Decade-Long War – VirnetX and Apple

Companies battle over numerous things. This could be users and customers, but sometimes patents are “shared” between the companies, be it legal or illegal. Apple seems to have chosen the other way around, directly using the patent from VirnetX without the rights to do so. This is nothing new, but what is new is their state in court. Does Apple really have a way out of the hell, they are currently in?

The patents

It is hard to believe a tech giant, such as Apple would infringement a patent from a much smaller company, but it is true and it is much more serious than you might think. The service which is stated to be used without certain rights is all about secure information transfer and it is used in more than one Apple’s product. The most interesting products using certain technology are the messaging application iMessage and the video chat app FaceTime. Although Apple could have just shut down the services in the initial state, that would mean Apple would be losing the majority of their customers, just because of one game-changing service. VitnetX is not the only company that sued Apple recently. WiLAN and CalTech did so too, and it seems like they are having much more success currently.

The more important patent comes from WiLAN, which allows users to make phone calls while simultaneously downloading data. None of these are the first or last companies to sue Apple and get awarded in court. The latest company to have done it is Neodron, who claim that their keyboard tech is used without the rights to do so. But they did not sue Apple exclusively, Amazon, LG, and Sony were found on the list too. We can’t really say whether anything of this is just made up, but judging by their words there is some serious investment going around to make all of this possible. Their goal is not to get any revenue though, just to block the importation of these devices, not only to the US but other countries as well. Besides the mentioned companies, Motorola and Microsoft are other targets.

The cost

Consider the number of people using the named services and we can easily see how big the fees actually are. Things are not as easy as they seem. Initially, Apple was ordered to pay over $500M to VirnetX, but that statement was reversed and we are back to the starting point. Apple stated the penalty was very inaccurate and suggested the case be closed. We have to remember this was based on the U.S. Patent and Trademark office claims. They also say that all the patents were almost wiped out, but that is yet to be confirmed. It was also stated in early 2012 that Apple’s engineers used the technology to create much more complex pieces of hardware, but VirnetX never agreed with this. Eventually, the company was awarded over $440M, which is a lot of money, even for Apple to pay.

The shares of the VirnetX’s went up by 18% annually, which is quite a bit, especially knowing they have less than $2M in annual revenue. WiLAN’s war lasted about the decade as well, but they didn’t make as much profit from all of it. Based on the number of iPhones which have been sold in the past years, WiLAN claims they should be making more than $85M, but there is not enough evidence to help the jury determine it was entitled to anything.

Nevertheless, WiLAN calls itself “one of the most successful patent licensing companies in the world”.


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