`APPENDIX A
`NOTE: This disposition is nonprecedential.
`United States Court of Appeals
`for the Federal Circuit
`
`
`
`VIRNETX INC., LEIDOS, INC.,
`Plaintiffs-Appellees
`
`v.
`
`CISCO SYSTEMS, INC.,
`Defendant
`
`APPLE INC.,
`Defendant-Appellant
`
`
`
`
`
`2018-1197
`
`Appeal from the United States District Court for
`the Eastern District of Texas in No. 6:10-cv-00417-
`RWS, Judge Robert Schroeder, III.
`
`
`
`
`
`JUDGMENT
`
`JEFFREY A. LAMKEN, MoloLamken LLP, Washing-
`ton, DC, argued for all plaintiffs-appellees. Plaintiff-
`appellee VirnetX Inc. also represented by JAMES A.
`BARTA, RAYINER HASHEM, MICHAEL GREGORY PAT-
`TILLO, JR.; ALLISON MILEO GORSUCH, New York, NY;
`
`
`
`2a
`BRADLEY WAYNE CALDWELL, JASON DODD CASSADY,
`JOHN AUSTIN CURRY, Caldwell Cassady & Curry, Dal-
`las, TX.
`DONALD SANTOS URRABAZO, Urrabazo Law, P.C.,
`Los Angeles, CA, for plaintiff-appellee Leidos, Inc.
`Also represented by ANDY TINDEL, Mann, Tindel &
`Thompson, Tyler, TX.
`WILLIAM F. LEE, Wilmer Cutler Pickering Hale
`and Dorr LLP, Boston, MA, argued for defendant-ap-
`pellant. Also represented by REBECCA A. BACT, MARK
`CHRISTOPHER FLEMING, LAUREN B. FLETCHER;
`THOMAS GREGORY SPRANKLING, Palo Alto, CA; BRIT-
`TANY BLUEITT AMADI, Washington, DC.
`
`
`
`THIS CAUSE having been heard and considered, it is
`ORDERED and ADJUDGED:
`PER CURIAM (PROST, Chief Judge, MOORE and
`REYNA, Circuit Judges).
`AFFIRMED. See Fed. Cir. R. 36.
`ENTERED BY ORDER OF THE COURT
`/s/ Peter R. Marksteiner
`Peter R. Marksteiner
`Clerk of Court
`
`January 15, 2019
`Date
`
`
`
`
`
`3a
`APPENDIX B
`
`In the United States District Court for the
`Eastern District of Texas Tyler Division
`
`VIRNETX INC. and §
`SCIENCE
`§
`APPLICATIONS
`§
`INTERNATIONAL §
`CORPORATION,
`§
`
`§
`§ CAUSE NO. 6:10-CV-417
`§
`§
`§
`§
`§
`§
`§
`MEMORANDUM OPINION AND ORDER
`
`SEALED
`
`UNSEALED 10-13-2017
`
`Defendant.
`
`Plaintiffs,
`
`
`vs.
`
`APPLE INC.,
`
`
`
`
`
`
`
`
`
`
`4a
`Before the Court are the following motions:
` Defendant Apple Inc.’s (“Apple”) Rule 50(a)
`Motion for Judgment as a Matter of Law on
`Damages (Docket No. 1018);1
` Apple’s Rule 50(a) Motion for Judgment as a
`Matter of Law of No Infringement (Docket
`No. 1019);
` Plaintiff VirnetX, Inc.’s (“VirnetX”) Post-Trial
`Brief Regarding Willfulness (Docket No. 1047);
` Apple’s Omnibus Motion for Judgment as a
`Matter of Law Under Rule 50(b) (Docket
`No. 1062); and
` VirnetX’s Motion for Entry of Judgment and
`Equitable Relief (Docket No. 1063).
`Having considered the parties’ written submis-
`sions and argument at the November 22, 2016
`post-trial hearing, and for the reasons stated
`below, the Court rules as follows:
` Apple’s Rule 50(a) Motion for Judgment as a
`Matter of Law on Damages (Docket No. 1018)
`is DENIED-AS-MOOT;
`
`
`1 Unless noted otherwise, all references to the docket refer to
`Case No. 6:10-cv-417.
