Tuesday, September 16, 2014

Apple escapes the Nash Bargaining Solution in VIRNETX case

from VIRNETX v. Cisco and Apple :

For the reasons that follow, we affirm the jury’s findings
that none of the asserted claims are invalid and that
many of the asserted claims of the ’135 and ’151 patents
are infringed by Apple’s VPN On Demand product. We
also affirm the district court’s exclusion of evidence relating
to the reexamination of the patents-in-suit. However,
we reverse the jury’s finding that the VPN On Demand
product infringes claim 1 of the ’151 patent under the
doctrine of equivalents. We also reverse the district
court’s construction of the claim term “secure communication
link” in the ’504 and ’211 patents and remand for
further proceedings to determine whether the FaceTime
feature infringes those patents under the correct claim
construction. Finally, we vacate the jury’s damages
award and remand for further proceedings consistent
with this opinion.

Of the Nash bargaining solution:

For the reasons that follow, we agree with the courts
that have rejected invocations of the Nash theorem without
sufficiently establishing that the premises of the
theorem actually apply to the facts of the case at hand.
The use here was just such an inappropriate “rule of


Indeed, Weinstein’s thin attempts to
explain his 10% deviation from the 50/50 baseline in this
case demonstrates how this methodology is subject to
abuse. His only testimony on the matter was that although
he “considered other splits,” he ultimately determined
that a 10% deviation—resulting in a 45/55 split—
was appropriate “to reflect the fact that Apple would have
additional bargaining power over VirnetX back in . . .
2009.” JA. 1708–09. Such conclusory assertions cannot
form the basis of a jury’s verdict. See Gen. Elec. Co. v.
Joiner, 522 U.S. 136, 146 (1997) (noting that where an
expert considers relevant material but fails to provide an
opinion explaining how that material leads to his conclusion,
“[a] court may conclude that there is simply too
great an analytical gap between the data and the opinion


Although the result of
that equation would be mathematically sound if properly
applied by the jury, there is concern that the high royalty
base would cause the jury to deviate upward from the
proper outcome. Id. Thus, in Uniloc, we noted that “[t]he
disclosure that a company has made $19 billion dollars in
revenue from an infringing product cannot help but skew
the damages horizon for the jury, regardless of the contribution
of the patented component to this revenue.” Id.
Similarly, here, the use of a 50/50 starting point—itself
unjustified by evidence about the particular facts—
provides a baseline from which juries might hesitate to
stray, even if the evidence supported a radically different

WILLIAM F. LEE of Wilmer Cutler Pickering Hale and
Dorr, LLP, of Boston, Massachusetts, argued for defendant-
appellant Apple.

**Reuters covered the CAFC decision as follows:

A federal appeals court on Tuesday [Sept. 16, 2014] threw out a jury order requiring Apple Inc to pay VirnetX Holding Corp $368.2 million in damages for infringing four patents concerning technology for providing security over the Internet.

Shares of VirnetX plunged as much as 59.8 percent after the U.S. Federal Circuit Court of Appeals in Washington ordered a new trial, and said the damages award was based on defective jury instructions.

VirnetX derives most of its revenue from patent licensing.

**In other news relating to Apple, from Apple's $100 million U2 debacle :

That leaves two lessons for Apple. One is never, never, never to let those over 40 decide what music they think younger consumers are bound to think is cool. The other is that, with $100 million in expense and 2 million downloads, $50 an album for a digital release is probably a bit much. Especially when you don't get the collector's version special cover art? Ah, well, Apple will weather this as it has other challenges and continue to rattle and hum along.


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