District Court: Apple must Pay $500 million Plus Interest

The Virnetx v. Apple patent battle has been running since 2010. Virnetx won its first verdict against Apple in 2012.  The court in that case required two more jury trials — but Virtnetx won all three and the $300 million damage award is pending appeal before the Federal Circuit.

Apple redesigned its FaceTime and VPNOnDemand products back in 2012.  Rather than adding the redesigns to the original case, Virnetx filed a new lawsuit (2012).  In April 2018, a jury awarded an additional $500 million in damages and found that Apple’s infringement was willful.

Now, Judge Schroeder (E.D.Tex.) has issued his post-trial opinion that confirms the verdict and damage award (with interest), but refuses to grant any injunction or enhanced damages for willfulness.  In particular, the court found no irreparable harm due to ongoing infringement; and – on willfulness – was pursuaded (despite the jury verdict of willfulness) that “Apple maintained a good faith belief that its redesigns did not infringe.” The court did grant an ongoing royalty of $1.20 per unit – which was the standard royalty rate set by the jury for back damages.

Read the decision here: Apple500Loss.  This case will certainly be appealed.

31 thoughts on “District Court: Apple must Pay $500 million Plus Interest

  1. 3

    For the life of me, I still can’t understand why the Judicial Department is so twisted around the intellectual axel of injunctions/compulsory license. Just issue the damn injunction under Rule 65, and stay the injunction pending appeal with a bond of the compulsory license under a theory of unjust enrichment. Exactly the same economic result, with the added features of (A) a specific injunction on the infringing behavior under Rule 65 and (B) ending the case within the normative rules of the Fed.R.Civ.Pro. and (C) keeping with traditional equity jurisprudence, see the Law of Equity by Justice Story. But, No! Patents are some type of red headed step child in the Constitution because SCOTUS is just so profoundly anti-patent and, frankly, economically ignorant of how the world turns around. Apple, just sent the case to the Kings Privy Court, seriously how can a Court even contemplate having injunctive power in a patent case, with the Executive Department having a Privy court to dissolve the injunction? Well, I guess you see the answer here, just create yet another anomaly to accommodate the past anomaly.

    1. 3.1

      Interesting. Was this argued in Ebay or since?

      1. 3.1.1

        Yes, it was argued re eBay that granting an injunction to a NPE who has no product sales of its own against a company actually supplying the product to the public allows distortion of the damage recovery of the patent owner by forced settlements far beyond its actual damages or any actual negotiated royalty anyone would pay. The injunction would not protect loss of business by the NPE. eBay does NOT preclude granting injunctions against infringers for companies with patents on actual products that the patent owner is making or selling. Also, injunctions were not always granted even before eBay, and it was not mandated by statute. The Sup. Ct. claimed it WAS restoring normal equity law which the Fed. Cir. had been ignoring.
        In any case this is now long since water over the dam.

        1. 3.1.1.1

          That is not responsive. The suggestion posed by @iwasthere seems to be that your complaint could be addressed within traditional principles of equity. In other words, staying an eviction order because the squatter had installed some valuable equipment and needs time or compensation to remove it. Or perhaps some rationale of adverse possession.

          My question was whether Ebay or subsequent patent owners have asked the courts to apply one of these alternates (which would restore some integrity to the patent “right to exclude”)?

  2. 2

    To clarify, VirnetX has 62.6M outstanding shares. The two damage awards totalling $800M comes out to $12.86/share. Yet they are trading at $3.45/share. This doesn’t even account for the NPV of the running royalty. Clearly investors don’t expect Apple to pay the jury damages of $12.86/share.

    This is the epitome of efficient infringement – in the 0.1% of cases that go to trial, the infringer still has no worries.

    1. 2.1

      To further your point, there was NO provision of punishment even given willfulness.

      In other words, “the little guy” incurred the entirety of the “risk,” and the infringer — even if caught AND prosecuted AND “convicted” —then and only then had to pay the license fee that it would have had to right from the start.

      In other words, the worst case is merely paying the fee that you would have had to, if EVERYTHING goes against you.

      What “rational actor” would ever choose to pay that “fare” up front given that only forced expenditures for your adversary to force you to pay?

      From the business perspective, this guarantees that infringement and make-them-prove-it will be the norm.

      Add into that THAT any such set-up FAVORS the established entity and disfavor the disruptive innovator who traditionally could bank on the power of the patent (including the perfect remedy of injunction).