`
`
`
`5a
` Apple’s Rule 50(a) Motion for Judgment as a
`Matter of Law of No Infringement (Docket
`No. 1019) is DENIED-AS-MOOT;
` VirnetX’s request in its Post-Trial Brief Re-
`garding Willfulness that the Court find that
`willful
`infringement
`(Docket No. 1047)
`is
`GRANTED;
` Apple’s Omnibus Motion for Judgment as a
`Matter of Law Under Rule 50(b) (Docket
`No. 1062) is DENIED; and
` VirnetX’s Motion for Entry of Judgment and
`Equitable Relief
`(Docket No. 1063)
`is
`GRANTED.
`BACKGROUND
`On August 11, 2010, VirnetX filed this action
`against Apple alleging that Apple infringed U.S. Pa-
`tent Nos. 6,502,135 (“the ’135 Patent”), 7,418,504
`(“the ’504 Patent”), 7,490,151 (“the ’151 Patent”), and
`7,921,211 (“the ’211 Patent”) (collectively, “the as-
`serted patents”). The ’135 and ’151 Patents generally
`describe a method of transparently creating a virtual
`private network (“VPN”) between a client computer
`and a target computer, while the ’504 and ’211 Pa-
`tents disclose a secure domain name service. On No-
`vember 6, 2012, a jury found that Apple’s accused
`VPN on Demand and FaceTime features infringed the
`asserted patents and that the asserted patents were
`not invalid (“2012 jury verdict”). Docket No. 790.
`
`
`
`6a
`Apple appealed the 2012 verdict to the Federal
`Circuit on multiple grounds. See VirnetX, Inc. v. Cisco
`Sys., Inc., 767 F.3d 1308, 1313-14 (Fed. Cir. 2014).
`The Federal Circuit affirmed the jury’s finding of in-
`fringement by VPN on Demand and affirmed this
`Court’s denial of Apple’s motion for judgment as a
`matter of law on invalidity. Id. The Federal Circuit
`reversed the Court’s claim construction, holding that
`the term “secure communication link” requires both
`“security and anonymity” and vacated the infringe-
`ment finding for FaceTime. Id. The Federal Circuit
`also vacated the damages award for both VPN on De-
`mand and FaceTime because it found that the jury re-
`lied on a flawed damages model. Id. at 1314.
`On remand, this case was consolidated with Case
`No. 6:12-cv-855 and retried between January 25 and
`February 2, 2016. Docket No. 425 in Case No. 6:12-cv-
`855. Because of the consolidation and repeated refer-
`ences to the prior jury’s verdict in front of the jury, the
`Court granted a new trial and unconsolidated the
`cases. Docket No. 500 in Case No. 6:12-cv-855. The
`Court conducted another jury trial September 26 to
`30, 2016 on infringement for FaceTime and damages
`for both FaceTime and VPN on Demand.
`At trial, VirnetX asserted that FaceTime met the
`“anonymity” requirement of the “secure communica-
`tion link” limitation by allowing participants to com-
`municate behind third-party network address trans-
`lators (“NATs”). Docket No. 1036 (“Trial Tr. 9/30/16
`PM”) at 37:17–40:41. VirnetX’s technical expert, Dr.
`Mark Jones, testified that NATs hide the private IP
`addresses of the persons or devices participating in a
`
`
`
`7a
`FaceTime call and therefore prevent eavesdroppers
`on the public internet from being able to correlate spe-
`cific persons or devices behind the NAT routers par-
`ticipating in the call. Docket No. 1030 (“Trial Tr.
`9/27/16 AM”) at 48:10-51:18. VirnetX further asserted
`that it was entitled to a reasonable royalty of $1.20
`per unit, for a total of $302,427,950, for the infringe-
`ment of its patents by FaceTime and VPN on De-
`mand.2 Trial Tr. 9/30/16 PM at 50:16-20. VirnetX’s
`damages expert, Roy Weinstein, testified that, based
`on his analysis of comparable licenses, a reasonable
`royalty for Apple to pay for use of the asserted patents
`would be between $1.20 and $1.67 per unit. Docket
`No. 1032 (“Trial Tr. 9/28/16 PM”) at 7:15-11:25.
