$439M VirnetX judgment is 'legally wrong and grossly unfair' Apple tells Supreme Court

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The Federal Circuit's decision to side with VirnetX in January 2019 as part of a long-running patent infringement case is "grossly unfair," Apple insists to the Supreme Court, claiming the "whopping" $439 million judgment involved the Federal Circuit making "two fundamental legal errors" to justify the size.

FaceTime, an Apple technology at the center of some of VirnetX's patent infringement lawsuits
FaceTime, an Apple technology at the center of some of VirnetX's patent infringement lawsuits


Petitioning for a writ of certiorari on December 27, Apple told the Supreme Court its objections to the January verdict, in the continuing affair of its patent infringement argument with VirnetX. Apple claimed the Federal Court was in the wrong for two main reasons: setting the award too high, and failing to take into account earlier cases.

"Defying this court's commands, the Federal Circuit committed two fundamental legal errors to sustain a whopping $439 million judgment," Apple wrote in the filing spotted by Law360. "It applied a rule that is fueling grossly excessive damages awards. And it sustained the inflated award even though the PTO has invalidated the underlying patent claims."

Bigger than warranted

On the award inflation front, the petition asserts the verdict flouts precedent where the damages need to be limited to the value of the patented invention, rather than all other features of the products in question. In short, VirnetX's award should be based on the value of its patent within products accused to use it, rather than the entire value of an iPhone or Mac.

The Federal Circuit is said to have deviated from the 1884 high court ruling setting the precedent by, over recent years, believing it is not necessary when the patent owner uses prior licenses as part of its theory for demanding damages. According to Apple, "the Federal Circuit has adopted a gaping loophole that allows patentees to recover inflated damages far beyond the value of the patented invention."

In this particular case, VirnetX is accused of using several licenses of patents at varying rates, which were then averaged to create a rate awarded by the jury for all Apple products ever sold. These licenses included some affecting landline telephones, a product category Apple's products typically cannot be classified under in many respects.

By "carefully selecting" licenses to create the damage theories, patent owners have the ability to secure "massive sums entirely untethered from the value of the patented feature," Apple believes. This in turn creates risks of liability, which may prevent the creation of new products.

"Only this court can end this innovation-busting deviation from settled law," Apple urged.

It's not over

On the second point, Apple calls the decision for the Federal Circuit to not reconsider its findings after the patent claims were invalidated "legally wrong and grossly unfair." According to Apple, the Supreme Court has made it clear that decisions that affect pending cases must be taken into account.

The Federal Circuit denied a request for reconsideration on August 2.

The argument is on when the case is deemed to be no longer pending, as the Federal Circuit seemingly deemed as such when the panel decision had been issued. Meanwhile, Apple believes the Supreme Court has to deny certiorari - an order to review the case - before it exits its pending status.

Since the certiorari hasn't been granted or denied by the Supreme Court, Apple reasons the case is still pending, and so the infringement ruling should be vacated.

"There is no need or justification to require a defendant to pay massive damages for infringing patent claims that the PTO has decided should never have been issued in the first place," Apple insists.

An ongoing battle

Dating back to 2010, the lawsuit is one of multiple Apple is fighting against VirnetX, chiefly over secure communications technology. VirnetX asserted Apple infringed on its patents in various ways, including Apple's VPN-on-Demand technology and elements of both FaceTime and iMessage.

VirnetX was initially awarded $386 million in 2010, but the judgment was vacated two years later, It was then folded into another 2016 patent suit retrial, where Apple was ordered to pay $625 million.

After that ruling was tossed over claims of an unfair trial with a confused jury and two further retrials, VirnetX was awarded $302.4 million, which was enhanced to $439 million.

In other legal fights, a Federal Circuit panel suggested it may not be able to uphold part of a separate $600 million judgment against Apple over the patent invalidation claims in October. In November, a Texas jury's decision that Apple had to pay VirnetX $503 million was overturned.

