In February VirnetX (NYSE: VHC) won a key battle with Apple (NASDAQ: APPL) when the Federal District Court in the Eastern District of Texas upheld VirnetX’s $368 million jury award against the tech giant. Nevertheless, VirnetX did not get everything they asked for. The district court refused to issue an injunction against Apple that would prevent it from using VirnetX’s patented technology in its applications, namely FaceTime. However, the Court’s assessment of VirnetX’s arguments provides important guidance for later litigation by non-practicing entities seeking injunctions against alleged patent infringers.
A permanent injunction is a remedy that can only be granted when a party can prove 4 elements have been met:
1) Irreparable injury
2) Inadequate monetary compensation
3) The hardships weigh in the prevailing party’s favor
4) Public interest would not be disserved by an injunction.
These elements were articulated by the U.S. Supreme Court in eBay, Inc. v. MercExchange, LLC, 547 U.S. 388, 394 (2006).
The opinion in this case focused on the fact that VirnetX had failed to show that it was actually harmed in the marketplace. The Court found key differences between the markets of Apple, which sells consumer phones and hardware; and VirnetX which seeks to sell security software. Because of these differences the Court found that it was unlikely that VirnetX was actually harmed, and if it was, monetary damages could definitely compensate it for any possible loss.
The court also mentioned that it seemed to think that the public interest favored allowing Apple to continue to put the technology to use. The court said, “an injunction would not only harm Apple, but also its customers and other third parties.”
Federal court trends
The judge’s decision in this case very much reflects the trend in federal courts to limit the ability to get injunctions against the use of non-commercially available technology. Some legal commentators have argued that by favoring practicing entities over non-practicing entities lower courts have effectively limited the application of the eBay case; which held that injunctions in the patent context should not be analyzed differently than any other type of injunction. Nonetheless, it appears that judges cast skepticism when organizations like VirnetX stall in releasing their technology and try to stop it from being utilized by others.
This series of litigation will likely continue to provide insight for later disputes as post-trial motions may continue to be filed in related cases. For example, on March 14 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. The injunction may be the first in a string of losses for Nevada based VirnetX.