`Apple denied that FaceTime met the “anonymity”
`requirement of the “secure communication link” limi-
`tation. Trial Tr. 9/30/16 PM at 53:8-15. Apple’s tech-
`nical expert, Dr. Matthew Blaze, testified that
`FaceTime is not anonymous because eavesdroppers
`are able to obtain the public IP addresses of the de-
`vices participating in a FaceTime call. Docket
`No. 1035 (“Trial Tr. 9/30/16 AM”) at 20:20-21:1,
`114:17-21. Dr. Blaze further testified that the private
`IP addresses hidden by the NATs do not provide any
`meaningful anonymity. Trial Tr. 9/30/16 AM at
`68:10-69:8. Apple also asserted that, based on an
`analysis of the comparable licenses by its damages ex-
`pert, Christopher Bakewell, VirnetX was entitled to a
`royalty rate of no more than $0.10 per unit, for a total
`of $25,202,329, for the infringement of VPN on
`
`2 The jury was instructed that infringement by VPN on Demand
`was previously determined. Docket No 1021 at 4.
`
`
`
`8a
`Demand and FaceTime. Docket No. 1033 (“Trial Tr.
`9/29/16 AM”) 63:11-16, 115:2-20.
`On September 30, 2016, the jury returned a unan-
`imous verdict. The jury found that FaceTime in-
`fringed the ’211 and ’504 patents and awarded
`$302,427,950 in damages for the collective infringe-
`ment by the VPN on Demand and FaceTime features
`in the accused Apple products. Docket No. 1025.
`I. APPLE’S OMNIBUS MOTION FOR JUDG-
`MENT AS A MATTER OF LAW UNDER
`RULE 50(b) AND FOR A NEW TRIAL
`Apple moves for judgment as a matter of law, or,
`alternatively, for a new trial, on non- infringement
`and damages. Docket No 1062 at 1. During the Sep-
`tember 2016 trial, Apple filed two Rule 50(a) motions
`before the case was submitted to the jury. Docket
`No. 1018; Docket No. 1019. In light of Apple’s
`Rule 50(b) motions, Apple’s Rule 50(a) motions
`(Docket Nos. 1018 and 1019) are DENIED-AS-
`MOOT. The Court therefore turns to Apple’s
`Rule 50(b) Motion for Judgment as a Matter of Law
`and for a New Trial (Docket No. 1062).
`A. Applicable Law Regarding Rule 50
`Judgment as a matter of law is only appropriate
`when “a reasonable jury would not have a legally suf-
`ficient evidentiary basis to find for the party on that
`issue.” FED. R. CIV. P. 50(a). “The grant or denial of a
`motion for judgment as a matter of law is a procedural
`issue not unique to patent law, reviewed under the
`law of the regional circuit in which the appeal from
`
`
`
`9a
`the district court would usually lie.” Finisar Corp. v.
`DirecTV Group, Inc., 523 F.3d 1323, 1332 (Fed. Cir.
`2008). The Fifth Circuit “uses the same standard to
`review the verdict that the district court used in first
`passing on the motion.” Hiltgen v. Sumrall, 47 F.3d
`695, 699 (5th Cir. 1995). Thus, a jury verdict must be
`upheld, and judgment as a matter of law may not be
`granted, unless “there is no legally sufficient eviden-
`tiary basis for a reasonable jury to find as the jury
`did.” Id. at 700. “A jury verdict must stand unless
`there is a lack of substantial evidence, in the light
`most favorable to the successful party, to support the
`verdict.” Am. Home Assurance Co. v. United Space Al-
`liance, 378 F.3d 482, 487 (5th Cir. 2004).
`A court reviews all evidence in the record and
`must draw all reasonable inferences in favor of the
`nonmoving party; however, a court may not make
`credibility determinations or weigh the evidence, as
`those are solely functions of the jury. See Reeves v.
`Sanderson Plumbing Prods., Inc., 530 U.S. 133,
`150-51 (2000) (“[A]lthough the court should review
`the record as a whole, it must disregard all evidence
`favorable to the moving party that the jury is not re-
`quired to believe”). Under Fifth Circuit law, a court is
`to be “especially deferential” to a jury’s verdict, and
`must not reverse the jury’s findings unless they are
`not supported by substantial evidence. Baisden v. I’m
`Ready Productions, Inc., 693 F.3d 491, 499 (5th Cir.
`2012). Consequently, “[o]nly if there existed substan-
`tial evidence that would have led reasonable jurors to
`reach a differing conclusion, will this court overturn
`the district court’s judgment.” Hawkins v. Jones, 74
`F. App’x. 391, 394 (5th Cir. 2003) (citing Portis v. First
`
`
`
`10a
`Nat’l Bank of New Albany, Miss., 34 F.3d 325, 327-28
`(5th Cir. 1994)).