      For anyone to try to paint “Efficient Infringement” as some type of myth is absolutely incredulous.

      1. 2.1.1

        + 1 anon.

        No one could say it better.

      2. 2.1.2

        For anyone to try to paint “Efficient Infringement” as some type of myth is absolutely incredulous.

        LOL

        What a marvelous strawman! And you took it down like it was made of … straw! Very very impressive.

        You can pick up your prize by clicking on the reward retrieval icon, wherein said icon is prominently displayed on a screen, wherein said screen is connected remotely to at least one processor configured to display at least one entry field for entering of reward redemption information by a viewer of said screen, wherein said screen is optionally touch-sensitive.

        1. 2.1.2.1

          It’s not straw – you don’t even have to leave the comments of this thread.

          Wake up son.

      3. 2.1.3

        “anon” the infringer — even if caught AND prosecuted AND “convicted” —then and only then had to pay the license fee

        Because in the patent maximalist fantasy world, everyone who doesn’t own a patent is presumed guilty. Heck, I must be infringing something right now! I am hereby offering to pay a pre-“catch&convict” license fee to every patent owner out there. If I am ultimately determined to be innocent — which will be an incredible stroke of luck — you can pay me back at your convenience. But the money is rightfully yours, patent owners! Please come and take it.

        I mean, anything is better than your incessant screeching and whining.

        1. 2.1.3.1

          … now THAT is straw.

          How Accuse Others of you.

      4. 2.1.4

        Well said Anon. Let me add a feature to the logic of the efficient infringer economics. Even if, a CEO/GC wanted to do the ‘right thing’ and license a patent and/or stop infringing, they can’t, because the economics of the situation REQUIRES them to grind it out legally until the bitter end – on all fronts – because otherwise they would be seconded guessed and make to look the fool/removed. This is a real world example of the foolishness of the Justice Breyer – optimal solution – judicial philosophy.

        1. 2.1.4.1

          Re: “the economics of the situation REQUIRES them [a CEO/GC] to grind it out legally until the bitter end – on all fronts.”
          Nonsense, almost all patent suits get settled by paying off the patent owners with cash [or patent trades] which is why so few go to trial. The statistics are undeniable, and I personally saw 14 pre-trial settlements in a row in just a few years from just one corporation. [And only one was ended due to an IPR.]
          Few patent suits these days are “life or death” suits to literally put a defendant company out of business with product injunctions, suits which do have to be fought all the way.
          As I have said before, if you want to fix patent problems [and they are ample] it will not get accomplished by allegations that will not even stand up in Congressional Committee hearings.

    2. 2.2

      Clearly investors don’t expect Apple to pay the jury damages of $12.86/share.

      Maybe the “investors” know when patent claims are junky. Or when a jury determination on some issue is likely to be overturned.

      Seems to me it’s the investors who are being “efficient” here. Shame on them!

      LOL

      You guys are hilarious. You know that, right?

    3. 2.3

      Look, no one is denying that Apple takes an unusually aggressive hardball litigation response to patents of others. They undoubtedly could have settled for far less than these two judgments. But it does not help your argument for legal changes to make up statistics like “In the 0.1% of cases that go to trial, the infringer still has no worries.” More than 95% percent of patent suits [other than suits against Apple, NuEgg and a few others] settle before trial, but that is because the patent owner in the large majority of suits accepts a settlement payment [license fee] from the defendant. Also, the success rate of cases that do go to trial is much higher than that. Only a minority are ended early without settlement by summary judgments, and quite a few SJs are not sustained on appeal. Usually successful SJ is for non-infringement, since the patent owner has the burden of proof only on that issue. Willfulness was not found in this case by the E.D.TX Judge because he held that Apple had presented a viable defense even though the jury did not buy it. That issue can be appealed also. If Virnetx is that small they may be one of the patent owners being backed by litigation investors these days. After having already won two costly jury verdicts, further such investments, or contingent fee attorneys, are not hard for small company patent owners to find.

      1. 2.3.1

        Put your pom-poms down and try reading what has actually been stated.

        There is NO “making up” in my post.

      2. 2.3.2

        Paul, you are way out of school in your surmise and conjecture about ‘what people do’ and when or why or what they could have settled. Anon and my points are exactly correct – there is no economic reasons to ever settle a case (unless you are in the nuisance domain, which you claim to loath) if the end result is a compulsory license.

