Case 6:10-cv-00417-RWS Document 1079 Filed 09/29/17 Page 1 of 59 PageID #: 43039
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TYLER DIVISION
`
`CAUSE NO. 6:10-CV-417
`XXXXXXXXX-
`UNSEALED 10-13-2017
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`§
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`§ §
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`VIRNETX INC. and SCIENCE
`APPLICATIONS INTERNATIONAL
`CORPORATION,
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`Plaintiffs,
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`vs.
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`APPLE INC.,
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`Defendant.
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`MEMORANDUM OPINION AND ORDER
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`

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`Case 6:10-cv-00417-RWS Document 1079 Filed 09/29/17 Page 2 of 59 PageID #: 43040
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`Before the Court are the following motions:
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` Defendant Apple Inc.’s (“Apple”) Rule 50(a) Motion for Judgment as a Matter of Law on
`Damages (Docket No. 1018); 1
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` Apple’s Rule 50(a) Motion for Judgment as a Matter of Law of No Infringement (Docket
`No. 1019);
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` Plaintiff VirnetX, Inc.’s (“VirnetX”) Post-Trial Brief Regarding Willfulness (Docket No.
`1047);
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` Apple’s Omnibus Motion for Judgment as a Matter of Law Under Rule 50(b) (Docket No.
`1062); and
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` VirnetX’s Motion for Entry of Judgment and Equitable Relief (Docket No. 1063).
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`Having considered the parties’ written submissions and argument at the November 22,
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`2016 post-trial hearing, and for the reasons stated below, the Court rules as follows:
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` Apple’s Rule 50(a) Motion for Judgment as a Matter of Law on Damages (Docket No.
`1018) is DENIED-AS-MOOT;
`
` 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 Regarding 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
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` VirnetX’s Motion for Entry of Judgment and Equitable Relief (Docket No. 1063) is
`GRANTED.
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`1 Unless noted otherwise, all references to the docket refer to Case No. 6:10-cv-417.
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`Case 6:10-cv-00417-RWS Document 1079 Filed 09/29/17 Page 3 of 59 PageID #: 43041
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`BACKGROUND
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`On August 11, 2010, VirnetX filed this action against Apple alleging that Apple infringed
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`U.S. Patent Nos. 6,502,135 (“the ’135 Patent”), 7,418,504 (“the ’504 Patent”), 7,490,151 (“the
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`’151 Patent”), and 7,921,211 (“the ’211 Patent”) (collectively, “the asserted patents”). The ’135
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`and ’151 Patents generally describe a method of transparently creating a virtual private network
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`(“VPN”) between a client computer and a target computer, while the ’504 and ’211 Patents disclose
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`a secure domain name service. On November 6, 2012, a jury found that Apple’s accused VPN on
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`Demand and FaceTime features infringed the asserted patents and that the asserted patents were
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`not invalid (“2012 jury verdict”). Docket No. 790.
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`Apple appealed the 2012 verdict to the Federal Circuit on multiple grounds. See VirnetX,
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`Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1313–14 (Fed. Cir. 2014). The Federal Circuit affirmed
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`the jury’s finding of infringement by VPN on Demand and affirmed this Court’s denial of Apple’s
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`motion for judgment as a matter of law on invalidity. Id. The Federal Circuit reversed the Court’s
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`claim construction, holding that the term “secure communication link” requires both “security and
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`anonymity” and vacated the infringement finding for FaceTime. Id. The Federal Circuit also
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`vacated the damages award for both VPN on Demand and FaceTime because it found that the jury
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`relied on a flawed damages model. Id. at 1314.
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`On remand, this case was consolidated with Case No. 6:12-cv-855 and retried between
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`January 25 and February 2, 2016. Docket No. 425 in Case No. 6:12-cv-855. Because of the
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`consolidation and repeated references to the prior jury’s verdict in front of the jury, the Court
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`granted a new trial and unconsolidated the cases. Docket No. 500 in Case No. 6:12-cv-855. The
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`Court conducted another jury trial September 26 to 30, 2016 on infringement for FaceTime and
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`damages for both FaceTime and VPN on Demand.
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`At trial, VirnetX asserted that FaceTime met the “anonymity” requirement of the “secure
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`communication link” limitation by allowing participants to communicate behind third-party
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`network address translators (“NATs”). Docket No. 1036 (“Trial Tr. 9/30/16 PM”) at 37:17–40:41.