`B. Applicable Law Regarding Rule 59
`Under Federal Rule of Civil Procedure 59(a), a
`new trial may be granted on any or all issues “for any
`reason for which a new trial has heretofore been
`granted in an action at law in federal court.”
`Rule 59(a)(1)(A). The Federal Circuit reviews the
`question of a new trial under the law of the regional
`circuit. Z4 Techs., Inc. v. Microsoft Corp., 507 F.3d
`1340, 1347 (Fed. Cir. 2007). “A new trial may be
`granted, for example, if the district court finds the
`verdict is against the weight of the evidence, the dam-
`ages awarded are excessive, the trial was unfair, or
`prejudicial error was committed in its course.” Smith
`v. Transworld Drilling Co., 733 F.2d 610, 612-13 (5th
`Cir. 1985). “A motion for a new trial should not be
`granted unless the verdict is against the great weight
`of the evidence, not merely against the preponderance
`of the evidence.” Dresser-Rand Co. v. Virtual Automa-
`tion Inc., 361 F.3d 831, 838-39 (5th Cir. 2004).
`C. Analysis
`Apple raises four main issues in its omnibus post-
`trial motion: (1) whether the evidence supports the
`jury’s finding of infringement; (2) whether the evi-
`dence supports the jury’s damages award; (3) whether
`Apple is entitled to a new trial on infringement; and
`(4) whether Apple is entitled to a new trial on dam-
`ages. See generally Docket No. 1062.
`
`
`
`11a
`1. Judgment as a Matter of Law of Non-
`infringement
`Apple seeks judgment as a matter of law of non-
`infringement, arguing that no reasonable jury could
`conclude that FaceTime’s peer-to-peer connection pro-
`vides the anonymity required by the Federal Circuit’s
`construction of “secure communication link.” Docket
`No. 1062 at 3. Apple also argues that VirnetX’s com-
`parison of FaceTime to VPN on Demand was im-
`proper and cannot provide substantial evidence of in-
`fringement. Id. at 7. Finally, Apple contends that
`FaceTime’s call-setup process and its dynamically
`changing IP addresses are irrelevant to whether
`FaceTime provides anonymity. Id.
`a. Applicable Law
`Infringement is a question of fact reviewed for
`substantial evidence. Finisar, 523 F.3d at 1332. To
`prove infringement under 35 U.S.C. § 271, a plaintiff
`must show the presence of every element, or its equiv-
`alent, in the accused product or service. Lemelson v.
`United States, 752 F.2d 1538, 1551 (Fed. Cir. 1985).
`First, the claim must be construed to determine its
`scope and meaning; and second, the construed claim
`must be compared to the accused device or service.
`Absolute Software, Inc. v. Stealth Signal, Inc., 659
`F.3d 1121, 1129 (Fed. Cir. 2011) (citing Carroll Touch,
`Inc. v. Electro Mech. Sys., Inc., 15 F.3d 1573, 1576
`(Fed. Cir. 1993)).
`
`
`
`12a
`b. Discussion
`Apple contends that the evidence does not support
`a finding that FaceTime’s peer-to-peer connection
`provides anonymity. Id. at 3. Apple argues that it was
`undisputed that FaceTime itself does nothing to con-
`ceal IP addresses on the connection. Id. Apple states
`that FaceTime can work with NATs but argues that,
`because NATs are not part of FaceTime and because
`FaceTime does not require the use of NATs, VirnetX’s
`infringement should fail as a matter of law. Id.
`Apple further argues that there is no evidence to
`support a finding that NATs provide anonymity. Id.
`Apple contends that because NATs were a widespread
`and basic component of the internet prior to the in-
`vention, NATs could not provide this anonymity,
`which the Federal Circuit stated is “one of the pri-
`mary inventive contributions of the patent.” Id. at 4
`(quoting VirnetX, 767 F.3d at 1317). Apple states that
`Dr. Robert Short, the inventor, admitted this at trial
`by identifying NATs as a prior art system and stating
`that a figure in the patent that included NATs was
`not the way that he achieved anonymity. Id. (citing
`Trial Tr. 9/27/16 AM at 74:25-75:3).
