Apple Loses Latest Legal Fight With VirnetX Over VPN Patents

(Bloomberg) -- Apple Inc. lost another round in its decadelong legal battle over hundreds of millions of dollars in royalty claims by VirnetX Holding Corp. for patents used in virtual private networks including FaceTime.

A three-judge panel of the U.S. Court of Appeals for the Federal Circuit had already barred Apple from arguing the VirnetX patents are invalid, because such claims have failed in other cases. The full court on Monday refused to reconsider the November ruling.

Apple and VirnetX have been battling for years over technology related to secure communications, and Apple is trying to throw out two jury verdicts for almost $1 billion in combined damages. The iPhone maker asked the appeals court to reconsider whether VirnetX’s patents should have been issued and claims the awards are excessive, especially considering VirnetX reports less than $2 million in annual revenue.

VirnetX rose 10% to $4.66 at 2:38 p.m. in New York trading, after jumping as much as 18% earlier Monday.

In November, the appellate panel ruled that there was “substantial evidence” that Apple’s virtual private network service infringed two VirnetX patents, but said Apple’s redesigned version of FaceTime didn’t use two other VirnetX patents. The court said that the $503 million in damages would have to be recalculated.

Apple argued in its petition for reconsideration that the panel was wrong to preclude it from renewing its invalidity arguments, saying it wanted to raise different legal issues. It also sought to have the court reconsider the infringement finding that was upheld.

At a separate trial, Apple lost a $439 million judgment over earlier versions of VPN on Demand and FaceTime, and the Federal Circuit upheld the verdict. Apple is asking the Supreme Court to consider the case, particularly how damages are calculated.

In the meantime, the patent office has found all but one aspect of one of the four patents to be invalid. Apple contends that it shouldn’t be forced to pay royalties on patents that shouldn’t have been issued. VirnetX has said that there is no final decision to cancel those patents, so Apple’s argument is premature and part of an ongoing effort to avoid paying for the use of another company’s inventions.

The case is VirnetX Inc. v Apple Inc., 19-1050, U.S. Court of Appeals for the Federal Circuit (Washington).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Steve Stroth, Joe Schneider

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