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`VirnetX’s technical expert, Dr. Mark Jones, testified that NATs hide the private IP addresses of
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`the persons or devices participating in a FaceTime call and therefore prevent eavesdroppers on the
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`public internet from being able to correlate specific persons or devices behind the NAT routers
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`participating in the call. Docket No. 1030 (“Trial Tr. 9/27/16 AM”) at 48:10–51:18. VirnetX
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`further asserted that it was entitled to a reasonable royalty of $1.20 per unit, for a total of
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`$302,427,950, for the infringement of its patents by FaceTime and VPN on Demand.2 Trial Tr.
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`9/30/16 PM at 50:16–20. VirnetX’s damages expert, Roy Weinstein, testified that, based on his
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`analysis of comparable licenses, a reasonable royalty for Apple to pay for use of the asserted
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`patents would be between $1.20 and $1.67 per unit. Docket No. 1032 (“Trial Tr. 9/28/16 PM”) at
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`7:15–11:25.
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`Apple denied that FaceTime met the “anonymity” requirement of the “secure
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`communication link” limitation. Trial Tr. 9/30/16 PM at 53:8–15. Apple’s technical expert, Dr.
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`Matthew Blaze, testified that FaceTime is not anonymous because eavesdroppers are able to obtain
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`the public IP addresses of the devices participating in a FaceTime call. Docket No. 1035 (“Trial
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`Tr. 9/30/16 AM”) at 20:20–21:1, 114:17–21. Dr. Blaze further testified that the private IP
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`addresses hidden by the NATs do not provide any meaningful anonymity. Trial Tr. 9/30/16 AM
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`at 68:10–69:8. Apple also asserted that, based on an analysis of the comparable licenses by its
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`damages expert, Christopher Bakewell, VirnetX was entitled to a royalty rate of no more than
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`2 The jury was instructed that infringement by VPN on Demand was previously determined. Docket No 1021 at 4.
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`$0.10 per unit, for a total of $25,202,329, for the infringement of VPN on Demand and FaceTime.
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`Docket No. 1033 (“Trial Tr. 9/29/16 AM”) 63:11–16, 115:2–20.
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`On September 30, 2016, the jury returned a unanimous verdict. The jury found that
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`FaceTime infringed the ’211 and ’504 patents and awarded $302,427,950 in damages for the
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`collective infringement by the VPN on Demand and FaceTime features in the accused Apple
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`products. Docket No. 1025.
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`I.
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`APPLE’S OMNIBUS MOTION FOR JUDGMENT AS A MATTER OF LAW
`UNDER RULE 50(b) AND FOR A NEW TRIAL
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`Apple moves for judgment as a matter of law, or, alternatively, for a new trial, on non-
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`infringement and damages. Docket No 1062 at 1. During the September 2016 trial, Apple filed
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`two Rule 50(a) motions before the case was submitted to the jury. Docket No. 1018; Docket No.
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`1019. In light of Apple’s Rule 50(b) motions, Apple’s Rule 50(a) motions (Docket Nos. 1018 and
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`1019) are DENIED-AS-MOOT. The Court therefore turns to Apple’s Rule 50(b) Motion for
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`Judgment as a Matter of Law and for a New Trial (Docket No. 1062).
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`A. Applicable Law Regarding Rule 50
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`Judgment as a matter of law is only appropriate when “a reasonable jury would not have a
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`legally sufficient evidentiary basis to find for the party on that issue.” FED. R. CIV. P. 50(a). “The
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`grant or denial of a motion for judgment as a matter of law is a procedural issue not unique to
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`patent law, reviewed under the law of the regional circuit in which the appeal from the district
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`court would usually lie.” Finisar Corp. v. DirecTV Group, Inc., 523 F.3d 1323, 1332 (Fed. Cir.
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`2008). The Fifth Circuit “uses the same standard to review the verdict that the district court used
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`in first passing on the motion.” Hiltgen v. Sumrall, 47 F.3d 695, 699 (5th Cir. 1995). Thus, a jury
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`verdict must be upheld, and judgment as a matter of law may not be granted, unless “there is no
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`legally sufficient evidentiary basis for a reasonable jury to find as the jury did.” Id. at 700. “A
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`jury verdict must stand unless there is a lack of substantial evidence, in the light most favorable to
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`the successful party, to support the verdict.” Am. Home Assurance Co. v. United Space Alliance,
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`378 F.3d 482, 487 (5th Cir. 2004).
