Appeals Court Throws Out $368 Million Verdict Against Apple in VirnetX Lawsuit

[MacRumors]

Back in 2012, patent holding company VirnetX won a patent lawsuit against Apple over virtual private networking (VPN) connectivity related to Apple's FaceTime video calling feature. VirnetX was awarded $368.2 million after a jury trial.

The U.S. Court of Appeals for the Federal Circuit today threw out the decision, reports The Wall Street Journal, ruling that the verdict was influenced by the instructions given to the jury during the trial.

The U.S. Court of Appeals for the Federal Circuit, a specialized Washington-based court that handles patent appeals, ruled the verdict was "tainted" by erroneous jury instructions in the case. The court also held some trial testimony from a VirnetX expert should have been excluded from the case.

Despite siding with Apple and reversing some of $368 million verdict, the court did rule that Apple infringed on some of the claims in VirnetX's patents, which means damages will need to be redetermined.

As a result of today's appeals court verdict, Apple and VirnetX will go back to trial court for further proceedings, further drawing out a lawsuit that first began in 2010.

Article Link: Appeals Court Throws Out $368 Million Verdict Against Apple in VirnetX Lawsuit

 

[Rudy69]

So...does this mean we can finally get back peer to peer FaceTime so we get better quality?

 

[Doctor Q]

Back in 2010 we learned that the judge was known for a willingness to rule in favor of plaintiffs in patent disputes. His jury instructions were apparently biased in the same way, and it caught up with him this time.

 

[HiVolt]

Hehe, the patent trolls must not be happy today!

 

[The WOPR]

So...does this mean we can finally get back peer to peer FaceTime so we get better quality?

I am hoping this happens in the future. I use FaceTime regularly and noticed a significant drop in quality after they changed their service due to the lawsuit.

 

[zorinlynx]

So...does this mean we can finally get back peer to peer FaceTime so we get better quality?

I used tcpdump to check and confirmed that FaceTime is usually Peer to Peer again. I'm guessing Apple found a workaround for the patent at some point and quietly fixed it.

Basically, call quality was notably good so I had to investigate to see if it was still going through a bounce server. I was pleased to find packets going directly to and from the other person's network instead of AWS. 🙂

 

[rmatthewware]

This is why these cases shouldn't be decided by juries. There's no way to educate a jury well enough in the time given for them to make the right decision, without potentially biasing them. Patent cases should be ruled on by a multi-judge panel that are expert in patent law.

 

[tdtran1025]

Totally agreed with one poste that jury selection on future tech infringement would be arduous, such that alawyers must also have the same specialty or training.
Man, I bet Apple was banking on taht notion. A a clever thief.

 

[IJ Reilly]

This is why these cases shouldn't be decided by juries. There's no way to educate a jury well enough in the time given for them to make the right decision, without potentially biasing them. Patent cases should be ruled on by a multi-judge panel that are expert in patent law.

Bill of Rights be damned, huh?

 

[kdarling]

I used tcpdump to check and confirmed that FaceTime is usually Peer to Peer again. I'm guessing Apple found a workaround for the patent at some point and quietly fixed it.

When the royalty rates were being decided, Apple's lawyers claimed that VirnetX's patents were worthless, because they could be worked around very easily. So apparently they did have a workaround in mind.

(After they lost, Apple's lawyers changed to claiming that it would be a huge hardship to change their code. The flip-flop ticked off the judge, who slapped them with a continuous fine amounting to almost 1% of Apple's earnings until they stopped infringing.)

--

This trial is like watching the Apple-Samsung trials in reverse. Apple has used many of the same arguments to defend against VirnetX, that Samsung did to defend against Apple. For example, besides the workaround argument:

- Apple claimed that they shouldn't have to pay high royalties because they had good reason to believe the patents were not novel. (Unfortunately for them, it turned out that an Apple engineer had tried to patent the same ideas, proving that Apple DID think they were patentable. Oops.)

- Apple claimed that the reward was excessive because Facetime was not the driving reason people bought Apple products. (Actually, I personally have bought Apple products just for this reason, but okay.) This is the same argument that Samsung used to prevent owing triple damages to Apple.

 

[petsounds]

I used tcpdump to check and confirmed that FaceTime is usually Peer to Peer again. I'm guessing Apple found a workaround for the patent at some point and quietly fixed it.

Basically, call quality was notably good so I had to investigate to see if it was still going through a bounce server. I was pleased to find packets going directly to and from the other person's network instead of AWS. 🙂

Interesting. Wasn't this lawsuit the reason they never opened FaceTime as an open standard? Or was that just speculation.

 

[rdlink]

Personally, I'd just like to have back the functionality we lost when we moved from iChat to FaceTime. Specifically, the ability to have three way video, and easily control someone else's computer.

 

[Cartaphilus]

Bill of Rights be damned, huh?

