VirnetX Inc. v. Apple Inc CAFC
- Filed: 02/26/2013
- Closed: 02/24/2015
- Latest Docket Entry: 04/02/2015
In Entering Judgment for VirnetX, Judge Schroeder Sees a Bleak House in the Long-Running Dispute with AppleJanuary 15, 2021
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.
November 25, 2020
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.
Judge Gilstrap held the August patent trial mentioned above, the nation’s first since the start of the pandemic, in litigation between several subsidiaries of PanOptis Holdings, LLC and Apple (2:19-cv-00066), following the expiration of the last district-wide jury trial continuance on May 31. The trial went forward after a debate over whether it could be conducted safely, with Apple arguing that the trial should be pushed back due to the risk posed by the pandemic to the parties and surrounding community—citing data showing uncontrolled community spread and the high risk of at least one attendee’s infection with the novel coronavirus. Yet Judge Gilstrap—who had recently made general public comments that local conditions did not favor further restrictions at that time—denied Apple’s motion, rejecting the company’s arguments that public health concerns outweighed the rights of the parties to resolve their dispute. While he acknowledged the “conundrum of first impression” that he faced in making this determination, Judge Gilstrap argued that ultimately, “the best way out is always through” (quoting the poet Robert Frost). Judge Gilstrap has subsequently stated, in his November 20 order, that the trial had been conducted “safely and with no known incident”.
By November, though, the COVID-19 pandemic had taken a dark turn, with dramatically spiking infection rates and hospitalizations leading some states to reimpose public health restrictions that had been loosened in the preceding months. The pandemic’s second wave then spilled into the courtroom: on November 9, on the sixth day of trial in a breach of contract suit between ResMan and Kayra Property Management, Judge Mazzant halted the trial after a juror tested positive. The number of confirmed infections then swelled to 15 people, according to the court clerk, including multiple jurors, members of the plaintiff’s and the defendant’s legal team, and court staff—despite the imposition of certain safety measures taken to prevent the spread of coronavirus, including daily temperature checks, the installation of physical barriers in the courtroom, and social distancing requirements. On November 17, Judge Mazzant declared a mistrial in that case.
Meanwhile, the coronavirus also began to affect litigation before Judge Gilstrap. On the same day as the aforementioned breach of contract mistrial, the parties in a patent case—plaintiffs Infernal Technology, LLC and Terminal Reality Inc., and defendant Sony (2:19-cv-00248)—jointly notified the court that one of the plaintiff’s attorneys had tested positive, and that the attorney had been in physical contact with two other members of the plaintiff’s legal team. Shortly afterward, on November 19, Sony filed an opposed motion to postponethe trial then scheduled for December 4 to March 2021, citing high overall infection rates and “substantial” increases within the Eastern District of Texas in particular. That motion came one day after a motion filed by Samsung in litigation filed by Irish NPE Solas OLED Limited (2:19-cv-00152), requesting the continuation of a trial also scheduled for early December.
On November 20, Judge Gilstrap issued a wider order, affecting all cases before him with trials scheduled from December through February, continuing all in-person jury trials—granting continuances where requested and otherwise doing so sua sponte. Judge Gilstrap’s order cited the growing severity of the pandemic, noting that while he had safely conducted trials as recently as November, “we now face a dangerously rising rate of increase in COVID-19 cases and swelling hospitalizations in this district and across the country”. The order noted that the court had come “to this result reluctantly—especially considering the huge earlier efforts undertaken to resume in-person jury trials”, but stated that continuing jury trials is a necessary step given public health concerns within the Marshall Division and the importance of holding such trials in person.
“While some motion practice may be adequately addressed via virtual proceedings”, continued Judge Gilstrap, “the Court believes that the fair adjudication of the rights of the parties, as envisioned by the Framers and embodied in the Sixth and Seventh Amendments, requires jury trials to be conducted in-person”. Judge Gilstrap emphasized the importance of face-to-face trials, stating that “[j]ury trials are innately human experiences” in which “[m]ore is often communicated in a courtroom non-verbally than verbally”. “This Court is persuaded that the remote, sterile, and disjointed reality of virtual proceedings cannot at present replicate the totality of human experience embodied in and required by our Sixth and Seventh Amendments”.