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`A court reviews all evidence in the record and must draw all reasonable inferences in favor
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`of the nonmoving party; however, a court may not make credibility determinations or weigh the
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`evidence, as those are solely functions of the jury. See Reeves v. Sanderson Plumbing Prods., Inc.,
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`530 U.S. 133, 150–51 (2000) (“[A]lthough the court should review the record as a whole, it must
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`disregard all evidence favorable to the moving party that the jury is not required to believe”).
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`Under Fifth Circuit law, a court is to be “especially deferential” to a jury’s verdict, and must not
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`reverse the jury’s findings unless they are not supported by substantial evidence. Baisden v. I’m
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`Ready Productions, Inc., 693 F.3d 491, 499 (5th Cir. 2012). Consequently, “[o]nly if there existed
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`substantial evidence that would have led reasonable jurors to reach a differing conclusion, will this
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`court overturn the district court’s judgment.” Hawkins v. Jones, 74 F. App’x. 391, 394 (5th Cir.
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`2003) (citing Portis v. First Nat’l Bank of New Albany, Miss., 34 F.3d 325, 327–28 (5th Cir. 1994)).
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`B. Applicable Law Regarding Rule 59
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`Under Federal Rule of Civil Procedure 59(a), a new trial may be granted on any or all
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`issues “for any reason for which a new trial has heretofore been granted in an action at law in
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`federal court.” Rule 59(a)(1)(A). The Federal Circuit reviews the question of a new trial under
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`the law of the regional circuit. Z4 Techs., Inc. v. Microsoft Corp., 507 F.3d 1340, 1347 (Fed. Cir.
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`2007). “A new trial may be granted, for example, if the district court finds the verdict is against
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`the weight of the evidence, the damages awarded are excessive, the trial was unfair, or prejudicial
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`error was committed in its course.” Smith v. Transworld Drilling Co., 733 F.2d 610, 612–13 (5th
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`Cir. 1985). “A motion for a new trial should not be granted unless the verdict is against the great
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`weight of the evidence, not merely against the preponderance of the evidence.” Dresser-Rand Co.
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`v. Virtual Automation Inc., 361 F.3d 831, 838–39 (5th Cir. 2004).
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`C. Analysis
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`Apple raises four main issues in its omnibus post-trial motion: (1) whether the evidence
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`supports the jury’s finding of infringement; (2) whether the evidence supports the jury’s damages
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`award; (3) whether Apple is entitled to a new trial on infringement; and (4) whether Apple is
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`entitled to a new trial on damages. See generally Docket No. 1062.
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`1. Judgment as a Matter of Law of Non-infringement
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`Apple seeks judgment as a matter of law of non-infringement, arguing that no reasonable
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`jury could conclude that FaceTime’s peer-to-peer connection provides the anonymity required by
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`the Federal Circuit’s construction of “secure communication link.” Docket No. 1062 at 3. Apple
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`also argues that VirnetX’s comparison of FaceTime to VPN on Demand was improper and cannot
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`provide substantial evidence of infringement. Id. at 7. Finally, Apple contends that FaceTime’s
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`call-setup process and its dynamically changing IP addresses are irrelevant to whether FaceTime
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`provides anonymity. Id.
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`a. Applicable Law
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`Infringement is a question of fact reviewed for substantial evidence. Finisar, 523 F.3d at
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`1332. To prove infringement under 35 U.S.C. § 271, a plaintiff must show the presence of every
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`element, or its equivalent, in the accused product or service. Lemelson v. United States, 752 F.2d
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`1538, 1551 (Fed. Cir. 1985). First, the claim must be construed to determine its scope and
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`meaning; and second, the construed claim must be compared to the accused device or service.
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`Absolute Software, Inc. v. Stealth Signal, Inc., 659 F.3d 1121, 1129 (Fed. Cir. 2011) (citing Carroll
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`Touch, Inc. v. Electro Mech. Sys., Inc., 15 F.3d 1573, 1576 (Fed. Cir. 1993)).
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`b. Discussion
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`Apple contends that the evidence does not support a finding that FaceTime’s peer-to-peer
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`connection provides anonymity. Id. at 3. Apple argues that it was undisputed that FaceTime itself
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`does nothing to conceal IP addresses on the connection. Id. Apple states that FaceTime can work
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`with NATs but argues that, because NATs are not part of FaceTime and because FaceTime does
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`not require the use of NATs, VirnetX’s infringement should fail as a matter of law. Id.
