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Daniel B. Ravicher is a registered patent attorney who frequently consults with investment banks, hedge funds, and individual investors on legal issues that may materially affect the value of publicly traded companies. In addition to private consulting, Mr. Ravicher also regularly publishes... More
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  • VirnetX Denied Injunction Against Apple, Parties To Negotiate Ongoing Royalty 5 comments
    Feb 26, 2013 10:32 PM | about stocks: VHC, AAPL

    Just over a month ago I predicted that VirnetX (NYSEMKT:VHC) would be awarded a permanent injunction against Apple (NASDAQ:AAPL) in its ongoing patent infringement suit, which resulted in a jury verdict in VirnetX's favor and awarding ~$370 for past damages.

    This evening, the judge issued his opinion and order on the post-trial motions of the parties, in which he denied VirnetX's motion for a permanent injunction. Thus, my prediction that he would grant that motion was wrong. VirnetX may appeal his denial of the injunction, and I expect they may very well do so. Thus, the Court of Appeals could reverse his decision to deny the injunction and order that one be implemented. We'll have to see if VirnetX does indeed raise such an issue on appeal.

    In the interim, VirnetX had made a request in its motion for a permanent injunction that if the judge were to deny that motion, he should in the alternative award VirnetX an ongoing royalty to be paid by Apple for its continued infringement. On that issue, the judge wrote in his order issued this evening:

    If the Court does not grant a permanent injunction against Apple, VirnetX "requests that the Court order the parties to negotiate a license regarding Apple's future use of VirnetX's
    patented technology." If the parties fail to reach an agreement, VirnetX then asks that Court to impose an ongoing royalty. The Federal Circuit has encouraged
    courts to allow the parties to negotiate a license amongst themselves regarding the future use of a patented technology prior to the court imposing a royalty.

    Accordingly, to provide finality to the trial, the Court SEVERS VirnetX's claim for an ongoing royalty into a separate cause of action. The parties are ORDERED to meet and confer to schedule mediation within 45 days of this order to attempt to negotiate a license. Should the parties fail to agree regarding Apple's future use of VirnetX's patents at the mediation, VirnetX is ORDERED to file the appropriate motion.

    Additionally, the judge also granted VirnetX's motion for the award of post-judgment royalties in the amount of "$330,201 per day from November 6, 2012 through the date of the final judgment."

    I hope to do a more thorough analysis of the implication of the judge's decisions issued tonight in the near future.

    Disclosure: I am long VHC, AAPL.

    Stocks: VHC, AAPL
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Comments (5)
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  • Jeff's WaterWorks
    , contributor
    Comments (92) | Send Message
    Honestly I think you do a disservice to the judge's ruling by concentrating on what he did not do tonight. Agreed, an injunction would have given VirnetX a hammer to wield during negotiations, but it would have also given Apple a gateway to the long and drawnout appeals process which they so greatly desire. By denying an appeal and centering his ruling on the specifics of the case itself, the judge has shown to Apple and to Cisco, the next company on the docket, that VirnetX has strong patents that are being violated by a large group of major corporations, and it would be wise to line up for licensing before they are also hauled before His Honor.


    And to combat the cries of "patent troll", VirnetX has the inventors that created these patents as officers or as retired officers that are shareholders. So, the people that came up with these inventions are in a position to actually profit from their ideas. Is this not the entire reason for the patent system? To allow the inventor to profit from their invention for a set amount of time? Yes, I thought it was.
    27 Feb 2013, 02:51 AM Reply Like
  • sonicthoughts
    , contributor
    Comments (231) | Send Message
    First, thanks for admitting you were wrong. I've noticed you are more willing to do that now than in the past.
    Do you think that the fact that Virnetx is a Non Practicing Entity (NPE) might have had something to do with the fact an injunction was denied? I raised this issue with you several times in your previous article:http://seekingalpha.co... and you ignored my question. I still don't understand why you don't think that is relevant here and based your analysis on a case with a practicing entity. Please share your perspective.
    27 Feb 2013, 11:41 AM Reply Like
  • Daniel B. Ravicher
    , contributor
    Comments (321) | Send Message
    Author’s reply » The problem with excluding NPE's from injunctions is that you then also exclude universities, which are a much stronger and more compelling social group. There's a good law review article that raises this whole point, titled "Are Universities Patent Trolls?" We'll see how the law of injunctions develops, especially if VHC appeals the judges denial of an injunction to them. I really saw this case as being on all fours with i4i, but as you say, I was wrong.
    1 Mar 2013, 12:38 PM Reply Like
  • sonicthoughts
    , contributor
    Comments (231) | Send Message
    Also, I haven't heard anyone mention the post-trial suit they filed against Apple to include the iphone 5, newer iPads, etc. That should be worth a significant amount. I Does this motion have any bearing on the separate lawsuit (ref: http://bit.ly/XimM4q)
    27 Feb 2013, 11:44 AM Reply Like
  • Daniel B. Ravicher
    , contributor
    Comments (321) | Send Message
    Author’s reply » It may have bearing, but isn't a conclusive finding of infringement, since those products were specifically considered by the jury. It'll be hard, though, for AAPL to come up with an argument that those products don't infringe.
    1 Mar 2013, 12:39 PM Reply Like
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