Apple wins U.S. appeal over patents in $502 million VirnetX verdict


FILE PHOTO: The Apple Inc. logo is seen hanging at the entrance to the Apple store on 5th Avenue in Manhattan, New York, U.S., October 16, 2019. REUTERS/Mike Segar

(Reuters) -Apple Inc persuaded a U.S. appeals court on Thursday to uphold a patent tribunal's ruling that could imperil a $502 million verdict for patent licensing company VirnetX Inc in the companies' long-running fight over privacy-software technology.

The U.S. Court of Appeals for the Federal Circuit affirmed a decision from the U.S. Patent and Trademark Office that invalidated the two patents VirnetX had accused Apple of infringing.

VirnetX Chief Executive Kendall Larsen said in a statement that the company was disappointed with the decision and considering seeking a rehearing or appealing to the U.S. Supreme Court.

VirnetX stock fell more than 14% by Thursday afternoon following the ruling. It had been up 55% in the morning before the decision was published, after the company announced it would pay a special cash dividend to shareholders and anticipated a future potential payout from the Apple case.

An Apple representative did not immediately respond to a request for comment.

The two companies have waged a 13-year court battle that has included several trials and appeals. An East Texas jury awarded VirnetX $502 million in 2020 after deciding that Apple infringed the virtual private network (VPN) patents at issue in Thursday's decision.

Apple has separately appealed the verdict itself, but the Federal Circuit has yet to rule in that case. The court heard combined arguments in both cases in September, and both sides said upholding the decision to cancel the patents would also likely negate the jury award.

"If the court upholds the (USPTO's) decision, we have a big problem," VirnetX attorney Jeff Lamken of MoloLamken said at the September hearing. "I don't think we have an enforceable judgment."

The Federal Circuit on Thursday affirmed decisions by the USPTO's Patent Trial and Appeal Board that the patents were invalid in light of earlier publications that described the same inventions.

VirnetX separately won a $302 million verdict against Apple in an East Texas court in 2016, which was later increased to $440 million, over related allegations that the tech giant used its internet-security technology in features like FaceTime video calls.

(Reporting by Blake Brittain in WashingtonEditing by David Bario, David Gregorio and Jonathan Oatis)

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