      3. 2.3.3

        Ok. Paul show us three cases that did not settle where patent owner got paid.

      4. 2.3.4

        Cases settle because it costs more than $50M and takes more than 10 years to reach a final judgment. The infringer will pay 1% to 10% of the $50M legal budget in a settlement. They will not pay more than 10% of the legal budget. They will pay their lawyers $50M rather than the patent owner $5M.

        The calculation has almost nothing to do with the damages.

        Even after multiple jury verdicts, Apple has not offered Virnetx more than $25M, their cost to drag this out another few years.

        1. 2.3.4.1

          IR, I do not doubt your assertion that Apple is still offering less than $25M to settle even at this point. Nor do I deny that as a matter of principle Apple is apparently willing to spend enormous amounts of money on attorneys to enhance its reputation as being a forbidding company to sue, as a way of discouraging hundreds of other possible suits.
          However, your other alleged financial facts here are quite fanciful as to normal patent suits against normal companies. Actual average patent litigation costs are less than a tenth of that even through trial, and are available from the AIPLA, for example, and regularly updated by surveys. Nor are Fed. Cir. appeals anywhere as expensive as suggested. Also, costs for defendants are normally much higher than for patent owners, especially pre-trial.
          Yes, patent litigation, like many civil suits in Federal Courts, is expensive. Getting a patent is not a license to make anything, or to automatically make any money, as too many inventors seem to think. Patents are merely a ticket to try to get license revenues and/or to just get into a Federal court to sue infringers. The ticket gets you into court, but trial courts in our legal system do not have a “cost-control department.” It is an adversarial system where the two parties do most of the work and create most of the work. If you chose to sue a hardball company like Apple they will run up your legal costs. That is not a problem due to the patent system, it is the way our legal system and civil courts work in general. Yes, it could use some improvements, but Congress keeps cutting its budgets.

          1. 2.3.4.1.1

            You do realize that “running up the opponent legal costs – for its own sake is strictly considered unethical, right?

            It has been FAR too long since you worked on the “create protection for the innovator” side and it shows in your attitudes.

            (by the way – all of those comments of your remarking how the patent right is simply NOT a guarantee of making money are correct – and even more point to the perfect remedy of injunctions)

          2. 2.3.4.1.2

            I agree with you that a trial is closer to $5M. Final judgment closer to $50M, if ever. Big difference.

            You keep saying it is a good thing for an infringer to use litigation cost to coerce a rights owner to license.

            And there is no contingency for cases with less than $1B in potential damages.

            1. 2.3.4.1.2.1

              Re: “You keep saying it is a good thing for an infringer to use litigation cost to coerce a rights owner to license.”
              I said no such thing. It is a unfortunate and undesirable partially true fact of our judicial system that a few companies do. Not a good thing.
              Why do so many blog commentators here have difficulty in understanding the difference between reality and idealism, and between what is actually said and an emotional soapbox trigger?

              1. 2.3.4.1.2.1.1

                Maybe because your posts are so laden with spin.

  3. 1

    500 million, plus 300 million, plus all the awarded-and-to-be-calculated post-judgment interest, plus the awarded post-verdict future sales royalties, plus another 50 million or so in legal expenses, added up, does not sound like very “efficient” infringement as that term is so widely used on this blog, unless it gets two Fed. Cir. reversals?

    1. 1.1

      One instance of “inefficiency” does not the entire philosophy dismantle.

      This cheerleading of yours is down right pathetic.

    2. 1.2

      Paul — VirnetX has earned every hard-fought dollar they’ve been repeatedly been meritoriously awarded.

      Apple has (and continues) to efficiently infringe.

      The difference here is that this tough little company can afford — and is willing to — fight the good fight.

      Something most other inventors and small companies are unable to do.

      Once in a while a David is able to beat a Goliath.

      1. 1.2.1

        this tough little company

        LOL

        Man, the maximalists never cease to amuse.

      2. 1.2.2

        Apple has (and continues) to efficiently infringe.

        Can we see the s00per d00per awesome techn0 claims?

        1. 1.2.2.1

          Some folks just never learn … there is no, “we” MM.

          You. Are. Alone.

          … and please tell us all you don’t really need to be hand-held to where the claims can be found, do you?

    3. 1.3

      C’mon Paul. Apple won’t pay that. I’ll sell you shares in VirnetX for one fourth of that valuation. Interested?

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