Apple Infringed VirnetX Patents: avoid paying nearly $440 million

On Monday, U.S Supreme Court dealt a blow to Apple Inc. in a decade-long legal battle over whether the iPhone maker infringed on another company’s patents.

Supreme Court refused to consider the appeal of Apple to avoid paying nearly $440 million to technology licensing company VirnetX for violations of its patents.

VirnetX declared a triumph over Apple in its statement. Shares of VirnetX increased significantly after the ruling and closed up 12% on a day when the larger stock market saw significant losses.

Since 2010, Apple and VirnetX have been battling in court, when VirnetX sued the tech giant in Eastern District Court of Texas for violating the four of its patents with its FaceTime and “VPN on Demand” applications on devices, which includes the iPhone and iPad. Patents involve the methods for enabling and securing real-time communications over the internet.

VirnetX is a holding company that licenses the patents for security technology. The company said that it owned 70 patents and patent applications in the United States, according to its 2018 annual report (the most recent one available),  and said that their portfolio of intellectual property is the foundation of our business model. VirnetX posted $63,000 in annual revenue in 2018.

A Texas jury found in 2016 that Apple had infringed on four patents that is resulting in a $302 million award for VirnetX, that award is now higher because of fees and interest. U.S Court of Appeals for Federal Circuit in Washington upheld that decision in 2019.

Then Apple had appealed to the Supreme Court, calling $440 million in damages grossly excessive and claiming the award overstated the value of patented technology. Apple Inc. (AAPL) also argued that at least some of the patents at issue in the suit are no longer valid, “leaving the Apple on the hook for hundreds of millions of dollars based on invalid claims,” the company said in its appeal.

The company has filed claims with the Patent Trial and Appeal Board challenging the patent-ability of the technology in all 4 VirnetX patents. And Board has officially found one of the four patents invalid; and the other three remain in the appeals process.

Now, Supreme Court has also rejected Apple’s appeal of judgement, the case will be sent back to the district court in Texas for the $440 million damages to be enforced.

The CEO of VirnetX Kendall Larsen said in a statement Monday that they have always believed that they were in the right with their court actions against Apple,

They believe that their technology provides an important security feature in some Apple Inc products especially the iPhone,” he said.

“We believe this (jury award) amount is more than fair considering the importance of Internet security.”