Comments

  • Reply 1 of 9
    DAalsethDAalseth Posts: 1,730member
    God I hate law. I read through the article and to be honest I don't know who did what to whom. At one point it sounded like Apple was accusing VirnetX of infringing on Apple IP. There were judgements that were set aside, then reinstated, then patents ruled invalid, but Apple was infringing on them anyway, and on and on. I honestly have read through this twice now and I couldn't tell you WTF is going on.
    beowulfschmidtwatto_cobra
  • Reply 2 of 9
    DAalseth said:
    God I hate law. I read through the article and to be honest I don't know who did what to whom. At one point it sounded like Apple was accusing VirnetX of infringing on Apple IP. There were judgements that were set aside, then reinstated, then patents ruled invalid, but Apple was infringing on them anyway, and on and on. I honestly have read through this twice now and I couldn't tell you WTF is going on.
    I had exactly the same thought when I read through that.  Even reading the supporting docs doesn't clear anything up for me.  :(

    watto_cobra
  • Reply 3 of 9
    hentaiboyhentaiboy Posts: 1,244member
    DAalseth said:
    I honestly have read through this twice now and I couldn't tell you WTF is going on.

    And that’s just how the lawyers like it...
    chabig
  • Reply 4 of 9
    StrangeDaysStrangeDays Posts: 11,582member
    Herein lies the problem with software patents, which are wholly unlike physical inventions. Software is code and code is speech and speech is protected via copyright. Assuredly Apple didn’t pirate the source code from the VirnetX, they wrote it themselves. But because software patents are (bogusly) granted on ideas rather than implementations, you get these cases. Which is why many developers argue copyright is all that's needed, since it protects our code, and patents on general ideas are overreaching. (Ex: Amazon’s crazy patent on a digital shopping cart)

    With a physical invention you can implement it on paper without manufacturing, because you can draw physical things in mechanical detail, and that warrants protection. But you can’t do that with software, you can only describe the idea or implement it in code. Ideas aren’t detailed enough to be patented, implementations are. And software implementation is code...and code is protected via copyright. 


    That aside, this seems reasonable:

    “In short, VirnetX's award should be based on the value of its patent within products accused to use it, rather than the entire value of an iPhone or Mac.”
    edited January 2020 emig647watto_cobran2itivguy
  • Reply 5 of 9
    ...award should be based on the value of its patent within products accused to use it, rather than the entire value of... 
    This makes me giggle.  Not because of the sentiment, cuz I agree with it 100%.  Awards should be based at the component level or patent level of the software, not on the entire value of the device.  I'm giggling because that is the exact argument Samsung used in it's patent battle with Apple.  Against Samsung, Apple took the Virnetx position that it should be based on full value.  Don't get me wrong, I would make the exact same arguments that Apple is making... in both cases.  Cuz bidness. But it does make me giggle.  
    gatorguy
  • Reply 6 of 9
    StrangeDaysStrangeDays Posts: 11,582member
    ...award should be based on the value of its patent within products accused to use it, rather than the entire value of... 
    This makes me giggle.  Not because of the sentiment, cuz I agree with it 100%.  Awards should be based at the component level or patent level of the software, not on the entire value of the device.  I'm giggling because that is the exact argument Samsung used in it's patent battle with Apple.  Against Samsung, Apple took the Virnetx position that it should be based on full value.  Don't get me wrong, I would make the exact same arguments that Apple is making... in both cases.  Cuz bidness. But it does make me giggle.  
    Arguably different cases -- the majority of the damages awarded to Apple was for "design patents" (copying the product's look & feel), not "utility patents" for a specific piece of functionality in the OS, as claimed by VirnetX here.

    https://www.nytimes.com/2018/05/24/business/apple-samsung-patent-trial.html

    "The jury awarded Apple $533.3 million for Samsung’s violation of so-called design patents and $5.3 million for the violation of so-called utility patents. [...]

    The case raised the question of whether the total profits from a product that infringes on a design patent should be awarded if the patent applies only to a component of the product, said Sarah Burstein, a professor of patent law at the University of Oklahoma.

    The verdict appears to be a compromise between Apple’s and Samsung’s positions and does not offer much clarity on that question, said Professor Burstein, who predicted Samsung would appeal it."

    edited January 2020 dedgeckoronnwatto_cobra
  • Reply 7 of 9
    gatorguygatorguy Posts: 23,174member
    ...award should be based on the value of its patent within products accused to use it, rather than the entire value of... 
    This makes me giggle.  Not because of the sentiment, cuz I agree with it 100%.  Awards should be based at the component level or patent level of the software, not on the entire value of the device.  I'm giggling because that is the exact argument Samsung used in it's patent battle with Apple.  Against Samsung, Apple took the Virnetx position that it should be based on full value.  Don't get me wrong, I would make the exact same arguments that Apple is making... in both cases.  Cuz bidness. But it does make me giggle.  
    Arguably different cases -- the majority of the damages awarded to Apple was for "design patents" (copying the product's look & feel), not "utility patents" for a specific piece of functionality in the OS, as claimed by VirnetX here.

    https://www.nytimes.com/2018/05/24/business/apple-samsung-patent-trial.html

    "The jury awarded Apple $533.3 million for Samsung’s violation of so-called design patents and $5.3 million for the violation of so-called utility patents. [...]

