Apple to Appeal $625 Million 'Patent Troll' Settlement

Apple Inc. Spring Forward
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Apple Inc. sign displayed at the Yerba Buena Center before the start of the the company's Spring Forward event on March 9, 2015 in San Francisco, California.

Score one for the so-called "patent trolls," as a litigation-loving patent firm wins big in Texas.

A Texas jury decided on Wednesday that Apple must pay $625.6 million for violating several patents held by VirnetX, a company known for collecting patents and then suing companies for allegedly violating them. The Nevada-based company, which has been snarling Apple in litigation for years, successfully convinced a jury that the tech giant had infringed on patents in the creation of its popular FaceTime and iMessage services. The lawsuit also said Apple infringed its virtual private network (VPN) technology.

Jurors in the U.S. District Court for the Eastern District of Texas ordered Apple to pay $335 million as part of an earlier settlement that was later vacated on appeal, plus $290 million for the new claim regarding FaceTime technology.

In a statement, Apple said it was surprised by the verdict and vowed to appeal. "Our employees independently designed this technology over many years, and we received patents to protect this intellectual property," the company said. "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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VirnetX has owned the four patents in question since 2006, according to court reports. It first sued Apple in 2010, accusing the Cupertino, Calif.-based company of infringing its patents with its iPhone, iPod and iPad products. In 2012, a jury sided with VirnetX and ordered Apple to pay $368 million in damages — a sum that was overturned on appeal and which led to the retrial and new settlement.

"The jury saw what we have been saying all along: Apple has been infringing VirnetX's patented technology for years,” VirnetX lawyer Jason Cassady said in a statement.

The case comes after Microsoft paid VirnetX $23 million in late 2014 to settle claims it violated patents with its Skype products. That was in addition to a $200 million settlement from Microsoft to the patent-licensing firm in 2010 over its VPN technology.

Proponents of patent reform refer to shell companies like VirnetX as “patent trolls” because instead of selling or developing products, they generate revenue by licensing and litigating over patents. With a recent track record of producing sympathetic juries, the Eastern District of Texas is the court of choice for such cases. (Fortune reports that an appeals court is currently considering a case that could change the venue rules for patent cases.)

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As it prepares to appeal the latest VirnetX damages, Apple has been hit with yet another lawsuit by a patent-holding company, this one called Meraloc. According to financial site Bidness Etc, Meraloc has only been in business for a month yet claims Apple infringed upon a patent regarding the inner-workings of the iPod Touch’s flash drive.

Meraloc alleges that several aspects of the Apple device, regarding music file information and the touch screen display itself, are covered under the patent. The new lawsuit was filed in — you guessed it -- the Eastern District of Texas.


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