Case 6:12-cv-00855-RWS Document 830 Filed 03/11/20 Page 1 of 10 PageID #: 57576
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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
`LEIDOS, INC.,
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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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`§
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`Civil Action No. 6:12-cv-00855
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`JURY TRIAL DEMANDED
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`APPLE’S SUR-REPLY IN SUPPORT OF ITS OPPOSITION TO VIRNETX’S MOTION
`FOR ENTRY OF JUDGMENT AND ITS BRIEF IN SUPPORT OF A NEW TRIAL ON
`DAMAGES
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`Case 6:12-cv-00855-RWS Document 830 Filed 03/11/20 Page 2 of 10 PageID #: 57577
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`TABLE OF CONTENTS
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`VirnetX Cannot Avoid a New Trial by Mischaracterizing the Normal Rule ..................... 1
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`Speculation Does Not Warrant Departing from the Federal Circuit’s Normal Rule .......... 3
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`A New Trial Is Necessary to Prevent Injustice ................................................................... 5
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`Conclusion .......................................................................................................................... 5
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`I.
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`II.
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`III.
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`IV.
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`i
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`Case 6:12-cv-00855-RWS Document 830 Filed 03/11/20 Page 3 of 10 PageID #: 57578
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`TABLE OF AUTHORITIES
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`Page(s)
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`Cases
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`Alaniz v. Zamora-Quezada,
`591 F.3d 761 (5th Cir. 2009) .....................................................................................................4
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`Dairy Queen, Inc. v. Wood,
`369 U.S. 469 (1962) ...................................................................................................................5
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`Memphis Cmty. Sch. Dist. v. Stachura,
`477 U.S. 299 (1986) ...................................................................................................................2
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`Oiness v. Walgreen Co.,
`88 F.3d 1025 (Fed. Cir. 1996)................................................................................................2, 3
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`Omega Patents, LLC v. CalAmp Corp.,
`920 F.3d 1337 (Fed. Cir. 2019)..................................................................................................3
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`Promega Corp. v. Life Techs. Corp.,
`773 F.3d 1338 (Fed. Cir. 2014), rev’d and remanded on other grounds, 137 S.
`Ct. 734 (2017) ............................................................................................................................2
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`Ross v. Bernhard,
`396 U.S. 531 (1970) ...................................................................................................................5
`
`Siemens Med. Sols. USA, Inc. v. Saint-Gobain Ceramics & Plastics, Inc.,
`07-190, Dkt. 266 (D. Del. Aug. 19, 2011) .................................................................................3
`
`TCL Commc’n Tech. Holdings Ltd. v. Telefonaktiebolaget LM Ericsson,
`943 F.3d 1360 (Fed. Cir. 2019)..........................................................................................3, 4, 5
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`Unisplay, S.A. v. Am. Elec. Sign. Co.,
`69 F.3d 512 (Fed. Cir. 1995)..................................................................................................2, 3
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`Verizon Servs. Corp. v. Vonage Holdings Corp.,
`503 F.3d 1295 (Fed. Cir. 2007)..................................................................................................1
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`VirnetX Inc. v. Apple Inc.,
`792 F. App’x 796 (Fed. Cir. 2019) ....................................................................................1, 2, 3
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`WesternGeco LLC v. ION Geophysical Corp.,
`913 F.3d 1067 (Fed. Cir. 2019)..........................................................................................1, 3, 4
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`ii
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`Case 6:12-cv-00855-RWS Document 830 Filed 03/11/20 Page 4 of 10 PageID #: 57579
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`VirnetX’s reply rehashes the arguments in its opening brief without acknowledging, let
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`alone addressing, the critical question: whether any basis exists to depart from the Federal Circuit’s
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`normal rule. That rule provides that when the basis of liability underlying the jury’s verdict is
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`narrowed, and “the jury rendered a single verdict on damages, without breaking down the damages
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`attributable to each patent,” a new damages trial is required. VirnetX Inc. v. Apple Inc., 792 F.
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`App’x 796, 812 (Fed. Cir. 2019) (quoting Verizon Servs. Corp. v. Vonage Holdings Corp., 503
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`F.3d 1295, 1310 (Fed. Cir. 2007)). That is what should happen here. All that remains are the two
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`patents asserted against VOD, and while the parties presented conflicting evidence concerning
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`damages or value associated with that, “the jury did not have to decide whether the $1.20 per-
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`unit figure would be correct if only VPN on Demand infringed.” Id. at 813; Dkt. 825 at 10–15.
