Case 6:12-cv-00855-RWS Document 827 Filed 03/09/20 Page 1 of 26 PageID #: 57514
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TYLER DIVISION
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`VIRNETX INC. AND
`SCIENCE APPLICATIONS
`INTERNATIONAL CORPORATION,
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`Plaintiffs,
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`v.
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`APPLE INC.
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`Defendant.
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`§
`§
`§
`§
`§
`§
`§
`§
`§
`§
`§
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`Civil Action No. 6:12-cv-00855-RWS
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`JURY TRIAL DEMANDED
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`PLAINTIFF VIRNETX’S MOTION FOR ENTRY OF JUDGMENT
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`FILED UNDER SEAL
`XXXXXXXXXXXXXX
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` PUBLIC VERSION
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`

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`Case 6:12-cv-00855-RWS Document 827 Filed 03/09/20 Page 2 of 26 PageID #: 57515
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`TABLE OF CONTENTS
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`INTRODUCTION ...............................................................................................................1
`
`BACKGROUND .................................................................................................................2
`A.
`PROCEEDINGS LEADING TO THE APRIL 2018 TRIAL IN THIS
`CASE .......................................................................................................................3
`1.
`The Verdict and Damages Remand in the -417 Case ..................................3
`2.
`Relevant Pretrial Proceedings in This Case (the -855 Case) .......................3
`3.
`Consolidation, a New Verdict, and Severance.............................................4
`4.
`Retrial and Appeal in the -417 Case ............................................................4
`THE APRIL 2018 TRIAL IN THIS CASE .............................................................5
`1.
`Expert Testimony .........................................................................................5
`2.
`The Jury’s Verdict........................................................................................7
`3.
`Apple’s Post-Trial Concessions ...................................................................8
`4.
`Apple’s Appeal in This Case .....................................................................10
`
`B.
`
`I.
`
`II.
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`III.
`
`IV.
`
`
`2.
`
`ARGUMENT .....................................................................................................................11
`A.
`THE JURY’S EXISTING VERDICT SUPPORTS A DAMAGES
`AWARD OF $461,433,906 ...................................................................................11
`1.
`The Jury’s Determination That VPN on Demand Infringes
`the ’135 and ’151 Patents Supports an Award of $461 Million ................11
`Apple’s Belated Efforts To Reinterpret the Jury’s Verdict Are
`Unavailing ..................................................................................................13
`THE COURT SHOULD CONFIRM THE FORWARD-LOOKING
`ONGOING ROYALTY FOR POST-VERDICT UNITS AND AWARD
`SUPPLEMENTAL DAMAGES ............................................................................18
`THE COURT SHOULD AWARD PRE-JUDGMENT INTEREST .....................19
`THE COURT SHOULD AWARD POST-JUDGMENT INTEREST ..................20
`
`B.
`
`C.
`D.
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`CONCLUSION ..................................................................................................................20
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`i
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`TABLE OF AUTHORITIES
`
`
`
`Cases
`
`Alaniz v. Zamora-Quezada,
`591 F.3d 761 (5th Cir. 2009) .............................................................................................. 12, 13
`
`
`Apple Inc. v. Motorola, Inc.,
`757 F.3d 12868 (Fed. Cir. 2014 ................................................................................................ 17
`
`
`Chrimar Holding Co., LLC v. ALE USA Inc.,
`732 F. App’x 876 (Fed. Cir. 2018) ........................................................................................... 13
`
`
`Denton v. Morgan,
`136 F.3d 10386 (5th Cir. 1998 ............................................................................................ 12, 13
`
`
`Engel Indus., Inc. v. Lockformer Co.,
`166 F.3d 1379 (Fed. Cir. 1999)................................................................................................. 16
`
`
`Gen. Motors Corp. v. Devex Corp.,
`461 U.S. 648 (1983) .................................................................................................................. 20
`
`
`Isbell v. Wal-Mart Stores, Inc.,
`997 F.2d 881, 1993 WL 261053 (5th Cir. 1993) ................................................................ 16, 17
`
`
`McDonald v. Bennett,
`674 F.2d 10802 (5th Cir. ............................................................................................... 12, 13, 14
