VirnetX Holding Corporation

The Federal Circuit has hit the ground running in the early weeks of 2022, overturning two sizable damages verdicts on February 4: the California Institute of Technology’s (Caltech’s) $1.1B award against Apple and Broadcom and Quarterhill Inc. subsidiary Wi-LAN Inc.’s (WiLAN’s) $85.2M award against Apple. Now, recent activity suggests that at least the latter ruling could potentially have a ripple effect on other large damages awards currently on appeal. The ensuing weeks have seen the defendant-appellants in those cases cite the WiLAN opinion, which faulted a district court for allowing a flawed methodology that was “untethered to the facts of this case”, as relevant authority justifying similar reversals.

Eastern District of Texas Judge Robert W. Schroeder III has docketed an unredacted order denying Apple’s posttrial motions challenging the verdict from a jury awarding VirnetX Inc. in excess of $500M this past October based on a $0.84 per infringing unit royalty rate. The court refused to set aside the verdict or order a new trial, on damages or otherwise, endorsing the jury’s figures and imposing an ongoing royalty at the same rate. Judge Schroeder bookended his order with quotations concerning the seemingly never-ending case of “Jarndyce and Jarndyce” from Charles Dickens’s classic novel Bleak House, which sprawls (in most published forms) over 1,000 pages.

The COVID-19 pandemic has forced courts to rethink many aspects of the patent litigation process. While a number of district judges have moved hearings and other procedures online, the nation’s top patent venues effectively suspended jury trials through most of the summer—until District Judge Rodney Gilstrap of the Eastern District of Texas resumed patent trials in August after local infection rates began to fall. However, as the pandemic moves further into its second wave, Judge Gilstrap has now taken the notable step of halting all jury trials before him after a coronavirus outbreak during a trial under another judge in the Eastern District. Judge Gilstrap stated that he was doing so “reluctantly” but asserted that he had no alternative—arguing that the face-to-face aspect of in-person trials is essential for due process.

At the end of October, another Texas jury returned a $500M-plus verdict in favor of VirnetX Inc. against Apple. While 2020 has not been all roses for patent plaintiffs—recall that a few weeks earlier, Roku won a noninfringement verdict in litigation filed by inventor-controlled NPE MV3 Partners LLC in District Judge Alan D. Albright’s first patent jury trial since he took the bench—the most recent VirnetX verdict does join a string of high-dollar awards in patent infringement cases this year.

An Eastern District of Texas jury has issued a new verdict on damages in a retrial between VirnetX Inc. and Apple, just under a year after the Federal Circuit vacated a prior $502.6M damages award in that case and vacated part of the underlying finding of infringement. On October 30, the jury set a royalty rate of $0.84 per infringing device, which when multiplied by the total number of products resulted in a new damages award of $502.8M. The trial was among the first held before a jury in a patent case since the start of the COVID-19 pandemic, and it went forward after a debate over whether the trial could be held safely despite public health concerns.

District Judge Alan D. Albright has moved forward with his recently announced plan to resume jury trials in the Waco Division of the Western District of Texas despite the ongoing COVID-19 pandemic. On October 1, he presided over jury selection for what will be his first-ever patent jury trial, in litigation filed by inventor-controlled MV3 Partners LLC against Roku (6:18-cv-00308). While the decision to hold this trial is significant on its own, the leadup to jury selection in this case was not without its own intrigue. Shortly before the pretrial conference, Judge Albright ruled on a series of pending motions in limine, barring any characterization of the plaintiff as an NPE as well as any discussions of alleged forum shopping, among other topics, during voir dire and opening arguments. The ruling comes as the Federal Circuit, also last week, declined to rehear a recent decision that faulted Judge Albright for denying a convenience transfer in another campaign, amidst a broader debate over whether his treatment of such motions has unduly encouraged plaintiffs to pack the Waco Division with patent cases.

The nation’s top patent venues have adapted to the COVID-19 pandemic in markedly different ways, diverging most dramatically with respect to jury trials. While the Eastern District of Texas recently held the nation’s first patent jury trial since the start of the pandemic under District Judge Rodney Gilstrap, the Northern and Central Districts of California have issued orders suspending all such trials. However, until recently, both the Western District of Texas and the District of Delaware—the first- and second-most popular venues for NPE litigation, respectively—took a middle ground by giving presiding judges the discretion over whether to hold jury trials, effectively on a case-by-case basis. Now, District Judge Alan D. Albright has issued an order stating that the Western District’s Waco Division is ready to move forward with jury trials in patent cases, citing declining infection rates within that division and measures designed “to ensure trials can be conducted safely”.

