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Apple’s Countdown to FaceTime Patent Infringement Settlement or Possible Appeal

Tech & Gadgets

Last month Apple (NASDAQ: APPL) lost a $368 Million patent infringement case against VirnetX (NYSE: VHC) in the U.S. District Court for the Eastern District of Texas (Tyler). On February 26, 2013 Judge Leonard Davis denied Apple’s motion to reduce damages or set a new trial and ordered the parties into mediation to determine a royalty fee for future use of patents. Now that a month has passed Apple must decide what action to take next.

It may be in Apple’s best interests to delay the final settlement for the royalty fee while it decides. However, it is paying serious money each day that passes. Judge Davis ordered that Apple must pay VirnetX $330,211 for each day that passes from February 26 until all the details are worked out, as well as $33,561 in daily interest.

The lawsuit originated when VirnetX, a non-practicing entity, filed a lawsuit in August 2010 alleging that Apple and several other companies had infringed on its patents. The complaint alleged that Apple’s VPN On Demand, and FaceTime features on its products infringed on VirnetX’s secure communications patents.

No word has been released on the status of the mediation. However, unverified sources are reporting that Apple will appeal the ruling to the Fifth Circuit Court of Appeals. Apple’s confidence in the strength of the case for appeal may have increased after the announcement VirnetX lost a related trial against Cisco represented by Desmarais LLP, Black Chang & Hamill LLP, Potter Minton, Findlay Craft, and Kirkland & Ellis, for similar claims of VPN patent infringement on March 14 and after Judge Davis denied VirnetX’s request for an injunction on February 23. Although Apple must act quickly if it will seek an appeal; the time frame for mediation is closing, the 45 days will expire on Friday, April 12, 2013. Apple could also buy more time, an extension will likely be granted if it were sought.

Apple’s case docket number is 6:10-CV-417.  Cisco’s case docket number is 10cv417.

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