Bloomberg News

VirnetX Loss in Apple ITC Case Will Stand, Agency Says

August 20, 2012

VirnetX Holding Co. (VHC:US) lost a bid to revive a patent-infringement case against Apple Inc. (AAPL:US) at the U.S. International Trade Commission, the agency said today. VirnetX said it will file a new complaint against Apple.

The commission said it will let stand a trade judge’s decision to terminate the case after he found that SAIC Inc. had ownership rights and should have been a party to the case. “The commission has terminated the investigation,” the agency said in a notice posted on its website.

VirnetX fell (VHC:US) as much as $3, or 12 percent, to $22.50 after the close of trading in New York. The company has said it’s entitled to royalties from Apple and filed the complaint, which posed the threat of a ban on imports of devices including the iPhone, iPad and Mac computer. Apple’s devices are made in Asia. It didn’t specify when it would file the new complaint against Apple at the agency.

“We believe in merits of our case against Apple,” Kendall Larsen, chief executive officer of Zephyr Cove, Nevada-based VirnetX, said in a statement. “We will continue to defend against any unauthorized use of our intellectual property by all means available to us under the U.S. legal system, including in the ITC.”

The patent, issued in November, is for a way of establishing a secure link between two computers in a virtual private network. VirnetX also has sued Cupertino, California- based Apple in a federal court in Texas, accusing it of infringing related patents.

Ownership Question

VirnetX was formed by former workers of SAIC, (SAI:US) a McLean, Virginia-based U.S. defense contractor. The federal judge in Texas ruled in March that, under the terms of a 2005 agreement, SAIC should be joined as a party in the case because it retained an interest in the patents. VirnetX has said the technology stemmed from work done for the U.S. Central Intelligence Agency.

VirnetX, which said it believed SAIC no longer had an interest, refiled the Texas suit with SAIC as a party. It then sought to amend the ITC case to add SAIC there as well. ITC Judge David Shaw rejected that request, saying VirnetX was aware of the ownership issue and didn’t follow the rules in how to file a complaint. He then terminated the investigation.

VirnetX said it believed it was the sole owner of the patent when it filed the complaint and that Shaw’s refusal to let SAIC join the case was unfair.

Apple Arguments

Apple said that VirnetX has been told by multiple courts that it needed to include SAIC as a party, including a case that ended with a $200 million settlement with Microsoft Corp. in 2010.

VirnetX failed to submit documentation to support its claim to sole ownership of the patent until after it received the March decision from the Texas court, Apple said in a filing with the agency.

Kristin Huguet, a spokeswoman for Apple, said the company had no comment.

The case is In the Matter of Certain Devices with Secure Communication Capabilities, 337-818, U.S. International Trade Commission (Washington).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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Companies Mentioned

  • VHC
    (VirnetX Holding Corp)
    • $5.63 USD
    • 0.17
    • 3.02%
  • AAPL
    (Apple Inc)
    • $104.7 USD
    • -0.13
    • -0.12%
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