The COVID-19 pandemic has forced courts and litigants alike to rethink some of the core mechanics of patent cases—perhaps most notably, triggering disputes over the timing and format of jury trials. As recently reported by RPX, this has led the nation’s top patent venues to diverge in their approach to such trials. In particular, District Judge Rodney Gilstrap of the Eastern District of Texas has bucked the trend and pushed forward with the nation’s first patent jury trial since the start of the pandemic, which ended on August 11 in a $506.2M infringement verdict against Apple in litigation brought by several subsidiaries of PanOptis Holdings, LLC. However, another judge in the same district has now signaled a more conservative approach: the day before that verdict, District Judge Robert W. Schroeder III continued a planned retrial in litigation between VirnetX Inc. and Apple at the defendant’s request. By so ruling, Judge Schroeder has aligned himself with courts in other popular venues that have also opted not to proceed with jury trials—including some that also leave such decisions up to the presiding judge and others that have halted trials district-wide.

In January 2020, the Federal Circuit sided with VirnetX Inc. in an appeal from a decision by the Patent Trial and Appeal Board (PTAB) in an inter partes reexamination triggered by Cisco. As VirnetX requested, the court vacated the decision and remanded the case back to the Board under its Arthrex decision: “Although this appeal arises out of an inter partes reexamination and not an inter partes review [IPR] as was at issue in Arthrex, we see no material difference in the relevant analysis. We therefore grant VirnetX’s motion”. Late last week, the same three judges denied a request for panel rehearing by Cisco and the Director of the USPTO (as intervenor), issuing an additional order “for the purpose of more fully explaining our rationale for rejecting” the argument that “administrative patent judges (‘APJs’) should be deemed constitutionally appointed officers at least when it comes to their duties reviewing appeals of inter partes reexaminations”.

The Federal Circuit has partly overturned an April 2018 infringement verdict for VirnetX Inc. in a suit against Apple, vacating a $600M judgment for the NPE (2019-1050). In a November 22 opinion, the appeals court declined to revisit a lower court ruling on issue preclusion with respect to invalidity but countermanded the jury’s finding that Apple’s FaceTime feature infringed two of the asserted patents. That reversal stemmed from the district court’s failure to properly construe a key claim term, with the Federal Circuit concluding that no reasonable jury could have found infringement through FaceTime under the correct construction.

The Federal Circuit has largely upheld an invalidity ruling for Cisco against a patent asserted by VirnetX, Inc. throughout its long-running litigation campaign. On June 28, the court reversed the invalidation of three claims cancelled in a Cisco inter partes reexamination, ruling that the Patent Trial and Appeal Board (PTAB) had erred by not considering certain arguments and by not making certain factual findings. It therefore remanded the case for further consideration of those claims (2018-1751), after affirming the PTAB’s invalidation of 33 other claims from the same patent, finding no reversible error in that portion of the Board’s analysis. The affected patent has been asserted in multiple VirnetX cases that have gone to trial, including one that led to a 2013 noninfringement verdict as to Cisco and several verdicts involving Apple, some of which have been overturned amidst an ongoing appellate battle between Apple and the NPE.

The Federal Circuit has declined to overturn a pair of final decisions by the Patent Trial and Appeal Board (PTAB) that cancelled claims from a VirnetX Inc. patent in an Apple inter partes review (IPR), holding that the NPE’s appeal was barred by issue preclusion. VirnetX had challenged the Board’s June 2017 decisions that certain claims from the challenged patent were invalid as obvious in light of a single prior art reference. However, in a December 10 opinion, the Federal Circuit held that VirnetX was collaterally estopped from disputing whether that reference was prior art, since in March 2017 the court had summarily affirmed multiple PTAB decisions that the same reference qualified as a printed publication in several other Apple IPRs against related patents (2017-2490, 2017-2494). Issue preclusion was applicable here in the Rule 36 context, the court ruled, because those decisions necessarily turned on a single issue: whether the aforementioned reference counted as prior art for the challenged patent family. The Federal Circuit also declined to allow VirnetX to proceed based on an alternative, constitutional argument, holding that it had failed to properly preserve the issue.

A Texas judge has upheld a pair of infringement verdicts issued in April for VirnetX Inc. against Apple, in which a jury found that the company had infringed claims from four patents through certain versions of the FaceTime and VPN on Demand features offered on iOS and macOS devices (6:12-cv-00855). In an order issued on August 30, District Judge Robert Schroeder III denied Apple’s motion judgment as a matter of law or for a new trial as to both verdicts, the first of which included a damages award of $502.6M and the second of which included a finding of willfulness. However, Judge Schroeder also declined to award VirnetX enhanced damages and denied the NPE’s request for an injunction. Meanwhile, each of the claims Apple was found to infringe was cancelled by the Patent Trial and Appeal Board (PTAB) before the trial in the -855 case, in inter partes reviews (IPRs) filed by Apple and other parties, and appeals of those decisions remain active before the Federal Circuit.