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`The amount of damages the jury might have awarded from VOD alone is unknowable from the
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`verdict and the normal rule requires a new trial. See WesternGeco LLC v. ION Geophysical Corp.,
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`913 F.3d 1067, 1074 (Fed. Cir. 2019). VirnetX asks the Court to ignore this binding precedent and
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`guess what the jury might have done had it decided damages for VOD. VirnetX also argues that
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`Apple should be denied its Seventh Amendment right to a damages trial based on an award of
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`equitable relief in the form of an ongoing royalty, which itself was based on an infringement
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`verdict that no longer stands. “What might have been” is not enough to disregard Apple’s Seventh
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`Amendment right to have a jury decide damages for VOD alone.
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`I.
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`VirnetX Cannot Avoid a New Trial by Mischaracterizing the Normal Rule
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`The Federal Circuit’s “normal rule” requires a new trial in this case. Dkt. 825 at 6–8, 10–
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`15; Verizon, 503 F.3d at 1310; WesternGeco, 913 F.3d at 1074. In its reply, VirnetX attempts to
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`avoid this “normal rule” by arguing it only applies when “the verdict does not reveal the means by
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`Case 6:12-cv-00855-RWS Document 830 Filed 03/11/20 Page 5 of 10 PageID #: 57580
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`which the jury calculated damages.”1 Dkt. 828 at 4 (quoting from Memphis Cmty. Sch. Dist. v.
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`Stachura, 477 U.S. 299 (1986)). But that is exactly this case. The verdict does not reveal how the
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`jury calculated damages for VOD alone because the jury was never asked to decide that question.
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`VirnetX, 792 F. App’x at 812. Regardless, Memphis supports granting a new trial here. There, the
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`jury’s verdict “did not specify how much” of its award was compensatory damages or damages
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`based on the value of constitutional rights; the latter category could not be awarded as damages.
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`Memphis, 477 U.S. at 310, 312. Because it was “likely, although not certain, that a major part of
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`these damages was intended to ‘compensate’ … for” the defendant’s constitutional rights, the case
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`had to “be remanded for a new trial[.]” Id. at 312–13. So too here. Even though it may “not [be]
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`certain” whether a “major part” of the jury’s damages award was intended to compensate for
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`FaceTime, that possibility requires a new trial. See id.; Dkt. 825 at 6–8, 10–15.
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`Although VirnetX purports to distinguish four Federal Circuit cases applying the “normal
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`rule,” those distinctions are mischaracterizations. VirnetX says that in Promega, “the Federal
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`Circuit did not discuss the necessity of a retrial,” Dkt. 828 at 5, but it did: “[s]ince the challenged
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`claims of four of the five asserted patents on which the jury based its damages verdict are invalid,
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`we vacate the jury’s damages award.” Promega Corp. v. Life Techs. Corp., 773 F.3d 1338, 1358
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`(Fed. Cir. 2014), rev’d and remanded on other grounds, 137 S. Ct. 734 (2017). Likewise, Omega
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`does not stand for the proposition that the “normal rule” is inapplicable if an identified “subset” of
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`accused devices survives on appeal, as VirnetX suggests. Dkt. 825 at 5. In Omega, like here, it
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`1 Although “Federal Circuit law controls ‘the distinctive characteristics of patent damages law.’”
`Dkt. 825 at 8 (citation omitted), VirnetX claims Unisplay holds that “the Federal Circuit routinely
`looks to regional circuit law in this context.” Dkt. 828 at 4 n.2. Unisplay, however, recites the
`Federal Circuit’s own rule for remittitur. Oiness v. Walgreen Co., 88 F.3d 1025, 1030 (Fed. Cir.
`1996) (“This court has adopted the ‘maximum recovery rule’ which requires this court to remit
`the damage award to the highest amount the jury could “properly have awarded[.]”) (citing
`Unisplay, S.A. v. Am. Elec. Sign. Co., 69 F.3d 512, 519 (Fed. Cir. 1995)).
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`2
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`Case 6:12-cv-00855-RWS Document 830 Filed 03/11/20 Page 6 of 10 PageID #: 57581
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`was not possible to determine the damages attributable to the accused product from the jury’s
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`damages award. Omega Patents, LLC v. CalAmp Corp., 920 F.3d 1337, 1351 (Fed. Cir. 2019).