More broadly, the discretion granted to Texas judges in all but the Northern District of Texas—which has continued jury trials scheduled through December in nearly all cases, with no room for discretion—has resulted in uneven responses, across districts, to rising infection rates. As noted above, the Eastern District gives judges such discretion, though some have also issued sweeping continuances—like Judge Mazzant, who has pushed back all trials scheduled before him in December. The Southern District also allows divisions to approach jury trials differently according to local circumstances. Additionally, on November 18, Western District of Texas Chief Judge Orlando Garcia issued a district-wide order continuing all civil and criminal jury trials set to begin through December 31. However, as in previous orders, he has given judges within the district the discretion to hold jury trials anyway if they determine it can be done safely.
One notable result of this policy is that District Judge Alan D. Albright of the Waco Division—who has seen a surge of patent litigation since his confirmation in late 2018, pushing the Western District to the top of the patent venue rankings earlier this year—has not issued an across-the-board continuance. Rather, a recent ruling in a consolidated case between VLSI Technology LLC and Intel (1:19-cv-00977) suggests that he may adopt more of a wait-and-see approach.
On November 20, Judge Albright issued a ruling on the location of a January trial to be held in one of the joined cases that had been transferred to the Austin Division but remained on his docket. Since the Austin courthouse has been closed indefinitely due to COVID-19, Judge Albright was faced with the choice to either delay the case until that courthouse reopens or hold the trial in Waco and avoid further delays. Judge Albright far and above favored the latter approach, citing in part the need to proactively manage the “backlog of trials” created by the pandemic, as well as the notion that trials should not be delayed because each US patent has an expiration date. (Note, however, that the oldest patent at issue in that case appears to expire in 2027.) While the issue at hand did not require Judge Albright to weigh public health concerns directly, he has placed similar emphasis on efficiency and speedy dispute resolution in other circumstances, including convenience transfers.
For more on the jury trial restrictions recently imposed by other top patent venues, see RPX’s third-quarter review.
November 6, 2020
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.
Judge Albright Gears Up for His First Patent Trial as Federal Circuit Declines to Revisit Reversal of Transfer RulingOctober 2, 2020
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.
Judge Albright greenlit the resumption of both bench and jury trials as soon as October 1—the day the MV3 Partners jury was empaneled—in a September 23 divisional standing order, citing statistics showing that “Waco Division counties have just 2.44%” of the active cases in Texas. The order, which followed another one that originally set the trial resumption date on September 1, also notes the precautions that the Waco Division is prepared to take in order to “ensure trials can be conducted safely”: “The court is prepared to mandate appropriate distancing in the courtroom and around the courthouse, limit the number of individuals in the courtroom, provide face masks or face shields to jurors, supply hand sanitizer, and install plexiglass shields where beneficial and appropriate”. The September 23 order further identified four categories of people who are not permitted to enter the courthouse “absent a specific order from the Court”, including anyone diagnosed with COVID-19, anyone quarantining or living with such individuals, or anyone with certain known symptoms of the disease.
Judge Albright has since provided further details on the court’s precautions, stating in a recent discussion panel that the witness stand will be cleaned between each witness (who, according to his September 23 order, “may speak unmasked, while maintaining all social distancing protocols”) and that jurors, who are to remain masked, shall each be separated by two chairs. As many as “40 masked people will be able to watch from the audience and still have 10 feet between each other”, according to a summary of his remarks. Moreover, Judge Albright reportedly noted that while “concerned potential jurors” had been calling the Waco clerk’s office, none had apparently opted out of jury service once informed of the court’s precautions.
With the October 1 empanelment of a jury in the MV3 Partners case, the docket now indicates that trial is set to begin on Monday, October 5. The trial had originally been scheduled to begin in June, but after denying the defendant’s initial request for a continuance in light of the pandemic, Judge Albright subsequently pushed back the trial date four times. In granting the last of those continuances on August 10, Judge Albright expressed that he was “surprised[,] as he thought everyone was on board with moving forward in September”, but nonetheless acknowledged the company’s concerns in what would be the case’s last continuance before trial.
