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VirnetX v. Apple: Patent Infringement Verdict Remanded for Damages

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By Mark Wilson, Esq. on September 16, 2014 4:18 PM

It's been a while since we covered the Federal Circuit, and they have busy little bees indeed, publishing 13 precedential opinions since September 9. Today, we bring you a patent infringement case involving Apple's FaceTime technology.

The U.S. District Court for the Eastern District of Texas -- every patent litigant's favorite venue -- determined that FaceTime infringed on several valid patents held by VirnetX, awarding it a total of $368 million. (VirnetX is considered a patent troll, reported Ars Technica back in June.)

VirnetX purchased patents that allow secure communication links between a computer and a target network address. Apple was alleged to have infringed on this patent through its FaceTime technology, which allows video calls over a secure connection. Part of the technology involves creating a secure VPN tunnel "on demand," something that the plaintiffs had already patented.

FaceTime

The Federal Circuit upheld the district court's claim construction of "domain name," but reversed the construction of "secure communications link." Apple argued that a secure communications link requires not only security but also anonymity, making it synonymous with "VPN." The court agreed with Apple, finding that VPN and secure communications link are used interchangeably, meaning "secure communications" as used in the patent must also be considered anonymous communications.

As a result, Apple argued that FaceTime doesn't infringe on VirnetX and SAIC's patents because FaceTime doesn't provide anonymity, and therefore, doesn't provide "secure communications" within the meaning of their patents. On this argument, the court remanded, as the jury was never presented with a claim construed this way.

VPN On Demand

Apple argued that its VPN On Demand doesn't infringe on the existing patents because it doesn't "determine whether" a requested domain is secure and doesn't create a VPN "between" the client and the target computer. The court affirmed the jury verdict on the first issue, but not the second.

Apple's product establishes a VPN only when a target address is secure. It does this by checking the address against a list of known secure addresses. This was sufficient to demonstrate that Apple's product "determines whether" the target is secure.

But Apple argued that its VPN implementation didn't establish a connection between the client device and a target computer: The VPN is established only between the client and a secure server; the path from the secure server to the target computer is not secured by Apple, even though it's encrypted. The court found that a channel encrypted on a network partially secured by Apple and partially secured by someone else is not the "the equivalent" of what's described in the patent, which is a channel encrypted and secured by the same entity from end to end.

The Federal Circuit remanded for a recalculation of the damage award. At trial, damages were calculated by formulated by determining the percentage of iOS device sales attributable to FaceTime. Apple countered, however, that FaceTime couldn't be taken into account on its own because it wasn't severable from the iPhones or iPods sold.

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