Apple Ordered to Pay $532.9 Million for Violating Patents

Apple Inc. has been ordered to pay $532.9 million after a federal jury ruled that it willfully infringed on intellectual property owned by a Texas patent-licensing company and used on Apple’s iTunes.

The company, Smartflash LLC, holds patents that cover methods of managing digital rights and paying for songs, games and other data. The jury in Tyler, Texas, decided late Tuesday that Apple infringed on three Smartflash patents.

Smartflash alleged that one of the co-inventors of the patents, Patrick Racz, discussed the data-management technology in 2000 with Augustin Farrugi, who went on to become a senior director at Apple, according to Smartflash’s complaint.

An Apple spokeswoman said the company will appeal the ruling.

“Smartflash makes no products, has no employees, creates no jobs, has no U.S. presence, and is exploiting our patent system to seek royalties for technology Apple invented,” Apple said in a statement. “We refused to pay off this company for the ideas our employees spent years innovating and unfortunately we have been left with no choice but to take this fight up through the court system.”

The U.S. District Court for the Eastern District of Texas has emerged as a popular venue for patent disputes with its reputation for speedy trials and juries willing to side with plaintiffs.

Court and regulatory filings show that Apple has faced more than 100 lawsuits in recent years from so-called patent trolls, companies that threaten to file patent lawsuits unless they receive royalty payments.

Apple has had some luck fighting such cases in court: At least two other high-profile patent decisions against Apple from East Texas have been reversed on appeal.

A Tyler jury in October 2010 ordered Apple to pay $625.5 million for infringing on patents owned by Mirror Worlds LLC. A judge later overturned that verdict.

A federal appeals court in 2014 threw out a jury order requiring Apple to pay VirnetX Holding Corp. $368.2 million in damages for violating its patents.

“We rely on the patent system to protect real innovation and this case is one more example of why we feel so strongly Congress should enact meaningful patent reform,” Apple said in a statement.

Smartflash has also filed separate patent-infringement complaints against Google and Samsung.

Smartflash did not immediately respond to a request for comment.

This article appeared in print in the February 26th, 2015 edition of Hamodia.