Judge tosses Smartflash's $533M victory against Apple, damages to be retried

Posted:
in General Discussion edited July 2015
Months after a Texas jury ordered Apple to pay $532.9 million to a product-less company that critics have dubbed a "patent troll," a judge has tossed out that decision, declaring that instructions given to the jury may have improperly affected the damage assessment.


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


A new trial to redetermine damages in the case will occur on Sept. 14, U.S. District Judge Rodney Gilstrap said in a decision Tuesday, as summarized by Reuters. Gilstrap reportedly said his jury instructions may have "skewed" jurors.

The half-billion-dollar decision stems from a 2013 lawsuit, in which Smartflash claimed that Apple's iTunes Store, iOS App Store, Mac App Store and iAd, among other products, infringe on three of its patents related to "data storage and managing access through payment systems."
Apple has vowed to fight Smartflash, accusing the company of "exploiting our patent system."
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, causing critics to dub the company a "patent troll."

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 originally sought $852 million in damages from Apple. After the damages were announced in February, the intellectual properly holder promptly filed another patent suit against Apple, seeking even more damages for alleged infringement.

Like many other patent holders, Smartflash has filed its lawsuits in the Eastern District of Texas because of the area's historically favorable outcomes towards intellectual property owners.

Apple had vowed to appeal the original $532.9 million decision in Smartflash's favor, and indicated it would push back hard to overturn the decision. After the damages were announced, a spokesperson for Apple accused Smartflash of "exploiting our patent system," and said the company "makes no products, has no employees, creates no jobs, (and) has no U.S. presence."

Comments

  • Reply 1 of 11
    freshmakerfreshmaker Posts: 517member
    Great news. I can't stand patent trolls. F Smartflash.
  • Reply 2 of 11
    radarthekatradarthekat Posts: 3,012moderator
    Question is, in which direction does the judge think his instructions skewed the jury? Given the venue, East Texas, perhaps the judge feels the jury didn't set the damages high enough.
  • Reply 3 of 11
    jungmarkjungmark Posts: 6,664member
    Technicality. The lawsuit should just be dismissed.
  • Reply 4 of 11
    MacProMacPro Posts: 18,150member
    Question is, in which direction does the judge think his instructions skewed the jury? Given the venue, East Texas, perhaps the judge feels the jury didn't set the damages high enough.

    LOL .... but wait I gues that isn't funny really ... you could be correct! :\
  • Reply 5 of 11
    gatorguygatorguy Posts: 20,291member
    This is what prompted Judge Gilstrap (who's probably heard more patent infringement cases than any other US judge) to set aside the original; judgement. Note that it is still over what damages to award and not whether Apple is guilty of infringement AFAIK. They are still found to have improperly used the IP and owe damages for it.

    "The judge had briefed the jury on the “entire market value rule,” at the request of Apple, which sets the market value of the product as the basis for calculation of royalty and hence damages from a patent infringement, according to the filing Tuesday.

    Judge Gilstrap wrote last month that he intended to hear oral arguments on a possible new trial on damages as the evidence presented at trial shows that [B]Smartflash’s damages model did not incorporate the entire market value rule.[/B]

    Apple had asked for a new trial on damages in the light of the instruction the court provided to the jury.

    Judge Gilstrap wrote Tuesday that he expects a new damages model from Smartflash in view of concerns about the model it used at the last trial. The judge ruled earlier this month that Apple’s infringement was not willful. A decision to the contrary would have exposed Apple potentially to higher damages.

