In the most recent decision in the Apple/VirnetX saga, the US Court of Appeals for the Federal Circuit affirmed a remand ruling from the Patent Trial & Appeal Board finding the challenged claims of VirnetX’s patents unpatentable. VirnetX Inc. v. Mangrove Partners Master Fund, Ltd., Case No. 2020-2271 (Fed. Cir. Mar. 30, 2023) (Moore, C.J.; Hughes, Stark, JJ.) (nonprecedential).

VirnetX owns two patents relating to a “secure mechanism for communicating over the internet.” The patents relate to a system in which a DNS module “intercepts . . . and determines whether [a] request is for a secure site.” The system creates a VPN if the proxy determines that the request is for a secure site. If the proxy determines that the request is not for a secure site, it forwards the request to a conventional DNS.

Mangrove, Apple and Black Swamp (collectively, Mangrove) petitioned for inter partes review (IPR) challenging various claims of the patents. The Board found that all the challenged claims were unpatentable as anticipated by Kiuchi or obvious in view of Kiuchi and other references. VirnetX appealed to the Federal Circuit (Mangrove Appeal). In that appeal, the Federal Circuit determined that, contrary to the Board’s finding, when VirnetX distinguished Aventail during reexamination of one of the patents, VirnetX disclaimed “a system in which a client computer communicates with an intermediate server via a singular, point-to-point connection.” As a consequence of the prosecution disclaimer, the Court found that the claims “require[s] direct communication between the client and target computers.” The Court vacated the Board’s decision and remanded the case for the Board to determine further factual questions regarding Kiuchi because “substantial evidence does not support the Board’s finding that the C-HTTP name server of Kiuchi performs the functions of the claimed DNS proxy module.”

Following the Mangrove Appeal, the Board again found that Kiuchi—the only prior art reference at issue in the present appeal—discloses a “secure network” for the transfer of patient information in a hospital setting and teaches a “direct-communication VPN between the client and target.” As a result, the Board concluded that Kiuchi anticipates all the challenged claims. VirnetX again appealed.

The Federal Circuit first addressed the Board’s conclusion that “Kiuchi teaches a direct-communication VPN and is therefore within the scope of the claims of VirnetX’s … patent, and not an indirect-communication VPN, which would have brought Kiuchi within the scope of VirnetX’s disclaimer.” The Court agreed with the Board that “Kiuchi discloses direct communication that satisfies the claimed VPN.” Specifically, “Kiuchi’s user agent does not communicate with the client-side proxy using a singular, point-to-point connection because the user agent addresses the desired endpoint, and the VPN provides the required message routing for the user agent to receive a response from the desired endpoint.” Moreover, the Court reasoned that Kiuchi’s proxy servers forward data packets and that Kiuchi teaches “the ability to address data to a particular computer,” consistent with the scope of the claims.

Next, the Federal Circuit addressed the Board’s conclusion that “Kiuchi teaches a [DNS] module and, therefore, anticipates [certain] claims.” The Federal Circuit agreed with the Board and concluded that Kiuchi teaches the “determining,” “forwarding” and “creating” limitations of the claims at issue. Kiuchi’s client-side proxy and C-HTTP name server “determine[s] whether a DNS request sent by a client corresponds to a secure server,” “forward[s] the DNS request to a DNS function that returns anrIP address of a nonsecure computer when the DNS request does not correspond to a secure server,” and “automatically create[s] a secure channel between the client and the secure server when the intercepted DNS request corresponds to a secure server.”

The Federal Circuit refused to address VirnetX’s argument that Black Swamp was improperly joined in the IPR, noting that VirnetX failed to present any argument regarding Black Swamp’s joinder in the earlier Mangrove Appeal. Therefore, as the Court stated, the issue was forfeit.

Practice Note: VirnetX’s unsuccessful appeal from the Board decision likely marks the end of the road with regard to the patents in issue. Shortly after issuing its decision on the IPR appeal, the Federal Circuit dismissed the separate appeal from VirnetX’s district court dispute with Apple, involving the same patents, as moot. VirnetX Inc. v. Apple Inc., Case No. 21-1672 (Fed. Cir. Mar. 31, 2023) (Moore, C.J.; Hughes, Stark, JJ.) The Court stated: “Now that we have affirmed the Board’s finding of unpatentability, VirnetX has lost its cause of action, and its dispute with Apple is moot.”