Apple, Inc has filed for mistrial in $625M VirnetX lawsuit

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in General Discussion
After objecting to the closing arguments made by Caldwell, Cassady & Curry attorneys representing VirnetX, Apple has now filed a motion for mistrial in the case that awarded a $625 million verdict after just a week of testimony and deliberation.


VirnetX headquarters: a Lake Tahoe home far from East Texas


According to a report by Texas Lawyer, Apple's motion for mistral argues that VirnetX lawyers' closing remarks to the jury included "arguments outside the evidence and blatantly misrepresented the testimony of Apple's witnesses."

The East Texas trial made headlines this week after a jury returned a verdict finding Apple guilty of willfully infringing on four VirnetX patents in products including iMessage, FaceTime and VPN services.

A previous trial held in 2012 had earlier awarded VirnetX $368.2 million, but that verdict was vacated on appeal last September. As part of its appellate ruling, the U.S. Court of Appeals for the Federal Circuit called for a damages retrial.

VirnetX, disparagingly referred to as a patent troll, filed its case in the town of Tyler, Texas, within the state's Eastern District, despite the fact that the patent holding company is headquartered in the tiny Lake Tahoe village of Zephyr Cove, Nevada, next to Stateline casinos and the Heavenly ski resort at the resort town of South Lake Tahoe.

Why East Texas?



Texas' Eastern District has emerged as the "patent litigation capital of America" over the past few decades. In 2014, Texas Monthly profiled why Tyler and its nearby neighboring town of Marshall have become plaintiffs' preferred location for the majority of patent cases, despite the fact that most U.S companies are incorporated in Delaware. (Apple is incorporated in California, just over three hours west of Lake Tahoe).

It began with Texas Instruments in the mid-80s, which saved itself from bankruptcy by "turning its patent portfolio into a profit machine," the report noted, "aggressively suing other tech giants for infringing on its patents for the integrated circuit and microprocessor."

Within a decade, TI was earning more from patent lawsuits than it was from operations. However, as Federal Court dockets in Dallas, Texas grew clogged with drug-related criminal cases, TI moved its litigation further east to the small town of Marshall, which lacked an FBI office or U.S. attorney, resulting in a light caseload of criminal complaints.

The small towns of East Texas were also "ideal venue for intellectual property debates," the article noted, because the resident juror pool was largely uneducated ("only 20 percent of the towns adult population hold bachelor's degrees") while also having grown up "on the edge of one of the world's richest oil reservoirs, and royalty battles with oil companies have created a strong sense of property rights, whether they relate to patents or minerals."

Former federal magistrate judge Judith Guthrie was cited as noting that the area was "always popular with plaintiff's lawyers. The perception was that juries weren't as sophisticated as in other parts of the district."

Judges in the district have also set up rules for rapidly processing cases, resulting it being called "the rocket docket," another contributing factor to its attraction of companies seeking quick and easy verdicts on complex intellectual property claims.

Companies that actually build products, such as Apple and Google, have been lobbying Congress to close the loopholes that allow "non practicing" patent trolls to drag firms into East Texas courts for easy, streamlined verdict awards that involve little significant argument and generate huge jury awards that embolden trolls to continue.

President Obama has repeatedly addressed "costly, needless" patent litigation in his State of the Union addresses as an American problem that needs to be addressed, while at the opposite end of the political spectrum, Supreme Court justice Antonin Scalia has similarly referred to East Texas as being a "renegade jurisdiction."