Judge Albright also resolved a series of lingering issues leading up to trial in a single September 29 order that mainly focused on the parties’ motions in limine—dispensing briefly with each ruling with little or no explanation. Perhaps the most notable of those addressed was MV3 Partners’ first motion in limine, which in part sought to “exclude reference to MV3’s business activities and structure, including the use of any derogatory, disparaging, and/or pejorative references to MV3 as a patent troll, patent assertion entity, and/or a non-practicing entity [NPE]”. In its opposition to this request, Roku argued in particular that it should not be prevented from referring to MV3 as an NPE, asserting that the term NPE is a “neutral term and not pejorative”—and that identifying the plaintiff as such is “accurate”. In support of that point, the company cited a variety of cases in which courts allowed references to a plaintiff’s NPE status. Additionally, Roku further argued that one of the decisions cited by MV3 Partners, a ruling in Rembrandt Wireless Technologies v. Samsung, actually supported the defendant’s position—as the court in that case explicitly declined to bar the “[d]efendants from arguing that Plaintiff is a patent assertion entity that does not manufacture or sell products in this field”. However, Judge Albright granted MV3’s motion to exclude such references.
Roku also pushed back against MV3’s request to “preclude reference to prior litigations involving MV3 witnesses”, including Jared “Jerry” E. Abbruzzese, Sr., the inventor of the asserted patent who formed MV3—arguing that this litigation provides “context to the business history of MV3 and its members”. In particular, Roku noted that Abbruzzese “has been the subject of several lawsuits, including serving as a central witness in a trial involving a New York state senator, involving allegations of corruption, fraud, and deceit”. Judge Albright also granted MV3’s motion in limine with respect to such litigation, as well as its request to exclude details of its “financial arrangements with counsel” and to exclude references to how potential damages would be distributed (including among the plaintiff’s witnesses).
Perhaps the portion of MV3’s first motion in limine of broadest relevance was its request to bar any mention of its “allegedly engaging in forum shopping or litigation abuse by selecting the Western District of Texas as the venue for this action”, along with related references to the popularity of the Western District and its suitability as a venue for this action. The defendant agreed in its opposition not to make any such references, and Judge Albright’s order granted that portion of MV3’s motion in limine.
While the parties here resolved that particular issue, litigants in other campaigns have pushed back against Judge Albright’s handling of certain venue issues—a topic of particular relevance for frequent defendants, given the Western District’s relatively newfound status as the most popular venue for utility patent litigation. More specifically, Judge Albright has been interpreting the factors for granting transfers for convenience in a manner that imposes a particularly “significant burden” on defendants seeking an exit from his district. In June 2020, Apple—objecting to one such decision in litigation filed by Fortress Investment Group LLC subsidiary Uniloc 2017 LLC, a ruling that at the time had not yet received an explanatory opinion—sought the Federal Circuit’s intervention through a petition for writ of mandamus, arguing that Judge Albright’s posture on the issue contributed to judge-shopping. On June 22, over 40 days after denying Apple’s motion at a hearing, Judge Albright issued an order outlining his reasoning, declining to “follow the crowd” by “blindly” adopting related factual findings and rulings from other judges.
For more details on that litigation, see “Judge Albright Declines to ‘Follow the Crowd’ on Convenience Transfers” (June 2020).
Although the Federal Circuit has not yet ruled on Apple’s mandamus petition, it has been critical of Judge Albright’s handling of a convenience transfer motion in litigation filed by another NPE, SynKloud Technologies, LLC. On July 28, the appeals court overturned Judge Albright’s denial of such a transfer motion filed by Adobe, holding in part that he had “failed to accord proper weight to the convenience of the transferee venue”; “that he had “failed to weigh the cost of attendance for willing witnesses factor”; and that he had erred by justifying the denial of transfer on his district’s “perceived ability to more quickly schedule a trial”. On September 30, the Federal Circuit denied SynKloud’s motion for a panel or en banc hearing of that decision.
For more details on the Federal Circuit’s opinion in that case, see “Federal Circuit Faults Judge Albright for Denying Convenience Transfer” (July 2020).
Finally, Judge Albright’s continued emphasis on his district’s quick time to trial has recently gained additional significance for defendants filing validity challenges before the Patent Trial and Appeal Board (PTAB). Earlier this year, the PTAB designated as precedential a series of rulings, establishing that the Board may deny institution for an inter partes review (IPR) based on the status of parallel district court litigation over the same patent—with the timing of a scheduled trial one of the factors that the Board may consider. On August 31, Alphabet (Google), Apple, Cisco, and Intel challenged those decisions—collectively known as the “NHK-Fintiv rule”—in a lawsuit jointly filed against Andrei Iancu (5:20-cv-06218) in his capacity as the Director of the USPTO. Their complaint alleges that the NHK-Fintiv rule violates the America Invents Act (AIA), is arbitrary and capricious, and is procedurally unsound, not having been “adopted through notice-and-comment rulemaking” under the Administrative Procedure Act (APA).
