“We are disappointed and disagree with the Federal Circuit’s decisions in light of its past rulings on these same patents.” – Kendall Larsen, VirnetX
The U.S. Court of Appeals for the Federal Circuit on Thursday upheld two Patent Trial and Appeal Board (PTAB) decisions finding VirnetX’s patent claims unpatentable in inter partes review (IPR) challenges brought by Apple, Inc. and Mangrove Partners.
The dispute relates to VirnetX’s U.S. Patent Nos. 6,502,135 and 7,490,151, which are directed to a “secure mechanism for communicating over the internet.” Mangrove Partners challenged several claims of the ‘135 patent at the PTAB, alleging they were anticipated by a 1996 article authored by Kiuchi and Kaihara, entitled “C-HTTP – The Development of a Secure, Closed HTTP-based Network on the Internet,” and that another claim was obvious based on Kiuchi in view of Mockapetris, Request for Comment 1034, “Domain Names – Concepts and Facilities.”
Mangrove also petitioned for IPR of the ‘151 patent, arguing the challenged claims were anticipated by Kiuchi and obvious based on (a) Kiuchi in view of RFC 1034, (b) Kiuchi in view of a 1996 reference by Rescorla and Schiffman, entitled “The Secure Hypertext Transfer Protocol” (“Rescorla”), and (c) Kiuchi in view of RFC 1034 and in further view of Rescorla. Apple was joined to both proceedings and Black Swamp IP was joined to the ‘151 IPR.
On appeal, the CAFC found that substantial evidence supported the PTAB’s finding that the Kiuchi reference teaches a “direct-communication VPN and is therefore within the scope of the claims of VirnetX’s ’135 patent, and not an indirect-communication VPN,” which would have brought Kiuchi within the scope of a disclaimer made by VirnetX during reexamination of the ‘135 patent that “disclaimed any virtual private networks and virtual private network communication links that are not direct” in order to distinguish another prior art reference.
As to the ‘151 patent, VirnetX argued on appeal that “Kiuchi does not teach a DNS proxy module capable of performing the determining, forwarding, and creating steps of the challenged claims,” but the Federal Circuit adopted the PTAB’s view “Kiuchi teaches a domain name server (‘DNS’) module and, therefore, anticipates claims 13 and 14 of the ’151 patent.” While the CAFC had previously vacated and remanded a Board decision that found Kiuchi’s C-HTTP name server alone taught the determining, forwarding, and creating limitations of claim 13, in the present appeal it said substantial evidence supported the PTAB’s adoption of the petitioners’ argument Kiuchi’s “client-side proxy, working with the C-HTTP name server, acts as the claimed DNS proxy module.”
VirnetX also challenged the PTAB’s decision to join Black Swamp to the IPR of the ‘151 patent, and asked the CAFC to vacate and remand based on Facebook, Inc. v. Windy City Innovations, LLC. The court said that VirnetX forfeited this issue when it failed to raise it in a previous appeal of a PTAB decision on the ‘151 patent.
The decision puts a 2020 jury award of $502 million to VirnetX at risk. In a statement, VirnetX CEO and President Kendall Larsen said: “We are disappointed and disagree with the Federal Circuit’s decisions in light of its past rulings on these same patents. We are evaluating all of our available options, including potentially seeking rehearing or certiorari review.”
The CAFC separately issued an opinion today dismissing VirnetX’s appeal of the U.S District Court for the Eastern District of Texas as moot in light of its Thursday ruling.
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