As reported by CNN Money, a jury recently awarded $626 million in damages against Apple in a case involving its FaceTime and iMessage software. VirnetX filed the lawsuit against Apple, claiming that Apple’s software infringes several of its patents that purportedly cover security technology used in real-time communications over the Internet.
VirnetX is a patent holding company, which means it does not manufacture goods based on its patents, but rather, owns a portfolio of patents, licenses them to third parties and sues for patent infringement when it believes its rights have been infringed. The company, for example, owns approximately eighty patents but has only fourteen employees. The four patents at issue in the Apple case were purchased from another company. This has led some to label VirnetX a “patent troll,” a company that, without practicing the inventions claimed by its patents, attempts to enforce patent rights against accused infringers that are far beyond the patent’s actual value or contribution to the prior art.
This type of business model can be profitable. In 2010, VirnetX reportedly reached a settlement with Microsoft in a patent case for $200 million. Situations like these, however, have led many to call for patent reform. It is relatively easy for companies to aggressively enforce their patents in the United States, where each side generally pays its own attorneys’ fees. In contrast, the losing party in a litigation in Europe is typically required to pay the other party’s attorneys’ fees, which may serve to decrease the number of frivolous lawsuits and/or reign in a patent holder’s tendency to aggrandize its patent rights.
The Apple case was originally tried in 2012. At that time, the jury returned a verdict against Apple in the amount of $368 million. Apple, however, appealed that decision on grounds that VirnetX failed to prove that consumers were buying Apple’s devices due to the software that allegedly violates its patents. The Court of Appeals vacated the damages award and remanded the case to the trial court (which incidentally is in the Eastern District of Texas, long noted for its generous juries in patent cases). On retrial, the jury found that Apple had willfully violated VirnetX’s patents. Importantly, a finding of willful infringement in patent litigation allows the patent owner to request that damages be enhanced up to three times the compensatory damages.
While $626 million is certainly a large award in a patent case, all is not lost for Apple. Per Reuters, the company reported a January 2016 cash balance of more than $200 billion.