Throughout May 2018, the Patent Trial and Appeal Board (PTAB) saw activity in multiple long-running campaigns, including challenges brought against patents and plaintiffs with colorful and tangled litigation histories. The Board saw petitions for AIA review brought in May against Publishing Technologies LLC, an NPE controlled by patent attorney and frequent litigant Bradley D. Liddle; in the mobile devices campaign waged by AGIS Software Development LLC; and in the networking campaign brought by XR Communications, LLC. Also in May, the Board instituted trial for inter partes reviews (IPRs) against Iridescent Networks, Inc. and Oyster Optics, LLC. Final decisions issued in May include three against prolific plaintiff Realtime Data LLC, which saw claims cancelled from one of its data compression patents while another two survived unscathed, as well as final decisions cancelling claims from patents held by General Patent Corporation and VirnetX Holding Corporation.

A Texas jury has issued a verdict for VirnetX Inc., finding that Apple infringed claims from four patents through certain versions of the FaceTime and VPN on Demand features offered on iOS and macOS devices (6:12-cv-00855). The April 10 verdict also included a damages award of $502.6M, while a second verdict issued on April 12 included a finding of willfulness. However, all of the claims that Apple was found to infringe have been invalidated by the Patent Trial and Appeal Board (PTAB) in inter partes reviews (IPRs) filed by Apple and other parties, with two of the patents also invalided through reexamination. Appeals of those decisions are currently pending before the Federal Circuit.

The Patent Trial and Appeal Board (PTAB) saw activity in a variety of notable campaigns throughout February 2018, with petitions for inter partes review (IPR) filed against publicly traded Quarterhill Inc. as well as Fundamental Innovation Systems International LLC, Intellectual Ventures LLC, Realtime Data LLC, and Uniloc Corporation Pty. Limited. The Board also instituted trial in February for IPRs against General Patent Corporation, Oyster Optics, LLC, and Uniloc. In addition, the PTAB issued final decisions throughout February in IPRs against a range of different patent owners, including publicly traded NPEs (Acacia Research Corporation; InterDigital, Inc.; and VirnetX Inc.), an individual inventor (Daniel L. Flamm), and privately held plaintiffs (ChanBond, LLC; Makor Issues & Rights Ltd.; Papst Licensing GmbH & Company Kg; and Personalized Media Communications, LLC).

A Texas judge has issued a final judgment in one of VirnetX Inc.’s two cases against Apple. In an order issued on September 29 and unsealed on October 13, District Judge Robert W. Schroeder III awarded enhanced damages, attorney fees, and interest to VirnetX, bringing the total judgment to $439M, up from the $302M in damages established by a September 2016 jury verdict (6:10-cv-00417). The judgment follows a significant loss for VirnetX before the Patent Trial and Appeal Board (PTAB), which in June cancelled all of the claims Apple had been found to infringe from both of the patents that went to trial in two inter partes reviews (IPRs) filed by Black Swamp IP, LLC (IPR2016-00693, IPR2016-00957). The Board has also collectively cancelled all claims from both patents in four inter partes reexaminations filed by Apple and Cisco. Federal Circuit appeals of both IPR decisions and three of the reexaminations are currently pending.

The Patent Trial and Appeal Board (PTAB) saw petitions for AIA review filed against a variety of prolific litigants in June 2017, including General Patent Corporation, Intellectual Ventures LLC (IV), Quarterhill Inc. (f/k/a Wi-LAN Inc.), Realtime Data LLC, Uniloc Corporation Pty. Limited, and Xperi Corporation (f/k/a Tessera Holding Corporation). Also in June, the PTAB instituted trial for petitions brought against patents asserted in a variety of sprawling campaigns, including some waged by Acacia Research Corporation, IV, Papst Licensing, Quarterhill, and VirnetX Inc. The Board further issued final decisions throughout June in AIA reviews against patents involved in several notable campaigns, including some waged by Document Security Systems, Inc., Elm 3DS Innovations LLC, Empire IP LLC, and Quarterhill.

Acacia Research Corporation has announced a 22 percent revenue increase for fiscal year 2016 and a dip in revenue for Q4, disclosing losses for both the quarter and the year that were significantly smaller than those in 2015. Meanwhile, VirnetX Holding Corporation reported stagnant revenue for 2016 along with a loss of its own, as it continues to experience setbacks in its sole litigation campaign due to post-trial rulings and the invalidation of multiple asserted patents.