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`Apple further argues that there is no evidence to support a finding that NATs provide
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`anonymity. Id. Apple contends that because NATs were a widespread and basic component of
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`the internet prior to the invention, NATs could not provide this anonymity, which the Federal
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`Circuit stated is “one of the primary inventive contributions of the patent.” Id. at 4 (quoting
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`VirnetX, 767 F.3d at 1317). Apple states that Dr. Robert Short, the inventor, admitted this at trial
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`by identifying NATs as a prior art system and stating that a figure in the patent that included NATs
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`was not the way that he achieved anonymity. Id. (citing Trial Tr. 9/27/16 AM at 74:25–75:3).
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`Apple contends that VirnetX’s infringement expert, Dr. Jones, admitted that NATs do not
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`hide public IP addresses and conceded that, though NATs hide private IP addresses, these private
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`addresses do not contain any identifying significance. Id. at 5 (citing Docket No. 1030 (“Trial Tr.
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`9/27/16 PM”) at 48:22–49:1, 49:9–15, 123:24–124:3. Apple argues that, because NATs cannot
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`hide public IP addresses, they are unable to prevent eavesdroppers from learning which websites
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`companies are visiting, which Apple describes as “the one exemplary goal of anonymity provided
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`in the patent.” Id. at 6. Finally, Apple states that Dr. Jones admitted that callers’ private IP
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`addresses are visible over the peer-to-peer connection. Id.
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`Apple argues that VirnetX improperly relied on a comparison between FaceTime and VPN
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`on Demand in order to prove infringement. Id. at 7. Apple contends that it is legally improper to
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`compare products for infringement purposes. Id. (citing Amstar Corp. v. Envirotech Corp., 730
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`F.2d 1476, 1481–82 (Fed. Cir. 1984)). Apple further states that the record was void of evidence
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`as to why the previous jury found VPN on Demand to be anonymous and that the undisputed
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`evidence at trial shows that VPN on Demand contained attributes of anonymity not present in
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`FaceTime. Id.
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` Finally, Apple contends that Dr. Jones’s testimony regarding FaceTime’s call-setup
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`process and dynamically changing IP addresses is irrelevant to the question of whether FaceTime
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`is anonymous and therefore cannot support a finding of infringement. Id. Apple argues that the
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`setup of the call is protected using an encrypted connection over the FaceTime servers and
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`therefore cannot provide the anonymity required by the patents, which, Apple argues, require the
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`secure communication link—identified by Dr. Jones as the separate peer-to-peer connection—to
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`provide the anonymity. Id. at 7–8. Apple similarly contends that dynamically changing IP
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`addresses cannot provide the required anonymity because the changing of an IP address is
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`dependent on the policy of the internet service provider and therefore is not “provided” by the
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`direct communication link. Id. at 8.
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`VirnetX responds that Apple’s motion for judgment as a matter of law on non-infringement
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`should be denied because the evidence presented at trial proved that “FaceTime Servers ‘support
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`establishing’ a ‘direct communication link that provides data security and anonymity,’ ” as
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`required by the patents. Docket No. 1065 at 1. VirnetX argues that the testimony of Dr. Jones
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`that an Internet eavesdropper cannot correlate the specific persons or devices located behind NAT
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`routers that are participating in a FaceTime call, along with the admission of Apple’s expert, Dr.
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`Blaze, that this inability to correlate constitutes a kind of anonymity, provides substantial evidence
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`to support the jury’s verdict. Id. (citing Trial Tr. 9/27/16 PM at 48:10–51:18; Trial Tr. 9/30/16
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`AM at 124:4–5).
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`VirnetX argues that, because Apple’s expert admitted that NATs provide a type of
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`anonymity, Apple is attempting to impose additional requirements to the Federal Circuit’s claim
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`construction. Id. at 2. VirnetX contends that Apple has waived any claim construction arguments
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`by raising them for the first time after trial and argues that these arguments fail on the merits
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`regardless. Id.
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`VirnetX states that Apple’s argument that NATs cannot provide the required anonymity
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`because they were present in the prior art is not legally relevant because Apple cannot prove non-
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`infringement by comparing the accused system to the prior art. Id. at 3 (citing Zenith Elecs. Corp.
