Jury orders Apple to pay $533M for infringing gaming patents

Posted:
in General Discussion edited February 2015
A U.S. federal jury in Texas ordered Apple to pay $532.9 million in damages on Tuesday after it found the company's iTunes digital media purchasing and distribution system in infringement of three patents held by licensing firm Smartflash.


Illustration from one of Smartflash's patents-in-suit. | Source: USPTO


The original complaint filed in 2013 claims Apple's iTunes Store, iOS and Mac App Stores and iAd, as well as other branded digital transaction services, infringe on three Smartflash patents relating to "data storage and managing access through payment systems."

According to in-court reports from Bloomberg, the jury in Tyler, Tex. was not pursuaded by Apple's arguments that the patents-in-suit are not used by iTunes or other first-party products. Apple also failed to invalidate Smartflash's inventions, the publication said.

Smartflash was founded by inventor Patrick Racz in the early 2000s as a way to market and commoditize his patents, some of which date back to 1999. As a non-practicing entity, the firm operates solely through patent licensing and litigation. Using its clutch of seven patents, all attributed to co-inventor Racz, the firm sued game makers Game Circus and KingsIsle Entertainment in 2014. Both companies settled out of court.

Court documents allege that around the time of Smartflash's founding, Racz met with executives from what is now Gemalto SA to market technology relating to the patents-in-suit. Among those who gained knowledge of the patented tech was Augustin Farrugia, who left Gemalto in 2002 and subsequently took a position as Apple's senior director of Internet service security and DRM technologies.

Smartflash sought $852 million in damages from Apple, a portion of which was calculated as a percentage of iPhone, iPad and Mac device sales. Apple lawyer Eric Albritton argued against awarding hardware royalties for a single device feature.

"It doesn't make a lick of sense that one person would buy an iPhone and not make calls," Albritton said in court. "People do not buy cell phones for the sole purpose of using apps."

Apple argued that the patents were worth $4.5 million at most, saying the royalty demands were "excessive and unsupportable."

With the Apple case completed, Smartflash will use the same patents in a separate case against Samsung. Google and Amazon have also been slapped with similar lawsuits over the same technology, but those cases have not yet concluded.

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Comments

  • Reply 1 of 56

    There is no way on earth Apple is EVER paying this EVER. They will go to the supreme court, or whatever court, if they have to. The US patent system is completely broken, kaput and having juries decide these kind of things is just plain crazy.

  • Reply 2 of 56
    The fact that they calculated awards based upon hardware sales will be the thing that gets a reversal for Apple.
  • Reply 3 of 56
    How do cases like this make it this far? Couldn't Apple's lawyers simply have asked the court if this patent perhaps could be applied to ANY ONLINE SERVICE EVER to demonstrate how totally absurd it is?
  • Reply 4 of 56
    I'm in the wrong business. Who needs a job when you can cash out from rich Uncle Apple by exploiting the legal system?
  • Reply 5 of 56
    How do cases like this make it this far? Couldn't Apple's lawyers simply have asked the court if this patent perhaps could be applied to ANY ONLINE SERVICE EVER to demonstrate how totally absurd it is?

    Tyler, Texas.
  • Reply 6 of 56
    I'm curious (and not a lawyer). How long will an appeal process take to overturn this absurdity?
  • Reply 7 of 56
    jungmarkjungmark Posts: 6,664member
    Ridiculous. Use it or lose it within 5 years.
  • Reply 8 of 56
    Congratulations to the author on the correct use of the term "non-practicing entity" instead of the loaded term "patent troll".

    Also, Apple will obviously appeal this decision.
  • Reply 9 of 56
    dphmicn wrote: »
    I'm curious (and not a lawyer). How long will an appeal process take to overturn this absurdity?

    I wouldn't assume that a reversal of this ruling is guaranteed.
  • Reply 10 of 56
    Quote:
    Originally Posted by SpamSandwich View Post





    I wouldn't assume that a reversal of this ruling is guaranteed.

     

    You really think that this company will make 3-4B dollars (ballpark if they go after everyone) from this crap?

