” of the patented secure-communications
`technology apart from the price of Apple’s (or anyone
`else’s) devices.
` VirnetX C.A. Br. 44-46, 48-50; see
`C.A. App. 1778, 1952-1953. In particular, he calculated
`the dollar value that prior licensees paid for that secure-
`calling technology, and determined that Apple would
`have paid no less. VirnetX C.A. Br. 49.
`Apple unsuccessfully sought exclusion of VirnetX’s
`damages model on apportionment grounds, but never
`argued that the features of its products that employ
`VirnetX’s patented technology (FaceTime and VPN on
`Demand) use it differently, or to a lesser degree, than the
`licensed products. See D. Ct. Dkt. 217-1, D.Ct. Dkt. 243-
`1, and D. Ct. Dkt. 323 in No. 12-cv-855 (E.D. Tex.).
`Instead, Apple argued that VirnetX’s expert should have
`adjusted the dollar value of prior licenses in view of other
`considerations. D. Ct. Dkt. 217-1 at 1-2 in No. 12-cv-855
`(E.D. Tex.). After trial, the jury again found for VirnetX.
`Pet. App. 6a. But the district court vacated the verdict,
`finding that Apple had been prejudiced by references to
`the first trial’s verdict. Ibid.
`
`
`
`
`
`9
`When a third trial was held, VirnetX prevailed again.
`The jury found that FaceTime infringed the ’504 and ’211
`patents, and awarded $302 million. Pet. App. 6a-8a.
`The district court enhanced a portion of the damages
`under 35 U.S.C. § 284 because Apple had willfully in-
`fringed and engaged in “litigation misconduct.” Pet. App.
`51a, 65a. The court found that Apple had improperly
`attempted to delay court proceedings, “repeatedly” seek-
`ing to “stay the litigation,” “even after receiving adverse
`rulings from the Court,” and after the Federal Circuit
`had upheld the jury’s no-invalidity finding. Pet. App. 63a.
`Finding this case “exceptional,” the court awarded Vir-
`netX attorney’s fees. Pet. App. 71a. It again cited
`Apple’s meritless stay requests, as well as other “games-
`manship.” Pet. App. 71a-72a.
`D. Parallel PTO Proceedings
`About a year after trial-court proceedings began,
`Apple and other parties filed petitions in the PTO chal-
`lenging the patents VirnetX had asserted against Apple.
`See VirnetX Inc. v. Apple Inc., 931 F.3d 1363, 1364 (Fed.
`Cir. 2019) (“Apple/Cisco Reexamination”); VirnetX Inc.
`v. Cisco Sys., Inc., 776 F. App’x 698, 699 (Fed. Cir. 2019)
`(“Cisco Reexamination”). In 2016, the PTO determined
`that the claims of the ’504 and ’211 patents infringed by
`FaceTime were unpatentable. See Apple/Cisco Reexam-
`ination, 931 F.3d at 1368 (’504 and ’211 patents); Cisco
`Reexamination, 776 F. App’x at 701 (’504 patent).
`In 2015, Mangrove Partners challenged the ’135 and
`’151 patents infringed by VPN on Demand as unpatent-
`able. VirnetX Inc. v. Mangrove Partners Master Fund,
`Ltd., 778 F. App’x 897, 900 (Fed. Cir. 2019). Apple filed a
`nearly identical petition that was consolidated with Man-
`grove’s (even though a prior Apple petition was rejected
`
`
`
`
`
`10
`as time-barred). Id. at 900-901. In 2016, the PTO found
`those claims unpatentable. Id. at 901.
`VirnetX appealed. The appeals were organized into
`three proceedings: (1) the Cisco Reexamination appeal
`concerning the ’504 patent infringed by FaceTime, 776 F.
`App’x 698; (2) the Apple/Cisco Reexamination appeal
`addressing the ’211 and ’504 patents infringed by Face-
`Time, 931 F.3d 1363; and (3) the Mangrove appeal
`addressing the ’135 and ’151 patents infringed by VPN on
`Demand, 778 F. App’x 897.