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`v. PDI Commc’n Sys., Inc., 522 F.3d 1348, 1363 (Fed. Cir. 2008)). VirnetX next argues that even
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`if the private IP addresses, which the NATs protect, tell an eavesdropper nothing about the
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`particular device in communication, this address is a critical piece of information necessary to
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`correlate the communication to a specific machine or person. Id. at 4 (citing Trial Tr. 9/27/16 PM
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`at 50:9–18). VirnetX therefore argues that the NATs’ protection of the private IP addresses is
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`sufficient to support a finding of infringement. Id.
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`VirnetX contends that Apple’s argument that NATs are insufficient to support a finding of
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`infringement because they cannot achieve one of the exemplary goals of the patents fails because
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`the Court has already observed that this goal does not limit the claims. Id. (citing VirnetX, Inc. v.
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`Microsoft Corp., 2009 WL 2370727, at *5 n.4 (E.D. Tex. July 30, 2009). VirnetX further argues
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`that Dr. Jones did not admit that private IP addresses are visible over the peer-to-peer connection,
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`but instead stated only that the private IP address of the caller is visible during the link setup and
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`is not visible over the link itself. Id. at 5 (citing Trial Tr. 9/27/16 PM at 115:7–116:2). VirnetX
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`also contends that, because FaceTime was designed to support establishing links between devices
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`located behind NATs, Apple’s motion should be denied.
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`VirnetX argues that its comparison between FaceTime and VPN on Demand was not
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`necessary to support the verdict and was not legally improper. Id. at 6. VirnetX argues that it did
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`not attempt to prove that FaceTime and VPN on Demand were identical, nor did it rely solely on
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`a comparison between FaceTime and VPN to prove infringement, but instead compared FaceTime
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`to the claims of the patent. Id. VirnetX further states that its comparison was relevant to rebut
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`Apple’s argument that an eavesdropper’s ability to view a caller’s public IP address rendered
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`FaceTime non-anonymous. Id.
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`VirnetX also contends that Dr. Jones’s testimony on FaceTime’s setup process and on the
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`dynamically changing IP addresses, while not necessary to uphold the jury’s finding of
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`infringement, offers additional support. Id. VirnetX argues that the setup process is relevant
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`because it sends identifying information over FaceTime’s servers, removing any need to send that
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`information over the peer-to-peer connection on the open internet. Id. at 7. VirnetX also contends
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`that Apple’s choice to design the system to use IP addresses, which regularly change, provides
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`additional anonymity to FaceTime calls. Id.
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`The evidence presented at trial supports a finding that a reasonable jury could determine
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`that FaceTime supports “a direct communication link that provides data security and anonymity,”
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`as required by the Federal Circuit’s claim construction. See VirnetX, Inc. v. Cisco Sys., Inc., 767
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`F.3d 1308, 1317 (Fed. Cir. 2015). Apple admits that FaceTime supports a communication link
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`between devices located behind NATs, see Docket No. 1062 at 3, and VirnetX presented evidence
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`at trial that NATs provide anonymity by hiding the users private IP address, see Trial Tr. 9/27/16
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`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.
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`In light of this testimony, the Court finds that there was substantial evidence for the jury to
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`conclude that FaceTime supports a direct-communication link that provides anonymity.
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`Apple’s arguments to the contrary are unpersuasive. The presence of NATs in the prior art
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`is unrelated to non-infringement, and the fact that NATs are not a part of FaceTime is irrelevant
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`because the claims only require the system to “support establishing” a direct communication link
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`that provides anonymity. Similarly, the system’s ability to meet an exemplary goal listed in the
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`patent specification is irrelevant, as the Court has already observed that this language does not
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`limit the claims. See VirnetX, Inc. v. Microsoft Corp., 2009 WL 2370727, at *5 n.4 (E.D. Tex.
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`July 30, 2009). Finally, VirnetX’s comparison of FaceTime to VPN on Demand and testimony
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`regarding the FaceTime call-setup process and the dynamic nature of IP addresses, while not
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`necessary to uphold the jury’s verdict, was relevant to respond to Apple’s trial arguments and
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`offers further support for the jury’s finding of infringement.
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`Accordingly, Apple’s motion for judgment as a matter of law of non-infringement is
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`DENIED.
