Six Hundred Million Dollars

The E.D. Texas is out with a $600,000,000+ jury verdict against Apple in favor of VirnetX.  (VirnetXVerdict). Interesting, after the huge verdict bump, the market cap for the company is $250.9M. That may be about right after paying for fees, costs, and taxes. However, there will still be appeals.

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

51 thoughts on “Six Hundred Million Dollars

  1. iit: Need the improvement be “remarkable” or “revolutionary”?

    To be patentable? No.

    But it seems safe to assume that the innovation in this case represented a quantum leap in the way people think about private data transfer over the Internet, given the value assigned to it by the jury. $600 million dollars is quite a bit of money.

    The named inventors …. surely they are some of the most important and highly regarded people in the recent history of computing. Right?

  2. We need triple damages on this one and a few results like it. Maybe then Apple will notice that the garbage patent game isn’t to their long term benefit and help reform the system to eliminate information and software patents.

      1. Looks like they patented the use of information to determine whether they’d make you a connection in claim 13 at least. I haven’t looked at the others.

            1. I’m not sure I would call a “connection” a “physical process”.

              It can be a physical process. But it’s an old one. Granting access based on status confirmation is older than the human race. So is the use of information to confirm status.

              But this is on teh Internets! So let’s all pretend we were born yesterday. Gosh, look at how shiny and new everything is.

              1. Do you know what is really old?

                Protons, neutrons, and electrons.

                Ah, but the different configurations matter, n’cest-ce pas?

                Or are you still at the maturity level of “three resistors in parallel is the same as three resistors in series”…?

                1. This MM really never offers anything of substance in his comments other than to be here to be the unenlightened opposite of anyone’s argument. It seems like an irrelevant way to live, IMHO, but he is what he is; devoid of any fundamental grounding of a right or a wrong… on anything. He is like watching a balloon that got away on a windy day.

            1. Information should be patentable. It’s the information age

              Information has been valuable for a long, long, long time and it’s difficult to imagine when that’s ever going to change. Is there more information out there now than there was 50 years ago? Yup. Pretty sure that’s been the case since people have been keeping track.

              If you do believe we are in some “new age” and “everything is different” now, then perhaps it’s worth taking some time to come up with a new system for incentivizing the development of this protectable information (assuming you can convince people that additional incentive is necessary). The patent system we have now certainly wasn’t designed to allow people to monopolize information (or logic) for 20 years. That’s why it sxcks so hard.

              Just not information consumed by human beings.

              What’s the fundamental difference between the information I process to determine X, on one hand, and the information used by the computer I’ve programmed to perform the same determination?

              1. One fundamental difference is that the law as written by Congress is meant to protect one and not the other.

                Malcolm’s desire to turn a blind eye to the very real difference (gee, goal post move anyone) and try to make this something TOTALLY in the mind reminds me of one of my favorite words:

                Anthropoporphication.

                Machines, my dear friend Malcolm, really do NOT think and do NOT have the legal protections that people have. You confuse and conflate the two with your attempts here. Time for you to step out of that cave.

              2. That’s a good question MM

                Q “What’s the fundamental difference between the information I process to determine X, on one hand, and the information used by the computer I’ve programmed to perform the same determination?”

                A. What’s the difference between a toothpick and 7 axis milling machine? What’s the difference between a pool float and a nuclear submarine?

                We have created technology that exceeds the human mind in certain kinds of information processing, and is exceeding it further every day in different dimensions. Thus there is a new kind of intelligence in the world, and that intelligence is generating new kinds of useful information that no human mind or collection of minds could accomplish.

                The patent system exists for two reasons; providing incentives to innovate is only one of them. The other is to encourage disclosure of advances with the quid pro quo that the disclosure would be protected for X amount of time.

                When I started this journey, I sensed that software should not be patentable. As I learned more about the evolution of patent law over hundreds of years , and I applied that to my understanding of information technology, it became clear to me that some software should be patentable.

                Information consumed by people is done so individually and idiosyncratically- the essence of why we have an abstract ideas exception to eligibility. To avoid encroachment on rights of creative expression, association, or freedom from arbitrary restriction on culture and pursuit of happiness, the line of patent rights to exclude must be drawn at that point of human consumption.

                New, useful, and non-obvious algorithms and simulations consumed by non-human intelligence to further human goals should be encouraged to be disclosed, and so protected. The internal functioning of much modern technology requires information inventions as components of that functioning- this is different in degree and kind from determining X using a human mind, although there may be greater or lesser parallels in given situations.

                The failure of the patent system to adjust to the realities of information inventions is the root of the problems we see today. The bar for what is obvious (predictable) or enabled (fully described) or within a single field of endeavor (PHOSITA) is much higher/more diffused for information inventions than physical inventions- so true information inventions are likely to be relatively much more rare than the reams and reams of junk flowing from the USPTO under current law would suggest.

                The distortion of half the activity of the current system to pure racketeering is detestable- I’d like to save the system, but if it must be destroyed so it stops destroying, that’s what has to happen.

                1. is much higher/more diffused for information inventions than physical inventions

                  Sorry but no – there is but one law written for all art fields.

