Apple Must Pay $502.6 Million to VirnetX, Federal Jury Rules

(Bloomberg) -- VirnetX Holding Corp. won $502.6 million against Apple Inc. after a federal jury in Texas said the maker of iPhones was infringing patents for secure communications, the latest twist in a dispute now in its eighth year.

VirnetX’s stock rose as much as 44 percent on the news in after hours trading. The company closed at $4.10 per share on Tuesday.

Apple’s stock has seen little change on the news given that the $502.6 million award is minuscule compared to the company’s profits. The company generated $20 billion profit in the first quarter, the company said in February.

VirnetX claimed that Apple’s FaceTime, VPN on Demand and iMessage features infringe four patents related to secure communications, claims that Apple denied.

The dispute has bounced between the district court, patent office and Federal Circuit since 2010. There have been multiple trials, most recently one involving earlier versions of the Apple devices. A jury in that case awarded $302 million that a judge later increased to $439.7 million.

Kendall Larsen , CEO of VirnetX, said the damages, which were based on sales of more than 400 million Apple devices, were "fair."

"The evidence was clear," Larsen said after the verdict was announced. "Tell the truth and you don’t have to worry about anything."

Apple lawyers declined to comment.

For VirnetX, the jury verdict in its favor could be a short-lived victory. The Patent Trial and Appeal Board has said the patents are invalid, in cases that are currently before the U.S. Court of Appeals for the Federal Circuit in Washington.

The Federal Circuit, which handles all patent appeals, declined to put this trial on hold, saying it was so far along that a verdict would come before a final validity decision.

VirnetX, based in Zephyr Cove, Nevada, reported just over $1 million in revenue last year but investors have boosted the stock by more than 70 percent in hopes of an eventual victory over Apple.

The company started within government contractor SAIC Inc., tasked with developing secure communications for the Central Intelligence Agency. It was spun out with aspirations to be bought by Microsoft Corp. Instead, Microsoft paid it $200 million to end litigation in 2010, and then another $23 million for newer products.

The case is VirnetX Inc. v. Apple Inc., 12cv855, U.S. District Court for the Eastern District of Texas (Tyler)

--With assistance from Mark Gurman

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net, Dennis Robertson in Tyler, Texas at drobertson28@bloomberg.net.

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman, Ros Krasny

©2018 Bloomberg L.P.