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`2. Judgment as a Matter of Law on Damages
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`Apple argues that the testimony of VirnetX’s damages expert, Mr. Weinstein, shows that
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`the jury’s damages verdict did not have a legally sufficient basis. Docket No. 1062 at 10. Apple
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`contends that VirnetX presented no “particularized expert testimony explaining how various
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`differences between the real and hypothetical license negotiations . . . would factor into the
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`appropriate royalty for [Apple’s] infringement” that would have permitted the jury to arrive at over
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`$302 million in damages. Id. (citing Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1329
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`(Fed. Cir. 2009)). Apple states that the only economically reliable evidence establishes that the
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`royalty rate could not be more than $0.10 per unit, well below the $1.20 per-unit rate awarded by
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`the jury.
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`Apple argues that Mr. Weinstein’s damages model does not apportion the incremental
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`value that the patented invention added to the end product. Id. at 10–11 (citing CSIRO v. Cisco
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`Sys., Inc., 809 F.3d 1295, 1301 (Fed. Cir. 2015)). Apple contends that Mr. Weinstein relied on
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`VirnetX’s licensing policy and suggests that there is no evidence in the record that the licensing
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`policy is apportioned. Id. at 12. Apple argues that the testimony of Kendall Larsen, VirnetX’s
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`president, who stated that VirnetX’s policy was to license its patents as a family, shows that the
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`licenses upon which Mr. Weinstein relied are not apportioned. Id.
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`Apple states that Mr. Weinstein admitted that his per-unit rates are not apportioned for the
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`accused products or features. Id. at 13. Though Mr. Weinstein claimed his $1.20 rate was
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`apportioned because he included only revenues related to Voice over Internet Protocol (“VoIP”)
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`phones, Apple contends that there is no proof in the record that these rates reflect the value of
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`VirnetX’s technology in those phones and that Mr. Weinstein admitted that VirnetX does not
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`charge the same rate to all its licensees. Id. Further, Apple argues that Mr. Weinstein admitted
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`that Apple devices are far more complex that VoIP phones but made no adjustment for this
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`difference. Id.
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` Apple states that Mr. Weinstein relied on the value of VPN on Demand and FaceTime and
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`not on the value that VirnetX’s technology added to those features. Id. at 14. Apple argues that
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`this reliance was inappropriate because both features have modes that indisputably do not
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`incorporate the patented technology and because both features include other, unaccounted-for
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`technologies not patented by VirnetX. Id. Apple further contends that Mr. Weinstein did not
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`account for the fact that each of the license agreements in his analysis included licenses to more
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`patents than were at issue in this case and that Mr. Weinstein failed to account for that difference.
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`Id. at 15–16.
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` Apple next argues that the VoIP licenses relied on by Mr. Weinstein were not sufficiently
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`comparable to the Apple devices and therefore cannot support the damages award. Id. at 16. Apple
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`first contends that Mr. Weinstein made no adjustment to render the VoIP licenses comparable to
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`the license that VirnetX and Apple would have negotiated in a hypothetical negotiation. Id. Next,
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`Apple argues that Mr. Weinstein admitted that several of the companies whose licenses Mr.
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`Weinstein relied on do not compete with Apple and that the licensed VoIP phones are far less
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`complex than the accused Apple devices. Id. at 16–17. Third, Apple states that the VoIP licenses
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`are not comparable because each was entered into in 2012 and 2013, well after the June 2009
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`hypothetical negotiation. Id. at 17. Fourth, Apple states that the royalties paid under the VoIP
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`licenses do not reflect the value of the patented technology and instead reflect the value of avoiding
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`litigation. Id. Finally, Apple contends that the low number of units (5.2 million combined units)
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`and low amount of royalties ($14.1 million combined) that were subject to the VoIP licenses (and
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`which were estimated through 2022) undermine their comparability and reliability. Id. at 18.
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`Apple also argues that Mr. Weinstein’s damages model violated the entire market value
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`rule. Id. Apple states that there was no showing that VirnetX’s patented technology drives sales
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`of Apple’s products and argues that VirnetX nonetheless presented a damages model at trial that
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`relied on percentage-based rates applied to Apple’s end-product revenues. Id. at 19. Apple argues
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`that VirnetX introduced testimony regarding its licensing policy, which applies a one to two
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`percent royalty rate to end-product prices, then relied on the percentage-based royalty rates in its
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`VoIP licenses, which are applied to end-product prices. Id. Apple further contends that VirnetX
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`elicited the price of the licensees’ products and compared that price to the price of Apple’s accused
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`devices. Id. Apple argues that by giving the jury these pieces of information, VirnetX invited the
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`jury to apply a percentage-based royalty to the entire revenue of the accused devices, which is the
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`same model the Federal Circuit held to be legally erroneous in the first appeal. Id.