                  You are only employing wishful thinking here Mr. Snyder.

                  But I will say, you are getting closer…

                2. A. What’s the difference between a toothpick and 7 axis milling machine? What’s the difference between a pool float and a nuclear submarine?

                  What’s the difference between a hack like you, Martin, and a hack like “anon”?

                  I’m not sure I can tell anymore.

                  1. Other than not being anonymous, actually managing a self-funded tech business and employing dozens of people, actually dealing with patentees and actually paying legal fees? Other than being willing to learn, or to work to find consensus to improve things?

                    Nothing I guess.

                  2. Hahahaha.

                    BOTH wrong.

                    But at least Mr. Snyder is getting closer.

                    The same most definitely cannot be said for Malcolm as he celebrates his Decade of Decadence this month.

              3. Would a new gate or a new lock based on a physical key engages physical tumblers be patentable?

                If so, then why should a new lock, where the key is information and the engagement with tumblers is replaced with new processing that ensures security not be eligible?

  3. At the very least VHC will **pay** nearly its entire market cap in Fed Taxes to the USA, as Apple has not paid any Taxes on the $600 mill it accumulated from its infringement. The $600 mill was probably a great deal for Apple, as it is discounted down from having to pay on the real value of its theft

      1. If you think that Apple’s taxes are irrelevant you have sadly missed the point to which you are responding.

        (hint: it is not a patent law point)

    1. I am not sure I follow – either
      (1) you imply that Apple will pay the $600 million from their reserve of currency outside the US to satisfy the judgment (and VirnetX would agree to accept that). I think, but am not sure, that VirnetX would be deemed to have made that $600M no matter where the money comes from. (deemed gross income based on judgment satisfied in US state (difference between recovery of equity etc (not applicable and not gross income) and lost compensation (applicable and gross income)). Therefore, VirnetX would have no reason to agree that Apple can pay them with outside US money. Further, I am not sure Apple would do that (it’s not deductible as a business expense) because the judgment was satisfied with outside US funds (but someone please correct me) (if not, GREAT!, the US doesn’t get the money as included in gross income and apple gets deductions when using that money!)

      or

      (2) you are talking about the time value of money (@ $600M for past infringement) by arguing that current (2015) reasonable royalty for past infringement is somehow at a discounted price? If so, and I’m not too familiar with damages, but do they consider the time value of money (say from 6 years ago to time complaint filed)? I agree that paying $600M today, rather than $600M over the past 6 years is a deal (if damages rules don’t take into account time value of money for past damages).

  4. “after the huge verdict bump, the market cap for the company is $250.9M”. Given that Alice / 101 subject matter eligibility may still be in play for the appeal, shorting this stock may be an excellent idea. I hear that you can invalidate anything under Alice.

      1. From IPR2015-0187 filed October 31, 2014:

        The ‘151 patent is the subject of a number of civil actions including: (i) Civ.
        Act. No. 6:13-cv-00211-LED (E.D. Tex.), filed February 26, 2013; (ii) Civ. Act.
        No. 6:12-cv-00855-LED (E.D. Tex.), filed November 6, 2012; (iii) Civ. Act. No.
        6:10-cv-00417-LED (E.D. Tex.), filed August 11, 2010; (iv) Civ. Act. No. 6:11-cv-
        00018-LED (E.D. Tex), (v) Civ. Act. No. 6:13-cv-00351-LED (E.D. Tex), filed
        April 22, 2013 (“the 2013 VirnetX litigation”); (vi) Civ. Act. No. 6:10-cv-00094
        (E.D. Tex); and (vii) Civ. Act. No. 6:07-cv-00080 (E.D. Tex).

        One would not know that Apple was a party to these actions unless one looked them up. Now why would they do that? 315(b)?

    1. 4 against the ‘135, all denied; 7 against the ‘211, all but one dismissed or terminated, one pending (Apple); 7 against the 504, all denied, dismissed or terminated, one pending (Apple); 3 against the 151, all terminated but one (Apple).

      The pending IPR are IPR201500186 (‘211), IPR201500187 (‘151) and IPR201500188 (‘504).

        1. Dennis, after B&B Hardware, where differences in burdens of proof were held not material to the issue, as soon as the court enters final judgment in Texas, it should bind the same parties in the PTO to the extent of the validity of the claims in suit.

          VirnetX will try to make sure any other IPRs are settled out as well. If they lose to a short-seller or the like, they should argue the lack of standing to appeal if they happen to lose, and move for the Feds to simply vacate the Board’s decision. If the Solicitor tries to intervene at the appellate level — standing in the shoes of a party that had no standing in the first place, the court should dismiss this solicitor out as well for not having standing.

            1. 6,

              You are right – the law is just not written as Ned would like here (with the IPR process merely being one of an advisory nature to a true Article III court).

              No court can rewrite the law to that extent and change how Congress set up this system.

    2. Yes, a few. Taking 6502135 as an example, Apple was involved way back when, but there were some issues about exceeding the time limit under the law for filing an IPR when named in an infringement lawsuit. This was followed by RPX Corporation and Microsoft filing IPRs. None of these were instituted.

