Apple’s Success Reversing Patent Cases May Dim CalTech’s Win

(Bloomberg) — If any company knows how to get rid of a billion-dollar patent-infringement verdict, it’s Apple Inc.

Apple pledged to appeal Wednesday’s $1.1 billion verdict won by California Institute of Technology, in which it was told to pay $838 million and its chip supplier Broadcom Inc. was hit with $270 million in royalties by a federal jury in Los Angeles. Apple is counting on its past history challenging such verdicts to mean good odds for the future.

In the past decade, the iPhone maker has evaded a $533 million verdict over controlling digital content, a $506 million judgment over microprocessor technology and a $625.5 million verdict for a way to display documents. In cases Apple hasn’t won, the company keeps fighting — it’s been embroiled in a decade-long fight to avoid paying as much as $1 billion over secure communications to VirnetX Holding Corp.

“They are certainly one of the most targeted entities out there, so it makes sense for them to aggressively defend themselves when they don’t see a path to settlement,” said Jonathan Stroud, chief intellectual property counsel for Unified Patents LLC, which challenges patents used in litigation against its members, including Apple. “Otherwise they’ll be seen as an ATM and continue to be targeted regardless.”

Led by Chief Litigation Counsel Noreen Krall, Apple’s strategy has been geared to maintaining the company’s high-profit margin. That means waging a years-long battle with Samsung Electronics Co. when Apple thought the Korean electronics maker had copied iPhone designs and a no-holds-barred fight with chipmaker Qualcomm Inc. to lower royalties it pays on critical telecommunications technology.

The cases don’t always end in complete victories. Apple continued to lose market share to Samsung, and its battle with Qualcomm ended in a settlement where it paid the chipmaker billions of dollars and agreed to start using its chips again.

“This is just the starting point,” said Bridget Smith, a lawyer with Lowenstein & Weatherwax in Los Angeles, of Wednesday’s verdict. “They’re still going to have to win on appeal.”

Apple also has been accused of being a bully when it comes to using other companies’ inventions. Medical device maker Masimo Corp. claims Apple stole health monitoring technology, and a Florida company that makes “virtual iPhones” to test for flaws has accused Apple of trying to control security research.

The big-dollar verdicts against Apple are in part because of its size. The $838 million won by CalTech is less than two days’ worth of sales for Apple and is equal to less than 2% of the company’s $55.3 billion net income in fiscal 2019.

Broadcom’s share of the verdict could mean a bigger rap to its bottom line. The San Jose-based chipmaker reported $22.6 billion in sales in the fiscal year ended Nov. 3, and net income of $2.7 billion. Broadcom fell as much as 2.8% Thursday on the news.

CalTech said it was “committed to protecting its intellectual property in furtherance of its mission to expand human knowledge and benefit society through research integrated with education.”

District Court Judge George Wu, who presided over the trial, has ordered a telephone conference Feb. 6 to determine the next steps in the case. The verdict is the sixth-largest for a patent-infringement case in U.S. history, according to data compiled by Bloomberg. No $1 billion-plus verdict has ever stood — they are tossed on appeal or settle for a lower amount.

“Less than a hundred million, there’s not a lot of attention,” said Bernard Chao, a professor at the University of Denver Sturm College of Law. “But when you get in excess of nine figures, I think you start raising eyebrows and drawing attention.”

The biggest decision won by a university was a $1.17 billion verdict won by Carnegie Mellon University against Marvell Technology Group Ltd. in 2013. An appeals court later ordered that damages be recalculated and the case settled for $750 million.

“When you have a number that big, the courts scrutinize the verdict and say ‘Is this legit?’” said Patrick McElhinny of K&L Gates in Pittsburgh, who represented Carnegie Mellon. “They typically are. As long as they are grounded in the record, they are perfectly appropriate.”

Apple and other Silicon Valley companies have been trying to lower how much patent owners can collect in damages for years. They have argued too often juries are awarding big awards when the invention is for a tiny component in a complex device.