See “Coalition of Tech Plaintiffs Challenge Discretionary Denials Under the PTAB’s ‘NHK-Fintiv Rule’” (September 2020) for more information.
Judge Albright Greenlights Patent Jury Trials in Waco Division, Citing Declining Local COVID-19 Infection RatesAugust 21, 2020
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”.
As noted in a recent RPX analysis, the Western District’s most recent district-wide order addressing COVID-19 continued all civil and criminal bench and jury trials set through September 30 to a date to be determined by the presiding judge. However, the order acknowledged that the various divisions of the Western District are differently situated and gave the most senior district judge in each division the discretion to resume jury trials, should they determine this can be done safely: “If judges in a specific division determine jury trials can be safely conducted, the most senior district judge within the relevant division may enter an order making those findings and resuming jury trials for the division despite this order and with notice to the Chief Judge”. This gave Judge Albright the sole discretion to make this determination, as he is the Waco Division’s only district judge.
Judge Albright entered such an order on August 18, stating that bench and jury trials shall resume in his division as early as September 1. The order notes that within the 13-county Waco Division, both the county in which the court sits (McLennan) and “those from which it pulls jurors have seen a meaningful decline in new reported COVID-19 cases”. In particular, Judge Albright cites data showing that McLennan County, “one of the densest and most populated in the division[,] . . . has seen a 70% drop in rolling 7-day average of daily positives”.
That post-July decline is reflected in the graph below, which shows an analysis of confirmed COVID-19 cases in McLennan County (as derived from an open API based on data compiled by Johns Hopkins University) through August 20. The data also indicate that the seven-day trailing average of new cases remains well above the levels observed when Texas Governor Greg Abbott first imposed health directives in March.
McLennan County: Daily Confirmed COVID-19 Cases and Seven-Day Moving Average
Additionally, Judge Albright cites data on the total number of cases in the Waco Division as a whole compared to other areas of Texas, observing in part that the division accounts for “approximately just 2.3% of all cases” in the entire state. Judge Albright further highlights the fact that “the Waco Division counties collectively have fewer cases than do a single county in Austin (Travis County), San Antonio (Bexar County), and El Paso (El Paso County)”. An analysis of infection rates by population also shows that the Waco Division has a lower cumulative infection rate than those counties: the Waco Division (which has a total population of around 888.2K) has had about 14.6 infections per 1K people, whereas Travis (with a roughly 1.3M population) has had 19.9 infections per 1K people, Bexar (with a 2M population) has had just under 22.3 infections per 1K people, and El Paso (with a 839K population) has had around 22.7 infections per 1K people. However, McLennan County alone (with a 256K population) is closer to the others, with 21.6 infections per 1K people.
An analysis of daily confirmed infections in the 13 counties that make up the Waco Division through August 20, shown below, indicates that new COVID-19 cases are also trending downward, albeit less sharply than McLennan County on its own. Moreover, daily caseloads remain around eight to ten times higher than they were in March.
Waco Division: Daily Confirmed COVID-19 Cases and Seven-Day Moving Average
Note: Includes data from all 13 counties located in the Waco Division (Bell, Bosque, Coryell, Falls, Freestone, Hamilton, Hill, Leon, Limestone, McLennan, Milam, Robertson, and Somervell).
Judge Albright’s order also details the various protective measures that his division plans to implement in order to allow trials to proceed safely: “Among other things, the Court is prepared to mandate appropriate distancing in the courtroom and around the courthouse, limit the number of individuals in the courtroom, provide masks to jurors, supply hand sanitizer, and install plexiglass shields where beneficial and appropriate.” These procedures, explains Judge Albright, are “informed” by “feedback from other judges and lawyers who have conducted in-person trials since the outbreak of the pandemic”.
While the order does not specify the venues from which that feedback originated, the safety procedures outlined by Judge Albright closely resemble those imposed by Judge Gilstrap in preparation for the recent trial in PanOptis v. Apple, which ended on August 11 with a $506.2M infringement verdict. As detailed here, Apple cited those measures as presenting a public health question of first impression in its request to continue a retrial in another case brought by VirnetX Inc. The company argued that presiding District Judge Robert W. Schroeder III should push the VirnetX retrial back in part due to the need to ascertain whether Judge Gilstrap’s safety procedures had been effective in preventing infections among the people present. Judge Schroeder granted a continuance on August 10, agreeing with Apple’s primary arguments that rising infection rates warranted a delay but not citing the defendant’s position on the assessment of safety procedures.
