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Business November 1, 2020 3 mins read

Apple ordered to pay VirnetX $502.8 million in royalties for VPN-on-Demand

Business ı By Marivic Cabural Summers

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Apple Inc. (NASDAQ; AAPL) suffered another major blow in its decade-long patent infringement battle against VirnetX Holding Corporation (NYSE: VHC), an internet security software company.

This time, the Cupertino-based tech giant is ordered to cough up over half a billion dollars for violating the internet security software company’s patents for secure communications, which were integrated into iPhones, iPads, iPods, and Mac computers.

A jury in Tyler, Texas ordered Apple to pay VirtneX $502.8 million in royalties for VPN-on-Demand, a feature that allows users to automatically connect to a virtual private network (VPN). It took approximately 90 minutes for the jury to reach the decision on Friday, according to Bloomberg.

In February, the U.S. Court of Appeals for the Federal Circuit affirmed the ruling of the U.S. District Court for the Eastern District of Texas that Apple is precluded from challenging the validity of VirnetX’s asserted patents. The appeals court noted that the tech giant failed to litigate the case and was prohibited from repeating those challenges.

Additionally, it also upheld the jury’s finding that Apple’s VPN-on-Demand features violated the security software company’s U.S. patent numbers 6,502,135 and 7,490,151. The court noted that

During their decade-long litigation, VirnetX asserted that its patents for secure communications stemmed from the technology it developed for the U.S. Central Intelligence Agency (CIA). The internet security software company strongly argued that Apple infringed its patents by integrating it on its devices, particularly the VPN-on-Demand.

VirtneX demanded $700 million from Apple

VirnetX told the jury that it was entitled to collect more than $700 million in royalties from Apple, which countered its demand at around $113 million. The tech giant claimed that the internet software company’s royalty should not exceed 19 cents per device. The jury decided that a royalty rate of 84 cents per device is reasonable.

In response to the verdict, a spokesperson for Apple issued a statement expressing that the company was disappointed but appreciated the jury’s time and consideration.

“We thank the jury for their time and appreciate their consideration but are disappointed with the verdict and plan to appeal. This case has been going on for over a decade, with patents that are unrelated to the core operations of our products and have been found to be invalid by the patent office. Cases like this only serve to stifle innovation and harm consumers,” the spokesperson said in the statement.

In March, Apple paid VirtneX $454 million over earlier versions of the VPB-on-Demand. The verdict of $502.8 million in royalty is connected to different litigation involving a newer version of VPN-on-Demand.

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Marivic Cabural Summers

Marivic has been a freelance writer/journalist for nearly 20 years. She strictly adheres to the ethical standards in journalism. For her, integrity is everything. Readers deserve to know that real story. She previously worked as research analyst and editor at Lombardi Financial and has written for various websites including The Motley Fool, ValueWalk, IcannWiki and was a news writer/radio program producer at Nation Broadcasting Corporation. Marivic holds a BA in Mass Communications.

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