`Apple contends that VirnetX’s infringement ex-
`pert, Dr. Jones, admitted that NATs do not hide pub-
`lic IP addresses and conceded that, though NATs hide
`private IP addresses, these private addresses do not
`contain any identifying significance. Id. at 5 (citing
`Docket No. 1030
`(“Trial Tr. 9/27/16 PM”) at
`48:22-49:1, 49:9-15, 123:24-124:3. Apple argues that,
`because NATs cannot hide public IP addresses, they
`are unable to prevent eavesdroppers from learning
`
`
`
`13a
`which websites companies are visiting, which Apple
`describes as “the one exemplary goal of anonymity
`provided in the patent.” Id. at 6. Finally, Apple states
`that Dr. Jones admitted that callers’ private IP ad-
`dresses are visible over the peer-to-peer connection.
`Id.
`
`Apple argues that VirnetX improperly relied on a
`comparison between FaceTime and VPN on Demand
`in order to prove infringement. Id. at 7. Apple con-
`tends that it is legally improper to compare products
`for infringement purposes. Id. (citing Amstar Corp. v.
`Envirotech Corp., 730 F.2d 1476, 1481-82 (Fed. Cir.
`1984)). Apple further states that the record was void
`of evidence as to why the previous jury found VPN on
`Demand to be anonymous and that the undisputed ev-
`idence at trial shows that VPN on Demand contained
`attributes of anonymity not present in FaceTime. Id.
`Finally, Apple contends that Dr. Jones’s testi-
`mony regarding FaceTime’s call-setup process and dy-
`namically changing IP addresses is irrelevant to the
`question of whether FaceTime is anonymous and
`therefore cannot support a finding of infringement.
`Id. Apple argues that the setup of the call is protected
`using an encrypted connection over the FaceTime
`servers and therefore cannot provide the anonymity
`required by the patents, which, Apple argues, require
`the secure communication link—identified by Dr.
`Jones as the separate peer-to-peer connection—to
`provide the anonymity. Id. at 7-8. Apple similarly con-
`tends that dynamically changing IP addresses cannot
`provide the required anonymity because the changing
`of an IP address is dependent on the policy of the
`
`
`
`14a
`internet service provider and therefore is not “pro-
`vided” by the direct communication link. Id. at 8.
`VirnetX responds that Apple’s motion for judg-
`ment as a matter of law on non-infringement should
`be denied because the evidence presented at trial
`proved that “FaceTime Servers ‘support establishing’
`a ‘direct communication link that provides data secu-
`rity and anonymity,’ “ as required by the patents.
`Docket No. 1065 at 1. VirnetX argues that the testi-
`mony of Dr. Jones that an Internet eavesdropper can-
`not correlate the specific persons or devices located
`behind NAT routers that are participating in a
`FaceTime call, along with the admission of Apple’s ex-
`pert, Dr. Blaze, that this inability to correlate consti-
`tutes a kind of anonymity, provides substantial evi-
`dence to support the jury’s verdict. Id. (citing Trial Tr.
`9/27/16 PM at 48:10-51:18; Trial Tr. 9/30/16 AM at
`124:4-5).
`VirnetX argues that, because Apple’s expert ad-
`mitted that NATs provide a type of anonymity, Apple
`is attempting to impose additional requirements to
`the Federal Circuit’s claim construction. Id. at 2. Vir-
`netX contends that Apple has waived any claim con-
`struction arguments by raising them for the first time
`after trial and argues that these arguments fail on the
`merits regardless. Id.
`VirnetX states that Apple’s argument that NATs
`cannot provide the required anonymity because they
`were present in the prior art is not legally relevant
`because Apple cannot prove non- infringement by
`comparing the accused system to the prior art. Id. at
`3 (citing Zenith Elecs. Corp. v. PDI Commc’n Sys.,
`
`
`
`15a
`Inc., 522 F.3d 1348, 1363 (Fed. Cir. 2008)). VirnetX
`next argues that even if the private IP addresses,
`which the NATs protect, tell an eavesdropper nothing
`about the particular device in communication, this
`address is a critical piece of information necessary to
`correlate the communication to a specific machine or
`person. Id. at 4 (citing Trial Tr. 9/27/16 PM at
`50:9-18). VirnetX therefore argues that the NATs’
`protection of the private IP addresses is sufficient to
`support a finding of infringement. Id.
`VirnetX contends that Apple’s argument that
`NATs are insufficient to support a finding of infringe-
`ment because they cannot achieve one of the exem-
`plary goals of the patents fails because the Court has
`already observed that this goal does not limit the
`claims. Id. (citing VirnetX, Inc. v. Microsoft Corp.,
`2009 WL 2370727, at *5 n.4 (E.D. Tex. July 30, 2009).