`
`
`Memphis Cmty. Sch. Dist. v. Stachura,
`477 U.S. 299 (1986) .................................................................................................................. 11
`
`
`Microsoft Corp. v. GeoTag, Inc.,
`817 F.3d 1305 (Fed. Cir. 2016)................................................................................................. 12
`
`
`Mondis Tech. Ltd. v. Chimei Innolux Corp.,
`2012 WL 1554645 (E.D. Tex. Apr. 30, 2012) .......................................................................... 19
`
`
`Siemens Med. Solutions USA, Inc. v. Saint-Gobain Ceramics & Plastics, Inc.,
`637 F.3d 1-91 (Fed. Cir. 2011) ................................................................................................. 12
`
`
`Telcordia Techs., Inc. v. Cisco Sys., Inc.,
`612 F.3d 1365 (Fed. Cir. 2010)................................................................................................. 16
`
`
`VirnetX Inc. v. Apple Inc.,
`No. 19-1050, 2019 WL 6247818 (Fed. Cir. Nov. 22, 2019) ............................................. passim
`
`
`
`ii
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`VirnetX, Inc. v. Cisco Sys., Inc.,
`767 F.3d 13080 (Fed. Cir. 2014 .................................................................................................. 3
`
`
`Wellogix, Inc. v. Accenture, L.L.P,
`716 F.3d 86776 (5th Cir. 201 .................................................................................................... 16
`
`
`Whitserve, LLC v. Computer Packages, Inc.,
`694 F.3d 105 (Fed. Cir. 2012 .................................................................................................... 19
`
`
`Williamson v. Citrix Online, LL,
`C, 792 F.3d 1339 (Fed. Cir. 2015) (en ba ................................................................................. 17
`
`Statutes
`
`28 U.S.C. § 1961 ........................................................................................................................... 20
`
`35 U.S.C. § 283 ............................................................................................................................. 19
`
`35 U.S.C. § 284 ................................................................................................................. 17, 19, 20
`
`iii
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`Case 6:12-cv-00855-RWS Document 827 Filed 03/09/20 Page 5 of 26 PageID #: 57518
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`I.
`
`INTRODUCTION
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`This case is on remand from the Federal Circuit. That court affirmed the jury’s finding
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`that Apple’s VPN on Demand feature infringes VirnetX’s patents, but reversed the finding that
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`Apple’s FaceTime feature infringes. VirnetX Inc. v. Apple Inc., No. 19-1050, 2019 WL 6247818
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`(Fed. Cir. Nov. 22, 2019) (“VirnetX III ”). The Federal Circuit remanded for a redetermination
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`of damages limited to VPN on Demand—but it did not order a damages retrial. Id. at *14.
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`Instead, the Federal Circuit recognized that this Court may be able to determine damages for
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`VPN on Demand based on the jury’s existing verdict. Id. That is precisely what this Court
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`should do. There is no colorable dispute regarding the number of infringing units, the
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`appropriate per-unit royalty under the jury’s verdict, or the total amount of damages owed.
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`At the April 2018 trial in this case, the jury found that Apple’s VPN on Demand and
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`FaceTime features each infringe VirnetX’s patents. The jury’s damages verdict awarded
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`VirnetX the same royalty—$1.20 per unit—without regard to whether a particular unit contained
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`one or two infringing features, in accordance with the testimony of VirnetX’s damages expert,
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`Roy Weinstein. Mr. Weinstein explained that, consistent with VirnetX’s prior licenses, the
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`parties in a hypothetical negotiation would have agreed to a single royalty for VirnetX’s portfolio
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`of secure-communications patents covering the infringing features, regardless of the specific
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`patents or claims infringed. VirnetX’s licensing history, Mr. Weinstein explained, supported a
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`uniform $1.20 per-unit royalty for any unit containing VPN on Demand, or FaceTime, or both.
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`The jury agreed, awarding VirnetX damages that applied a $1.20 per-unit royalty to every unit
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`that contained one or both of the accused features.