The Seventh Amendment requires only "trial by jury", and doesn't specify that the jury must be made up only of ordinary randomly-chosen people, although I would agree that a Federal jury of judges is unconstitutional. The Fifth Amendment, which provides for "due process" is offended when a litigant's rights are determined by an under-educated, under-sophisticated, and under-intelligent jury which can't possibly be relied upon to weigh the scientific and engineering issues of fact on which a patent case often turns. I love juries, and when it comes to deciding who is telling the truth and who is lying about events that occur in ordinary life, I trust a lay jury over any alternative. I just don't believe a randomly-selected lay jury is the best way of determining whether a violation of an issued patent has occurred. There is an excellent and balanced law review article on this subject that I'd recommend:

http://www.stlr.org/html/volume2/fisher.pdf

 

[IJ Reilly]

The Seventh Amendment requires only "trial by jury", and doesn't specify that the jury must be made up only of ordinary randomly-chosen people, although I would agree that a Federal jury of judges is unconstitutional. The Fifth Amendment, which provides for "due process" is offended when a litigant's rights are determined by an under-educated, under-sophisticated, and under-intelligent jury which can't possibly be relied upon to weigh the scientific and engineering issues of fact on which a patent case often turns. I love juries, and when it comes to deciding who is telling the truth and who is lying about events that occur in ordinary life, I trust a lay jury over any alternative. I just don't believe a randomly-selected lay jury is the best way of determining whether a violation of an issued patent has occurred. There is an excellent and balanced law review article on this subject that I'd recommend:

http://www.stlr.org/html/volume2/fisher.pdf

The paper you cite espouses a legal theory, not a fact. Who you personally trust really isn't the issue.

However, there are constitutional and statutory rules which may impose limits on the use of expert juries. This article examines some of these legal barriers, but also considers whether, in certain situations, a litigant in a patent case might legitimately claim a fundamental right to have its case heard by a jury of engineers or scientists.

 

[gnasher729]

Reading the court order, it seems that all the patents are valid, Apple didn't infringe on the 1st claim of one patent but on some other claims, and the calculation of damages was based on the retail value of the whole iPhone / iPad / iPod ($199 to $699) but only based on $29 for an OS upgrade in the case of Macs, and the base for the damage calculation was much too high in the case of the iOS devices.

Case goes back to the court. Most likely outcome I believe would be that Apple loses, but with reduced or hugely reduced damages. Not having infringed on one patent claim should of course get the damages down. If the damage calculation was wrong, that could get the damages _hugely_ down.

 

[Cartaphilus]

The paper you cite espouses a legal theory, not a fact. Who you personally trust really isn't the issue.

Ah, you see when it comes to the application of Constitutional language, there is no such thing as "fact". The closest anyone can come to knowing what the Constitution means is citing the most recent opinion of the most authoritative court ruling touching the issue. Until the U.S. Supreme Court rules on an issue, anyone's statement about what the law provides is just a theory, and even then the statement is only valid until the next case comes along.

The issue here is what legal process fulfills the promise of the Due Process clause of the Fifth Amendment without running afoul of the Seventh Amendment's guarantee of trial by jury. A legal system that entrusts the resolution of complex questions to people who lack the ability to make rational decisions is not Due Process, but a game of roulette.

Bear in mind that the Seventh Amendment only "preserves" the right of trial by jury, it didn't create that right. Since no right to a jury was recognized in 1791 for cases arising in equity, admiralty, maritime law, immigration and naturalization issues, or lawsuits against the sovereign (now the United States government), there is no right to a jury in those types of cases today. Juries can be composed of as few of six people, and verdicts need not be unanimous. In 1791 juries were composed of white men, but today our law recognizes that trial by jury requires a more inclusive composition so that the process of creating a jury pool and striking jurors has been accordingly altered. These outcomes aren't apparent from simply reading the stark language of the Amendment, but they are, in fact, universally recognized to be the law today.

What the law considers to be a Constitutional jury has evolved in the last 223 years, and it will continue to evolve, a process that allows the principles of the Framers to be perpetuated in a world unimaginable in the 18th century. Such a process can't accommodate any notion of unvarying inalterable "fact", but rather must depend upon wise adaptation to evolving conditions. In such a dynamic system we rely upon the opinions of knowledgable experts in each field of law to advise us as to the most likely result were the question to be decided by a court.
Consequently, expert legal theories and opinions are a far more reliable guide to what the law is than any layman's notion of the "facts" derived from simply reading the words of the Constitution.

 

[IJ Reilly]

Ah, you see when it comes to the application of Constitutional language, there is no such thing as "fact". The closest anyone can come to knowing what the Constitution means is citing the most recent opinion of the most authoritative court ruling touching the issue. Until the U.S. Supreme Court rules on an issue, anyone's statement about what the law provides is just a theory, and even then the statement is only valid until the next case comes along.