A Texas jury has issued a verdict against Apple in a lawsuit brought by VirnetX Inc., finding that the company infringed a pair of patents (7,418,504; 7,921,211) through its FaceTime feature (6:10-cv-00417). The September 30 verdict included a $302M damages award that covered FaceTime, as well as Apple’s VPN on Demand feature, which had been the subject of another infringement verdict handed down earlier in this same case. The current verdict comes after a late July win for Apple in another suit (6:12-cv-00855) brought against it by VirnetX; there, a Texas judge reversed a $625M jury verdict and granted Apple a new trial.

The Patent Trial and Appeal Board (PTAB) has cancelled claims from two VirnetX Inc. patents (8,850,009; 8,868,705) in multiple inter partes reviews (IPRs) filed by Apple. In two final decisions issued on August 30, and one issued on September 8, the PTAB ruled that asserted claims 1-8, 10-20, and 22-25 of the ‘009 patent (IPR2015-00812) and all 34 claims of the ‘705 patent (IPR2015-00810, IPR2015-00811) are invalid as obvious over various combinations of prior art. While these patents have not yet been involved in litigation, they belong to the same family as four other patents that the NPE has asserted against Apple, which led to a $625 infringement verdict issued in February 2016 that was overturned in July.

A Texas judge has overturned VirnetX Inc.’s $625M infringement verdict against Apple. In an order issued on July 29, District Judge Robert Schroeder III granted a motion for new trial filed by Apple, accepting the company’s arguments that the consolidation of two cases involving different versions of the same accused features had resulted in undue prejudice and confusion to the jury (6:10-cv-00417, 6:12-cv-00855). Judge Schroeder ruled that prejudice had indeed resulted from repeated mentions of the first infringement verdict at trial due to the “incredibly similar issues” shared by the cases. The complexity of the issues involved, Judge Schroeder continued, “magnified the risk of deference” to the first case, especially since the jury had been tasked with relying on the first verdict for the issue of willfulness but ignoring it for others. Confusion had also likely resulted from the fact that the earlier verdict had been partially reversed on appeal. Judge Schroeder concluded by reversing the court’s consolidation order, bifurcating the issue of willfulness in both cases, and scheduling jury selection in September for the retrial of the first-filed case.

Last week, a Texas jury handed down a $625.6M verdict in VirnetX’s 2012 lawsuit against Apple (6:12-cv-00855). The jury found that the company’s FaceTime and iMessage features infringe two secure networking patents (7,418,504; 7,921,211) and that the latest version of its VPN On Demand feature infringes two other patents from the same family (6,502,135; 7,490,151). The February 3 verdict also included a determination of $334.9M in royalties based on a partially vacated jury decision from VirnetX’s first case against Apple, which found that a previous version of the VPN On Demand feature also infringed the same two patents.

The Court of Appeals for the Federal Circuit vacated a jury order requiring Apple to pay VirnetX $368M in damages. While the court partially affirmed the jury’s finding that Apple’s VPN On Demand infringes two patents (6,502,135, 7,490,151), it reversed the district court’s construction of a claim term in two other patents (7,418,504, 7,921,211) and remanded for further proceedings as to those claims. The court also found that the theories on which VirnetX’s damages expert relied were flawed, and that the jury’s verdict was “tainted by erroneous jury instruction”.

Last week a judge in the Eastern District of Texas ordered Apple to pay VirnetX an ongoing royalty rate of 0.98% on products found to infringe VirnetX’s asserted patents in a 2012 trial. Also included are products “not colorably different from those adjudicated at trial that incorporate any of the FaceTime or VPN on Demand features found to infringe at trial.” The order stemmed from a 2010 lawsuit VirnetX filed against Apple, Aastra, Cisco, and NEC for alleged infringement of four patents related to VPN and network communications (6:10-cv-00417). Following a five-day trial in November 2012 a jury found that Apple infringed the asserted claims and awarded VirnetX $368 million in damages. The court also ordered Apple to pay pre- and post-judgment interest. District Judge Leonard Davis denied Apple’s post-trial motion for judgment as a matter of law and also denied a request by VirnetX for a permanent injunction. Post-trial motions filed by VirnetX led to severance of the 2010 matter into two separate cases: one to cover past damages, and the other to address future royalty rates.

VirnetX Holding Corp. reported Q3 2013 revenue of $1.6 million, up from $368,000 in Q3 2012. Third quarter revenue was primarily a result of VirnetX’s September 2013 settlement agreement with Avaya: VirnetX attributed $1.5 million in royalties to the settlement with Avaya. VirnetX disclosed a net loss of $5.1 million for the third quarter and $20 million for the first nine months of 2013. VirnetX also reported $21 million in cash at quarter end. The company is currently involved in litigation it initiated against Apple (6:11cv00563; 6:13cv00211; 6:12cv00855; 6:13mc00037) and Microsoft (6:13cv00351).