• Jeremy Rutman

Goliath vs. Troll, round 2

Goliath vs. Patent Troll
Goliath vs. Patent Troll

A jury in Tyler, Texas reached a $500 million verdict for VirnetX against Apple Computer in about 90 minutes, which one might think would be a record-setting dollar-per-minute amount, but actually the case has been in court for a decade; in this last round, the jury only had to decide how much Apple owes VirnetX in royalties for ' VPN on Demand'.

What's a VPN ? And Why Would I Demand One?

Many at this point know that a VPN is a 'virtual private network' which increases your online security; VPNs mask your IP address (a number that uniquely identifies your computer, sort of like a mailing address) so your online actions are largely untraceable, and encrypts the traffic over the connection.

'VPN on demand', as you might expect, is a feature (used in the iphone's iOS software) that allows the user to use a VPN for certain sites (e.g. your banking site) and not for others, automatically. In the regular scenario, starting the VPN involved a few dedicated clicks and one's entire traffic was then routed through the VPN. With VPN on demand, both VPN and non-VPN connections are maintained and the VPN used when listed sites are accesed. Thus as long as your banking site is listed as a VPN site, every time you access it, its opened through the VPN. Sites whose security isn't important can go through the regular connectin (which will be somewhat faster).

The Case

VirnetX has been described as being a 'patent troll' , an entity that buys lots of patents, and makes money licensing these and suing accused infringers, without producing or selling any goods or services of its own. VirnetX successfully sued Microsoft, for instance, in a $200 million settlement. On the other hand VirnetX, did apparently produce 'Gabriel' software implemented VPN on demand, so the claim of trollhood may not be entirely correct.

VirnetX, which claims its inventions stemmed from technology it developed for the CIA and held that both VPN on Demand and some FaceTime features relied on VirnetX IP, and demanded $700 million in royalties and damages. After the first judgement against Apple some 6 years ago, Apple countered that they owed only $113 million using a royalty rate of 19 cents per unit. as opposed to VirnetX's ask of 84 cents per unit.

After the verdict, an Apple spokesperson averred that the case involves "...patents that are unrelated to the core operations of our products and have been found to be invalid by the patent office. Cases like this only serve to stifle innovation and harm consumers.”

Previous verdicts in the same case brought VirnetX about $450 million. As is common in such cases, Apple tried (succesfully) to invalidate the VirnetX patents, but these victories at the USPTO were not in time to avoid the first losses in district court.

The ongoing court fight saw a federal court in Texas awarding VirnetX $500M for infringement, while in November 2019, a panel invalidated this judgement but did allow that some iOS versions infringed.

The current trial involved newer versions of VPN on Demand and came after an appeals court dismissed the infringement finding, as Apple had redesigned FaceTime to avoid the VirnetX patents.

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