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`Apple’s post-trial briefing conceded that “the jury adopted” Mr. Weinstein’s damages
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`model, under which “Apple would pay the same royalty regardless of what infringes.” Dkt. 783
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`at 8, 10. While Apple (unsuccessfully) objected to Mr. Weinstein’s methodology, Apple agreed
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`1
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`that the jury adopted his model and awarded “the same per-unit rate regardless of whether one
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`feature or two features infringed.” Dkt. 775 at 44.
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`This Court likewise recognized that the jury awarded a uniform per-unit royalty regard-
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`less of the number of infringing features. It ordered Apple to pay an ongoing $1.20 per-unit
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`royalty for devices that contain VPN on Demand, or FaceTime, or both. The Court explained
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`that it was simply applying the “jury’s implied royalty rate” to future sales of infringing devices.
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`Dkt. 798 at 50. Again, Apple did not dispute that the jury had adopted that approach.
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`Because the jury’s calculations are clear, this Court can enter judgment consistent with
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`the verdict without yet another trial in this decade-long litigation. Where an appeal overturns
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`some but not all of a jury’s liability findings, district courts need not hold a retrial on damages if
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`the remaining claims support a portion of the jury’s prior damages award. That is the case here.
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`At trial, the parties agreed that Apple had sold
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` that included VPN on
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`Demand. The jury and this Court found—and Apple conceded the jury found—that every device
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`containing at least one infringing feature entitles VirnetX to the same $1.20 per-unit royalty.
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`VirnetX is thus entitled to $461,433,906 in damages
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` plus interest, as
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`compensation for VPN on Demand’s infringement. The Court should enter judgment in that
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`amount without further delay, and order royalties on post-verdict sales.
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`II. BACKGROUND
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`This case is the second of two actions accusing certain features of Apple’s iOS devices
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`(e.g., iPhones, iPads, etc.) and Mac computers of infringing VirnetX patents—U.S. Patent Nos.
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`6,502,135 (“the ’135 patent”), 7,490,151 (“the ’151 patent”), 7,418,504 (“the ’504 patent”), and
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`7,921,211 (“the ’211 patent”). All the asserted patents relate to methods and apparatuses for
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`establishing secure communications. In both cases, VirnetX accused VPN on Demand of
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`infringing the ’135 and ’151 patents, and FaceTime of infringing the ’504 and ’211 patents.
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`2
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`A.
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`PROCEEDINGS LEADING TO THE APRIL 2018 TRIAL IN THIS CASE
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`1. The Verdict and Damages Remand in the -417 Case
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`VirnetX first sued Apple in 2010, alleging infringement by then-existing versions of VPN
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`on Demand and FaceTime. See VirnetX Inc. v. Cisco Sys., Inc., No. 6:10-cv-417 (E.D. Tex.) (the
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`“-417 action”). After trial in October 2012, the jury found that both VPN on Demand and Face-
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`Time infringed VirnetX’s patents, awarding $368,160,000 in damages. -417 Dkt. 598 at 1-2.
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`Apple appealed. Apple challenged testimony by VirnetX’s damages expert, Roy Wein-
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`stein, who proposed a royalty rate “based on six allegedly comparable licenses.” VirnetX, Inc. v.
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`Cisco Sys., Inc., 767 F.3d 1308, 1330 (Fed. Cir. 2014) (“VirnetX I”). Apple argued that the six
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`licenses were not “sufficiently comparable,” but the Federal Circuit disagreed. Id. The court
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`also affirmed the finding that VPN on Demand infringed. Id. at 1320-21. The court remanded,
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`however, for a limited retrial on whether FaceTime infringed under a new claim construction.
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`Id. at 1313. It also required a new trial on damages, rejecting testimony by Mr. Weinstein on the
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`appropriate royalty base and two damages models no longer at issue. Id. at 1329, 1331.
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`2. Relevant Pretrial Proceedings in This Case (the -855 Case)
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`After the adverse jury verdict in the -417 case, Apple released redesigned versions of
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`VPN on Demand and FaceTime. Concluding that the redesigned versions continued to infringe,
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`VirnetX filed this action (“the -855 case”) in November 2012. Dkt. 1.
