Apple Hit With Huge $625M Verdict Over FaceTime, VPN Patents

February 3, 2016, 10:23 PM UTC
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Apple just lost a patent case and, oh boy, this one is a doozy. On Wednesday, jurors in Texas federal court ordered the iPhone maker to pay nearly $335 million over an earlier finding it had infringed on patents for secure VPN networks, plus another $290 million upon finding Apple’s (AAPL) popular FaceTime feature infringed different patents.

The plaintiff in the case is a Nevada holding company called VirnetX(VHC), which does not sell any products and has been dubbed a “patent troll” – a derogatory term for shell companies that make money by licensing and suing over patents.

The latest trial between Apple and VirnetX, which has been taking place over the last week, is a do-over of an earlier 2012 patent clash between the two parties. In that case, a jury ordered Apple to pay $368.2 million, but an appeals court threw out that verdict and ordered a new trial.

In response to a request for comment, an Apple spokesperson said the company would challenge the verdict.

“We are surprised and disappointed by the verdict and we’re going to appeal. Our employees independently designed this technology over many years, and we received patents to protect this intellectual property. All four of VirnetX’s patents have been found invalid by the patent office. Cases like this simply reinforce the desperate need for patent reform.”

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The patents at issue it the Apple case include U.S. Patent 7921211, which dates from 1998, and describes a way to ensure secure communications through the use of domain names. Patent records list the original inventor as an entity called “Science Applications International Corporation,” which assigned the patent to VirnetX in 2006. VirnetX’s lawsuit claims FaceTime, which lets Apple users talk to each other, violates the patent and a related one.

The case involves two other patents, including US Patent 6502135 (titled “Agile network protocol for secure communications with assured system availability”), that likewise involve secure communication. Those patents were at issue in the earlier 2012 trial over Apple’s use of VPN networks; even though an appeals court threw out the earlier case, the jury appears to have reinstated a similar award against Apple.

The new $625 million verdict will likely add grist to the ongoing debate over patent reform and, in particular, the role of the federal district of East Texas in many patent trials. Critics say judges, lawyers and small towns in the state, including Tyler and Marshall, have created a cottage industry of sorts where patent holding companies – which typically have no more than a mailbox in East Texas – will find sympathetic juries.

In response, many defendants simply settle rather than face the expense of an out-of-state trial and the risk of massive verdicts. Currently, an appeals court is considering a case that would the venue laws for patent trials, and crimp the influence of East Texas.

The latest twist in the Apple case comes after Microsoft paid $23 million to VirnetX in a settlement over its Skype video technology.

This story was updated several times as new information became available. here’s a copy of the verdict.

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