    The case raised the question of whether the total profits from a product that infringes on a design patent should be awarded if the patent applies only to a component of the product, said Sarah Burstein, a professor of patent law at the University of Oklahoma.

    The verdict appears to be a compromise between Apple’s and Samsung’s positions and does not offer much clarity on that question, said Professor Burstein, who predicted Samsung would appeal it."

    He's referring to the filing and attorney's claims and not the award. Many of Apple's utility patent claims were dismissed during the course of the trial, that's true, but Apple did argue that any infringement penalties on utility ones should apply to the value of the entire device and not a component. 
    CloudTalkinFileMakerFeller
  • Reply 8 of 9
    dedgeckodedgecko Posts: 169member
    ...award should be based on the value of its patent within products accused to use it, rather than the entire value of... 
    This makes me giggle.  Not because of the sentiment, cuz I agree with it 100%.  Awards should be based at the component level or patent level of the software, not on the entire value of the device.  I'm giggling because that is the exact argument Samsung used in it's patent battle with Apple.  Against Samsung, Apple took the Virnetx position that it should be based on full value.  Don't get me wrong, I would make the exact same arguments that Apple is making... in both cases.  Cuz bidness. But it does make me giggle.  
    Arguably different cases -- the majority of the damages awarded to Apple was for "design patents" (copying the product's look & feel), not "utility patents" for a specific piece of functionality in the OS, as claimed by VirnetX here.

    https://www.nytimes.com/2018/05/24/business/apple-samsung-patent-trial.html

    "The jury awarded Apple $533.3 million for Samsung’s violation of so-called design patents and $5.3 million for the violation of so-called utility patents. [...]

    The case raised the question of whether the total profits from a product that infringes on a design patent should be awarded if the patent applies only to a component of the product, said Sarah Burstein, a professor of patent law at the University of Oklahoma.

    The verdict appears to be a compromise between Apple’s and Samsung’s positions and does not offer much clarity on that question, said Professor Burstein, who predicted Samsung would appeal it."

    This also brings to mind the Apple VS Qualcomm cases about a percentage of unit sales or whatever it was. Space is hard, patent/contract law is just an exercise in stabbing one’s eyes out over and over again. 
  • Reply 9 of 9
    ...award should be based on the value of its patent within products accused to use it, rather than the entire value of... 
    This makes me giggle.  Not because of the sentiment, cuz I agree with it 100%.  Awards should be based at the component level or patent level of the software, not on the entire value of the device.  I'm giggling because that is the exact argument Samsung used in it's patent battle with Apple.  Against Samsung, Apple took the Virnetx position that it should be based on full value.  Don't get me wrong, I would make the exact same arguments that Apple is making... in both cases.  Cuz bidness. But it does make me giggle.  
    Arguably different cases -- the majority of the damages awarded to Apple was for "design patents" (copying the product's look & feel), not "utility patents" for a specific piece of functionality in the OS, as claimed by VirnetX here.

    https://www.nytimes.com/2018/05/24/business/apple-samsung-patent-trial.html

    "The jury awarded Apple $533.3 million for Samsung’s violation of so-called design patents and $5.3 million for the violation of so-called utility patents. [...]

    The case raised the question of whether the total profits from a product that infringes on a design patent should be awarded if the patent applies only to a component of the product, said Sarah Burstein, a professor of patent law at the University of Oklahoma.

    The verdict appears to be a compromise between Apple’s and Samsung’s positions and does not offer much clarity on that question, said Professor Burstein, who predicted Samsung would appeal it."

    Arguably different arguments altogether.  :) I'm referencing the actual argument: award should be based on the value of its patent within products accused to use it, rather than the entire value of... , not the specifics of either case.   Regardless, infringement awards should be based on component or patent level, not full devices.
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