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`Mr. Weinstein’s expert report applied a revised damages methodology in light of VirnetX
`
`I. Dkt. 542-2. He relied on six comparable licenses, four of which the Federal Circuit had up-
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`held in VirnetX I, together with two others that were substantially similar. Dkt. 542-2 at 51. He
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`used the royalty rates associated with those licenses to determine a uniform, per-unit royalty for
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`each infringing Apple device. Id. at 51-56. Consistent with VirnetX’s prior licensing practice
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`3
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`and policy, the royalty rate was the same “for every unit shipped with the VirnetX techniques
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`independent of usage by [the] customer.” PX1092; Dkt. 753 at 41:24-42:4. Thus, the same per-
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`unit royalty applied to any device that used VirnetX’s patented technology, whether that device
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`had only VPN on Demand, had only FaceTime, or had both. Dkt. 753 at 126:20-127:8.
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`3. Consolidation, a New Verdict, and Severance
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`By the time this case (the -855 action) was ready for trial, the -417 action had been
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`remanded from the Federal Circuit. This Court consolidated the two cases for trial. Dkt. 220. In
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`early 2016, the jury returned a verdict for VirnetX. Dkt. 425 at 1. This Court, however, later
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`concluded that the joint trial had prejudiced Apple. Dkt. 500. Accordingly, it vacated its order
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`consolidating the two proceedings and scheduled a separate trial for each case. Id. at 15.
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`4. Retrial and Appeal in the -417 Case
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`In September 2016, a third trial was held in the -417 case (involving earlier versions of
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`VPN on Demand and FaceTime). VPN on Demand’s infringement had already been established.
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`The jury found that FaceTime infringed as well. -417 Dkt. 1025. The jury awarded VirnetX
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`$302 million. Id. at 2. As Apple recognized, the jury reached that figure by adopting Mr.
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`Weinstein’s reasonable-royalty methodology. -417 Dkt. 1062 at 9-10. Both Mr. Weinstein and
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`the jury applied a $1.20 per-unit royalty to each infringing device, regardless of whether a
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`particular device had VPN on Demand, FaceTime, or both. Id. at 9-10, 14-15.
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`After trial, Apple argued that damages were insufficiently apportioned. It urged that
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`“[t]he jury’s failure to apportion for the value of the patented technology is . .. reflected in its
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`award of the same per-unit royalty rate for VPN On Demand alone, for FaceTime alone, and for
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`FaceTime and VPN On Demand combined, all at Mr. Weinstein’s behest.” -417 Dkt. 1062 at
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`14-15 (emphasis altered). This Court rejected Apple’s challenge. -417 Dkt. 1079 at 17-18.
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`Apple renewed its apportionment challenge on appeal. Apple Br. 40-49 in No. 18-1197
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`4
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`(Fed. Cir.). It again conceded that the jury had adopted Mr. Weinstein’s approach by applying a
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`$1.20 per-unit royalty to every infringing device, regardless of how many infringing features it
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`had. See id. at 22; Oral Arg. Recording at 1:34-2:03 in No. 18-1197 (Fed. Cir.) (Apple’s coun-
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`sel: “no one is contesting” that the $1.20 “royalty rate” would remain unchanged if the infringe-
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`ment judgment were overturned as to one set of patents; only “the number of units to which [the
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`rate] applied” would change). The Federal Circuit rejected Apple’s challenge, and summarily af-
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`firmed the judgment in VirnetX’s favor. VirnetX II, 748 F. App’x 332. Certiorari was denied on
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`February 24, 2020. Apple Inc. v. VirnetX Inc., No. 19-832, 2020 WL 871794 (U.S. Fed. 24, 2020).
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`B.
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`THE APRIL 2018 TRIAL IN THIS CASE
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`The parties proceeded to a second trial in the -855 action (and fourth trial overall),
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`concerning the redesigned versions of VPN on Demand and FaceTime.