Comments

  • Reply 1 of 14
    Shouldn't trolls be filing their cases in middle earth instead of Texas?
    larryatallest skiltenlySpamSandwichpropod
  • Reply 2 of 14
    maestro64maestro64 Posts: 4,642member
    Well those lawyers are earning their paycheck or ballooning that paycheck.
  • Reply 3 of 14
    tenlytenly Posts: 707member
    Thanks Daniel.  I was wondering about exactly the question this article answers - why East Texas is so troll-friendly - although the headline is a bit misleading. I expected more information around the mistrial - more detail about what was said to justify a potential retrial.  Does Apple have a good chance at having a mistrial declared - or is this just some sort of stalling tactic?  Can the ruling be appealed?  Or can the damage award be vacated yet again?
  • Reply 4 of 14
    tenly said:
    Thanks Daniel.  I was wondering about exactly the question this article answers - why East Texas is so troll-friendly - although the headline is a bit misleading. I expected more information around the mistrial - more detail about what was said to justify a potential retrial.  Does Apple have a good chance at having a mistrial declared - or is this just some sort of stalling tactic?  Can the ruling be appealed?  Or can the damage award be vacated yet again?
    East Texas litigation is rarely the final outcome - appellate courts almost never agree with the lower verdict and damages, plus cases which are seen there are already tainted with assumptions of "patent trolling for a settlement."

    So, why bother with East Texas at all? The function of East Texas is so the plaintiff can obtain a larger settlement. The defendant will either be frustrated by the costly, drawn out litigation process or be postured into a weakened negotiating position.

    Apple could go either way with this one: Either they'll settle for a significantly lower figure – usually trolls settle for significantly below the verdict to avoid the defendant from trying to void their IP, or: Apple find the patents so absurd that they'll see it through to having them invalidated as a lesson to other patent trolls.

    The fact is Apple are willing licensees of intellectual property and frequently aim to do the right thing by IP holders.
    edited February 2016 latifbp
  • Reply 5 of 14
    Please refrain from taking a side on this issue with the "patent troll" label. NPE (non-practicing entity) is more acceptable as a description when discussing legal matters.

    After all, there have been PLENTY of cases of small patent holders fighting larger companies over cases of infringement.
    edited February 2016 frac
  • Reply 6 of 14
    cnocbuicnocbui Posts: 3,613member


    The fact is Apple are willing licensees of intellectual property and frequently aim to do the right thing by IP holders.
    And sometimes they don't.
    revenantsingularity
  • Reply 7 of 14
    icoco3icoco3 Posts: 1,459member
    Apple should just cease to allow their products to be sold by any retail outlet in that entire district.  I believe that would remove any standing to sue in that district.
    edited February 2016
  • Reply 8 of 14
    gatorguygatorguy Posts: 20,915member
    tenly said:
    Thanks Daniel.  I was wondering about exactly the question this article answers - why East Texas is so troll-friendly - although the headline is a bit misleading. I expected more information around the mistrial - more detail about what was said to justify a potential retrial.  Does Apple have a good chance at having a mistrial declared - or is this just some sort of stalling tactic?  Can the ruling be appealed?  Or can the damage award be vacated yet again?
    Apple could go either way with this one: Either they'll settle for a significantly lower figure – usually trolls settle for significantly below the verdict to avoid the defendant from trying to void their IP, or: Apple find the patents so absurd that they'll see it through to having them invalidated as a lesson to other patent trolls.

    The fact is Apple are willing licensees of intellectual property and frequently aim to do the right thing by IP holders.
    Apple already attempted , unsuccessfully, to have the patents invalidated. They weren't the first ones either. They've also apparently admitted to the court that they are not disputing patent validity in the case of Facetime, a somewhat surprising admission.  You might also note that Apple has a policy of not responding to licensing demands from outside parties (particularly NPE's)  probably a contributing factor to the fact they are consistently one of the most sued companies over IP claims. Doubtful they're the only tech with the same general "ignore" policy. For instance I'm guessing Google does as well. 
    edited February 2016 revenantcnocbui
  • Reply 9 of 14
    tenlytenly Posts: 707member
    gatorguy said:
    Apple could go either way with this one: Either they'll settle for a significantly lower figure – usually trolls settle for significantly below the verdict to avoid the defendant from trying to void their IP, or: Apple find the patents so absurd that they'll see it through to having them invalidated as a lesson to other patent trolls.

