High Stakes Race Between Apple and VirnetX: Will PTAB Trump The Texas Jury's Award of $326.5M?

A Texas jury today raised the stakes even higher in a race involving parallel proceedings between the PTAB and Texas district court when it found that Apple infringed the VirnetX patents and awarded to VirnetX $625.6M in damages. While the Texas jury found the patents to be valid and infringed in today’s verdict, the PTAB earlier instituted IPRs on October of 2015 against the patents-in-suit. In the event that the PTAB finds the claims unpatentable before a final judgment is entered in the district court proceedings, then the entire damages award could be trumped by the PTAB’s decision, assuming the holding in the Federal Circuit’s Fresenius v. Baxter decision is followed. However, the Federal Circuit was sharply divided in its Fresenius decision and further declined to reconsider the holding en banc in a divided opinion, raising questions about whether a differently composed panel will reach the same outcome.

Given the PTAB’s institution date, a final written decision in the IPRs is not expected until October of 2016. A key question will be whether the Texas litigation will reach a final decision before the PTAB renders its final written decision. Given the potential for an appeal of the decision in the Texas litigation, it is possible that the PTAB’s final written decision will reach the Federal Circuit and be decided before a final judgment is entered following a presumed appeal of the district court litigation.

Apple had initially attempted to file IPRs on its own, but they were denied as time-barred in view of the litigation. However, when a hedge fund filed a new set of IPRs that were instituted, Apple was able to successfully join into them and sidestep the time bar using a motion for joinder. The Jan. 25th decision of the PTAB instituted IPR and concurrently granted Apple’s motion for joinder. Being joined as a party in the IPR will allow Apple to participate to a certain extent and engage in any settlement discussions. In particular, the decision on joinder states that:

FURTHER ORDERED that any separate filing by Apple, Inc. in
IPR2015-01046 must not exceed five pages, without prior authorization of
the Board;
FURTHER ORDERED that Apple, Inc. is bound by any discovery
agreements between Patent Owner and the other petitioner in IPR2015-
01046 and that Apple, Inc. shall not seek any discovery beyond that sought
by the other petitioner in IPR2015-01046;
FURTHER ORDERED that all petitioners in IPR2015-01046 shall
collectively designate attorneys to conduct the cross-examination of any
witness produced by Patent Owner and the redirect examination of any other
witness; within the timeframes set forth in 37 C.F.R. § 42.53(c) or agreed to
by the parties;
FURTHER ORDERED that all petitioners in IPR2015-01046 shall
collectively designate attorneys to present at the oral hearing, if requested
and scheduled, in a consolidated argument.