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`1. Expert Testimony
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`At trial, Mr. Weinstein testified about damages for infringement by VPN on Demand,
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`FaceTime, or both. In a hypothetical negotiation, Mr. Weinstein testified, the parties would be
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`guided by VirnetX’s existing licensing policy and practice. Dkt. 753 at 40:25-41:6. Consistent
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`with that policy, VirnetX’s prior licenses applied a uniform royalty “for every unit shipped with
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`the VirnetX techniques independent of the usage by customer.” PX1092; Dkt. 753 at 41:24-
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`42:4; see PX404-PX409. In other words, “VirnetX applies one royalty rate per unit regardless of
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`the number of features in the product that use the patented technology.” Dkt. 753 at 126:20-23.
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`Averaging the per-unit royalties associated with six prior, comparable licenses, Mr. Weinstein
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`arrived at a per-unit royalty of $1.20 for each Apple device that used VirnetX’s patented
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`technology, regardless of which or how many infringing features (VPN on Demand, FaceTime)
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`5
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`it included. Dkt. 753 at 48:23-49:7; see PX1088.03.l
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`There was no dispute regarding the number of devices with each feature; Apple itself pro-
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`vided those figures. Dkt. 758 at 262212-17, 263:3-8, 264:2-9. Mr. Weinstein explained that
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`Apple had sold— with VPN on Demand. Dkt. 753 at 9019—91 :8; see
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`PX1089.06. Ifthe jury found that VPN on Demand infringed and selected a royalty of $1.20 per
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`unit, he explained, it should award_ Dkt. 753 at 909-91 :8; see PX1089.06. Mr.
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`Weinstein explained that Apple had sold— with FaceTime. Dkt. 753 at 91 :9-
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`18; see PX1089.03. If the jury determined that FaceTime infringed and selected a $1.20 per-unit
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`royalty, it should award—Dkt. 753 at 91 :9-18; see PX1089.03.
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`Mr. Weinstein then addressed the damages the jury should award if it found that both
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`VPN on Demand and FaceTime infringed. He made clear that VirnetX was not “asking the jury
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`to give [VirnetX] multiple royalty rates” for “multiple infringements.” Dkt. 753 at 92:11-14.
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`Instead, Mr. Weinstein testified, the jury should award a single $1.20 per-unit royalty for each
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`device containing either or both of the features. Because Apple sold— that
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`included one or both features, damages would total $502,569,709. Id. at 92:15-24.2 That ap—
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`proach, Mr. Weinstein explained, flowed from VirnetX’s prior licensing history, which “ap—
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`pli[ed] one royalty rate per unit regardless of the number of features in the product that use the
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`patented technology.” Id. at 126:20-23. As Apple confirmed on cross-examination, Mr. Wein-
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`stein’s “ultimate opinion [was] that only one royalty should be awarded for each product no mat-
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`ter how manyfeatures allegedly use thepatented technology.” Id. at 12725-8 (emphasis added).
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`1 Mr. Weinstein alternatively suggested that the jury might disregard certain licenses arising from
`unique circumstances; doing so would increase the proposed royalty. Dkt. 753 at 54:5-55z7.
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`reflected— with both VPN on Demand and
`2 Those
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`(Mac computers) with only FaceTime. Dkt. 753 at 90:9-92214;
`FaceTime, and
`see Dkt. 758 at 262112-17, 263:3—8, 264:2-9.
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`

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`Apple’s damages expert, W. Christopher Bakewell, agreed with Mr. Weinstein about the
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`number of Apple devices that included VPN on Demand and FaceTime. Dkt. 758 at 264:2-9
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` with VPN on Demand); id. at 262:12-17, 263:3-8
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`
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`with FaceTime). Unlike Mr. Weinstein, Mr. Bakewell proposed different royalty rates depend-
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`ing on the features found to infringe. He opined that, if both FaceTime and VPN on Demand
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`infringed, the jury should award a royalty of $0.06 per unit. Id. at 262:18-263:2. If the jury
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`determined that only FaceTime infringed, Mr. Bakewell recommended a royalty of $0.01 per
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`unit. Id. at 263:11-17. Mr. Bakewell did not propose a specific royalty rate for VPN on Demand
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`only, but opined the rate would be “no more than $0.06 per unit” (i.e., Mr. Bakewell’s proposed
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`royalty rate for both features). Id. at 264:6-9.