On August 19, the day after clearing the way for jury trials to proceed, Judge Albright set an October 5 trial date in litigation filed by inventor-controlled MV3 Partners LLC against Roku (6:18-cv-00308), after announcing his decision to continue that case (but not specifying a date) on August 10. That continuance was the fourth granted in that case, in which trial had last been scheduled for September 8. In agreeing to another delay, Judge Albright expressed that he was “surprised[,] as he thought everyone was on board with moving forward in September”, but cited Roku’s concerns in continuing the trial.
For additional analysis on pandemic-era jury trials, see “As the COVID-19 Pandemic Rages On, Top Patent Venues Diverge on Jury Trials” (August 2020). Details on the PanOptis v. Apple trial, as well as the VirnetX v. Apple retrial, can be found here.
Nation’s First Patent Jury Trial During Pandemic Ends in $506.2M Verdict for PanOptis, but VirnetX Trial Gets Pushed BackAugust 14, 2020
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.
Judge Gilstrap Presides Over PanOptis Trial After Citing Safety Precautions
PanOptis filed the case that just went to trial against Apple in late February 2019, just weeks after the NPE’s acquisition by private equity firm Brevet Capital was announced. PanOptis’s complaint against Apple—the first new complaint filed by the NPE in years—alleged infringement of a group of patents declared essential to the LTE standard and was filed in the Marshall Division before Judge Gilstrap (2:19-cv-00066). As the case began to approach the trial scheduled for August 3, Judge Gilstrap suggested in an interview (addressing the pandemic generally, rather that this specific litigation) that while the court was “attempting to follow . . . public health guidance”, the pandemic had not affected his district to the extent that the court would need to “substantially curtail addressing the Constitutional mandate we have of providing justice”.
Apple argued to the contrary in a July 14 motion to continue, arguing that the trial should be pushed back until October 5 due to the risk posed by the pandemic to the parties and surrounding community. The company argued that increasing COVID-19 cases reported in the six counties that make up the Marshall Division, in Texas’s metropolitan areas, and the country in general reflected a much higher risk than when the Eastern District imposed a since-expired general continuance on jury trials. Moreover, Apple cited data showing that there would be more than a 90% risk that at least one individual attending the first day of trial would be infected with the virus, and that the safety measures to be imposed by the court—including requirements related to mask-wearing, regular disinfection, and social distancing—could be inadequate to prevent infection.
However, Judge Gilstrap denied that motion, declining to accept Apple’s arguments that public health concerns outweighed the rights of the parties to resolve their dispute. Notably, Judge Gilstrap pushed back on a medical doctor’s declaration addressing trial safety submitted by Apple, arguing that the report appeared “to convey that no in-person jury trial should be undertaken—anywhere”, faulting the doctor for not making a prediction on when it might be safe to do so. Overall, while Judge Gilstrap acknowledged the “conundrum of first impression” he faced in making this determination, he argued that ultimately, “the best way out is always through”—quoting the poet Robert Frost.
The trial then began as scheduled on August 3. On August 11, the seventh day of trial, the jury returned a verdict that Apple had infringed the asserted claims from the five tried patents (8,019,332; 8,102,833; 8,385,284; 8,411,557; 9,001,774) and that it had not shown the claims to be invalid. The verdict also included a finding that Apple’s infringement had been willful and awarded $506.2M in damages as a royalty for past sales.
Bench Trial on Remaining FRAND Issues
On August 11, Judge Gilstrap also held a one-day bench trial on remaining FRAND issues while the jury deliberated. That part of the dispute stemmed from Count VIII in PanOptis’s complaint, which sought a declaratory judgment that the NPE had not breached its FRAND obligations as to a worldwide license offer made to Apple. The defendant subsequently moved to dismiss that claim, arguing that the court lacked the jurisdiction to address PanOptis’s FRAND compliance as to foreign patents. As to the remaining part of the claim related to US patents, Apple argued that there remained no justiciable controversy, and that the court should decline to issue what amounted to an advisory opinion on that issue—as it held in another PanOptis case against Huawei.
