CASE CITE

VirnetX Inc. v. Apple, Inc., No. 6:10-CV-417, 2013 WL 692652 (E.D. Tex. Feb. 26, 2013).

IPDQ COMMENTARY

The VirnetX judge approved use of the Nash Bargaining Solution and appears to have shifted the burden to the defendant to present “a credible alternative” to the royalty base proposed by the patent owner. Score this as a win for the patent owner, but wait to see what the Federal Circuit does on appeal.

CASE SUMMARY

A jury awarded VirnetX $368+ Million on its infringement claims. In post-trial rulings, the VirnetX court denied Apple’s Rule 50(b) motion for JMOL and motion for a new trial or remittitur. The court also granted in part VirnetX’s motion for post-verdict damages, as well as pre- and post-judgment interest. Id. at *1.

Apples’ Motion for JMOL — Apple challenged the jury’s award as lacking both legal and evidentiary bases. Considering each point raised by Apple, the court concluded:

  • There was sufficient evidence to support the claim of direct infringement. Id. at *13.
  • VirnetX’s damages theory did not implicitly invoke the EMVR. Id. at *14. VirnetX properly used the smallest salable unit of the accused products which excluded approximately 20% of the total revenue from the accused products when calculating a reasonable royalty. Id. at *13. VirnetX provided some evidence that the infringing features necessarily used other aspects of the accused device and thus met its burden of establishing the device had a “close relation” to the claimed invention. Id. Moreover, Apple failed to advance a credible alternative for the royalty base. Id. at *14.
  • VirnetX presented substantial evidence to support the royalty rate of 1% proposed by its damages expert, Mr. Weinstein. Id. at *15. Weinstein presented a detailed reasonable royalty analysis to the jury. VirnetX introduced several license agreements and its own licensing policy. While some of the licenses postdated the hypothetical negotiation, they helped to demonstrate what the parties would have agreed to in the hypothetical negotiation. Id.
  • VirnetX and its damages expert provided substantial evidence to support its alternate damages theory. Id. at *16. Apple challenged Weinstein’s use of the Nash Bargaining Solution (“NBS”) as akin to the disdained 25% rule of thumb. Id. at *15. Notwithstanding this, the court concluded Weinstein had accounted for the 45%/55% profit split to which he testified.
  • VirnetX had produced sufficient evidence of Apple’s knowledge of the patents to support an award of pre-suit damages. Id. at *16.

Apple’s Motion for New Trial or Remittitur — The court also denied Apple’s alternate motion for a new trial or remittitur. Id. at *19. In denying the motion, the court: (1) upheld a challenged damages instruction to the jury, concluding that it did not improperly inject the EMVR into the case; (2) rejected Apple’s renewed Daubert challenge to Weinstein’s testimony; and (3) rejected Apple’s evidentiary challenges. Id. at *17 – *19.

VirnetX’s Motion for Post-Verdict Damages and Interest – The court granted VirnetX’s motion for prejudgment interest, awarding interest at the prime rate compounded quarterly. Id. at *19. The court also concluded that VirnetX’s methodology for determining post-verdict damages was reasonable because “Apple is asking VirnetX to look into a crystal ball to divine if and how accused product sales will further decrease. VirnetX was only given sales information of to December 31, 2012, and VirnetX’s methodology is reasonable in light of the almost impossible task Apple is now requesting.” Id. at 20.