`VirnetX further argues that Dr. Jones did not admit
`that private IP addresses are visible over the peer-to-
`peer connection, but instead stated only that the pri-
`vate IP address of the caller is visible during the link
`setup and is not visible over the link itself. Id. at 5
`(citing Trial Tr. 9/27/16 PM at 115:7-116:2). VirnetX
`also contends that, because FaceTime was designed to
`support establishing links between devices located be-
`hind NATs, Apple’s motion should be denied.
`VirnetX argues that its comparison between
`FaceTime and VPN on Demand was not necessary to
`support the verdict and was not legally improper. Id.
`at 6. VirnetX argues that it did not attempt to prove
`that FaceTime and VPN on Demand were identical,
`nor did it rely solely on a comparison between
`
`
`
`16a
`FaceTime and VPN to prove infringement, but in-
`stead compared FaceTime to the claims of the patent.
`Id. VirnetX further states that its comparison was rel-
`evant to rebut Apple’s argument that an eavesdrop-
`per’s ability to view a caller’s public IP address ren-
`dered FaceTime non-anonymous. Id.
`VirnetX also contends that Dr. Jones’s testimony
`on FaceTime’s setup process and on the dynamically
`changing IP addresses, while not necessary to uphold
`the jury’s finding of infringement, offers additional
`support. Id. VirnetX argues that the setup process is
`relevant because it sends identifying information over
`FaceTime’s servers, removing any need to send that
`information over the peer-to-peer connection on the
`open internet. Id. at 7. VirnetX also contends that Ap-
`ple’s choice to design the system to use IP addresses,
`which regularly change, provides additional anonym-
`ity to FaceTime calls. Id.
`The evidence presented at trial supports a finding
`that a reasonable jury could determine that FaceTime
`supports “a direct communication link that provides
`data security and anonymity,” as required by the Fed-
`eral Circuit’s claim construction. See VirnetX, Inc. v.
`Cisco Sys., Inc., 767 F.3d 1308, 1317 (Fed. Cir. 2015).
`Apple admits that FaceTime supports a communica-
`tion link between devices located behind NATs, see
`Docket No. 1062 at 3, and VirnetX presented evidence
`at trial that NATs provide anonymity by hiding the
`users private IP address, see Trial Tr. 9/27/16 PM at
`48:10-51:18, 49:5-7, 124:16-125:5; Trial Tr. 9/30/16
`AM at 98:3-9, 141:10-20, 124:4-5. In light of this tes-
`timony, the Court finds that there was substantial
`
`
`
`17a
`evidence for the jury to conclude that FaceTime sup-
`ports a direct-communication link that provides ano-
`nymity.
`Apple’s arguments to the contrary are unpersua-
`sive. The presence of NATs in the prior art is unre-
`lated to non-infringement, and the fact that NATs are
`not a part of FaceTime is irrelevant because the
`claims only require the system to “support establish-
`ing” a direct communication link that provides ano-
`nymity. Similarly, the system’s ability to meet an ex-
`emplary goal listed in the patent specification is irrel-
`evant, as the Court has already observed that this
`language does not limit the claims. See VirnetX, Inc.
`v. Microsoft Corp., 2009 WL 2370727, at *5 n.4 (E.D.
`Tex. July 30, 2009). Finally, VirnetX’s comparison of
`FaceTime to VPN on Demand and testimony regard-
`ing the FaceTime call-setup process and the dynamic
`nature of IP addresses, while not necessary to uphold
`the jury’s verdict, was relevant to respond to Apple’s
`trial arguments and offers further support for the
`jury’s finding of infringement.
`Accordingly, Apple’s motion for judgment as a
`matter of law of non-infringement is DENIED.
`2. Judgment as a Matter of Law on
`Damages
`Apple argues that the testimony of VirnetX’s
`damages expert, Mr. Weinstein, shows that the jury’s
`damages verdict did not have a legally sufficient ba-
`sis. Docket No. 1062 at 10. Apple contends that Vir-
`netX presented no “particularized expert testimony
`explaining how various differences between the real
`
`
`
`18a
`and hypothetical license negotiations … would factor
`into the appropriate royalty for [Apple’s] infringe-
`ment” that would have permitted the jury to arrive at
`over $302 million in damages. Id. (citing Lucent
`Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1329
`(Fed. Cir. 2009)). Apple states that the only economi-
`cally reliable evidence establishes that the royalty
`rate could not be more than $0.10 per unit, well below
`the $1.20 per-unit rate awarded by the jury.
