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An active investor since 1998, both long and short, I make my decisions based on all the information available to me and continue to monitor that information for items that will change my investment thesis.
  • Strange Goings On In The VirnetX Vs. Apple Case 14 comments
    Mar 28, 2014 2:24 PM

    Now I'm not a lawyer and have never claimed to be one, but not having a membership to the guild does not mean that I cannot read a legal document and notice when something is out of the ordinary. In the case of VirnetX (NYSEMKT:VHC) vs. Apple (NASDAQ:AAPL) these irregularities show themselves with amazing frequency and some are worth talking/writing about.

    Fine examples of these irregularities have come down from on high several times in the last month alone. Hopefully there is lawyer out there with patent experience (and maybe a SC case under his belt) that can set me straight on all of my musings.

    Case 6:13-cv-00211-LED (I know the LED is just an identifier of the judge, but it is nice to remind everybody that we are dealing with the legal work of the Honorable Chief Justice of The Eastern District of Texas Federal Court Judge Leonard E. Davis) for example was deemed closed on Feb. 25th, 2014 without a corresponding document closing the case being filed on the public PACER system. Lo and behold, on March 6th we have PACER Docs No. 52 (ORDER granting in part and denying in part 51 Sealed Patent Motion to Unseal and Redact. The Court will maintain the original order under seal; however, it will republish its sealed order with the requested redactions) and 53 (The redacted Order itself). This Order is redacted in four spots all of which refer to Apple's business. The Order itself reads as having a very unfavorable opinion of Apple's conduct, IMHO. That opinion may also stem from having attended the trial and the post trial hearings. All of these things are at least a mite out of the ordinary and one or two might have an experienced legal practitioner or member of their support staff saying, "I've never seen that before".

    And then yesterday evening, Apple's Notice of Appeal (Docket No. 58) arrives on our door step like an unexpected puppy (ok, everybody knew it was coming) and it contains the curious wording, "Defendant Apple Inc. hereby appeals the Court's Order granting in part and denying in part the motion of VirnetX, Inc. for an ongoing royalty (Dkt. 48 (under seal); Dkt. 53 (signed Feb. 25, 2014; filed Mar. 6, 2014)) and any judgment entered in this matter". "and any judgment entered in this matter", was Apple expecting something else? I think, obviously so. Now, obviously if the answer was out there in black and white I wouldn't be having all this speculative fun at my keyboard, but with redactions and sealed documents one can only speculate. That's what I'm here for.

    Put yourself in their shoes, Apple is about to appeal before the CAFC an ongoing royalty rate order that implies that their court given testimony was a steaming pile of misguided facts, where they "grossly misrepresented" and had a "huge disparity" between pre-trial and post-trial costs and implementation time. It may not sound like much to the lay person, but my research suggests that this is a judge's way of "screaming" at Apple. So, here is Apple about to enter an appeal to the second highest court in the land of patents and the paperwork shows that the honorable judge is "screaming" at them. Kind of embarrassing and kind of hard to assume your appeal is going to be looked upon favorably by judge Davis's fellow judges. Ouch! So, what would any good lawyer do? File a sealed document (or even make a personal phone call??) asking for a little bit of toning down of the official "screaming" to kind of a loud admonition?? I don't know, but it never hurts to ask, does it.

    Well, if that phone call was made or that sealed motion filed, I believe that Apple received their answer earlier today, a loud door slamming in their face reminiscent of those '70s cartoons where the recipient was a traveling salesman a.k.a. Wyle E. Coyote and the slammer was The Roadrunner. On 3/28/2104 before the noon lunch break (as it's called in east Texas towns) Docket No. 59 was filed on PACER, "ACKNOWLEDGMENT OF RECEIPT by USCA-Federal Circuit of [58] Notice of Appeal, [53] Order, [48] Sealed Order, and Certified Copy of Docket Sheet. (dlc, ) ". That little 'ol courthouse in east Texas had on the ready and shipped out to the CAFC all the paperwork needed to make the good judge's work finished on this case, no relief of any sort coming for Apple. Time clock started on your appeal, thank you very much!

    All of this, of course, is just one man's speculation and may make better campfire stories that Seeking Alpha Instablog material, but as a VHC long, it does make an interesting tale and might just put a smile on your face.