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`2. The Jury’s Verdict
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`The jury returned a verdict for VirnetX. The jury found that “Apple’s redesigned version
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`of its VPN on Demand feature infringes [all asserted] claims of VirnetX’s ’135 & ’151 patents.”
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`Dkt. 722 at 1. The jury then found that “Apple’s redesigned version of the FaceTime feature
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`infringes [all asserted] claims of VirnetX’s ’504 & ’211 patents.” Id. at 2.
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`The jury identified the royalty that “would fairly and reasonably compensate VirnetX for
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`any infringement that [it had] found.” Dkt. 722 at 2. It awarded VirnetX $502,567,709—the
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`exact amount Mr. Weinstein had testified would be appropriate if both VPN on Demand and
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`FaceTime infringed. Dkt. 753 at 92:11-24, 126:20-23, 127:5-8. That reflected a uniform royalty
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`rate of $1.20 per unit for each of the
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` the jury found to infringe—consisting
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`of
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` that included both features, and
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` that included only
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`FaceTime. Dkt. 753 at 90:9-91:18. The jury thus adopted Mr. Weinstein’s approach of
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`“appl[ying] one royalty rate per unit regardless of the number of features in the product that use
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`the patented technology.” Dkt. 753 at 126:20-23. The jury did not adopt Mr. Bakewell’s
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`7
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`contrary opinion that a different royalty should apply depending on the number of infringing
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`features in each device. Dkt. 758 at 262:18-264:9.
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`3. Apple’s Post-Trial Concessions
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`1.
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`In seeking a new trial, Apple repeatedly conceded that “the jury adopted Mr.
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`Weinstein’s theory” of damages, under which “Apple would pay the same royalty regardless of
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`what [features] infringe[d].” Dkt. 783 at 8, 10. Apple recognized that “Mr. Weinstein asserted
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`that Apple should pay the same royalty for a given device . .. regardless of which feature
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`infringed,” and that the jury had “awarded . .. t he same per-unit rate regardless of whether one
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`feature or two features infringed.” Dkt. 775 at 23, 44; see id. at 18 (Mr. Weinstein “appli[ed]”
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`the “exact same royalty rate to [VPN on Demand] and FaceTime”). Apple thus described the
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`damages award as reflecting “Mr. Weinstein’s (and the jury’s) $1.20 per-unit royalty rate.” Id. at
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`43; see id. at 39 (Mr. Weinstein “was directly responsible for the jury’s . .. damages award”); id.
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`at 41 (jury “us[ed] Mr. Weinstein’s . .. $1.20 royal ty rate”). Apple contrasted that to the
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`approach urged by its expert who, “unlike Mr. Weinstein, . .. provided different royalty rates
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`depending on which features infringed.” Dkt. 783 at 10. Seeking to challenge Mr. Weinstein’s
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`(and the jury’s) damages approach on various grounds, Apple again urged that “the jury’s award
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`of the same per-unit rate regardless of whether one feature or two features infringed” reflected a
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`lack of apportionment. Dkt. 775 at 44.
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`The Court rejected Apple’s arguments. The Court agreed with Apple that the jury had
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`adopted “Mr. Weinstein’s opinion that the per-unit royalty rate should remain constant regard-
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`less of the number of accused features present in the given device.” Dkt. 798 at 29 (emphasis
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`added). But the Court disagreed with Apple’s suggestion that Mr. Weinstein’s (and the jury’s)
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`approach was somehow improper. The Court explained that “the jury heard substantial evidence
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`explaining the basis for [Mr. Weinstein’s] opinion that the royalty rate was not dependent on the
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`8
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`number of accused features” and was amply justified in “credit[ing] his opinion.” Id.
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`2.