    The fact is Apple are willing licensees of intellectual property and frequently aim to do the right thing by IP holders.
    Apple already attempted , unsuccessfully, to have the patents invalidated. They weren't the first ones either. They've also apparently admitted to the court that they are not disputing patent validity in the case of Facetime, a somewhat surprising admission.  You might also note that Apple has a policy of not responding to licensing demands from outside parties (particularly NPE's)  probably a contributing factor to the fact they are consistently one of the most sued companies over IP claims. Doubtful they're the only tech with the same general "ignore" policy. For instance I'm guessing Google does as well. 
    I thought I read that they didn't "admit" anything to the courts regarding validity - but in fact that they missed a filing date for their objection.  Missing the date may mean that they are unable to challenge validity - but it's a far cry from "admitting the patents are valid".
  • Reply 10 of 14
    gatorguy said:
    Apple could go either way with this one: Either they'll settle for a significantly lower figure – usually trolls settle for significantly below the verdict to avoid the defendant from trying to void their IP, or: Apple find the patents so absurd that they'll see it through to having them invalidated as a lesson to other patent trolls.

    The fact is Apple are willing licensees of intellectual property and frequently aim to do the right thing by IP holders.
    Apple already attempted , unsuccessfully, to have the patents invalidated. They weren't the first ones either. They've also apparently admitted to the court that they are not disputing patent validity in the case of Facetime, a somewhat surprising admission.  You might also note that Apple has a policy of not responding to licensing demands from outside parties (particularly NPE's)  probably a contributing factor to the fact they are consistently one of the most sued companies over IP claims. Doubtful they're the only tech with the same general "ignore" policy. For instance I'm guessing Google does as well. 
    It is true that Apple alone could not invalidate the patents, but they *were* invalidated.   From Apple's statement to the press: "All four of VirnetX’s patents have been found invalid by the patent office."  While researching this for other appleinsider threads, I noted that Apple put up a huge fight chronicled at law360.com challenging this "patent assertion entity".  The jury instructions illustrated in the .pdf posted to AI, that Apple "does not contest that the Original Version of VPN on Demand feature" (iOS 3-6, 2009-2013) infringed ..." are very dissembling.  Perhaps not challenged as an issue in East Texas (in favor of non-infringement arguments instead of invalidity arguments perhaps), but contested very much elsewhere before the USPTO.
  • Reply 11 of 14
    Shouldn't trolls be filing their cases in middle earth instead of Texas?
    They are not trolls. They are the actual inventors of the technology. Read up.
    cnocbui
  • Reply 12 of 14
    Shouldn't trolls be filing their cases in middle earth instead of Texas?
    They are not trolls. They are the actual inventors of the technology. Read up.
    So, where'd you get the information that they actually invented the technology.  According to the company info, they're a holding company.   Holding companies don't usually invent their own stuff.   Also, it says that these guys actually sued Avaya over network patents?  Now, that had to be a stretch.   Wow.
    latifbp
  • Reply 13 of 14
    Shouldn't trolls be filing their cases in middle earth instead of Texas?
    They are not trolls. They are the actual inventors of the technology. Read up.
    Not necessarily.  Implementations of VPN and variants go way back, even before the Aventail tech that Apple cited as prior art.

    “Well before 2000, there was an extensive amount of literature and other prior art describing techniques for establishing secure communication links, including VPNs,” Apple wrote in its petition. “A person of ordinary skill would have been familiar with this prior art, and would have found it to render obvious the claimed method.”

    Admittedly, the inventors who became assignors to VirnetX may have added their own wrinkles to VPN design, so they should indeed be credited (in a first-to-file, not
    first-to-invent system) for any improvements (minor or major) they actually did over prior art.   But are they the original concept inventors of publishable work,
    or mere improvers within an obscurantist patent system which may or may not highlight original work?

    Concept inventors here include renowned cryptographer David Chaum of "Chaum's mixes" etc. cited in much of VPN patent lore.  

    I myself am not a specialist in crypto work, so I must defer to the cognoscenti.   Notwithstanding, I remain skeptical of NPEs who claim big things.


  • Reply 14 of 14
    Rayz2016Rayz2016 Posts: 4,730member
    Apple tends to buy companies for their talent, so perhaps they should fire their own legal team and buy Cisco for theirs:

    http://www.wsj.com/articles/SB10001424127887324532004578361280127852340

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