`Apple argues that Mr. Weinstein’s damages
`model does not apportion the incremental value that
`the patented invention added to the end product. Id.
`at 10-11 (citing CSIRO v. Cisco Sys., Inc., 809 F.3d
`1295, 1301 (Fed. Cir. 2015)). Apple contends that Mr.
`Weinstein relied on VirnetX’s licensing policy and
`suggests that there is no evidence in the record that
`the licensing policy is apportioned. Id. at 12. Apple ar-
`gues that the testimony of Kendall Larsen, VirnetX’s
`president, who stated that VirnetX’s policy was to li-
`cense its patents as a family, shows that the licenses
`upon which Mr. Weinstein relied are not apportioned.
`Id.
`
`Apple states that Mr. Weinstein admitted that his
`per-unit rates are not apportioned for the accused
`products or features. Id. at 13. Though Mr. Weinstein
`claimed his $1.20 rate was apportioned because he in-
`cluded only revenues related to Voice over Internet
`Protocol (“VoIP”) phones, Apple contends that there is
`no proof in the record that these rates reflect the value
`of VirnetX’s technology in those phones and that Mr.
`Weinstein admitted that VirnetX does not charge the
`same rate to all its licensees. Id. Further, Apple
`
`
`
`19a
`argues that Mr. Weinstein admitted that Apple de-
`vices are far more complex that VoIP phones but
`made no adjustment for this difference. Id.
`Apple states that Mr. Weinstein relied on the
`value of VPN on Demand and FaceTime and not on
`the value that VirnetX’s technology added to those
`features. Id. at 14. Apple argues that this reliance was
`inappropriate because both features have modes that
`indisputably do not incorporate the patented technol-
`ogy and because both features include other, unac-
`counted-for technologies not patented by VirnetX. Id.
`Apple further contends that Mr. Weinstein did not ac-
`count for the fact that each of the license agreements
`in his analysis included licenses to more patents than
`were at issue in this case and that Mr. Weinstein
`failed to account for that difference. Id. at 15-16.
`Apple next argues that the VoIP licenses relied on
`by Mr. Weinstein were not sufficiently comparable to
`the Apple devices and therefore cannot support the
`damages award. Id. at 16. Apple first contends that
`Mr. Weinstein made no adjustment to render the
`VoIP licenses comparable to the license that VirnetX
`and Apple would have negotiated in a hypothetical
`negotiation. Id. Next, Apple argues that Mr. Wein-
`stein admitted that several of the companies whose
`licenses Mr. Weinstein relied on do not compete with
`Apple and that the licensed VoIP phones are far less
`complex than the accused Apple devices. Id. at 16-17.
`Third, Apple states that the VoIP licenses are not
`comparable because each was entered into in 2012
`and 2013, well after the June 2009 hypothetical nego-
`tiation. Id. at 17. Fourth, Apple states that the
`
`
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`20a
`royalties paid under the VoIP licenses do not reflect
`the value of the patented technology and instead re-
`flect the value of avoiding litigation. Id. Finally, Apple
`contends that the low number of units (5.2 million
`combined units) and
`low amount of royalties
`($14.1 million combined) that were subject to the
`VoIP licenses (and which were estimated through
`2022) undermine their comparability and reliability.
`Id. at 18.
`Apple also argues that Mr. Weinstein’s damages
`model violated the entire market value rule. Id. Apple
`states that there was no showing that VirnetX’s pa-
`tented technology drives sales of Apple’s products and
`argues that VirnetX nonetheless presented a dam-
`ages model at trial that relied on percentage-based
`rates applied to Apple’s end-product revenues. Id. at
`19. Apple argues that VirnetX introduced testimony
`regarding its licensing policy, which applies a one to
`two percent royalty rate to end-product prices, then
`relied on the percentage-based royalty rates in its
`VoIP licenses, which are applied to end-product
`prices. Id. Apple further contends that VirnetX elic-
`ited the price of the licensees’ products and compared
`that price to the price of Apple’s accused devices. Id.
`Apple argues that by giving the jury these pieces of
`information, VirnetX invited the jury to apply a per-
`centage-based royalty to the entire revenue of the ac-
`cused devices, which is the same model the Federal
`Circuit held to be legally erroneous in the first appeal.
`Id.