In March, Judge Gilstrap granted Apple’s motion as to foreign patents but declined to dismiss the US-centric portion of the claim. Rather, he distinguished his contrary ruling on the latter issue in the Huawei case as based on the plaintiff’s failure to produce sufficient evidence and held that PanOptis should here get the chance to make its case at summary judgment or trial. PanOptis filed a sealed motion for summary judgment on that issue in June, and the motion was decided at the pretrial conference held on July 27. While the record does not reflect how the court ruled, PanOptis indicated during a dispute over jury instructions that at least some of its FRAND claim remained undecided (“FRAND issues have been saved for the bench trial”). The docket also does not reveal how Judge Gilstrap decided those FRAND issues at the bench trial, for which a written ruling is presumably forthcoming.
Judge Schroeder Continues VirnetX Trial, Noting Rising Infection Rates
Apple raised similar public health concerns as in the PanOptis case in requesting a continuance of the VirnetX trial (6:12-cv-00855) before Judge Schroeder, citing COVID-19 statistics in the Tyler Division (where the case is proceeding) and the fact that other, similarly situated districts—like the Western District—have continued jury trials. The company’s July 29 motion went further than its PanOptis brief in arguing that infection rates in the surrounding area, as well as statewide, statistically demonstrate that there is currently “uncontrolled community spread of COVID-19”. Apple also argued that the court should delay the present case from its then-scheduled date of August 17 to give enough time to determine whether the safety measures taken in the PanOptis trial, which ultimately concluded on August 11 as noted above, were effective. (The most recently available guidance from the Centers for Disease Control and Prevention, last updated on June 30, 2020 as of the date of this report, state that “[t]he incubation period for COVID-19 is thought to extend to 14 days, with a median time of 4-5 days from exposure to symptoms onset”.)
Beyond its arguments related to public health, Apple further argued that no prejudice would result to VirnetX because “any harm can be compensated with monetary damages, including prejudgment interest”—adding that “[w]hile the pandemic itself is unprecedented, continuing a trial due to the risk of contracting a highly infectious, potentially life-threatening disease is not”.
Judge Schroeder appeared to agree with Apple, largely granting its request for a continuance (setting trial for October 26, rather than moving it to November) in a two-page order issued on August 10. In that decision, Judge Schroeder found that there was “good cause” for a continuance because “Smith County—and the Tyler Division more generally—is in the midst of a COVID-19 outbreak”, further noting that “three counties in the Tyler Division rank among the top-30 counties for active COVID-19 cases in Texas: Anderson County (14th of 250), Smith County (17th of 250) and Gregg County (26th of 250)” (citing data from the Texas Department of State Health Services updated on August 9). Judge Schroeder concluded by finding that “[t]he continuance provided herein is relatively short, and its importance is not outweighed by VirnetX’s alleged prejudice”.
Judge Albright Grants Another Continuance
As also noted in RPX’s recent analysis on jury trials, District Judge Alan D. Albright of the Western District of Texas has been empowered by his district’s chief judge to conduct trials at his sole discretion, as the sole judge in his division. However, like Judge Schroeder, he has continued exercising that discretion to push back scheduled trials in certain cases before him. This includes one such decision on August 10, when Judge Albright granted a fourth continuance in litigation between inventor-controlled MV3 Partners LLC against Roku (6:18-cv-00308). In granting the defendant’s request to continue the trial previously rescheduled to September 8, Judge Albright—according to the docket text summarizing the ruling—expressed that he was “surprised[,] as he thought everyone was on board with moving forward in September”, but continued the trial to a date not specified in the public docket, citing Roku’s concerns. (The company had asked to move the trial “further out - possibly October”, per the associated docket entry.)
For more information on COVID-19 infection rates and jury trials in the above districts, as well as for the District of Delaware and the Central and Northern Districts of California, see “As the COVID-19 Pandemic Rages On, Top Patent Venues Diverge on Jury Trials” (August 2020).
May 17, 2020
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”.
Federal Circuit Vacates $600M VirnetX Judgment Against Apple, Reverses FaceTime Infringement VerdictNovember 27, 2019
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.
July 7, 2019
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.
December 14, 2018
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.
Texas Judge Upholds VirnetX Verdict Against Apple over Claims Cancelled by PTAB, but Declines to Enhance Damages or Grant InjunctionSeptember 7, 2018
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.
April 13, 2018
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.
March 16, 2018
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).
Texas Judge Issues $439M Judgment in VirnetX Case Against Apple, with PTAB’s Cancellation of Tried Claims on AppealOctober 20, 2017
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.
July 8, 2017
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.
March 17, 2017
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.
October 7, 2016
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.
September 9, 2016
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.
March 13, 2014
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.
December 30, 2013
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).