VirnetX Wins $302.4 Million Trial Against Apple in Texas

(Bloomberg) -- Apple Inc. was told to pay $302.4 million to VirnetX Holding Corp. for infringing patents covering secure computer and mobile communications, following a federal jury trial in Texas.

The jury in Tyler, Texas, said Friday Apple infringed two patents related to its FaceTime calling feature. The damage award also includes the amount Apple must pay for use of VirnetX technology in Virtual Private Network on Demand, also called VOD.

This was the third trial in a case that began in 2010. An appeals court upheld a portion of the first verdict, which found Apple’s VOD infringed two patents, leaving the jury only to determine how much Apple should pay. Separately, the appeals court ordered a reconsideration of whether FaceTime infringed two other patents.

The last time a jury heard the case -- the second trial -- VirnetX was awarded $625.6 million, though that also involved newer versions of the two Apple products. A trial judge threw out that case in July, saying it was unfair to Apple to combine all the issues.

The amount was on point with what VirnetX argued it was entitled to during Sept. 26 opening arguments, based on the billions of dollars worth of products sold by Cupertino, California-based Apple. The iPhone maker countered that VirnetX was entitled to no more than $25 million.

VirnetX, which had 20 full- and part-time employees as of Dec. 31, has been unsuccessful in marketing its own software and relies on patent licensing for revenue. Its last big payout was from a $23 million settlement with Microsoft Corp. announced in December 2014.

Company Founders

VirnetX was founded by former employees of government contractor SAIC Inc., and the company has said that its technology stemmed from work done for the U.S. Central Intelligence Agency to develop secure communications.

The U.S. Patent and Trademark Office conducted parallel reviews of the four patents and on Sept. 9 said none covered new inventions. The agency uses a different standard of review and it’s easier to have a patent found invalid by the patent office than a district court.

Still, the ultimate decision will lie with the U.S. Court of Appeals for the Federal Circuit in Washington, which specializes in patent law.

The Federal Circuit will use the patent office’s legal standard when reviewing the agency’s decisions, and the district court’s legal standard when ruling on the jury verdict. That means VirnetX needs to win in both instances to ultimately get money from Apple.

The case is VirnetX Inc. v. Apple Inc., 10cv417, U.S. District Court for the Eastern District of Texas (Tyler).