Patent troll on the verge of winning 1 percent of Apple’s iPhone revenue

“In 2012, Apple won the year’s biggest patent verdict — more than $1 billion against Samsung,” Joe Mullin reports for Ars Technica. “The company also lost one of that year’s biggest cases when an East Texas jury ordered it to pay $368 million to a company named VirnetX for infringing patents related to FaceTime and VPN On Demand functions used in iPhones, iPads, and Macs.”

“VirnetX is a company some call a ‘patent troll’ because its only business is now patent enforcement,” Mullin reports. “Then, in March, US District Judge Leonard Davis ordered an ongoing royalty to be paid to VirnetX. The number was downright stunning: 0.98 percent of revenue from iPhones and iPads sold in the US.”

“To no one’s surprise, Apple is fighting tooth and nail to avoid this outcome. A decision published yesterday shows that one creative strategy that Apple tried to use went too far,” Mullin reports. “The decision puts VirnetX back in the driver’s seat, in a stronger position to collect a patent tax of nearly 1 percent on the most popular product produced by the world’s richest tech company. One estimate suggests that VirnetX could soon be collecting around $340 million from Apple annually unless VirnetX’s patents are vanquished on appeal.”

Read more in the full article here.

[Thanks to MacDailyNews Reader “David G.” for the heads up.]

Related articles:
Judge upholds $368 million patent suit verdict for VirnetX against Apple – February 27, 2013
Jury slaps Apple with $368.2 million fine over VirnetX patents – November 7, 2012
VirnetX awarded new security patent files new complaint against Apple – November 1, 2011

48 Comments

  1. Patent enforcement makes great sense to me when people use other people’s ideas in their products. But when Company 1 has zero awareness of Company 2’s patents and in a sense independently comes to the same conclusion, possibly believing they are the first to conceive of the solution, it makes zero sense to me that Company 2 should get royalties. Now, there’s a good question there about how would you know if the first company knew of the other company’s patent or not. And that is a good question. But evidence that shows independent development could presumably be generated. This idea that some random next-to-non-existent company has a patent. I one knows about that should somehow be their ticket to million of dollars a year in other people’s inventions is… ludicrous.

    1. Why is Apple autocorrect so stupid? It consistently shifts “in” for “on” and vice versa, even though the grammar in the switch makes no sense. And don’t even get me started on how stupid it is understanding that sometimes backspace is hit instead of the letter n and m. I CANNOT WAIT for iOS 8’s predictive text.

      1. Pay closer attention to where you’re hitting the keyboard before you suddenly blame autocorrect.

        I have that “in” and “on” problem all of the time, and it has nothing to do with autocorrect. It’s my pressing the wrong letters. Big difference.

      2. iOS does predictive sizing of the region around the keys you tap. It seems to me that in iOS 7 the region around the “o” was reduced in favor of an enlarged region around the “i” key. Blame Apple, to be sure, but don’t forget this stupid QWERTY layout that puts three vowels next to each other.

    2. Unfortunately creating evidence that you independently developed something would be trivial. It would just take time to create a fictional document trail that would be indistinguishable from independent invention.

      I agree with you, this is probably the worst aspect of patents, that they give a monopoly to one company without consideration whether the invention might have been inevitable and independently discovered by many companies.

      There does not seem to be anything about patents which is not either legally vague or includes a counter incentive alongside every incentive for inventors.

      In this case, maybe some limit on how much a patent can earn in total would have been a good concept for the law to adopt. Say 1000x the cost of developing that patent might have resulted in one-time $100 million payment or something.

      1. The problem Higo and never mark are trying to get to is that patents are illegitimately granted for things that are obvious solutions to a Person Having Ordinary Skill In The Art (or PHOSITA, as it is called in patent law). Independent development isn’t considered easy enough to prove. Instead, if the thing is so obvious that any ordinary engineer would be likely to solve a problem the same way, then it does NOT deserve patent protection for whichever engineer (well, his/her employing company) happened to run into the problem first.

        So, basically, the problem is that the Patent Office is granting patents when it absolutely should not be. The reason for that probably includes factors like:
        1. Congress not providing enough funds for them to not be swamped,
        2. companies feeling entitled to get patents for whatever garbage they file and appealing rejections,
        3. and the examiners not having enough familiarity with the subject matter (see item #1, since you need to _pay_ people better if you want them to be experts, or give them more time to research).