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`Similarly, VirnetX points out that in Siemens, the district court was permitted to determine
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`a royalty on remand for 18 products excluded from the lost profits award. Dkt. 825 at 4. The court
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`only did so because “[t]he parties … agreed that the royalty determination should be made by the
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`Court based on the trial record.” Siemens Med. Sols. USA, Inc. v. Saint-Gobain Ceramics &
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`Plastics, Inc., 07-190, Dkt. 266 at 2 (D. Del. Aug. 19, 2011). There is no such agreement here.
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`VirnetX also argues that in WesternGeco, damages could be affirmed if the “marine surveys
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`causing lost profits[] practiced a remaining claim.” Dkt. 828 at 5. But infringement alone was
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`insufficient to sustain the verdict; the adjudicated infringing technology had to be “undisputed[ly]
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`… necessary to perform the surveys upon which the lost profits award is based.” WesternGeco,
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`913 F.3d at 1075. Here, the value of VOD was disputed, requiring a new trial. Dkt. 825 at 8, 15.
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`VirnetX also points to Unisplay and Oiness for support, but neither warrant departure from
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`the normal rule. In both, the Federal Circuit only awarded remittitur after it affirmed liability for
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`all accused products and patents. Oiness, 88 F.3d at 1030; Unisplay, 69 F.3d at 519. In this case,
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`by contrast, the Federal Circuit’s conclusion that FaceTime did not infringe and the jury’s general
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`verdict “raise[d] the question of whether a new trial must or should be held because of the reduced
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`basis of liability.” VirnetX, 792 F. App’x at 812. Nonetheless, both cases make clear that “[a] court
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`is not at liberty to supplant its own judgment on the damages amount for the jury’s findings.”
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`Oiness, 88 F.3d at 1030 (citing Unisplay, 69 F.3d at 519). Denying a new trial here would do just
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`that and deny Apple its Seventh Amendment right to a jury trial on damages. See TCL Commc’n
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`Tech. Holdings Ltd. v. Telefonaktiebolaget LM Ericsson, 943 F.3d 1360, 1371 (Fed. Cir. 2019).
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`II.
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`Speculation Does Not Warrant Departing from the Federal Circuit’s Normal Rule
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`Although the jury’s valuation of VOD cannot be discerned from its verdict, VirnetX again
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`3
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`Case 6:12-cv-00855-RWS Document 830 Filed 03/11/20 Page 7 of 10 PageID #: 57582
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`contends that “[a] damages retrial is unnecessary … where a sustained theory of liability supports
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`an existing damages award.” Dkt. 828 at 4. But even VirnetX admits that infringement by VOD
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`alone cannot sustain the “existing damages award” and VirnetX’s speculation that the jury may
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`have found VOD was also worth $1.20/unit does not mean the jury necessarily would have arrived
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`at that same conclusion on its own.2 See WesternGeco, 913 F.3d at 1075. Indeed, VirnetX does not
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`dispute that FaceTime is more popular and more commonly used than VOD or that the jury had
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`evidence from which it could arrive at a different royalty for VOD alone of less than $0.06.3 Dkt.
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`825 at 8, 15. This is why Apple’s position has always been that if infringement of one of the
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`accused features was disturbed, “a new trial on damages should be granted.” Dkt. 775 at 38.
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`VirnetX now acknowledges Apple’s position, but it still maintains Apple “conceded” the jury
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`adopted Mr. Weinstein’s damages theory. Dkt. 828 at 2–3 & n.1. VirnetX’s rehashed arguments
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`fail for the same reasons Apple explained in its opposition: Apple never argued, and the Court
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`never found, that the jury adopted Mr. Weinstein’s royalty rate for VOD alone. Dkt. 825 at 11. As
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`a result, a new damages trial should be granted.
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`Finally, VirnetX repeats its argument that the Court’s earlier award of an ongoing royalty
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`(equitable relief) can now be used to deny Apple’s Seventh Amendment right to a jury trial on
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`damages (legal relief). Dkt. 828 at 3; Dkt. 798 at 49–50; TCL, 943 F.3d at 1371. The Federal
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`Circuit, however, has made clear that the “right to a jury trial of legal issues” cannot be “lost
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`2 This case is therefore unlike Alaniz, where the theories of liability affirmed on appeal supported
`the entirety of the jury’s award. Alaniz v. Zamora-Quezada, 591 F.3d 761, 773 (5th Cir. 2009).
