Supreme Court Kills Apple’s Attempt to Dodge $440 Million Judgment for VirnetX

The Supreme Court today denied certiorari in Apple, Inc. v. VirnetX, Inc. et. al., a development that VirnetX said in a press release spells “triumph” for the Internet security software company, following a decade long battle.

The underlying judgment was delivered in October 2017, when the U.S. District Court for the Eastern District of Texas increased the amount of damages to be paid by Apple from $302.4 million in a prior jury verdict up to nearly $440 million for Apple’s infringement of patents covering secure communications in applications like FaceTime.

Apple appealed to the Federal Circuit, which issued a Rule 36 judgment in January 2019 affirming the district court. In August 2019, the CAFC denied Apple’s requests for rehearing, and in October the Court denied subsequent motions to vacate that order and stay issuance of the mandate in the case. The formal mandate issued on October 8, making the Rule 36 judgment final, and Apple petitioned the Supreme Court on December 27.

High Court Not Moved by “Gaping Loophole” Argument

Apple argued in its petition that the Federal Circuit “flout[ed] more than a century of doctrine from this Court requiring “apportion[ment]” of patent damages “in every case,” invoking Garretson v. Clark, 111 U.S. 120, 121 (1884). In Garretson, the Supreme Court held that “a patentee cannot recover the entire profit from an infringing product as damages unless ‘the entire value of the whole machine * * * is properly and legally attributable to the patented feature.’”

The company added that case law at the Federal Circuit over the last five years has resulted in the adoption of a “gaping loophole” allowing for an epidemic of inflated damages awards.

But VirnetX replied that Apple did not dispute that it incorporated VirnetX’s technology into its products, thereby infringing VirnetX’s patents, and said that Apple was “inventing rationales and supposed legal rules the Federal Circuit never adopted”.

There is a separate case pending between Apple and VirnetX in which the Federal Circuit ordered a recalculation of damages earlier this month, making the total outstanding judgment for VirnetX nearly $1 billion.

Apple Must Pay Up

According to VirnetX, Apple signed an agreement on October 16, 2017 “stipulating Apple agrees that…Apple will pay any payments then due under the Judgment within 20 days of completion of any appeal from the Judgment in this matter, as well as any proceedings seeking relief from the Judgment before the Supreme Court of the United States, and any remand proceedings in the event the court of appeals or Supreme Court grants Apple relief from the Judgment, or within 20 days of the expiration of the times for initiating such appellate or Supreme Court proceedings.”

“We trust Apple will honor the decisions rendered by our courts and their esteemed judges and honor an agreement to abide by the court’s decision,” Kendall Larsen, VirnetX CEO and President, said in a statement.

Larsen added:

We are extremely pleased with the Supreme Court’s decision not to hear Apple’s writ of certiorari. It has taken us 10 long years, 4 successful jury trials, 2 successful Appellate Court rulings and a favorable Supreme Court decision to get here.  We believe in the fairness of the American justice system and have respectfully played by its rules no matter how arduous.

We are a small company with valuable security technology. The inventors of that technology have senior level positions at VirnetX. It has always been our objective to create our own products with our proprietary technology. Unfortunately, when other companies are using your technology without permission, you must take action to protect that company asset.

We have always believed that we were in the right with our court actions against Apple. Four juries and countless judges agree. We believe that our technology provides an important security feature in some Apple products, especially the iPhone. The jury award we received, and confirmed by Federal judges, is less than a quarter of one percent of the cost of an iPhone. We believe this amount is more than fair considering the importance of Internet security.

IPWatchdog reached out to Apple’s counsel for comment, but had not received a response as of the time of publication.