New VirnetX Patent Case Survives Apple Challenge

New VirnetX Patent Case Survives Apple Challenge Photo: PadMobil.com.

The patent licensing company VirnetX Inc. got a boost on Friday in its latest fight with Apple Inc., persuading a federal judge in East Texas that Apple can’t revive defenses from an earlier case that culminated in a $368 million verdict for VirnetX.

In a 10-page decision, U.S. District Judge Leonard Davis in Tyler ruled that the doctrine of collateral estoppel precludes Apple from arguing in the most recent case that 16 claims in VirnetX’s patents are invalid. If the case goes to trial as scheduled in October 2015, Davis will instruct jurors that those 16 claims are valid, and Apple must now prove noninfringement to defeat them.

VirnetX, which holds patents on technology for securing online communications, derives its revenue almost entirely from enforcing its patent portfolio. Much of that portfolio once belonged to the defense contractor Science Applications International Corporation, and VirnetX’s founders are former SAIC employees. As The American Lawyer reported in a 2013 feature, VirnetX has asserted that it planned to enter the software business but was instead forced to litigate after Microsoft Corp., Apple and Cisco Systems Inc. infringed its patents.

In March 2010 an East Texas jury awarded VirnetX $106 million in its case against Microsoft, which later settled the case as part of a $200 million licensing deal. VirnetX was represented in that case by a McKool Smith team led by Douglas Cawley.

After winning the Microsoft verdict, VirnetX and McKool Smith set their sights on Apple. A federal jury in Tyler returned a $368 million verdict against Apple in November 2012, finding that features included on the iPhone and iPad infringe 16 claims in four of VirnetX’s patents. Apple’s lawyers at Williams Morgan & Amerson had argued during trial that prior art rendered the patent claims invalid. The verdict is currently before the U.S. Court of Appeals for the Federal Circuit.

The same day the 2012 verdict came down, VirnetX and McKool Smith filed a new complaint against Apple. The new suit, known as VirnetX II, involves many of the same patents as the prior case but targets a different lineup of Apple products.

VirnetX II also features a different legal lineup. This time around, Apple has retained a Kirkland & Ellis team including Robert Appleby and Gregory Arovas to work alongside Williams Morgan. VirnetX, for its part, has turned the case over to a small Dallas firm called Caldwell Cassady & Curry. Caldwell Cassady’s relatively young founders—Bradley Caldwell, Jason Cassady and J. Austin Curry—are all former McKool Smith attorneys who worked alongside Cawley in VirnetX’s first Apple case. According to D Magazine, VirnetX pushed for the trio to break off from McKool Smith because the larger firm had potential conflicts of interest that could complicate the company’s future litigation prospects.

In the second case, VirnetX accuses Apple of infringing 116 claims in six patents, including all 16 patent claims at issue in the 2012 trial. In April, Caldwell Cassady urged Davis to preclude Apple from arguing in the new case that those 16 patent claims are invalid. Apple “had a full and fair opportunity to actually litigate the issue of the invalidity of the tried claims,” VirnetX’s lawyers wrote.

Davis agreed in Friday’s ruling, rejecting Apple’s arguments that it would be unfair to block it from arguing over the invalidity of those claims. “On the contrary, it would be unfair if these defenses were not precluded,” Davis wrote.

“It’s very significant and very favorable to VirnetX to not have to relitigate the validity of those claims,” Curry said in an interview.

A Kirkland spokesperson referred our request for comment to Apple’s PR department, which didn’t respond before our deadline.

The Federal Circuit heard arguments in March in Apple’s appeal of the earlier $368 million verdict. Wilmer Cutler Pickering Hale and Dorr’s William Lee argued the appeal for Apple, while VirnetX turned to J. Michael Jakes of Finnegan, Henderson, Farabow, Garrett & Dunner.

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