David L. Mccombs Debra J. Mccomas Theodore M. Foster 2323 Victory Avenue, Suite 700 Dallas, Texas 75219 Phone: (972) 739-8636 Fax: (972) 692-9116

Case: 19-1671 Document: 28 Page: 1 Filed: 11/18/2019
NO. 19-1671
IN THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT
VIRNETX INC.,
Appellant,
v.
CISCO SYSTEMS, INC.,
Appellee.
APPELLEE’S RESPONSE TO APPELLANT’S

SECOND MOTION TO REMAND
From the U.S. Patent and Trademark Office,

Patent Trial and Appeal Board No. 95/001,679
David L. McCombs
Debra J. McComas
Theodore M. Foster
HAYNES AND BOONE, LLP
2323 Victory Avenue, Suite 700
Dallas, Texas 75219
Phone: (972) 739-8636
Fax: (972) 692-9116
[email protected]
[email protected]
[email protected]
Attorneys for Appellees

TABLE OF CONTENTS
TABLE OF CONTENTS ........................................................................................... i
TABLE OF AUTHORITIES .................................................................................... ii

INTRODUCTION .....................................................................................................1
ARGUMENT IN RESPONSE...................................................................................2
I. VirnetX’s reliance on Arthrex is misplaced. ...................................................2
II. The Director, not a Board judge, has ultimate supervisory

authority over inter partes reexaminations, including appeals. ......................4
A. The Director supervises inter partes reexamination

appeals. ..................................................................................................4
B. The Director has review authority over inter partes

reexamination appeal decisions.............................................................5
C. Board judges in inter partes reexamination appeals are

inferior officers. .....................................................................................7
III. A Board panel in an inter partes reexamination appeal acts with

the Director’s delegated authority. ..................................................................8
CONCLUSION AND PRAYER ...............................................................................9
CERTIFICATE OF INTEREST ..............................................................................10

CERTIFICATE OF SERVICE ................................................................................12
ECF CERTIFICATION ...........................................................................................13

CERTIFICATE OF COMPLIANCE .......................................................................13
i
TABLE OF AUTHORITIES
Page(s)
Cases
Arthrex, Inc. v. Smith & Nephew, Inc.,

No. 18-2140, --- F.3d ----, 2019 WL 5616010 (Fed. Cir. Oct. 31,
2019) ............................................................................................................passim
Edmond v. United States,

520 U.S. 651 (1997) ..........................................................................................4, 7
Statutes
35 U.S.C. § 2 ..............................................................................................................4
35 U.S.C. § 3 ..............................................................................................................4
35 U.S.C. § 6 (2012) ..................................................................................................2
35 U.S.C. § 6 ......................................................................................................3, 5, 8
35 U.S.C. § 132 ..........................................................................................................6
35 U.S.C. § 312 ..........................................................................................................5

35 U.S.C. § 314 ......................................................................................................3, 5
35 U.S.C. § 318 ..........................................................................................................3
35 U.S.C. § 319 ..........................................................................................................3
Other Authorities
37 C.F.R. § 1.181 .......................................................................................................6

37 C.F.R. § 1.183 .......................................................................................................6
37 C.F.R. § 41.3 .....................................................................................................6, 8
37 C.F.R. § 41.81 .......................................................................................................6
Leahy-Smith America Invents Act, Pub. L. 112-29, (Sept. 16, 2011) ..................2, 3
ii
MPEP 2671.03 ...........................................................................................................6
iii
INTRODUCTION
The panel members of the Board who heard VirnetX’s appeal in the inter
partes reexamination below were acting properly within their roles as inferior
officers of the United States. This Court’s decision in Arthrex is not controlling
because it addresses only the authority of Board judges to hear trial proceedings
under the America Invents Act (AIA). This case proceeds under the patent laws as
if the America Invents Act had not been enacted. Furthermore, the Director of the
Patent Office has supervisory authority over the Board’s reexamination appeal
decisions, including through a petition process that distinguishes appeals from AIA
trial proceedings. Thus, the Board judges hearing appeals in inter partes
reexaminations were properly appointed as inferior officers under the Constitution.
1
ARGUMENT IN RESPONSE
Appellee Cisco Systems, Inc. (“Cisco”) asks the Court to deny VirnetX Inc.’s
(“VirnetX”) Second Motion to Remand. In its motion, VirnetX urges this Court’s
decision in Arthrex1 as justification to further delay the final resolution of this case.
But Arthrex focused on the role of Patent Trial and Appeal Board2 judges in hearing
Patent Office trials, not in their role (as here) in reviewing on appeal the decisions
of a team of examiners in inter partes reexamination. Because the Director retains
extensive supervisory control over the Board’s decision making in reexamination
appeals, the Board judges’ appointments by the Secretary of Commerce are
consistent with the Appointments Clause of the Constitution. No vacatur or remand
is justified or necessary.
I. VirnetX’s reliance on Arthrex is misplaced.