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`Apple next contends that it is entitled to a partial offset of any damages award for products
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`that are already licensed, including, for example, accused devices that already include Skype. Id.
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`at 20. Apple states that Skype is available for download on the accused devices and argues that
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`these devices that contain Skype are already licensed, rendering any award for those devices
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`impermissible. Id. (citing Aero Prods., Int’l v. Intex Recreation Corp., 466 F.3d 1000, 1017, 1019
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`(Fed. Cir. 2006); Bowers v. Baystate Techs., Inc., 320 F.3d 1317, 1327-28 (Fed. Cir. 2003).
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`Finally, Apple argues that no reasonable jury could award more than $25.2 million in
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`damages. Id. at 21. Apple states that the $1.20 per-unit rate offered by Mr. Weinstein and adopted
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`by the jury is the economically unsound average of Mr. Weinstein’s translated per-unit rates from
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`the five VoIP licenses and the Microsoft license. Id. Apple contends that of the licenses
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`considered by Mr. Weinstein, only the Microsoft license was comparable because it was the only
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`license to include products with as many features as the accused products. Id. Apple states that
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`Mr. Weinstein admitted that his rate for the Microsoft license, $0.19 per unit, was flawed because
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`it did not account for Microsoft’s foreign sales. Apple argues that Mr. Weinstein admitted that if
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`these sales were taken into account, the royalty rate would be $0.10 per unit, which would lead to
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`a damages award of approximately $25.2 million. Id.
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`In response, VirnetX argues that Apple is inappropriately re-urging its failed Daubert
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`motion against Mr. Weinstein’s theory and requests that the Court decline to consider Apple’s
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`Rule 50 arguments relating to his damages theory. Docket No. 1065 at 8 (citing Rembrandt
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`Wireless Techs., LP v. Samsung Elecs. Co., Ltd., et al., 2016 WL 362540, *3–4 (E.D. Tex. Jan.
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`29, 2016) (declining to consider JMOL arguments previously made in a Daubert motion and
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`stating that “[t]he Federal Circuit held that a JMOL is not the appropriate context for renewing
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`attacks on an expert’s methodology”)). VirnetX further states that Apple’s arguments are factually
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`and legally incorrect and that VirnetX has met its burden of proof on damages through Mr.
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`Weinstein’s tesimony. Id.
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`VirnetX states that Mr. Weinstein’s damages opinions were properly apportioned and
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`based on comparable licenses. Id. at 9. VirnetX contends that Mr. Weinstein’s analysis was based
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`on actual agreements in which companies paid an apportioned value to VirnetX for the patented
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`technology and that he therefore did not need to present all the details of how the VirnetX licensing
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`policy was apportioned to the patents-in-suit because the real-world market had already done the
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`apportionment for him. Id. VirnetX argues that Apple’s argument against Mr. Weinstein’s
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`damages is therefore one of evidentiary weight and is not an appropriate ground for judgment as a
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`matter of law. Id. at 12.
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`VirnetX further states that Mr. Weinstein properly apportioned his royalty rate to account
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`for unpatented technology. Id. VirnetX argues that the fact that VirnetX charges less as products
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`become more complex, as reflected in the different royalty rates charged to companies, shows that
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`Mr. Weinstein’s model is apportioned to Apple’s products. Id. at 13. VirnetX also argues that the
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`fact that the per-unit rate applied to Apple is much lower than the one to two percent of revenue
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`that VirnetX licensees typically pay. Id. VirnetX states that Apple has no legal support for its
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`argument that Mr. Weinstein was also required to identify the value of the unpatented features of
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`the accused products and contends that Apple’s damages expert, Christopher Bakewell, also failed
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`to identify the value of these features. Id. VirnetX further argues that Apple has cited no evidence
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`that its customers use the unpatented elements of the VPN on Demand and FaceTime or that the
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`features provide any value to its customers. Id. at 14.
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`VirnetX next states that Mr. Weinstein properly accounted for the differences between
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`VirnetX’s licenses that support his damages theory and the hypothetical negotiation by carefully
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`distinguishing facts related to the comparability of VirnetX’s licenses in discussing Georgia-
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`Pacific Factor 1. Id. at 15. VirnetX argues that the Federal Circuit has already