Apple Gets Path to Escape $503 Million Patent Infringement Award

Apple Inc. received a victory Thursday when a Federal Circuit panel agreed with a patent tribunal that a pair of VirnetX Inc. patents are invalid, undermining a $503 million jury verdict that the software company secured against the tech giant.

Writing for the panel, Judge Leonard P. Stark said the Patent Trial and Appeal Board rightly found the online communication patents were anticipated by a 1996 article about the development of a secure HTTP-based web network, nicknamed Kiuchi.

“The Board’s findings that Kiuchi anticipates claims of the ’135 and ’151 patents are supported by substantial evidence,” Stark wrote.

During oral arguments, the panel heard that, if it found the patents aren’t valid, a lower court would need to vacate the nine-figure award against Apple.

The case concerns US Patent Nos. 6,502,135 and 7,490,151, which are at the center of a broader legal battle that started a dozen years ago when VirnetX alleged that Apple’s FaceTime and VPN on Demand infringed four secure communications patents.

Apple already paid $450 million in one VirnetX suit, which ended in 2020 after Apple exhausted its appeals options. Another suit against similar Apple products went to trial three times. In 2021, an East Texas judge ruled that Apple wouldn’t get a new trial after VirnetX won $503 million, leading Apple to file an appeal to the Federal Circuit.

Throughout the saga, VirnetX has faced dozens of challenges to its patents at the PTAB, including from third parties like Mangrove Partners Masters Fund.

Mangrove originally asked the PTAB to examine whether the ‘135 and ‘151 patents were obvious and anticipated by previous designs, with Apple and another third party later joining in the validity challenges.

In 2016, the board knocked out all of the challenged claims in the patents, but the Federal Circuit ordered it to reconsider the decisions after an appeal. The board again found the claims couldn’t stand in 2020, and VirnetX appealed that outcome to the Federal Circuit.

Chief Judge Kimberly A. Moore and Judge Todd M. Hughes also sat on the panel.

Paul Hastings LLP and MoloLamken LLP represent VirnetX. Wilmer Cutler Pickering Hale and Dorr LLP and Sidley Austin LLP represent Apple. The Law Office of James T. Bailey represents Mangrove.

The case is VirnetX Inc. v. Mangrove Partners Master Fund, Fed. Cir., No. 20-02271, affirmed 3/30/23.