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`VirnetX moved for an ongoing royalty for post-verdict sales, to run “until the
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`earlier of (1) Apple ceasing infringement by redesigning its products, or (2) the expiration of the
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`patents-in-suit.” Dkt. 774 at 41-42. The Court agreed, holding that “imposition of an ongoing
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`royalty is an appropriate exercise of the Court’s discretion in this case.” Dkt. 798 at 50. It noted
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`that the “jury’s implied royalty rate is $1.20, which is supported by substantial evidence”—
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`namely, Mr. Weinstein’s testimony. Id.; see id. at 29, 31. The Court thus set the “ongoing
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`royalty at the jury’s implied rate of $1.20 per unit.” Id. at 51.
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`The Court’s $1.20-per-unit ongoing royalty applied uniformly to every future sale of
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`infringing devices, regardless of the number of infringing features in a device. For example, the
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`’504 and ’211 patents relating to FaceTime expire approximately six months before the ’151
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`patent relating to VPN on Demand.3 The Court, however, did not provide for a different per-unit
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`royalty during the six-month period when only devices containing VPN on Demand could
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`infringe. The Court likewise did not provide for a different per-unit royalty in the event Apple
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`were to remove only one feature, such as by “mak[ing] FaceTime 100% relayed” (and thus
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`concededly non-infringing) while maintaining “the infringing[] Evaluate Connection
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`functionality in VPN on Demand.” Dkt. 774 at 41. Nor did Apple ever suggest that the jury’s
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`verdict supported different royalty rates depending on the number of infringing features. Apple
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`objected to the ongoing royalty “only on the basis of its JMOL and new trial arguments,”
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`attacking the Mr. Weinstein’s (and the jury’s) view that Apple should pay a uniform royalty rate
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`regardless of how many features infringed. Dkt. 798 at 49; see Dkt. 783 at 8, 10.
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`3 The ’211 and ’504 patents expire on August 5, 2021. The ’151 patent expires on January 24,
`2022. The ’135 patent (also infringed by VPN on Demand) expired on October 29, 2019.
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`Case 6:12-cv-00855-RWS Document 827 Filed 03/09/20 Page 14 of 26 PageID #: 57527
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`4. Apple’s Appeal in This Case
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`On appeal, the Federal Circuit affirmed the jury’s finding that VPN on Demand infringes
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`the ’135 and ’151 patents. VirnetX III, 2019 WL 6247818, at *7-10. Based on a revised claim
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`construction, the court reversed the determination that redesigned FaceTime infringes the ’504
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`and ’211 patents. Id. at *11-14.
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`While Apple had also challenged the damages methodology, it expressly had limited its
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`challenge to arguments it had previously raised—and lost—in the second -417 action appeal.
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`See Apple Br. 63 in No. 19-1050 (Fed. Cir.). Apple conceded those arguments were foreclosed
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`unless it obtained “further review” in the -417 case. Apple Br. 63 in No. 19-1050 (Fed. Cir.).
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`The “reasonable royalty methodology” in each case, Apple recognized, was “the same” and
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`should be treated “the same.” Id. Apple did not obtain further review in the -417 case,
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`foreclosing its challenge to the damages methodology.
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`Having reversed the determination that FaceTime infringes, however, the Federal Circuit
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`vacated the damages award. The court explained that it was “undisputed that the jury used a per-
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`unit royalty of $1.20 and adopted the calculation of VirnetX’s expert to reach its damages figure”
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`of $502,567,709. VirnetX III, 2019 WL 6247818, at *14. The $502,567,709 figure included
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`royalties for approximately
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` having both FaceTime and VPN on Demand.” Id.
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`But it also included royalties for approximately
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` having only FaceTime.” Id.
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`Consequently, the damages award had to be vacated due to “the reduced basis of liability.” Id.
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`The Federal Circuit declined to order a new damages trial. It observed that a retrial is
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`generally appropriate where “‘the verdict does not reveal the means by which the jury calculated
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`damages.’” VirnetX III, 2019 WL 6247818, at *14. Here, however, it was “undisputed” that the
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`jury “adopted the calculation of VirnetX’s expert,” who had testified that “the same [$1.20 per-
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`unit] figure would apply” if only one feature infringed. Id. Thus, while the jury did not
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`Case 6:12-cv-00855-RWS Document 827 Filed 03/09/20 Page 15 of 26 PageID #: 57528
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`expressly “decide whether the $1.20-per-unit figure would be correct if only VPN on Demand
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`infringed,” the court questioned “whether a limited retrial need or should be held at all.” Id.
