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IP wars: Apple fined $625M in latest patent infringement case

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Apple has a beef to pick with Texas.

On Wednesday, a jury in an East Texas federal court ordered the iPhone maker to pay $625.6 million for infringing on pre-existing patent rights. The court found both Apple’s iMessage as well as its popular Facetime feature in violation of several different patents, for which they’ve decided to fine the company $335m and $290m, respectively.

“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,” Apple said in a statement.

The plaintiff? VirnetX, a company with, as of yet, no actual products to its name. The Nevada-based venture currently employs 14 people, and makes most of its income from patenting various technologies and the ensuing lawsuits.

This has lead to some publications dubbing VirnetX a ‘patent troll’ – a pejorative term for individuals and companies that build their business solely around suing for patent rights, while never manufacturing or marketing the patented products themselves.

The verdict is likely to reignite the ongoing debate about patent laws in the United States, and whether the government’s doing enough to protect tech companies from faux litigation. In general, patent trolling has been far more prevalent in the US compared to Europe for example. This is most likely due to the old continent’s ‘loser pays litigation costs’ regime, which seems to have effectively disincentivized any similar practices.

This is not the first patent rodeo for VirnetX. The company sued Apple for FaceTime patent infringement back in 2013 as well, for which Apple was initially ordered to dish out $368m in damages. The verdict was overturned on appeal and the company later tweaked the features in question.

But Apple isn’t even the only tech juggernaut VirnetX has taken on in the past. In 2010, Microsoft agreed to a $200m settlement with the company over allegedly infringing on VirnetX’s networking patents.

Similarly, the PC pioneer decided to settle a different dispute 2 years ago, over several patents claimed by VirnetX used in Skype. The settlement deal in question? $24 million.

VirnetX has also previously sued Cisco, Siemens and Avaya for patent infringements.

Although patent reformists are likely to piggyback on this most recent of cases, it’s worth noting there have already been some significant precedents set over the last couple of years. In particular, the 2014 Supreme Court’s decision in Alice Corp. v. CLS Bank doubled down on what kind of software is eligible for patent protection in the first place (even though the court’s opinion doesn’t explicitly mention software as such).

Meanwhile, patent trolling remains a looming issue for industry leaders and aspiring startups alike. There have been multiple studies concluding that patent trolls not only curb innovation by causing companies to spend less on R&D, but also lead to an overall reduction in capital investments for tech startups.