    That would make them the most successful troll ever, better than even legitimate patent holders of actual real hard stuff.

    Doesn't seems likely, but insanity is the US legal system' middle name after all...

    Just thinking about the moron in the patent office who accepted this makes my head hurt...

  • Reply 11 of 56
    chris_cachris_ca Posts: 2,543member
    Quote:

    Originally Posted by jmgregory1 View Post

    The fact that they calculated awards based upon hardware sales will be the thing that gets a reversal for Apple.

    We don’t know if the jury found any relevance or made any award based on hardware.

    Smart flash wanted that and Apple argued against it but no mention was made as to the outcome of that specific request.

  • Reply 12 of 56

    It figures, this one was in Texas.

  • Reply 13 of 56
    foggyhill wrote: »
    You really think that this company will make 3-4B dollars (ballpark if they go after everyone) from this crap?
    That would make them the most successful troll ever, better than even legitimate patent holders of actual real hard stuff.
    Doesn't seems likely, but insanity is the US legal system' middle name after all...
    Just thinking about the moron in the patent office who accepted this makes my head hurt...

    Sorry if this is obvious, but in the US we still respect intellectual property rights (including patents). A company may or may not be infringing existing patents on purpose, but if found to be willfully infringing the penalties can be quite large. This will be appealed, as I wrote earlier, so the final judgement has yet to be decided.
  • Reply 14 of 56
    Again my appeal time frame question? Yes, I'm aware it's not a guarantee win for Apple on appeal.
  • Reply 15 of 56
    dphmicn wrote: »
    Again my appeal time frame question? Yes, I'm aware it's not a guarantee win for Apple on appeal.

    You'd have to search court records to find that out.
  • Reply 16 of 56
    Quote:

    Originally Posted by SpamSandwich View Post





    Sorry if this is obvious, but in the US we still respect intellectual property rights (including patents). A company may or may not be infringing existing patents on purpose, but if found to be willfully infringing the penalties can be quite large. This will be appealed, as I wrote earlier, so the final judgement has yet to be decided.

     

    Seriously? Who do you think I am? Some yokel off the farm? I've lived and worked in Canada and the US all my life. I'm well versed in IP law, so you can talk down to someone else.

     

    This "patent" and jury award is utter complete joke and is a sign of total breakdown in the system, not a sign that it works.

     

    IF you think this thing deserves half a billion then I'd have to deeply question your judgement.

  • Reply 17 of 56
    Lol. I used to live an hour from Tyler Texas.

    Podunk town with a lot of backward thinking.

    I can see this appealed and overturned.
  • Reply 18 of 56
    Originally Posted by AppleInsider View Post

    "It doesn't make a lick of sense that one person would buy an iPhone and not make calls," Albritton said in court. "People do not buy cell phones for the sole purpose of using apps."

     

    Oh, good. Now my argument has Apple backing it up.

  • Reply 19 of 56
    habihabi Posts: 317member

    The most absurd thing is that non-practicing entities don't have the same kind of scrutiny over their claims than practicing entities do. Why can you copy everything and just keep going over 5 years without paying a dime, but if you don't have a business (other than legal) you don't need to prove you are hurt, when in fact getting 5 dollars would be more than you were getting in the first place? Now if you make a device and someone copies you you have to _prove_ how much you have been hurt by this copying. Even if the copier didn't have to copy (but could go around), it's still allowed by court and the court is on the side of the copier?!?!

     

    I'm not surprised that already some multinational companies are moving their patents to non-practicing entities because of the leverage they have that the original patent owner does not share....

     

    This is just the beginning of the end.

  • Reply 20 of 56
    foggyhill wrote: »
    Seriously? Who do you think I am? Some yokel off the farm? I've lived and worked in Canada and the US all my life. I'm well versed in IP law, so you can talk down to someone else.

    This "patent" and jury award is utter complete joke and is a sign of total breakdown in the system, not a sign that it works.

    IF you think this thing deserves half a billion then I'd have to deeply question your judgement.

    Who do I think you are? You're no one to me, amigo. I don't know you and I don't really care for your thin-skinned hostility. Get a life.
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