A U.S. District Court in Tyler, Texas, handed VirnetX Holding Corp. (VHC), an Internet security software and technology company run by CEO Kendall Larsen, a setback in its enforcement dispute with Apple Inc., vacating a $625.6 million jury award against Apple as well as its previous ruling consolidating two cases against Apple and ordering separate trials on remaining issues.
Shares of VirnetX plunged $1.80, or 41.5%, to $2.53 in trading Monday, Aug. 1. They’ve traded between $1.95 and $9.64 over the past year.
Judge Robert Schroeder III vacated his earlier decision consolidating the two cases and decided to bifurcate the two cases on the issue of willful infringement, which could allow Zephyr Cove, Nevada-based VirnetX to win treble damages.
In February, a jury awarded VirnetX $625.6 million in damages, even though the Court of Appeals for the Federal Circuit had previously ruled a $368 million award was too high, leading to the re- trial on damages.
Apple appealed the award to the Federal Circuit arguing that consolidating the cases was unfair to it. The Federal Circuit upheld Apple’s infringement and ordered the district court to reconsider the issue of consolidating the two cases. Apple argued that VirnetX repeated references to the first Apple trial from 2010 was unfairly prejudicial to Apple and confused the jury.
“The court is left with the conclusion that repeated statements such as these—more than 50 in all, many of which were either redundant or gratuitous—tipped the balance towards unfairly prejudicing Apple,” Judge Schroeder said.
“Because only certain findings from the previous jury verdict were relevant to the consolidated case and in light of the repeated references to that prior verdict, there was a substantial risk that the jury would defer to the prior jury’s findings altogether,” he said.
“To be clear, the consolidated case could very likely have been tried successfully—and fairly—had the Apple I verdict not been repeatedly mentioned, often unnecessarily, throughout the trial.
Indeed, were the court examining a motion for a new trial based upon the consolidation alone, this scenario would in all likelihood not dictate the same result. However, under the circumstances here, the repeated references to the prior jury verdict in the consolidated case resulted in an unfair trial.”
The first case will now go to trial on unresolved remanded issues related to damages related to Apple’s infringement of VPN-on-Demand and alleged infringement of Apple’s FaceTime product.
The second case, which covers issues of alleged infringement, damages and willfulness by Apple’s redesigned VOD in iOS 7 and 8, the redesigned FaceTime in iOS 7 and 8 and OS X 10.9 and 10.10 and iMessage, will now go to trial after the first case is concluded.
“We are disappointed by the court’s decision to vacate its prior ruling on consolidation and ordering the parties to retry the cases as two separate matters,” Larsen said in a statement.
“We are reviewing all our options and will follow the Court’s direction as we start preparing for these retrials. We are confident that we have the resources required for these retrials. We trust that the jury will again make the right decision in the retrials.”