Federal Appeals Court Upholds $440 Million Patent Verdict Against Apple, Spotlighting Patent Troll Litigation Issues

In January, the U.S. Court of Appeals for the Federal Circuit rejected Apple Inc.’s attempt to overturn a 2016 patent infringement verdict, affirming that Apple must pay $302 million in damages to Nevada-based VirnetX. The court further increased the total award to $440 million to cover interest, enhanced damages, and other costs. The ruling found that Apple’s VPN-on-Demand, FaceTime, and iMessage technologies infringed on VirnetX’s patents related to secure communications.

VirnetX, a company that does not appear to commercialize the patented technology itself, disclosed in Securities and Exchange Commission filings that it currently derives minimal revenue from licensing activities. Nonetheless, VirnetX has secured over $1 billion in damages through patent litigation over the past decade, including two judgments against Microsoft totaling $223 million.

The U.S. Constitution grants patent rights to promote scientific progress by providing inventors with a 20-year monopoly on their inventions. However, patent trolls—also known as non-practicing entities (NPEs) or patent assertion entities (PAEs)—typically acquire patents not to innovate but to generate revenue through litigation. These entities often purchase low-cost patents from companies seeking to liquidate assets.

Patent law requires inventions to be novel and nonobvious, but the U.S. Patent and Trademark Office has historically granted patents for broad and vague concepts. This practice equips patent trolls with powerful legal tools to assert infringement claims against successful technologies.

The rise of patent trolls has paralleled the technology sector’s expansion. Research from Boston University School of Law indicates a six-fold increase in patent litigation between 1990 and 2010, involving nearly 5,000 unique defendants annually. Patent infringement functions similarly to a strict liability tort, where plaintiffs need not prove intent or provide prior notice before filing suit. This low barrier encourages frequent litigation.

Many litigated patents are of questionable quality. For instance, most of VirnetX’s patents are approximately 15 years old and nearing expiration. Despite this, the prospect of protracted legal battles pressures many defendants into settlements. Studies by Stanford Law and the University of Texas McCombs School of Business reveal that fewer than 1% of defendants in patent troll cases are found to have infringed valid patents. Yet about 87% settle before trial due to the high average defense cost exceeding $3.2 million.

While patent troll litigation often targets large corporations like Apple and Microsoft, data shows that 66% of defendants have annual revenues under $100 million, and 55% earn $10 million or less. Many are startups forced to alter products, business strategies, or operations, with some shutting down entirely due to litigation pressures.

Congress enacted the Leahy-Smith America Invents Act (AIA) in 2011 to combat patent troll litigation and address concerns about low-quality patents undermining confidence in the patent system. The AIA amended 35 U.S. Code § 299 to restrict the joinder of multiple defendants in patent infringement cases. Under Federal Rule of Civil Procedure 20, plaintiffs may join defendants if claims arise from the same transaction or occurrence and share common legal or factual questions. The AIA added that claims must relate to the same accused product or process, not merely the same patent, to permit joinder.

The AIA also introduced measures to streamline patent applications and enhance protections for inventors, aiming to improve patent quality and reduce litigation. Although the legislation initially slowed patent lawsuits, recent analytics from Lex Machina indicate that overall patent litigation volumes have not significantly declined.

Academic research estimates that patent litigation costs the U.S. economy over $60 billion annually, partly by diverting funds from research and development. This outcome conflicts with the Constitutional goal of fostering innovation through intellectual property rights.

Experts suggest that Congress should consider stronger reforms to prevent abuse of the patent system. Potential measures include requiring patent holders to demonstrate that they have brought inventions to market, licensed them, or made good-faith attempts to do so before pursuing litigation.

For those interested in intellectual property law, resources are available through the United States Patent and Trademark Office, including educational tools and Patent and Trademark Resource Centers nationwide. The World Intellectual Property Organization also provides global IP policy information.

Purdue Global Law School offers online legal education focused on intellectual property and technology law, including an Executive Juris Doctor degree and specialized courses. Their Juris Doctor program prepares students for patent litigation careers, with eligibility to sit for bar exams in California, Connecticut, and Indiana, subject to state-specific requirements.

Established in 1998, Purdue Global Law School is Purdue University’s fully online law school designed for working adults seeking flexible legal education pathways.