McKool Smith returned to its roots on Nov. 6, scoring a nine-figure patent infringement verdict against a tech giant in East Texas.
A Tyler jury determined that Apple Inc. should pay $368 million for infringing four patents owned by a small software company called VirnetX Inc. The patents relate to virtual private network (VPN) technology.
A team at McKool Smith, led by Douglas Cawley, first sued Apple on VirnetX’s behalf in 2010, alleging that Apple’s VPN on Demand service for the iPhone infringes on VirnetX’s patented software. The complaint also targeted three other tech companies that make VPN software: Cisco Systems Inc., Aastra Technologies Ltd, and NEC Corp. Both Aastra and NEC settled before trial for undisclosed sums. VirnetX’s claims against Cisco were severed and are scheduled for trial in February.
Aastra and NEC had good reason to be spooked. While McKool Smith is branching out into securities litigation and whistleblower suits these days, its bread and butter remains asserting software patents against tech companies and pulling in big awards. In 2010, Cawley’s team won a $105 million verdict for VirnetX against Microsoft Corp. in a different case in Tyler involving two of the same VPN patents. Microsoft later paid $200 million to settle that case and a related suit. McKool Smith scored a $290 million win following a 2009 trial for another software company, i4i Inc., in an infringement case against Microsoft. (The verdict was later affirmed at the U.S. Supreme Court.) McKool Smith’s Scott Cole also won a $391 million verdict against SAP America Inc. for longtime client Versata Software Inc. in May 2011. Cole struck out in his latest case for Versata, however.
Apple and its lawyers at Williams Morgan & Amerson and the Albritton Law Firm decided to fight VirnetX’s claims, and trial got underway on Oct. 29. VirnetX’s expert pegged damages at $708 million. Jurors deliberated for just over seven hours before returning their verdict.
VirnetX is one of the few publicly traded companies largely dependent on patent litigation for revenue, and its investors were fixated on the case as it hurtled toward trial. On Oct. 19, U.S. District Judge Leonard Davis in Tyler ordered VirnetX to tell its investors to stop calling his courthouse, complaining that the court was getting about 10 calls a day. In some ways, VirnetX is a predecessor of Vringo Inc., which recently set off an investing frenzy by suing Google Inc. for patent infringement. Coincidentally, that case ended in a plaintiff-side verdict on Tuesday as well, as Texas Lawyer affiliate The AmLaw Litigation Daily reported on Nov. 6 in “Dickstein Shapiro Scores for Vringo in Google Patent Trial.” For its part, VirnetX has seen its stock price jump 20 percent so far on news of the verdict.
“We’re pleased with the verdict,” Cawley told us. “We think the jury did its job properly and that the verdict will stand up on appeal.”
Apple’s troubles in the VirnetX litigation started early, and the two companies may be battling for a while yet. An unnamed Apple lawyer got reprimanded by Davis in an August opinion for halting a deposition of a key Apple engineer, as The AmLaw Litigation Daily reported on Aug. 10 in “Apple Lawyer Sanctioned in East Texas Over Deposition Flap.” On Nov. 7, McKool and VirnetX brought a fresh case alleging that two new Apple products, the iPad Mini and the iPhone 5, infringe the same patents.
Apple lawyer Danny Williams of Williams Morgan didn’t return a call seeking comment.