Apple to challenge US$368 million patent infringement verdict

Gregg Keizer
29 April, 2013
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Apple will challenge a November 2012 jury verdict that awarded US$368 million in damages to Nevada patent-holding company VirnetX, a filing with US regulators showed.

In a Form 10-Q filed this week with the US Securities and Exchange Commission (SEC), Apple said it had not yet recorded the millions owed to VirnetX on its balance sheet.

“The Company is challenging the verdict, believes it has valid defences and has not recorded a loss accrual at this time,” Apple said in the SEC filing.

VirnetX filed its lawsuit against Apple in August 2010, claiming that Apple’s FaceTime and Message, a video chat application and SMS text-replacement, respectively, infringed on four of its patents. A jury awarded VirnetX US$368 million in damages.

Apple’s attempt to reduce the award was blocked in February.

While no record exists in the US Court of Appeals for the Fifth District of an Apple appeal, the company has submitted a motion in the US District Court that heard the original case, asking Judge Leonard Davis to amend an earlier ruling severing ongoing royalty payments to VirnetX from the rest of the case and, in effect, requesting he reconsider his decision that the infringement lawsuit had been decided.

In February, Davis ordered that Apple pay VirnetX just over US$330,000 in royalties daily until the two parties agreed on a licensing deal.

In its motion, filed on 28 March, Apple argued that the daily royalty should not have been separated from the case itself and, since a licensing deal has not been reached, the lawsuit has not officially ended.

It appears Apple made that move because, if the case was not closed, it cannot be appealed to a higher court, another clue that Apple will, in fact, challenge the verdict via appeal to the Fifth District, as the Form 10-Q hinted.

“Because VirnetX’s request for an ongoing royalty remains to be decided, the judgement in this case is not yet final or appealable,” Apple’s lawyers said in the motion.

Davis has yet to rule on the motion, which VirnetX has contested.

The up-in-the-air nature of the case, from Apple’s perspective at least, may have been what prompted the company to reverse an earlier decision to reconfigure iOS 6 so that its VPN (virtual private networking) On Demand setting defaulted to ‘Establish if needed’ rather than ‘Always’.

Apple said then that it would issue an update to iOS 6 to finalise the VPN setting modification.

The change would have required users to run the VPN client before they pointed Safari to a website, such as an intranet URL maintained by their employer, that demanded a secure connection. In its present state, iOS devices automatically connect using the VPN client.

But in a revised support document published this week – first noticed by MacRumours – Apple changed its mind. “Apple no longer plans to change the behaviour of the VPN On Demand feature of iOS 6.1 for devices that have already been shipped,” the revamped document stated. “The ‘Always’ option will continue to work as it currently does on these devices.”

As MacRumours noted, the security firm Mobile Active Defense had published a white paper ( download PDF) taking Apple to task for the VPN changes, claiming that it would result in security risks to companies’ networks as workers connect, or try to, from iPhones and iPads.

While MacRumours and other Apple blogs speculated that Apple’s backtracking on the VPN changes stemmed from Apple and VirnetX striking an agreement, that seems unlikely, what with Apple’s motions still before Judge Davis and its promise to challenge the infringement verdict.


By Gregg Keizer, Computerworld

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