    Smartflash’s royalty base had encompassed about 23 percent of the total revenue generated by the sales of the accused products, and not 100 percent of it, based on a consumer survey that asked whether the consumers were motivated to purchase the accused products because of the infringing features, according to Judge Gilstrap. The company then multiplied a royalty, also based on a consumer survey, with this royalty base to calculate its ultimate reasonable royalty estimate."

    http://www.pcworld.com/article/2945312/new-trial-on-damages-ordered-in-apple-smartflash-patent-dispute.html
  • Reply 6 of 11
    freerangefreerange Posts: 1,585member
    Looking at the diagram, what a BS patent! It's called a network! Which already existed. All of these silos, and networked activities, were already taking place in one form or another when this patent was filed! We had data networks, we had networked delivery of video (free and paid on-demand), and we had mobile communications that tied into data and content networks, etc., etc, etc.
  • Reply 7 of 11
    lightknightlightknight Posts: 2,312member
    @freerange Checking the last two patents reported by AppleInsider, which in all honesty sound totally "obvious answer to simple problem" to me, and therefore unworthy of a patent under the US patent system (theoretically....), I'd say that the problem is that huge companies like Apple can easily take small companies like Racz's out of the market by simply out-patenting them, and once having effectively driven the company out of business, prevent the inventor from benefiting from his invention by labelling him a patent troll.

    Not that it's what is really happening. Probably the US patent system works exactly as intended, the media reports perfectly well, analysts are a useful group of intelligent people, and no big company would ever think of doing something that nasty. It just feels like something is weird.
  • Reply 8 of 11
    esummersesummers Posts: 893member

    Software patents shouldn't exist at all.  Copyright law is sufficient to protect software.  

  • Reply 9 of 11
    esummersesummers Posts: 893member
    Quote:
    Originally Posted by lightknight View Post



    @freerange Checking the last two patents reported by AppleInsider, which in all honesty sound totally "obvious answer to simple problem" to me, and therefore unworthy of a patent under the US patent system (theoretically....), I'd say that the problem is that huge companies like Apple can easily take small companies like Racz's out of the market by simply out-patenting them, and once having effectively driven the company out of business, prevent the inventor from benefiting from his invention by labelling him a patent troll.



    Not that it's what is really happening. Probably the US patent system works exactly as intended, the media reports perfectly well, analysts are a useful group of intelligent people, and no big company would ever think of doing something that nasty. It just feels like something is weird.

     

    The problem is almost all software patents are obvious.  Software takes a lot of creativity, time, and effort to write, but doesn't do anything particularly novel in the implementation.  Software should be treated the same as books and art.  Sure there may be some exceptions that deserve patents, but it should be rare with a much more rigorous process to grant them.  We would be better off with no software patents then the current system.

     

    In this case they are simply using PKI to encrypt video with an expiring key (i.e. DRM).  They are basically patenting the use of an existing technology.  You might as well say patenting a method of listening to music by pressing the play button on an iPod.

  • Reply 10 of 11
    SpamSandwichSpamSandwich Posts: 30,862member
    esummers wrote: »
    Software patents shouldn't exist at all.  Copyright law is sufficient to protect software.  

    I disagree. A patent protects the utility of the software invention, copyright only covers the exact text contained in the programming. A functional software patent is far better for the patent holder.

    Remember, the purpose of patents is multi-fold: to provide the patent holder with a time limited monopoly, upon expiration the patent is entered into the public domain, and to increase competition for economic benefit among individuals and businesses. Getting around existing patents has been technologically hugely beneficial.
  • Reply 11 of 11
    esummersesummers Posts: 893member
    Quote:
    Originally Posted by SpamSandwich View Post





    I disagree. A patent protects the utility of the software invention, copyright only covers the exact text contained in the programming. A functional software patent is far better for the patent holder.



    Remember, the purpose of patents is multi-fold: to provide the patent holder with a time limited monopoly, upon expiration the patent is entered into the public domain, and to increase competition for economic benefit among individuals and businesses. Getting around existing patents has been technologically hugely beneficial.



    I think there may be niche areas where software patents may be acceptable.  They should just be extremely rare.  Software developers rarely patent algorithms.  Instead they rely on the fact that it is difficult for a competitor to enter the space due to the amount of work required and lack of first mover advantage.  Most patents are written purely as protection against patent trolls–not competitors.  I have nothing against patenting complex unintuitive algorithms, but the bar needs to be much higher to grant these patents.  Not to mention that obscurity is generally sufficient to protect complex algorithms.

     

    Your argument also suggests that the patent holder should be the software creator.  This is not usually the case.  In virtually all cases "inventing" a software patent is many orders of magnitude easier them implementing the idea.

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