`E. The Federal Circuit Affirms the District
`Court’s Judgment But Overturns the PTO
`Decisions in Relevant Part
`Notwithstanding a one-year delay in entering judg-
`ment after the third trial, Apple’s appeal from the district
`court reached the Federal Circuit while VirnetX’s ap-
`peals from PTO proceedings were still being briefed.
`Following repeated efforts by Apple to delay the appeal
`in this case, the Federal Circuit—recognizing that this
`case and the Apple/Cisco Reexamination and Mangrove
`appeals concerned the same patents and claims—ordered
`that they be coordinated for argument. C.A. Dkt. 50; see
`pp. 12-14, infra. Those appeals were argued in January
`2019 before the same panel (Prost, C.J.; Moore and
`Reyna, J.). The Cisco Reexamination appeal, to which
`Apple was not a party, proceeded separately.
`1. The Federal Circuit Summarily Affirms the
`District Court’s Judgment
`Following argument on January 15, 2019, the Federal
`Circuit summarily affirmed the district court’s decision
`without opinion. Pet. App. 1a-2a. As explained above,
`VirnetX’s expert had calculated the “dollar value” that
`prior licensees paid for VirnetX’s patented secure-
`
`
`
`
`
`11
`communications feature. See pp. 7-8, supra. Challenging
`that methodology, Apple urged that “apportionment”
`required additional, unspecified adjustments to the prior-
`license royalty rates. Apple C.A. Br. 40-48. It insisted
`that VirnetX had “ignor[ed] * * * sharp differences”
`between the prior licenses and any license Apple might
`have sought. Id. at 40, 43. Citing Garretson in passing,
`id. at 40, it argued that it had more complex products,
`and some prior licenses gave rights to more patents for a
`longer period of time. Id. at 45-47.
`As VirnetX pointed out, however, Apple utterly failed
`to show that the methodology asked it to pay a royalty
`for Apple features that did not use VirnetX’s technology.
`VirnetX C.A. Br. 45-47, 49-50. If Apple included features
`in its phones that were absent from those of prior
`licensees, it explained, any “ ‘extra revenue’ ” from those
`features went “ ‘to Apple.’ ” Ibid. (quoting C.A. App.
`1952). Apple’s arguments went to its claim that the
`dollar amounts of prior licenses should be adjusted. Id.
`at 51-52. But Apple did not explain “which ‘special cir-
`cumstances’ and ‘sharp differences’ went unaddressed.”
`Ibid. Moreover, while the prior licenses Apple attacked
`were the same or indistinguishable from those in the
`prior appeal, Apple had failed to raise purported distinc-
`tions in that appeal or in a Daubert challenge below.2
`The arguments were therefore foreclosed. Id. at 53.
`At oral argument, Apple urged that affirmances in
`three PTO appeals—the Mangrove, Cisco Reexamina-
`tion, and Apple/Cisco Reexamination appeals—would
`
`
`2 VirnetX’s expert had used four of the six licenses at issue in
`VirnetX I, Pet. App. 117a-119a, plus two more that were indistin-
`guishable, VirnetX C.A. Br. 44.
`
`
`
`
`
`12
`require the damages judgment to be vacated. Oral Arg.
`Recording 0:36-3:52, 38:42-41:20. But Apple had conced-
`ed that damages would be the “same” for each feature,
`regardless of the number of patent claims each infringed.
`D. Ct. Dkt. 1036 at 70 (closing statement); see Oral Arg.
`Recording 1:33-2:02, 26:16-27:10. Thus, Apple had no an-
`swer to the panel’s observation that damages “[would]n’t
`[be] affect[ed] * * * at all” so long as at least at least one
`infringed claim covering VPN on Demand, and one cover-
`ing FaceTime, remained intact. Oral Arg. Recording
`40:59-41:11.
`A week after argument, the Federal Circuit affirmed
`without opinion under Federal Circuit Rule 36. Pet. App.