VirnetX’s motion is premised entirely on the assumption that this Court’s
decision in Arthrex3 is equally applicable and controlling for inter partes
1
Arthrex, Inc. v. Smith & Nephew, Inc., No. 18-2140, --- F.3d ----, 2019 WL
5616010 (Fed. Cir. Oct. 31, 2019).
2
While the Board is referred to as the Board of Patent Appeals and Interferences in
the Pre-AIA statutes governing inter partes reexamination, for simplicity and
consistency Cisco simply refers to the Board by its current name, the Patent Trial
and Appeal Board. See Pre-AIA 35 U.S.C. § 6 (2012); Leahy-Smith America Invents
Act, Pub. L. 112-29, § 7(e)(3) (“the Patent Trial and Appeal Board may be deemed
to be the Board of Patent Appeals and Interferences for purposes of appeals of inter
partes reexaminations…”).
3
In numerous proceedings, including this one, the government has moved to stay
any remand pending anticipated en banc consideration of Arthrex. Cisco does not
2
reexamination appeals. But Arthrex addressed the role of Board judges in inter
partes reviews under, inter alia, 35 U.S.C. §§ 6, 314, 318 and 319, as enacted in the
America Invents Act. Arthrex, slip op. at 9-10, 13. However, Congress specifically
provided for inter partes reexaminations, such as this proceeding, to continue as if
those portions of the America Invents Act “had not been enacted.” Leahy-Smith
America Invents Act, Pub. L. 112-29, § 6(c)(3)(C) (Sept. 16, 2011); see also id.,
§ 7(e)(2) (“the provisions of sections 6, 134, and 141 of title 35, United States Code,
as in effect on the day before the effective date of the amendments made by this
section shall continue to apply to inter partes reexaminations that are requested under
section 311 of such title before such effective date”). This Court’s ultimate holding
in Arthrex is inapplicable to this case because Arthrex reviewed statutory text that—
so far as this proceeding is concerned—was not enacted. VirnetX’s motion does not
acknowledge Congress’s specific provision for continuing inter partes
reexaminations under the pre-existing laws, let alone grapple with its implications.
For this reason alone, VirnetX’s motion to remand should be denied.
oppose that request. If no stay is granted, however, and recognizing the panel
decision in Arthrex as the current state of the law in this Circuit, Cisco limits its
response to the bases for distinguishing this case (and reexamination proceedings)
from the inter partes review process challenged in Arthrex. Cisco reserves its right
to raise additional arguments in the event Arthrex is modified or superseded by any
proceedings on rehearing.
3
II. The Director, not a Board judge, has ultimate supervisory authority over
inter partes reexaminations, including appeals.
VirnetX’s motion also fails on its merits. Inter partes reexaminations are
different in many ways from inter partes reviews considered in Arthrex and relied
upon by VirnetX. The Board judges who heard VirnetX’s inter partes reexamination
appeal were properly appointed inferior officers.
While there is no “exclusive criterion” separating principal officers from
inferior officers, the “extent of direction or control” provided by a presidentially
appointed official is “the central consideration.” Arthrex, slip op. at 9 (citing Edmond
v. United States, 520 U.S. 651, 663 (1997)). Specifically, at issue is: (1) the level of
supervision and oversight a presidentially appointed official has over the officers;
and (2) whether an appointed official has the power to review and reverse the
officers’ decision. Arthrex, slip op. at 8-9; Edmond, 520 U.S. at 664-665. These
factors support finding that Board judges hearing inter partes reexamination appeals
are inferior officers.
A. The Director supervises inter partes reexamination appeals.
The Director has the authority to promulgate regulations governing the
conduct of inter partes reexamination appeals. Pre-AIA 35 U.S.C. § 2(b)(2). He also
has the power to provide policy directives and management supervision of the
Office. Id. § 3(a). The Director has the sole authority to designate Board opinions as
4
precedential, which are then binding on future Board panels. Patent Trial and Appeal
Board Standard Operating Procedure 2 at 1, 11.
The Director has additional powers governing the procedures applicable to
individual cases. For example, the Director decides whether to institute an inter
partes reexamination in the first instance. Pre-AIA 35 U.S.C. § 312(a). And the
Director controls the selection of judges to hear each inter partes reexamination
appeal. Pre-AIA 35 U.S.C. § 6(c).
In summary, the Director possesses authority to promulgate regulations
governing inter partes reexamination appeals and to issue policy interpretations
which the Board judges must follow. These supervisory powers weigh in favor of a
conclusion that Board judges hearing inter partes reexamination appeals are inferior
officers.
B. The Director has review authority over inter partes reexamination

