May 10, 2018Legal
Jury Orders Apple Inc. to Pay $500 Million to VirnetX for Infringing Patents Covering A Secure Communication Link

Patent Judgments & Awards

In April 2018, a jury in the Eastern District of Texas awarded VirnetX Inc. (“VirnetX”) a total of more than $500,000,000 in its patent infringement suit against Apple Inc. (“Apple”).  The four patents-in-suit were directed to secure communication links such as Virtual Private Networks (VPN) and Domain Name Services (DNS).  This decision is the result of eight years of litigation between VirnetX and Apple, which included multiple trials.  In the original case, Apple I, a jury found that the Virtual Private Network On Demand (“VOD”), which allows an Apple user to automatically connect to a VPN, and FaceTime, as used in various Apple products, infringed VirnetX’s patents. 

While the original jury verdict was on appeal, VirnetX filed a second case against Apple, alleging that the redesigned versions of VOD and FaceTime, used in Apple’s iPhone, iPod Touch, and iPad products, infringed VirnetX’s patents.  At the second trial, which consolidated the damages issue from the first case with the second case directed to the redesigned VOD and FaceTime, the jury awarded over $600 Million in damages, with approximately $290,000,000 attributed to the redesigned versions of VOD and FaceTime.  The royalty rate for the redesigned versions equaled approximately $1.20 per device.  At the conclusion of the second trial, Apple requested a new trial for just the products using the redesigned VOD and FaceTime; the court granted Apple’s request. 

At the new trial, which concluded in April, the jury again concluded that Apple’s redesigned VOD and FaceTime infringe VirnetX’s patents.  The parties fought over an appropriate royalty rate, pointing to VirnetX’s royalty bearing licenses with various companies including Aastra, Mitel, NEC, Siemens, Avaya, and Microsoft.  The jury awarded VirnetX $502,567,709.00, based on sales of over 400 million Apple devices.  However, the victory for VirnetX may be short lived, as the asserted claims were determined to be unpatentable in recent post-grant Patent Office proceedings.  The appeal of the Patent Office’s decision to invalidate the asserted patent claims is pending.

Written by: Ashley C. Morales and Boris Zelkind

Edited by: John Sganga, Joe Cianfrani, and Boris Zelkind

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