`1a-2a. Apple sought rehearing. C.A. Dkt. 78. Apple also
`urged the court to hold its rehearing petition pending
`decisions in the Mangrove, Cisco Reexamination, and
`Cisco/Apple Reexamination appeals, asserting those
`decisions might result in cancellation of every claim
`infringed by FaceTime, VPN on Demand, or both. Id. at
`16-18. The Federal Circuit held Apple’s petition pending
`those appeals.
`2. The Federal Circuit Overturns the PTO in
`Critical Part in the Cisco Reexamination
`Appeal
`In June 2019, with Apple’s rehearing petition in this
`case still pending, the Federal Circuit decided the Cisco
`Reexamination appeal. It vacated the PTO’s finding
`that claim 5 of the ’504 patent—infringed by FaceTime—
`was unpatentable, holding that the PTO failed to consider
`VirnetX’s arguments. 776 F. App’x at 704. The court
`upheld other PTO unpatentability findings. Id. at 698.
`Apple filed a supplemental brief in this case, urging
`that the Cisco Reexamination decision should be given
`“collateral estoppel” effect. C.A. Dkt. 86 at 1-13. Apple
`
`
`
`
`13
`urged VirnetX should be precluded from asserting that
`any claim of the ’504 and ’211 patents is patentable. Ibid.
`If the court agreed, Apple argued, damages in this case
`should be “recalculate[ed]” so as to cover only VPN on
`Demand. Id. at 14-15. But Apple conceded that recalcu-
`lation would be necessary only if the court held that “all
`claims of the ’504 and ’211 patents asserted against
`Apple * * * (including claim 5 of the ’504 patent)” were
`unpatentable. Ibid. (emphasis added). That, however,
`had not happened.
`3. The Federal Circuit Overturns the PTO in the
`Mangrove Appeal
`In July 2019, the Federal Circuit decided the Man-
`grove appeal involving the ’151 and ’135 patents infringed
`by VPN on Demand. The panel vacated all of the PTO’s
`unpatentability findings, holding that the PTO’s claim
`construction was erroneous and its findings were unsup-
`ported by substantial evidence. 778 F. App’x at 905-906.
`It also held that the PTO erred in refusing VirnetX dis-
`covery on a potentially case-dispositive issue. Id. at 901-
`904.
`
`4. The Federal Circuit Overturns the PTO in
`Critical Part Again in the Apple/Cisco Reex-
`amination Appeal
`On August 1, 2019, the Federal Circuit decided the
`Apple/Cisco Reexamination appeal involving the ’504
`and ’211 patents infringed by FaceTime. The same panel
`that heard this case vacated PTO findings that several
`claims, including claim 5 of the ’504 patent, were un-
`patentable. 931 F.3d at 1378. It held that a statutory
`estoppel provision barred Apple from challenging those
`claims before the PTO after having lost its validity
`challenge in this case years before. Id. at 1369-1378; see
`
`
`
`
`
`14
`pp. 5-6, supra. The court upheld unpatentability findings
`regarding other claims. 931 F.3d at 1379-1380.
`The court rejected as “unpersuasive” Apple’s argu-
`ment that “collateral estoppel” required it to find all
`claims of the ’504 patent unpatentable. 931 F.3d at 1378
`n.15.
`5. The Federal Circuit Denies Apple’s Motion To
`File a Successive Rehearing Petition
`The Federal Circuit’s review of PTO proceedings left
`intact all claims of the ’135 and ’151 patents (infringed by
`VPN on Demand) and claim 5 of the ’504 patent (in-
`fringed by FaceTime). Apple had conceded that, unless
`all claims underlying the infringement findings for each
`feature were cancelled, damages would be unaffected.
`See pp. 12-13, supra. Accordingly, on August 1, 2019,
`after holding Apple’s rehearing petition for six months
`pending the three PTO appeals, the Federal Circuit
`denied rehearing. Pet. App. 129a.
`On August 7, 2019, Apple filed a motion for leave to
`file a second rehearing petition. C.A. Dkt. 98. Apple con-
`ceded that “claim 5 of the ’504 patent does not currently
`stand invalidated.” C.A. Dkt. 99-2 at 6 (emphasis added).
`It also conceded that “redetermination of damages”
`would be required only if “all asserted claims of two of
`the patents—the ’5