appeal decisions.
The Director also has extensive authority to control the outcome of an
individual inter partes reexamination appeal. That authority begins before a case
even reaches the Board. Inter partes reexaminations are primarily conducted by the
examining corps under procedures that are substantially similar to ordinary patent
prosecution. Pre-AIA 35 U.S.C. § 314(a). Only after a team of examiners has
reviewed the prior art, made findings of fact, and provided written patentability
determinations does the Board take up the case as an appeal. Pre-AIA 35 U.S.C.
5
§ 314(a); MPEP 2671.03 (“A panel review will be conducted at each stage of the
examiner’s examination in an inter partes reexamination proceeding.”). Since the
examiners act under the delegated authority of the Director, the Director has absolute
authority to determine what findings of fact and conclusions of law are present in
the reexamination at the start of the appeal process. See Pre-AIA 35 U.S.C. § 132(a)
(“…the Director shall notify the applicant thereof, stating the reasons for such
rejection…”). The Director can change any part of the examiners’ decisions to reject
or confirm a claim under reexamination. Doing so could obviate an appeal entirely—
if, for example, the Director ordered the examiners to withdraw a rejection of a
claim—or it could alter the posture of the case later presented to the Board.
The Director’s supervision of inter partes reexamination proceedings does not
end when a case passes to the Board’s jurisdiction for an appeal. In stark contrast to
inter partes reviews, inter partes reexamination appeals allow for the Director’s
direct involvement through a petition process. See 37 C.F.R. §§ 41.3 & 1.181(a)(3).
Specifically, a party to an appeal before the Board can invoke the supervisory
authority of the Director. See 37 C.F.R. §§ 41.3 & 1.181(a)(3). The Director is also
empowered to take action in an appeal sua sponte. See 37 C.F.R. § 1.183. The
Director’s petition powers continue through the entirety of the Board’s jurisdiction,
including a period following issuance of a decision on appeal. See 37 C.F.R. § 41.81
(Board retains jurisdiction “until all parties’ rights to request rehearing have been
6
exhausted”). The Director can therefore exercise his supervisory powers in an appeal
even after the Board’s decision issues, providing the Director with a mechanism to
directly review Board decisions. This supports a conclusion that Board judges
hearing inter partes reexamination appeals are principal officers.
C. Board judges in inter partes reexamination appeals are inferior

