US court throws out $368.2 million patent award against Apple

A lower court made mistakes in defining the value of the patented technology asserted by VirnetX, an appeals court says

A U.S. appeals court has thrown out a US$368.2 million award against Apple in a patent infringement case brought by patent-holding and software company VirnetX.

The U.S. Court of Appeals for the Federal Circuit on Tuesday declined to invalidate VirnetX's four Internet security-related patents, but ruled that Apple's VPN On Demand service did not infringe one of the Nevada firm's patents. The U.S. District Court for the Eastern District of Texas also erred in defining the value of the patented technology related to secure communications links in two patents, and should reexamine whether Apple's FaceTime application infringes the two patents under a correct claim construction, the appeals court ruled.

The district court must also reconsider the jury's damages award based on the appeals court ruling, the higher court said.

"In calculating the royalty base, [the district court] did not even try to link demand for the accused device to the patented feature, and failed to apportion value between the patented features and the vast number of non-patented features contained in the accused products," Chief Judge Sharon Prost wrote for the appeals court.

VirnetX acquired the four VPN-related patents from SAIC in 2006. Two of the patents involve DNS and resolving domain names using secure communications links. The other two patents involve using DNS proxies to intercept Web traffic to determine whether a DNS request is for a secure site.

VirnetX, in a patent lawsuit filed in late 2012, accused Apple's iPhone 5, iPod Touch 5th Generation, iPad 4th Generation, iPad mini and Mac computers running the Mountain Lion operating system of infringing the four patents.

VirnetX said it was disappointed with the appeals court's decision. "We are bolstered by the fact that the patents were again found valid and that it was confirmed that Apple's VPN on Demand functionality infringes the VirnetX patents," Kendall Larsen, VirnetX CEO and president, said in a statement. "We look forward to readdressing the FaceTime infringement and damages issues as soon as possible."

Apple representatives didn't immediately respond to a request for comments on the appeals court decision.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's email address is grant_gross@idg.com.

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Tags intellectual propertysecurityU.S. District Court for the Eastern District of TexaspatentlegalKendall LarsenVirnetXSharon ProstU.S. Court of Appeals for the Federal CircuitApple

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