VirnetX Gets $625.6 Million in Patent Trial Against Apple

Apple Inc. was told to pay $625.6 million to VirnetX Holding Corp. for using its patented technology related to secure communications, by a federal jury in Tyler, Texas, on Wednesday. VirnetX jumped in after-hours trading on the New York Stock Exchange.

Of that figure, $334.9 million covers royalties on older versions of Apple’s VPN on Demand, which allows for remote connections and were found to infringe patents in a 2012 trial. The jury said other Apple products also infringe the patents, including newer VPN, as well as its FaceTime video-calling feature and iMessage system to send messages to other Apple users. For those, Apple was told to pay $290.7 million.

VirnetX had been seeking between $532 million and $740 million, arguing that Apple had widely used its inventions without permission. Apple said it developed its own technology, and that VirnetX overvalued what it did invent. In a court filing, Apple said that the most VirnetX should get was $44.4 million.

VirnetX lawyer Brad Caldwell of the firm Caldwell Cassady said jurors were able to clearly understand the case. He said the company’s witnesses were “believable” while Apple’s witnesses “varied” under questioning.

VirnetX soared as high as $8.81, an 84 percent jump over its closing share price on Wednesday. During regular trading, shares jumped almost 30 percent as investors bet that the daylong jury deliberations would mean a big win for the company.

Second Case

Apple said it will appeal, and it has a history of success in getting big verdicts overturned. A judge in the same Texas court district in July threw out a $533 million damage award Apple lost to Smartflash LLC. A damages retrial in that case is pending the appeal of the underlying infringement finding.

Wednesday’s decision ranks in the top 10 among damage awards issued by juries in patent cases, according to data compiled by Bloomberg.

“We are surprised and disappointed by the verdict and we’re going to appeal,” Apple said in an e-mailed statement. “Our employees independently designed this technology over many years, and we received patents to protect this intellectual property. All four of VirnetX’s patents have been found invalid by the patent office. Cases like this simply reinforce the desperate need for patent reform.”

This is the second go-around for VirnetX and Apple. VirnetX had previously won a $368.2 million verdict against Apple only to see it thrown out by an appeals court. The infringement finding regarding VPN on Demand was upheld, while a new trial was ordered on damages and whether FaceTime infringed the patents. This case is a retrial on those issues plus some newer generations of Apple products.

The dispute is over secure networks, known as virtual private networks, through which a website owner can interact with customers, employees can work at home and access company files, or people can see each other as they talk over the phone.

Since VirnetX has been unable to commercialize its own products, investors were counting on a big victory against Apple. The stock lost half its value last year and rises or falls based on news in this case. Shares rose 54 percent on Jan. 12 after the judge said the case would go forward and rejected Apple’s bid to narrow the legal issues.

The case is VirnetX Inc. v. Apple Inc., 12cv855, U.S. District Court for the Eastern District of Texas (Tyler).

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