$439M VirnetX judgment is 'legally wrong and grossly unfair' Apple tells Supreme Court

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The Federal Circuit's decision to side with VirnetX in January 2019 as part of a long-running patent infringement case is "grossly unfair," Apple insists to the Supreme Court, claiming the "whopping" $439 million judgment involved the Federal Circuit making "two fundamental legal errors" to justify the size.

Petitioning for a writ of certiorari on December 27, Apple told the Supreme Court its objections to the January verdict, in the continuing affair of its patent infringement argument with VirnetX. Apple claimed the Federal Court was in the wrong for two main reasons: setting the award too high, and failing to take into account earlier cases.

"Defying this court's commands, the Federal Circuit committed two fundamental legal errors to sustain a whopping $439 million judgment," Apple wrote in the filing spotted by Law360. "It applied a rule that is fueling grossly excessive damages awards. And it sustained the inflated award even though the PTO has invalidated the underlying patent claims."

Bigger than warranted

On the award inflation front, the petition asserts the verdict flouts precedent where the damages need to be limited to the value of the patented invention, rather than all other features of the products in question. In short, VirnetX's award should be based on the value of its patent within products accused to use it, rather than the entire value of an iPhone or Mac.

The Federal Circuit is said to have deviated from the 1884 high court ruling setting the precedent by, over recent years, believing it is not necessary when the patent owner uses prior licenses as part of its theory for demanding damages. According to Apple, "the Federal Circuit has adopted a gaping loophole that allows patentees to recover inflated damages far beyond the value of the patented invention."

In this particular case, VirnetX is accused of using several licenses of patents at varying rates, which were then averaged to create a rate awarded by the jury for all Apple products ever sold. These licenses included some affecting landline telephones, a product category Apple's products typically cannot be classified under in many respects.

By "carefully selecting" licenses to create the damage theories, patent owners have the ability to secure "massive sums entirely untethered from the value of the patented feature," Apple believes. This in turn creates risks of liability, which may prevent the creation of new products.

"Only this court can end this innovation-busting deviation from settled law," Apple urged.

It's not over

On the second point, Apple calls the decision for the Federal Circuit to not reconsider its findings after the patent claims were invalidated "legally wrong and grossly unfair." According to Apple, the Supreme Court has made it clear that decisions that affect pending cases must be taken into account.

The Federal Circuit denied a request for reconsideration on August 2.

The argument is on when the case is deemed to be no longer pending, as the Federal Circuit seemingly deemed as such when the panel decision had been issued. Meanwhile, Apple believes the Supreme Court has to deny certiorari - an order to review the case - before it exits its pending status.

Since the certiorari hasn't been granted or denied by the Supreme Court, Apple reasons the case is still pending, and so the infringement ruling should be vacated.

"There is no need or justification to require a defendant to pay massive damages for infringing patent claims that the PTO has decided should never have been issued in the first place," Apple insists.

An ongoing battle

Dating back to 2010, the lawsuit is one of multiple Apple is fighting against VirnetX, chiefly over secure communications technology. VirnetX asserted Apple infringed on its patents in various ways, including Apple's VPN-on-Demand technology and elements of both FaceTime and iMessage.

VirnetX was initially awarded $386 million in 2010, but the judgment was vacated two years later, It was then folded into another 2016 patent suit retrial, where Apple was ordered to pay $625 million.

After that ruling was tossed over claims of an unfair trial with a confused jury and two further retrials, VirnetX was awarded $302.4 million, which was enhanced to $439 million.

In other legal fights, a Federal Circuit panel suggested it may not be able to uphold part of a separate $600 million judgment against Apple over the patent invalidation claims in October. In November, a Texas jury's decision that Apple had to pay VirnetX $503 million was overturned.

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