If at first, second, third... fourth time you don't succeed, you're Apple: Another appeal lost in $440m net patent war

Yes, it plans to appeal again

Apple has, for the fourth time now, lost an appeal against a $440m patent-infringement damages award, payable to VirnetX – and pledged to appeal the decision.

On Tuesday, a US appeals court denied Apple's request to overturn a 2016 verdict; just the latest in a long game of legal ping-pong that the tech giant appears to be playing in the hope that VirnetX will go out of business before it can get the funds.

The tech giant was sued back in 2010 for infringing VirnetX's network protocol patents (US 7,418,504 and 7,921,211) with its FaceTime videoconferencing app and iMessage. In 2012, Apple was ordered to pay $368m in damages; just as Microsoft had been ordered to cough up $200m to VirnetX for infringing the same patents.

But Apple decided to fight the issue to the death, even going to the trouble of cutting off some of its own users from FaceTime and claiming it was the result of a "bug." It wasn't, though, it was a deliberate decision – and Apple is facing a class-action lawsuit over that decision.

Strap in

Since that first award, Apple has done everything in its power to delay payment:

  • In 2013, it appealed the $368m award – and lost
  • So it appealed that appeal – and in 2014 won in part, with the appeals court sending the decision back down to the lower court
  • In 2016, that lower court decided against Apple a second time – and increased the award to $625m
  • Apple appealed again, and won a retrial, also in 2016
  • The retrial took place and went against Apple yet again – this time with a $440m award, some of it comprising interest from the original award back in 2012. We're now into 2017
  • Apple appealed again. And lost again. In April 2018, it was ordered to pay $503m.
  • And so, you guessed it, Apple appealed again. And this week, lost again. We think that makes it four failed appeals.

As things stand that makes it: VirnetX 6, Apple 2. But, of course, Apple has said it will appeal the appeal of the appeal of the appeal of the appeal. And, amazingly, it may still win.

Invalid

How? Because in a parallel case, back in 2016 – in between the $440m and $625m rulings – Apple went to the US Patent and Trademark Office (USPTO) and argued that VirnetX's patents should be invalidated. And it won.

Guess what VirnetX did? Yep, it appealed. And that appeal is still ongoing.

So as things stand, it looks as though Apple is never going to win the patent case so long as those patents remain valid. And VirnetX has to persuade the USPTO that they are valid because currently they aren't.

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To make things even more complicated, this month the USPTO signaled that it was going to shake up its rules and make it much more likely that it will approve more software patents – which means there is a very real possibility that VirnetX patents will be deemed valid again, and Apple will be on the hook again.

The truth is that VirnetX entire corporate future may rest on winning the case. Its share price has soared and plummeted each time there has been another decision in the case. On today's news, for example, its share price rocketed 53 per cent.

The company exists solely to sue other companies that are infringing patents that it bought. If it eventually wins against Apple, it is very unlikely that other tech companies will want the hassle and expense of a multi-year court battle and so it will be a strong position to threaten to sue others and rake in the royalties.

If, on the other hand, Apple succeeds in stripping its patents away, the company will have a much harder time pressuring other companies to accept its patents and it may find that its other patents are also challenged. That could easily sink the company due to the huge cost of litigation.

All eyes are now on the USPTO appeal. ®

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