    Don't forget to visit my other musings at:


    Disclosure: I am long VHC.

    Additional disclosure: and may go longer still.

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Comments (14)
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  • gloriason
    , contributor
    Comments (39) | Send Message
    Yes, Jeff, it left a smile on my face. Thank you very much!
    28 Mar 2014, 02:42 PM Reply Like
  • ClintH
    , contributor
    Comments (98) | Send Message
    28 Mar 2014, 03:19 PM Reply Like
  • RikP
    , contributor
    Comments (4) | Send Message
    That's actually very funny :-) VHC long and strong !
    28 Mar 2014, 03:26 PM Reply Like
  • moishe62
    , contributor
    Comments (16) | Send Message
    I don't know but my educated guess is that "and any judgment entered in this matter" refers to Apple products not yet subject to this judgment that may well be adjudicated to be "no more than colorably different" and, therefore, to come under the current running royalty rate. And I believe that will be the case. That Apple is a bad apple.
    28 Mar 2014, 03:36 PM Reply Like
  • Jeff's WaterWorks
    , contributor
    Comments (89) | Send Message
    Author’s reply » My retired lawyer friend told me that you cannot appeal the future, so I think it has to be something already out there that Apple was hoping for.
    28 Mar 2014, 03:49 PM Reply Like
  • moishe62
    , contributor
    Comments (16) | Send Message
    If those products get rolled into the ruling the run rate will still apply. The run rate is not a future ruling. It is an already established by adjudication. Apple would still be able to appeal HJD's deciding them to be "no more than colorably different" but the rate or box (if you will) that they will be placed into has already been established.
    28 Mar 2014, 04:21 PM Reply Like
  • bernardc
    , contributor
    Comments (31) | Send Message
    I hope you are "bored" again soon.
    28 Mar 2014, 04:23 PM Reply Like
  • cssdraw
    , contributor
    Comments (34) | Send Message
    Boredom can be Fun! Nice piece Jeff!
    28 Mar 2014, 04:31 PM Reply Like
  • Chinabob
    , contributor
    Comments (36) | Send Message
    As Arte Johnson on "Rowan and Martins Laugh In" would say:


    Ver ty Intra resting!
    28 Mar 2014, 04:54 PM Reply Like
  • Blue Corn Investments
    , contributor
    Comments (477) | Send Message
    I asked on IV and I'll ask here..


    Will the same three CAFC judges who heard the past damages appeal hear the new severed RRR appeal? (it would make sense they would)


    If Rader is one of the 3 judges for the newly filed RRR appeal do you think he'll read the RRR order and appellant briefs before the CAFC rules on the prior damages appeal?


    Since Rader was focused on damages at the past damages appeal I would think the RRR order on the new appeal would give some additional color into the damages and the shenanigans that Apple pulled at trial - low-balling the cost of a vastly inferior work-around for Face Time.
    28 Mar 2014, 11:41 PM Reply Like
  • Jeff's WaterWorks
    , contributor
    Comments (89) | Send Message
    Author’s reply » The RR appeal is a long way off from having all of the documentation in final and presentable form to be submitted for the justices' review. I think that the decision on the original appeal of the verdict and damages will have been published long before any judge takes a look at the second appeal.
    29 Mar 2014, 10:43 AM Reply Like
  • steve taylor
    , contributor
    Comment (1) | Send Message
    Nice time passing recap of events .Patience will out.
    30 Mar 2014, 02:56 AM Reply Like
  • markriely
    , contributor
    Comments (3) | Send Message
    Jeff, do you think the judges in the current CAFC appeal (related to the original infringement trial and damages) have also gotten to see this RR ruling with its entertaining language? Normally I might think not, since it typically would not relate to the original case, but since here it adds to the record of that original case by revealing Apple's "gross misrepresentation" in an attempt to deceive the jury into a lower damages award, I would think it would be relevant, or even imperative, for the CAFC to see.
    30 Mar 2014, 02:56 AM Reply Like
  • fernane
    , contributor
    Comments (3) | Send Message
    Hey Jeff, Apple just filed in regards to outstanding final judgments they are waiting for
    30 Mar 2014, 03:20 AM Reply Like
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