Apple Inc was told to pay US$532.9 million after a US federal jury said the company’s iTunes software used a Texas company’s patented inventions without permission.
Smartflash LLC, which claimed that Apple infringed three patents, was seeking US$852 million in damages, while Apple said the case was worth US$4.5 million at most. A federal jury in Tyler, Texas, where Smartflash is based, on Tuesday rejected Apple’s arguments that it did not use the inventions and that the patents were invalid.
The dispute is over digital rights management and inventions related to data storage and managing access through payment systems.
Smartflash said that iTunes used the inventions in applications such as Game Circus LLC’s Coin Dozer and 4 Pics 1 Movie.
Apple pledged to appeal.
“Smartflash makes no products, has no employees, creates no jobs, has no US presence and is exploiting our patent system to seek royalties for technology Apple invented,” Apple spokeswoman Kristin Huguet said. “We refused to pay off this company for the ideas our employees spent years innovating and, unfortunately, we have been left with no choice to but take this fight up through the court system.”
Game Circus and another game developer, KingsIsle Entertainment Inc, maker of Wizard 101 and Grub Guardian, were also defendants before they were dismissed from the case last year.
In asking for US$852 million, Smartflash said that it was entitled to a percentage of sales of Apple devices used to access iTunes and that Apple intentionally infringed the patents because one of its executives had been briefed on the technology more than a decade ago.
“Apple doesn’t respect Smartflash’s inventions,” company lawyer, John Ward of Ward & Smith in Longview, Texas, told the jury. “Not a single witness could be bothered with reviewing the patent.”
Apple, based in Cupertino, California, attacked every aspect of Smartflash’s case. It said the patents were invalid and were not infringed. It said Smartflash did not have complete control of the patents and waited too long to file suit. It also said that Smartflash’s royalty demands were “excessive and unsupportable.”
Smartflash was started in the early 2000s by inventor Patrick Racz in an effort to commercialize his ideas. At one point, Racz was offered less than US$200,000 for an interest in one of his patents, according to a court filing.
Racz met with executives of what is now Gemalto SA, including Augustin Farrugia, now a senior director at Apple, the complaint said.
Farrugia, a long-time specialist in digital rights, is Apple’s director of security and designed the national banking system for Singapore in the 1990s.
Smartflash does not make any products and its only business is licensing seven patents issued between 2008 and 2012, which Racz co-invented.
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