        Here’s a great article about a big reason lousy software patents get issued:
        https://www.eff.org/deeplinks/2014/03/why-patent-office-so-bad-reviewing-software-patents

  2. Let’s see, when Apple sues then it’s considered protecting their rights and products but when someone sues Apple then they’re trolls.

    Kind of a double standard.

    1. I don’t understand how Apple can hold patents for products that they make, Samsung can steal the patents and copy them to make their own product, Apple sues and gets virtually nothing in return.
      And then this company holds a patent for a product they didn’t even develop and they get millions in return. WTF

    2. A patent “troll” doesn’t practice the patent. It is literally a shell corporation that does nothing but enforce the patent. Trolls add zero value to society. There’s no double standard—Apple’s practicing its patents adds tons of value to tech.

    3. So what all of you are saying is that if you have an idea but can’t or don’t bring it to market then you have no rights. Some company with deep pockets can steal your idea and bring it to market without compensation for you.

  3. There is no such thing as a patent troll. Any company that owns intellectual property has a right to protect it, whether they use the patent or build products or not.

    “Patent troll” is a fictitious term invented by libtards.

    1. “A patent troll, also called a patent assertion entity (PAE), is a person or company who enforces patent rights against accused infringers in an attempt to collect licensing fees, but does not manufacture products or supply services based upon the patents in question, thus engaging in economic rent-seeking…” -I don’t have a problem with this definition

        1. Patent trolls don’t exist. They pay money for intellectual property. They try to sell this property in a capitalist society, which you praise mightily. There is no case law that says a patent isn’t any more enforceable based on the method that it was acquired.

          Obama and the democrats have nothing to do with patent law. Your opinion matters not, and your knowledge is pathetic.

          Your own friends in the congress recently blocked a change to patent law. So, let the fun begin.

      1. Patent trolls are sort of like Wall Street investment bankers who justify their abhorrent behavior on the basis that what they do is “good for liquidity” and serves an important — indeed, a noble! — economic purpose. But most common folk see this twisted perception as delusional. Most people see them as pillaging and burning their way through the financial system — weakening the system for their own rapacious gain at the expense of others.

    2. Is that what you think, David? Here’s a little history for you: the term “patent troll” was first used in a video about patents created by a (now presumably non-existent) company called Intellectual Property Videos, LLC in a promotional video about patents (you can view it here: https://www.youtube.com/watch?v=lOGoZFzHkhs ). The term did not gain wide-spread usage, however, until an attorney for Intel, Peter Detkin, used it while in litigation with TechSearch, another company that doesn’t produce anything.

      Question: do you think most attorneys for gigantic tech corporations are “libtards”? You can read a bit more about Peter Detkin here: https://en.wikipedia.org/wiki/Peter_Detkin

      Though he certainly doesn’t fit my definition of a “libtard” (mostly because I have no need to use such terms), YOU fit my definition of an “asshole” perfectly.

      1. Grigori (look in the mirror, asshole),

        Anyone who thinks that a company that violates a patent should get a free ride just because the patent holder does not produce anything is akin to a leach on society , also known as a libtard–in your case, a libturd.

  4. Are Apple Lawyers stupid? Incompetent? I don’t know who the firm is, and what their record is on winning cases. Seems to me that they are constantly tripping and falling all over themselves.

    1. Apple hires many, many different law firms all over the country. Texas is a notoriously plaintiff-friendly jurisdiction with patents, too.

  5. Who are these attorneys that apple has hired? That a company with no credence, no history, no record except of being a troll, is “back in the drivers seat?” I would clean house in the legal dept if I were Mr Cook and turn the heat up in the kitchen and really start cooking in the legal dept. These trolls should be getting 0.00000000000000 or less.

  6. I have a suggestion for patent reform. It’s really simple and puts patent law in line with other kinds of corporate law.

    You should only be able to sue for damages. You should have to demonstrate those damages.

    So, for example, if you own a patent and somebody else infringes, you have to show how much revenue you lost by their infringement. In the case of a patent troll, the loss is zero, because they weren’t going to make any revenues from their patent to begin with.