officers.
In summary, the Director has near-complete control over the appellate work
of the Board. By controlling the proceedings before the examining corps, the
Director determines how a case will be presented to the Board, including the
evidence, findings of fact, and conclusions of law to be reviewed. The Director’s
rules determine how the Board will hear the case. The Director chooses which
specific judges will be assigned to the case. And the Director retains the authority to
act in the case, either on petition from a party or sua sponte, throughout the appeal
and subsequent rehearing period.
Because an inter partes reexamination is conducted subject to the Director’s
supervision, both before the examining corps and on appeal before the Board, Board
judges hearing inter partes reexamination appeals are “officers whose work is
directed and supervised at some level by others [i.e., the Director] who were
appointed by Presidential nomination with the advice and consent of the Senate.”
Edmond, 520 U.S. at 662-63.
7
Thus, Board judges are properly appointed inferior officers. VirnetX’s motion
to remand should be denied.
III. A Board panel in an inter partes reexamination appeal acts with the
Director’s delegated authority.
The Director has delegated his supervisory authority over appeals (based on
the petition process) to the Chief Administrative Patent Judge. 37 C.F.R. § 41.3(a).
The Chief Administrative Patent Judge can further delegate this supervisory
authority, for example, to Board judges. Id. This line of delegation is mirrored in the
process for assigning cases to Board panels. See PTAB Standard Operating
Procedure 1 (Rev. 15) (“The Director’s authority under 35 U.S.C. § 6(c) to designate
panels has been delegated to the Chief Judge. The Chief Judge may further delegate
the authority delegated by the Director…”). Thus, the authority vested in a Board
panel hearing an appeal includes not only the statutory authority to hear the appeal
under 35 U.S.C. § 6, but also the Director’s supervisory authority to oversee the
actions of the panel. In other words, the Director has delegated to Board panels
hearing reexamination appeals the authority to oversee their own decisions. In
rendering a decision in a reexamination appeal, therefore, the Board acts with both
the authority given to it by Congress and with the authority delegated to it by the
Director. As this Court stated in Arthrex, the Board’s actions are immune to an
Appointments Clause challenge when they are undertaken with the delegated
authority of the Director. See Arthrex, slip op. at 30 (“the decision to institute is not
8
suspect”). The Board’s decision on appeal was, therefore, properly issued under both
the Board judges’ powers as inferior officers and under delegation of the Director’s
authority as a principal officer. VirnetX’s motion to remand should be denied.
CONCLUSION AND PRAYER

For the reasons explained above, VirnetX’s motion to remand is unwarranted
and should be denied.
Respectfully Submitted,
/s/ David L. McCombs

David L. McCombs
Debra J. McComas
Theodore M. Foster
2323 Victory Avenue, Suite 700
Dallas, Texas 75219
Phone: (972) 739-8636
Fax: (972) 692-9116
[email protected]
[email protected]
[email protected]
Attorneys for Appellee,

Cisco Systems, Inc.
9
CERTIFICATE OF INTEREST
Pursuant to Federal Circuit Rules 21(a)(2) and 47.4(a)(1), counsel for the
Appellee Cisco Systems, Inc. certifies the following:
1. The full name of every party or amicus represented by me is:
Cisco Systems, Inc.
2. The name of the real party in interest (If the party named in the caption
is not the real party in interest) represented by me is:
N/A.
3. All parent corporations and any publicly held companies that own 10
percent or more of the stock of the party or amicus curiae represented by me are:
N/A
4. The names of all law firms and the partners or associates that appeared
for the party or amicus now represented by me in the trial court or agency or are
expected to appear in this court (and who have not or will not enter an appearance
in this case) are:
Andrew Ehmke (Haynes and Boone, LLP)
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:
No. 17-1591, -1593, VirnetX Inc. v. Cisco Systems, Inc.

No. 18-1751, VirnetX Inc. v. Cisco Systems, Inc.
No. 17-1368, VirnetX Inc. v. The Mangrove Partners
No. 18-2140, Arthrex, Inc. v. Smith & Nephew, Inc.
No. 18-2082, Bedgear, LLC v. Fredman Bros. Furniture Co.
No. 18-1768, Polaris Innovations Ltd. v. Kingston Tech. Co.
10
November 18, 2019 /s/ David L. McCombs

David L. McCombs
11
CERTIFICATE OF SERVICE
I hereby certify that I served a copy on counsel of record on November 18, 2019, by:
U.S. Mail
Fax
Hand
X Electronic Means (by E-mail or CM/ECF)
David L. McCombs /s/ David L. McCombs

Name of Counsel Signature of Counsel
Law Firm: Haynes and Boone, LLP
Address: 2323 Victory Avenue, Suite 700
City, State, Zip: Dallas, Texas 75219
Telephone No.: (972) 739-8636
Fax No.: (972) 692-9116
E-Mail Address: [email protected]
12
ECF CERTIFICATION
I hereby certify that (i) the required privacy redactions have been made
pursuant to Federal Rule of Civil Procedure 5.2; (ii) the electronic submission is an
exact copy of the paper document; (iii) the document has been scanned for viruses
with the most recent version of a commercial virus scanning program and is free of
viruses; and (iv) the paper document will be maintained for three years after the
mandate or order closing the case issues.