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`Rather than decide that question, the court remanded for this Court to address it in light of “the
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`law, the facts, and any admissions that might be relevant.” Id.
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`III. ARGUMENT
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`The Court should enter judgment for $461,433,906, plus interest, for VPN on Demand’s
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`infringement of VirnetX’s ’135 and ’151 patents. Apple has conceded, and this Court has recog-
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`nized, that the jury awarded the “same per-unit rate” of $1.20 per infringing device, “regardless
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`of whether one feature or two features infringed.” Dkt. 775 at 44. Apple conceded at trial that it
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` containing the infringing VPN on Demand feature. Dkt. 758 at 264:2-9.
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`And the Federal Circuit has affirmed the jury’s finding that VPN on Demand infringes. VirnetX
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`III, 2019 WL 6247818, at *7-10. Consequently, under findings affirmed on appeal, VirnetX is
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`entitled to $461,433,906 (of the original judgment of $502,567,709). The Court should also
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`confirm that Apple must pay a royalty of $1.20 for each infringing device sold post-verdict.
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`A. THE JURY’S EXISTING VERDICT SUPPORTS A DAMAGES AWARD OF
`$461,433,906
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`1. The Jury’s Determination That VPN on Demand Infringes the ’135 and
`’151 Patents Supports an Award of $461 Million
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`This is not a case where “‘the verdict does not reveal the means by which the jury
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`calculated damages.’” VirnetX III, 2019 WL 6247818, at *14 (quoting Memphis Cmty. Sch.
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`Dist. v. Stachura, 477 U.S. 299, 312 (1986)). Every participant in this case—from VirnetX, to
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`Apple, to this Court, to the Federal Circuit—has consistently recognized “the means by which
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`the jury calculated damages” here: “[T]he jury adopted Mr. Weinstein’s theory” and awarded
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`VirnetX “the same per-unit rate regardless of whether one feature or two features infringed.”
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`Dkt. 783 at 8; see Dkt. 775 at 44; Dkt. 798 at 29, 50; VirnetX III, 2019 WL 6247818, at *14.
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`Case 6:12-cv-00855-RWS Document 827 Filed 03/09/20 Page 16 of 26 PageID #: 57529
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`Under that methodology, “the royalty rate [is] not dependent on the number of accused features.”
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`Dkt. 798 at 29. Instead, VirnetX receives a $1.20 per-unit royalty for every device that uses
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`VirnetX’s patented secure-communications technology, regardless of whether a given device
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`includes VPN on Demand, or FaceTime, or both. As Mr. Weinstein explained, if both FaceTime
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`and VPN on Demand infringe, VirnetX is entitled to $1.20 for each unit with either or both of
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`those features. Dkt. 753 at 92:11-24. If only FaceTime infringes, VirnetX is entitled to $1.20 for
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`each unit with FaceTime. Id. And if—as the Federal Circuit has now held—only VPN on
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`Demand infringes, VirnetX is entitled to $1.20 for each of the
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` with VPN on
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`Demand. Id. at 90:9-91:8. This Court thus can determine that—under the jury’s verdict and
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`basic arithmetic—Apple owes $461,433,906 for infringement.
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`Precedent supports that result. Whether a reduced basis of liability requires a new trial on
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`damages is a non-patent-specific question governed by Fifth Circuit law. Microsoft Corp. v.
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`GeoTag, Inc., 817 F.3d 1305, 1310, 1313 (Fed. Cir. 2016). Under Fifth Circuit law, where “the
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`jury’s verdict on each theory of liability [is] clear,” a “new trial on damages” is not required, so
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`long as the claims on which the jury properly found liability “support the . .. damages awards.”
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`Alaniz v. Zamora-Quezada, 591 F.3d 761, 773 (5th Cir. 2009). Similarly, where the record sup-
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`ports part of the jury’s damages award, the Court need not order a retrial, but may “reduc[e] the
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`verdict to the maximum