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Apple must pay a shell company $532.9 million because iTunes infringes upon three patents related to online patents, a jury in East Texas ruled on Tuesday.
The company in question, named Smartflash LLC, is also based in Texas and doesn’t make or do anything besides file patent lawsuits, as an Apple spokesperson pointed out.
“Smartflash makes no products, has no employees, creates no jobs, has no U.S. presence, and is exploiting our patent system to seek royalties for technology Apple invented,” said Apple’s Kristin Huguet to Bloomberg, which reported the verdict, shown here in a screenshot:
Court records show that Smartflash is also suing [company]Google[/company], Samsung and [company]Amazon[/company] with the same patents.
The patents themselves have a priority date of 1999, and describe a method for “downloading and paying for data such as audio and video data, text, software, games and other types of data.”
The broad-based nature of the patents, which appear to cover basic internet-based payment transactions, could expose a variety of companies, including app makers, to royalty demands. Bloomberg noted that the complaint cited apps like Game Circus LLC’s “Coin Dozer” and “4 Pics 1 Movie” as the basis of infringement.
The huge damage figure against Apple may draw renewed attention to the role played by the District of East Texas in America’s troubled patent system, which Congress is attempting to reform for the third time in five years.
For years, patent trolls like Smartflash have chosen East Texas towns like Tyler, the site of this week’s jury verdict, where local judges and lawyers have built a cottage industry on patent litigation, drawing a stream of visiting lawyers to the town’s hotels and restaurants.
In the Apple case, Smartflash was represented before the jury by John Ward, a former East Texas judge who left the federal bench to join his son T. John “Johnny” Ward Jr., a prominent patent lawyer at a local law firm.
Apple said it will appeal the ruling.
“We refused to pay off this company for the ideas our employees spent years innovating and unfortunately we have been left with no choice but to take this fight up through the court system,” the Apple spokesperson also told Bloomberg.
Here’s the verdict, which shows the jury found Apple’s conduct to be willful — meaning Smartflash can ask the judge to triple the damages:
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