`3 VirnetX tries to dismiss that evidence by claiming it indicates VOD “is worth six times as much
`as FaceTime.” Dkt. 828 at 3 n.1. Mr. Bakewell, Apple’s damages expert, testified to the following
`royalty rates: $0.01 per unit for FaceTime alone; $0.06 for FaceTime and VOD combined; and
`“less than $0.06 per unit” if only VOD infringed (4/9 (PM) Tr. 263:3–25). Thus, the jury had
`sufficient evidence to award less than $0.06/unit for VOD alone.
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`4
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`Case 6:12-cv-00855-RWS Document 830 Filed 03/11/20 Page 8 of 10 PageID #: 57583
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`through prior determination of equitable claims.” TCL, 943 F.3d at 1372.4 Ongoing royalties are
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`awarded as a matter of the district court’s discretion and are not limited to precisely what the jury
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`necessarily determined. And in this case, the ongoing royalty was premised on a verdict where
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`both FaceTime and VOD were found to infringe. Dkt. 798 at 49–50. When the Court was deciding
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`for itself the equitable remedy of an ongoing royalty, the Court was not required to decide, did not
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`decide, and was not even asked to consider, whether the jury had determined damages for VOD-
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`only units. As explained in Apple’s opposition and in this sur-reply, that conclusion cannot be
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`drawn from the jury’s verdict and a new trial should be granted. Dkt. 825 at 15.
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`III. A New Trial Is Necessary to Prevent Injustice
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`The jury’s failure to award a VOD-only royalty means there are “sufficient uncertainties
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`relating to the jury’s verdict to justify the grant of a new trial.” Dkt. 825 at 16 (citation omitted).
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`VirnetX claims a trial now would “consume scarce judicial and party resources,” Dkt. 828 at 5,
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`yet VirnetX previously argued the opposite in this case. Specifically, VirnetX asserted that “[t]he
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`burden on the parties and the Court for the upcoming trial is minimal at worst” and “the amount
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`of work left to do pales in comparison to the amount of work already done.” Dkt. 522 at 4, 6. That
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`retrial involved infringement of two features, damages, and willfulness. VirnetX cannot now claim
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`that an even more limited trial would be burdensome, and a new trial should be granted.
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`IV. Conclusion
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`Apple respectfully requests that VirnetX’s motion be denied and that a new trial be granted.
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`4 See also Ross v. Bernhard, 396 U.S. 531, 538 (1970) (the “right to jury trial on the legal claims
`… must not be infringed either by trying the legal issues as incidental to the equitable ones”);
`Dairy Queen, Inc. v. Wood, 369 U.S. 469, 479 (1962) (“the legal claims involved in the action
`must be determined prior to any final court determination of respondents' equitable claims.”).
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`5
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`Case 6:12-cv-00855-RWS Document 830 Filed 03/11/20 Page 9 of 10 PageID #: 57584
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`Dated: March 11, 2020
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`Respectfully submitted,
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`
`
`By: /s/ Jeanne M. Heffernan
`Gregory S. Arovas
`greg.arovas@kirkland.com
`Robert A. Appleby
`robert.appleby@kirkland.com
`Jeanne M. Heffernan
`jeanne.heffernan@kirkland.com
`Joseph A. Loy
`joseph.loy@kirkland.com
`KIRKLAND & ELLIS LLP
`601 Lexington Avenue
`New York, New York 10022
`Telephone: (212) 446-4800
`Facsimile: (212) 446-4900
`
`John C. O’Quinn
`john.oquinn@kirkland.com
`KIRKLAND & ELLIS LLP
`655 Fifteenth Street, N.W.
`Washington, D.C. 20005
`Telephone: (202) 879-5000
`Facsimile: (202) 879-5200
`Michael E. Jones
`Texas Bar No. 10969400
`mikejones@potterminton.com
`POTTER MINTON
`A Professional Corporation
`110 N. College Avenue, Suite 500
`Tyler, Texas 75702
`Telephone: (903) 597-8311
`Facsimile: (903) 593-0846
`
`Attorneys for Apple Inc.
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`6
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`Case 6:12-cv-00855-RWS Document 830 Filed 03/11/20 Page 10 of 10 PageID #: 57585
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`CERTIFICATE OF SERVICE
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`The undersigned certifies that, on March 11, 2020, the foregoing document was filed
`electronically in compliance with Local Rule CV-5(a). As such, this motion was served on all
`counsel who have consented to electronic service. Local Rule CV-5(a)(3)(A).
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`/s/ Jeanne M. Heffernan
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`7
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