Apple Must Pay $532.9M in iTunes Patent-Infringement Verdict

Texas-based Smartflash LLC alleged in its lawsuit that Apple had infringed on three of the company's data storage and payments systems patents in Apple's iTunes music software.

Apple, Smartflash, patent infringement

Apple has been ordered by a federal jury in Texas to pay $852.9 million to Smartflash LLC to compensate the company for infringing on several Smartflash patents in Apple's iTunes music software.

The verdict was issued by a federal court jury in Tyler, Texas, on Feb. 24, which rejected Apple's arguments that it did not infringe on Smartflash's patents, according to a report by BloombergBusiness.

Smartflash alleged in its lawsuit that Apple violated its patents in three ways in iTunes relating to digital rights management and inventions related to data storage and managing access through payment systems, BloombergBusiness reported. "Smartflash claimed that iTunes used the inventions in applications such as Game Circus LLC's Coin Dozer and 4 Pics 1 Movie."

Smartflash originally sought $852 million in damages, based on a percentage of Apple's sales of devices that were used to access iTunes, while Apple said that any infringement was only worth about $4.5 million, the story said.

Smartflash alleged that "Apple had intentionally infringed the patents, in part because one of its executives had been given a briefing on the technology more than a decade ago," according to the news story.

"Apple doesn't respect Smartflash's inventions," John Ward, Smartflash's attorney, said in court, the news story reported. "Not a single witness could be bothered with reviewing the patent."

That's not how Apple sees it. Instead, Apple says it will appeal the jury's verdict because Smartflash did not create the technologies it fought over and is not in the business of creating such systems.

"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," an Apple spokeswoman told eWEEK in an email reply to a Feb. 25 inquiry about the case. "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. 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."

Many critics of U.S. patent laws have been balking for years about companies that simply buy up patents and then go after other companies seeking damages for patent infringement, even though the suing companies didn't make the technology they are suing over. These so-called "patent trolls" have been the subject of lots of discussions and criticism for years in the United States.

In the Smartflash case, the lawsuit was filed in federal court in the Eastern District of Texas because the region "has become known as a hotbed for patent lawsuits and a favorite jurisdiction for lawyers pursuing patent claims," according to a Feb. 25 article by the Associated Press.

In the Smartflash case against Apple, the jury "agreed with Smartflash's argument that Apple used software based on ideas patented by inventor and Smartflash executive Peter Racz, without permission," according to the AP. "The Texas firm alleged that in 2000, Racz met to discuss his ideas with prominent software designer Augustin Farrugia, who was then working for a European company but later joined Apple to work on security programs for its iTunes store."

Like other major technology companies, Apple is often mired in patent-infringement cases, as a plaintiff and as a defendant. In 2012, Apple won a $1.05 billion patent-infringement verdict from Samsung that was later lowered and then appealed by Samsung, according to earlier eWEEK reports. That lawsuit involved infringements of features used in Samsung's Galaxy smartphones.