On September 16, 2014, the Federal Circuit vacated a $368 million damages award against Apple because the underlying damages model was based on the entire price of Apple products instead of being limited to the infringing features of the devices. The court held that damages experts must ensure that damages theories are based on the value of the infringing features and exclude the value of all other features from their estimates. Plaintiff VirnetX sued Apple in the Eastern District of Texas, alleging that Apple’s FaceTime videocalling feature and VPN On Demand secure web connection feature infringed its patents. A jury found that the features infringed four patents and awarded VirnetX $368 million in damages. The Federal Circuit affirmed the jury’s finding that the VPN On Deman feature infringed, remanded the infringement finding regarding the FaceTime feature, and vacated the damages award. Plaintiff’s damages expert based his damages model on the entire price of the devices, arguing that the devices themselves were the smallest salable unit that practice the patents. The Federal Circuit rejected this approach, holding “A patentee’s obligation to apportion damages only to the patented features does not end with the identification of the smallest salable unit if that unit still contains significant unpatented features.”
Apple, Inc. v VirnetX, Inc. et al, U.S. Federal Circuit Court of Appeals, No. 20131489.