The error you make here is in thinking that I simply read the plain language of the Constitution and decided what it means. Not so. What I read, among other things, was the paper you linked here. Quite clearly it advances an argument for a type of jury trial that even the author acknowledges only may be Constitutional. It would not become Constitutional until some plaintiff or defendant demands an expert jury over the objections of the other party in the suit, a judge allows it, the case is appealed to the Federal courts, and the Federal court rules in favor of it. Has any such case ever reached a Federal court, let alone, the Supreme Court? If so, the author of the paper doesn't let on.

In the meantime, it is all well and good to espouse the theory that expert juries would be a good idea in technology cases. I can think of some fairly obvious arguments against them. What you cannot do is vouch for the Constitutionality, since that appears to be an unknown at this point.

 

[Cartaphilus]

In the meantime, it is all well and good to espouse the theory that expert juries would be a good idea in technology cases. I can think of some fairly obvious arguments against them. What you cannot do is vouch for the Constitutionality, since that appears to be an unknown at this point.

I think we're talking past each other.

You're certainly right in saying I can't vouch for the constitutionality of blue ribbon juries in patent cases, but neither can I nor anyone else vouch for it being unconstitutional. The same is true for constitutional issues like gay marriage, executive delays in implementing provisions of the ACA, requiring abortionists to have privileges at a hospital, or any of hundreds of other issues that haven't been decided by the U.S. Supreme Court lately, including, perhaps, a few most experts tend to think are well-settled.

I think there are good reasons for the Court to find expert juries constitutional, and I recommended that article because I thought it did a good job of making the case. You had posted a comment that I read as taking as settled law that any such jury would be unconstitutional, and I thought bringing your attention to a serious argument for constitutionality would be interesting and thought-provoking to you and others. Although I rather share the author's goals, I certainly wasn't claiming that the Court had or definitely would come on board. By the same token, though, I don't think that it's correct to say definitively that the Bill of Rights absolutely forbids expert juries either.

I've read many of your thoughtful posts, so I didn't take you for a blind literalist.

 

[IJ Reilly]

I think we're talking past each other.

You're certainly right in saying I can't vouch for the constitutionality of blue ribbon juries in patent cases, but neither can I nor anyone else vouch for it being unconstitutional. The same is true for constitutional issues like gay marriage, executive delays in implementing provisions of the ACA, requiring abortionists to have privileges at a hospital, or any of hundreds of other issues that haven't been decided by the U.S. Supreme Court lately, including, perhaps, a few most experts tend to think are well-settled.

I think there are good reasons for the Court to find expert juries constitutional, and I recommended that article because I thought it did a good job of making the case. You had posted a comment that I read as taking as settled law that any such jury would be unconstitutional, and I thought bringing your attention to a serious argument for constitutionality would be interesting and thought-provoking to you and others. Although I rather share the author's goals, I certainly wasn't claiming that the Court had or definitely would come on board. By the same token, though, I don't think that it's correct to say definitively that the Bill of Rights absolutely forbids expert juries either.

I've read many of your thoughtful posts, so I didn't take you for a blind literalist.

I never said that such a thing was absolutely forbidden, I merely pointed out that the concept faces significant Constitutional hurdles, something you seemingly did not allow until your most recent post. The Court has not weighed in on this issue because no judge has yet dared to force a trial by an "expert jury" on an unwilling litigant. Unlike the issues you cite as supposed analogies, this one has not been litigated at all, to my knowledge.

In any event, in the interests of not talking past one another, I can see a number of issues beyond the Constitutional with this theory, not the least of which is finding six or more individuals with the requisite education and expertise to serve on this ideal jury. In fact it seems to me the more expertise any potential juror demonstrates, the more readily one of the sides in the suit could challenge that juror as having predetermined views on the subject of the suit. Expertise easily cuts two ways.

 

[kdarling]

I would submit that patent oppositions are not like other debates decided by juries, because in fact experts and others can decide patent validity and infringement WITHOUT a jury involved.

- The USPTO itself can reexamine and invalidate a patent or some of its claims. This is decided by experts, not juries.

- The ITC can declare a patent invalid or infringed, and order an injunction. Again, no jury involved, and ITC judges are considered experts at IP issues.

- Meanwhile, as recently happened, a non-expert Presidentially appointed Trade Rep can overturn the expert ITC decision. Again, no jury.

- A Federal judge, who might or might not be an expert, can arbitrarily decide a patent has been infringed, such as Koh did, and not even submit it for her jury to decide except for damages.

- A lay jury can declare a patent invalid.

- Some top IP authorities, such as Judge Posner, have argued that patent trials should only be decided by expert judges or judges with expert help, not by lay juries.

What a hot mess, or a convoluted system of checks and balances, depending on your views 🙂