    Wouldn’t that fix things? It would destroy the patent troll market. The way the market works now is this: I invent and patent something, and rather than start a business to bring my invention to market, I can sell my patent to a troll. The troll then waits for infringement and sues. My suggestion would shut that down. Inventors would have to license to product makers, or seek funding to bring the invention to market.

      1. David, I really don’t think you understand how the patent system works. Just because you have a patent does not mean that the patent is valid and enforceable. The USPTO issues invalid patents all the time. Figures vary, but between 22% and 37% of patents had invalid claims or were completely invalid in 2012. Patent invalidity is the very first affirmative defense an alleged patent infringer raises at trial.

        A patent troll uses a patent—usually, a weak or dubious one—and they sue in a hyper-plaintiff-friendly court like the eastern district of Texas to extract exorbitant fees from people. Today it’s Apple, but these trolls prefer menacing smaller start-ups and other small businesses.

        The Founding Fathers gave Congress the power to issue patents to promote the progress of science, not to create a class of special property that receives federal protection. Patent trolls abuse the system because they don’t promote any form of progress–they stunt it, if anything.

        1. The idea with damages sounds like a reasonable one. The fundamental purpose of the patent, as it was originally created, was to enable the inventor to get, for a limited time, exclusive right to use the invention as described in the patent for his own product/service.

          Not all jurisdictions in the world have patent trolls, because in many of them, patent protection cannot be raised in court unless there is an actual product or service that the patent owner produces / offers, and where the infringement demonstrably damages (financially or otherwise) the product that contains patented method/apparatus.

          So, the concept of patent is defined differently around the world, and there is a very powerful argument to require demonstrated use of the patented method/apparatus in a product that is either commercially offered, or demonstrably in the development with the purpose of being commercially offered at the time of infringement.

          America currently has no such restriction, which makes it an extremely fertile soil for proliferation of patent trolls.

    1. This is exactly what I was thinking. If you can’t demonstrate that you lost sales as a result of someone infringing your patents then you have no damages. Problem solved.

      1. I have a friend who has a very wild and creative imagination. In his mind, he has invented many little things (along the lines of the crap sold on TV for $19.95, “…but wait, there’s more, if you order in next ten minutes, you get two for the same price!” — you know what I mean). Remarkably enough, over these years, some of his inventions have subsequently been invented by other people (and sold on TV for $19.95). On many occasions, I have had to suffer through his lamentations over missing so many chances to get rich by patenting all those things he invented in his mind. In reality, he is probably correct, because in America, he didn’t need to do anything with those ideas (beyond just patenting them).

        The point here is, the threshold for patent is rather low (as mentioned above, as long it is non-obvious for PHOSITA, you have your patent); sooner or later, there is a strong chance that another person having somewhat more than ordinary skill in the art will think of the same solution to a problem, and most likely, such things happen all the time. The protection should be afforded to the one that takes his idea and invests it into an actual, real product (or service). I don’t think it would be fair for my friend to become rich because twenty years ago, he got the idea to create what later became known as “Topsy Tail” ($99 piece of plastic used for hair styling) and never did anything about it. Someone else had such an idea, invested money to start a business, poured his sweat and tears into promoting and building that business and succeeded. It would certainly be unfair to expect such business to begin paying some royalty to some random person just because they had the same idea a bit earlier and never did anything about it.

    1. A patent troll is a good way to redistribute income to the undeserving without going to the trouble of electing representatives

      That was the quote before the ‘political correctness’ filter kicked in

      1. But you see, they’re not undeserving. A patent (for whatever purpose) is an item which can be bought or sold. It’s called capitalism.

        If you buy the patent, it is your right to enforce the patent. You don’t like it, change the law. Oh yeah, that was tried and blocked by the Republicans and conservatives whose lobbyists made sure enough booze and hookers went around to make this inconvenience go away.

  7. “undeserving” is essentially a moral judgment aimed at the recipients of redirected wealth. Moral values underpin all social compacts, especially law, and are not excluded from consideration in cases heard by the U.S. Supreme Court. Laws that violate citizens’ sense of fairness, or laws that are circumvented by the unscrupulous through loopholes, are open to criticism and review, as are the plaintiffs and their motives. The phrase “if it’s legal, it’s right” is wrong.

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