      However, currently, “Mangrove Partners Master Fund, Ltd.” (appears to be a hedge fund, although VirnetX argues that the full list of real parties in interest has not been disclosed) has an instituted IPR, and Apple subsequently filed another IPR plus a request for joinder with Mangrove’s IPR, which the PTO granted.

  5. So … what was the super awesome alleged “innovation” here?

    Mind you, I’m not asking about the service that Apple provided which is undoubtedly the greatest thing since evenly divided subunits of bread, wherein said subunits are divided prior to sale.

    I’m asking about what remarkable revolutionary improvement was made to the prior art by the alleged “innovators” on these patents.

        1. As it turns out, I was wrong, people are probably using this thing all the time with their Iphones. Considering how broad the claims are I wouldn’t be surprised at all.

    1. Looks like the one 6502135 is a protocol and computer therefore.

      link to google.com

      10. A system that transparently creates a virtual private network (VPN) between a client computer and a secure target computer, comprising:
      a DNS proxy server that receives a request from the client computer to look up an IP address for a domain name, wherein the DNS proxy server returns the IP address for the requested domain name if it is determined that access to a non-secure web site has been requested, and wherein the DNS proxy server generates a request to create the VPN between the client computer and the secure target computer if it is determined that access to a secure web site has been requested; and a gatekeeper computer that allocates resources for the VPN between the client computer and the secure web computer in response to the request by the DNS proxy server.

      So a system with a proxy server that does something and a client computer that will make a VPN in response to a request by a the proxy server (aka an old computer with VPN software on it). The thing that the proxy server does is determine whether or not a DNS request is asking for the IP address of a secure or non-secure computer (aka apply a rule) and if it is a secure one then it generates a request to make a VPN with the secure computer. The proxy server of course is near certain to just be software and the computer is a general purpose computer.

      Basically a computer with VPN software on it that will make a VPN when triggered by some new proxy software that will determine, based on the DNS request, whether or not the IP requested belongs to a secure or non-secure computer.

      In other words, the idea of making a VPN automatically on a computer in response to whether or not your DNS is requesting the IP of a secure or non-secure computer as determined by proxy software. I’m kind of surprised this survived 101, unless of course Apple chose to not make the “full throated” 101 challenge.

      Interesting aside:
      1. A method of transparently creating a virtual private network (VPN) between a client computer and a target computer, comprising the steps of:
      (1) generating from the client computer a Domain Name Service (DNS) request that requests an IP address corresponding to a domain name associated with the target computer;
      (2) determining whether the DNS request transmitted in step (1) is requesting access to a secure web site; and
      (3) in response to determining that the DNS request in step (2) is requesting access to a secure target web site, automatically initiating the VPN between the client computer and the target computer.

      Make, transparently, a VPN by generating a DNS request from a client computer corresponding to a specific IP of a target computer, determine whether the DNS is requesting access to a secure website, and automatically initiate the VPN between the client computer and the target computer in response to the determining that the DNS request is requesting access to a secure target web site.

      Basically make a transparent VPN by automatically making the VPN when you determine whether a DNS made by a client computer is requesting access to a secure website or a non-secure one. < abstract idea.

      1. Wait wait! My bad!

        We’re looking at claim 13, not claim 10!

        13. A method of establishing communication between one of a plurality of client computers and a central computer that maintains a plurality of authentication tables each corresponding to one of the client computers, the method comprising the steps of:
        (1) in the central computer, receiving from one of the plurality of client computers a request to establish a connection;
        (2) authenticating, with reference to one of the plurality of authentication tables, that the request received in step (1) is from an authorized client;
        (3) responsive to a determination that the request is from an authorized client, allocating resources to establish a virtual private link between the client and a second computer; and
        (4) communicating between the authorized client and the second computer using the virtual private link.

        So basically make a group chat, where one of the computers checks that the request to make a group chat from another computer is using an authorized client (aka an authorized chat program like Imessenger?) and after making sure that it is an authorized program making a virtual private link between the one of the computers and still yet another computer, and then chatting using the virtual private link.

        In other words, using a 3rd party computer to make sure that a first computer in a communication is using an “authorized” communication program and then make a virtual private link for the first computer in the chat and another computer to use to communicate (chat etc) where the 3rd party computer contains authorization data.

        In other words, using Apple’s central server to verify that a person you’re trying to chat with etc is using apple software before the central server makes you a connection.

        1. We could probably boil that down to 3rd party computer verification of authorized software on the computer someone wants to communicate to before it makes you a private link to communicate.

          1. Authorization … genius. Who’d have thunk? In the context of a secure communication?

            I see a Nobel prize in the future for these inventors.

      2. 6, claim 1 reads like a method. It also sounds like every single step in the method is individually old. For example, I would assume that one of ordinary skill in the art at the time of the patent knew exactly how one could determine, for example, whether the “DNS request” is requesting access to a secure website.

        But what if that step were not known? Then I think we have a functional claim at the point of novelty – essentially claiming an idea.

    2. Need the improvement be “remarkable” or “revolutionary”? All that matters is (1) the patent be valid, (2) the patent be infringed, and (3) the award can be reasonably calculated.

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