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Apple To Pay $440 Million After Being Denied Appeal In Patent Lawsuit Out Of Texas

(CBSDFW.COM/CNN) -- The United States Supreme Court on Monday dealt a blow to Apple in a decade-long legal battle over whether the iPhone maker infringed on another company's patents.

The Supreme Court declined to consider Apple's appeal to avoid paying nearly $440 million to technology licensing company VirnetX for violations of its patents.

VirnetX declared a "triumph" over Apple in its statement. Shares of VirnetX increased significantly after the ruling, and closed up 12% on a day when the larger stock market saw significant losses.

Apple declined to comment on the decision.

Apple and VirnetX have been battling in court since 2010, when VirnetX sued the tech giant in the Eastern District Court of Texas for violating four of its patents with its FaceTime and "VPN on Demand" applications on devices including the iPhone and iPad. The patents involve methods for enabling and securing real-time communications over the internet.

VirnetX is a holding company that licenses patents for security technology. In its 2018 annual report (the most recent one available), the company said it owned 70 patents and patent applications in the United States and said "our portfolio of intellectual property is the foundation of our business model." VirnetX posted $63,000 in annual revenue in 2018.

In 2016, a Texas jury found Apple had infringed on the four patents, resulting in a $302 million award for VirnetX (that award is now higher because of fees and interest). The U.S. Court of Appeals for the Federal Circuit in Washington upheld that decision in 2019.

Apple then appealed to the Supreme Court, calling the $440 million in damages "grossly excessive" and claiming the award overstated the value of the patented technology. Apple also argued that at least some of the patents at issue in the suit are no longer valid, "leaving Apple on the hook for hundreds of millions of dollars based on invalid claims," the company said in its appeal.

Apple has filed claims with the Patent Trial and Appeal Board challenging the patentability of the technology in all four VirnetX patents. The Board has officially found one of the four patents invalid; the other three remain in the appeals process.

A year ago, Apple closed two of its stores -- Stonebriar Centre in Frisco and The Shops at Willow Bend in Plano -- which reside in the Eastern District of Texas. It was reported that the reason for the closures was so the company could protect itself from these types of lawsuits.

The Eastern District of Texas is reportedly a well-known area where companies file their patent lawsuits.

But the Supreme Court ruled about three years ago that Apple and other companies couldn't be sued if they weren't incorporated or didn't have physical locations in that jurisdiction.

Now that the Supreme Court has rejected Apple's appeal of the judgment, the case will be sent back to the district court in Texas for the $440 million damages to be enforced.

"We have always believed that we were in the right with our court actions against Apple," VirnetX CEO Kendall Larsen said in a statement Monday.

"We believe that our technology provides an important security feature in some Apple products especially the iPhone," he said. "We believe this (jury award) amount is more than fair considering the importance of Internet security."

Apple and VirnetX are involved in another ongoing legal dispute, which deals with whether redesigned versions of FaceTime and VPN on Demand still violate the same VirnetX patents. In this case, too, Apple has argued the patent claims are invalid.

(© Copyright 2020 CBS Broadcasting Inc. All Rights Reserved. CNN Wire contributed to this report. The-CNN-Wire™ & © 2020 Cable News Network, Inc., a Time Warner Company contributed to this report. All rights reserved.)

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