`
`Apple next contends that it is entitled to a partial
`offset of any damages award for products that are
`
`
`
`21a
`already licensed, including, for example, accused de-
`vices that already include Skype. Id. at 20. Apple
`states that Skype is available for download on the ac-
`cused devices and argues that these devices that con-
`tain Skype are already licensed, rendering any award
`for those devices impermissible. Id. (citing Aero
`Prods., Int’l v. Intex Recreation Corp., 466 F.3d 1000,
`1017, 1019 (Fed. Cir. 2006); Bowers v. Baystate
`Techs., Inc., 320 F.3d 1317, 1327-28 (Fed. Cir. 2003).
`Finally, Apple argues that no reasonable jury
`could award more than $25.2 million in damages. Id.
`at 21. Apple states that the $1.20 per-unit rate offered
`by Mr. Weinstein and adopted by the jury is the eco-
`nomically unsound average of Mr. Weinstein’s trans-
`lated per-unit rates from the five VoIP licenses and
`the Microsoft license. Id. Apple contends that of the
`licenses considered by Mr. Weinstein, only the Mi-
`crosoft license was comparable because it was the
`only license to include products with as many features
`as the accused products. Id. Apple states that Mr.
`Weinstein admitted that his rate for the Microsoft li-
`cense, $0.19 per unit, was flawed because it did not
`account for Microsoft’s foreign sales. Apple argues
`that Mr. Weinstein admitted that if these sales were
`taken into account, the royalty rate would be $0.10
`per unit, which would lead to a damages award of ap-
`proximately $25.2 million. Id.
`In response, VirnetX argues that Apple is inap-
`propriately re-urging its failed Daubert motion
`against Mr. Weinstein’s theory and requests that the
`Court decline to consider Apple’s Rule 50 arguments
`relating to his damages theory. Docket No. 1065 at 8
`
`
`
`22a
`(citing Rembrandt Wireless Techs., LP v. Samsung El-
`ecs. Co., Ltd., et al., 2016 WL 362540, *3-4 (E.D. Tex.
`Jan. 29, 2016) (declining to consider JMOL argu-
`ments previously made in a Daubert motion and stat-
`ing that “[t]he Federal Circuit held that a JMOL is
`not the appropriate context for renewing attacks on
`an expert’s methodology”)). VirnetX further states
`that Apple’s arguments are factually and legally in-
`correct and that VirnetX has met its burden of proof
`on damages through Mr. Weinstein’s testimony. Id.
`VirnetX states that Mr. Weinstein’s damages
`opinions were properly apportioned and based on
`comparable licenses. Id. at 9. VirnetX contends that
`Mr. Weinstein’s analysis was based on actual agree-
`ments in which companies paid an apportioned value
`to VirnetX for the patented technology and that he
`therefore did not need to present all the details of how
`the VirnetX licensing policy was apportioned to the
`patents-in-suit because the real-world market had al-
`ready done the apportionment for him. Id. VirnetX ar-
`gues that Apple’s argument against Mr. Weinstein’s
`damages is therefore one of evidentiary weight and is
`not an appropriate ground for judgment as a matter
`of law. Id. at 12.
`VirnetX
`further states that Mr. Weinstein
`properly apportioned his royalty rate to account for
`unpatented technology. Id. VirnetX argues that the
`fact that VirnetX charges less as products become
`more complex, as reflected in the different royalty
`rates charged to companies, shows that Mr. Wein-
`stein’s model is apportioned to Apple’s products. Id. at
`13. VirnetX also argues that the fact that the per-unit
`
`
`
`23a
`rate applied to Apple is much lower than the one to
`two percent of revenue that VirnetX licensees typi-
`cally pay. Id. VirnetX states that Apple has no legal
`support for its argument that Mr. Weinstein was also
`required to identify the value of the unpatented fea-
`tures of the accused products and contends that Ap-
`ple’s damages expert, Christopher Bakewell, also
`failed to identify the value of these features. Id. Vir-
`netX further argues that Apple has cited no evidence
`that its customers use the unpatented elements of the
`VPN on Demand and FaceTime or that the features
`provide any value to its customers. Id. at 14.
`VirnetX next states that Mr. Weinstein properly
`accounted for the differences between VirnetX’s li-
`censes that support his damages theory and the hypo-
`thetical negotiation by carefully distinguishing facts
`related to the comparability of VirnetX’s licenses in
`discussing Georgia- Pacific Factor 1. Id. at 15. Vir-
`netX argues that the Federal Circuit has already held
`that the licenses are sufficiently comparable to form
`the basis of a royalty rate