Apple Denied JMOL, Remittitur After $368 Million Verdict In FaceTime Patent Case

by Tara Arick on March 4, 2013 · 0 comments

in Civil Procedure

- From LexisNexis® Mealey’s™ Daily Legal News.

A Texas federal judge on Feb. 26 denied a motion for judgment as a matter of law (JMOL) to Apple Inc. following a jury’s finding that the tech giant’s FaceTime and VPN On Demand (VPNOD) features infringed four patents of a rival technology firm (VirnetX Inc. v. Apple Inc., No. 6:10-cv-00417, E.D. Texas).
Additionally, U.S. Judge Leonard Davis of the Eastern District of Texas upheld the jury’s $ 368 million verdict and declined to grant Apple’s motion for a new trial.

Infringement Alleged 

In August 2010, VirnetX Inc. sued Apple, Cisco Systems Inc. and others for infringement. VirnetX named its U.S. Patent Nos. 6,502,135 and 7,490,151, which pertain to “a method of transparently creating a virtual private network [VPN] between a client computer and a target computer,” and Nos. 7,418,504 and 7921,211, which disclose “a secure name service.”

Related to Apple, VirnetX claimed infringement via VPNOD and FaceTime features, both of which feature establishing secure communications. FaceTime provides a secure communication link for users when video-chatting, while VPNOD creates a VPN when a user requests access to a secure website or server. VirnetX said that Apple willfully infringed its patents with “every version of” its popular iPhone, as well as with the Apple iPad, iPad2 and iPod.

Verdict, JMOL Motion

Cisco’s AnyConnect Secure Mobility Client software application also infringed, VirnetX alleged. The other defendants were ultimately dismissed from the case. A five-day jury trial on Apple’s alleged commenced Oct. 31, 2012. A trial on Cisco’s alleged infringement is pending.

On Nov. 6, the jury handed down the $ 368 million verdict, finding that Apple infringed all 16 of the asserted patent claims and rejecting Apple’s arguments of patent invalidity. On Nov. 21, Apple moved for JMOL or, in the alternative, a new trial or remittitur.

‘Determines Whether’ Limitation

As it had at trial, Apple argued that VPNOD does not perform the patent claim stating that a method “‘determines whether’ a DNS [domain name service] request is requesting access to a secure website or server” and, thus, does not infringe. Although Apple conceded that VirnetX presented testimony and evidence that VPNOD can be configured to infringe the patents in suit, Apple argued that “the claims require that the actual security of the requested web site or server be ‘determined.’” However, Apple contended, VPNOD “only initiates connections with whatever server or website the user has provided” and that it does not “decide if a DNS request corresponds to a secure server” by itself.

Judge Davis found that VirnetX sufficiently addressed direct infringement by showing that “once the feature is set-up by the user, the actual steps of the asserted claims are performed by the feature itself and not the user.” And even though “Apple contends that user input is required to practice the claimed invention,” the judge disagreed, stating that “the steps of the asserted claims do not explicitly require an additional party’s involvement.”

FaceTime Infringement

Concerning infringement via FaceTime, the parties’ arguments at trial mostly concerned whether the feature meets the “direct communication” limitation of the asserted patents, in that the relevant claims require an indication that “the domain name service system supports establishing a secure communication link.” Although the parties agreed that “secure communication” requires a direct communication, they disputed whether a network address translator (NAT) allows for such direct communication. FaceTime can operate either via a relay server or via a NAT or other devices containing NAT functionality. Apple’s iPhones and other devices using FaceTime can be located behind other devices that have NAT functionality.

Judge Davis held that VirnetX provided evidence and testimony that NATs do not impede direct communication, finding this to be consistent with the court’s claim construction that “routers, firewalls, and similar servers that participate in typical network communication do not impede ‘direct communication between a client and a target computer.’” The judge also found sufficient evidence that FaceTime satisfies the “look up service” limitation, which Apple had also disputed. In light of these findings, Judge Davis denied JMOL related to direct infringement of the patents in suit.

JMOL Denied

Apple argued that VirnetX failed to demonstrate that it was “willfully blind to its customers’ infringement” and that it “intentionally encouraged its customers to infringe the patents-in-suit,” of which it was aware prior to the lawsuit. As such, Apple asserted that it was entitled to JMOL on indirect infringement.

Again, Judge Davis found that VirnetX supplied sufficient evidence to overcome the JMOL motion. VirnetX “presented testimony that Apple believed there was a high probability that its customers infringed and took deliberate actions to avoid confirming infringement.” The jury properly drew “inferences from the evidence presented” by VirnetX in reaching this conclusion, the judge held, denying JMOL on this point as well.

Remittitur Denied

Addressing the award, Judge Davis found that VirnetX’s evidence supported the reasonable royalty rate of 1 percent, represented in the verdict amount. The judge also held that VirnetX “did not implicitly invoke the entire market value rule in its damages theory,” as Apple contended. In light of the evidence of Apple’s presuit knowledge of the patents in suit and VirnetX’s “figures that discounted pre-suit sales,” the judge held that “there is no basis to grant Apple’s request to reduce the jury award.”

The judge also found no evidence to merit JMOL on matters of patent invalidity, jury instructions or a new trial.

Judge Davis granted in part VirnetX’s motion for pre- and post-judgment interest and granted its motion for post-verdict damages. The judge denied VirnetX’s motion for a permanent injunction, though, finding that the asserted damages “can be remedied with monetary damages.” He also ruled that VirnetX did not demonstrate that it suffered any loss of goodwill, lost profits or market share and, therefore, did not demonstrate the necessary irreparable harm to merit a permanent injunction.

Counsel

VirnetX is represented by Douglas A. Cawley, Christopher L. Limpus, Rosemary T. Snider, Ryan A. Hargrave, Stacie L. Greskowiak and Mitchell R. Sibley of McKool Smith in Dallas; Ramzi R. Khazen, Seth R. Hasenour and Trent E. Campione of McKool Smith in Austin, Texas; Samuel F. Baxter of McKool Smith in Marshall, Texas; Andrew T. Gorham, Robert C. Bunt, Robert M. Parker and Charles Ainsworth of Parker Bunt & Ainsworth in Tyler; and Bradley W. Caldwell, Daniel R. Pearson, Jason D. Cassady and John A. Curry of Caldwell Cassady Curry in Dallas.

Apple is represented by Danny L. Williams, Christopher N. Cravey, Kyung Kim, Leisa T. Peschel, Matthew R. Rodgers, Ruben S. Bains, Scott E. Woloson and Terry D. Morgan of Williams Morgan & Amerson in Houston; Eric M. Albritton and Stephen Edwards of Albritton Law Firm in Longview, Texas; Marcia H. Sundeen of Kenyon & Kenyon in Washington, D.C.; and Megan W. Olesek of Kenyon & Kenyon in Palo Alto, Calif.

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