An East Texas jury has ruled that Apple must pay patent-holding company VirnetX $625.6 million for infringing four patents. It's a massive verdict for VirnetX, a company that has no products and makes its money solely through patent litigation.
The verdict form (PDF) shows the jury found Apple infringed on every patent claim that was at issue. The first question was how much Apple should pay for infringement related to two VirnetX patents that it had already been ruled to infringe, and the jury held Apple should pay $334.9 million. The panel also found in VirnetX's favor on other, disputed patent claims, and ordered Apple to pay another $290.7 million for infringing those. The accused products included Apple's VPN on Demand, FaceTime, and the iMessage service.
The VirnetX v. Apple showdown may be one of the last of its kind in which a "patent troll"-style company is able to wrest a nine-figure jury verdict from a tech company. Patent trolling still abounds and is increasingly concentrated in East Texas. But the ability to get huge verdicts has been dampened by changes in case-law, particularly the Supreme Court's 2014 Alice Corp. v. CLS Bank decision that made it easier for defendants to get software patents thrown out of court.
Court records from the VirnetX trial show that the jury began deliberating after 4:00pm Central Time on Tuesday, and they left just after 5:00pm. They resumed deliberations Wednesday, and the verdict showed up in the public courts database some time after 3:00pm Central Time.The VirnetX trial is partly a do-over of a 2012 jury trial in which VirnetX won $368 million in damages. In addition to the $368 million, VirnetX was on the verge of getting an even bigger reward: a running royalty of nearly one percent of iPhone and iPad revenue. However, both the $368 million and the ongoing royalty were overturned on appeal.
VirnetX has had some big wins in the past. Its original patent attack on Microsoft ended in a $200 million settlement. Microsoft later paid $23 million to end claims that Skype also infringed VirnetX patents. VirnetX sued Cisco, but Cisco took the case to a jury trial and prevailed.
VirnetX's patents (1, 2, 3, 4) originated at a company called Science Applications International Corporation, or SAIC. VirnetX has been saying for years it has plans to market various products, but for the time being, its income comes from licensing patents. It has 14 employees and leases a small office suite in Zephyr Cove, Nevada, for $5,000 a month, according to its most recent yearly financial statement.
VirnetX stock is up substantially in after-hours trading. The VHC stock traded at $3.60 late Tuesday and is trading at $8.80 per share at press time. Apple stock didn't budge significantly.
Going forward, VirnetX may seek to impose a "running royalty" on Apple products, like it won last time. Meanwhile, Apple is surely looking to appeal.
“We are thankful for the jurors’ hard work and attention in this case, and for reaching a just verdict,” said VirnetX lawyer Jason Cassady in an e-mailed statement. “The jury saw what we have been saying all along: Apple has been infringing VirnetX’s patented technology for years.”
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