David L. McCombs
CERTIFICATE OF COMPLIANCE
1. This response complies with the type-volume limitation of Fed. R. App.
P. 27(d)(2)(A) because:
■ this response contains 1,892 words, excluding the parts of the

motion exempted by Fed. R. App. P. 32(a)(7)(B)(i).
2. This response complies with the typeface and type style requirements
of Fed. R. App. P. 27(d)(1)(E) because:
■ this response has been prepared in a proportionally spaced

typeface using Microsoft Word 2016 in 14-point Times New Roman font.

David L. McCombs
4820-0810-1036
13

David L. Mccombs Debra J. Mccomas Theodore M. Foster 2323 Victory Avenue, Suite 700 Dallas, Texas 75219 Phone: (972) 739-8636 Fax: (972) 692-9116

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Case: 19-1671 Document: 28 Page: 1 Filed: 11/18/2019

IN THE UNITED STATES COURT OF APPEALS

CISCO SYSTEMS, INC.,

APPELLEE’S RESPONSE TO APPELLANT’S

From the U.S. Patent and Trademark Office,

Attorneys for Appellees

TABLE OF AUTHORITIES .................................................................................... ii

I. VirnetX’s reliance on Arthrex is misplaced. ...................................................2

II. The Director, not a Board judge, has ultimate supervisory

A. The Director supervises inter partes reexamination

B. The Director has review authority over inter partes

C. Board judges in inter partes reexamination appeals are

III. A Board panel in an inter partes reexamination appeal acts with

CONCLUSION AND PRAYER ...............................................................................9

CERTIFICATE OF INTEREST ..............................................................................10

ECF CERTIFICATION ...........................................................................................13

Arthrex, Inc. v. Smith & Nephew, Inc.,

Edmond v. United States,

35 U.S.C. § 312 ..........................................................................................................5

35 U.S.C. § 319 ..........................................................................................................3

37 C.F.R. § 1.181 .......................................................................................................6

37 C.F.R. § 41.3 .....................................................................................................6, 8

37 C.F.R. § 41.81 .......................................................................................................6

MPEP 2671.03 ...........................................................................................................6

reexaminations were properly appointed as inferior officers under the Constitution.

of a team of examiners in inter partes reexamination. Because the Director retains

extensive supervisory control over the Board’s decision making in reexamination

appeals, the Board judges’ appointments by the Secretary of Commerce are

consistent with the Appointments Clause of the Constitution. No vacatur or remand

I. VirnetX’s reliance on Arthrex is misplaced.

decision in Arthrex3 is equally applicable and controlling for inter partes

provided for inter partes reexaminations, such as this proceeding, to continue as if

acknowledge Congress’s specific provision for continuing inter partes

For this reason alone, VirnetX’s motion to remand should be denied.

appeal were properly appointed inferior officers.

While there is no “exclusive criterion” separating principal officers from

inferior officers, the “extent of direction or control” provided by a presidentially

are inferior officers.

A. The Director supervises inter partes reexamination appeals.

The Director has the authority to promulgate regulations governing the

conduct of inter partes reexamination appeals. Pre-AIA 35 U.S.C. § 2(b)(2). He also

Board Standard Operating Procedure 2 at 1, 11.

The Director has additional powers governing the procedures applicable to

appeal. Pre-AIA 35 U.S.C. § 6(c).

In summary, the Director possesses authority to promulgate regulations

governing inter partes reexamination appeals and to issue policy interpretations

B. The Director has review authority over inter partes reexamination

The Director also has extensive authority to control the outcome of an

prosecution. Pre-AIA 35 U.S.C. § 314(a). Only after a team of examiners has

examiner’s examination in an inter partes reexamination proceeding.”). Since the

or confirm a claim under reexamination. Doing so could obviate an appeal entirely—

The Director’s supervision of inter partes reexamination proceedings does not

including a period following issuance of a decision on appeal. See 37 C.F.R. § 41.81

hearing inter partes reexamination appeals are principal officers.

C. Board judges in inter partes reexamination appeals are inferior

evidence, findings of fact, and conclusions of law to be reviewed. The Director’s

and subsequent rehearing period.

Because an inter partes reexamination is conducted subject to the Director’s

Edmond, 520 U.S. at 662-63.

to remand should be denied.

hearing reexamination appeals the authority to oversee their own decisions. In

authority as a principal officer. VirnetX’s motion to remand should be denied.