Friday, August 31, 2012

Comparisons with VRNG: Apple Sanctioned In VirnetX Patent Case For Obstructing 'Unfavorable Testimony

Apple Sanctioned In VirnetX Patent Case For Obstructing 'Unfavorable Testimony

In VRNG Case, we should expect a lot of current and former Google employees to be called.

This will be a big drag on Google in court.

We should EXPECT GOOGLE to use similiar dirty tricks and setting themselves up for sanctions.

"The court handed down a particularly clever and creative set of tailored sanctions, giving Apple the choice between two options:
Option 1: In addition to paying VirnetX the costs associated with this particular issue, Apple must also produce the engineer again for further deposition by VirnetX. Apple is banned from communicating with witness regarding the patents. If Apple attorneys have had conversations with the engineer since the deposition was interrupted, they are deemed to have waived any confidentiality of those conversations. Meaning, VirnetX is free to ask questions regarding those discussions and the witness must truthfully answer all questions about any communication. Apple, on the other hand, will not be able to ask the witness questions about the comparison of the two patents.
Option 2: Apple is not allowed to call the engineer to the stand at trial or provide ANY rebuttal or counter arguments of the engineer's testimony regarding the comparison of the two patents. In addition, (and here is the kicker) the jury will receive instruction at trial that Apple's interference was improper and that "…Apple's counsel's reason for terminating the deposition was to prevent such unfavorable testimony from being presented to you in this case."
On Wednesday, a court order was handed down which may have severely damaged Apple's (AAPL) defense in its patent infringement case with VirnetX (VHC). The judge in the case largely adopted and granted VirnetX's proposed sanctions against the Cupertino-based tech firm. Sanctions are penalties used by courts to reprimand or correct the damage done by an attorney for violating rules or abusing the judicial process. The sanction in this case came about in light of Apple's actions in interfering with a witness deposition.
Much is at stake for both companies in the litigation. The order for sanctions may significantly better VirnetX's position in its legal wrangling with Apple, helping it to secure a license for potentially billions of dollars in future sales. For Apple, the sanctions put it at an increased risk of paying damages, future royalties, and facing potential injunction of sales of its top products.
Earlier this year, VirnetX interviewed an Apple software engineer in preparation for the upcoming trial. During the deposition, the court ordershows the engineer testified that he worked extensively to help develop Apple's "VPN On Demand". VPN On Demand is in many ways at the heart of Apple's alleged infringement in this case.
According to Apple's documentation, VPN On Demand is used to "…establish a connection automatically when accessing predefined domains, providing a seamless VPN connectivity experience for iPad users." VPN On Demand is critical for Apple for several reasons. Without this feature, VPNs on the iPhone must be manually established, with many apps unable to connect without this access. Furthermore, this functionality found throughout Apple devices.
VPN On Demand is very relevant to the current patent case as VirnetX is alleging that any Apple product with VPN On Demand functionality infringes on its patents, which claim the methods to trigger secure communication links and VPNs (virtual private networks) based on DNS lookups. These alleged infringing products include the Apple iPhone, iPhone 3G, iPhone 3GS, iPhone 4, iPod Touch, and iPad. VirnetX will likely seek an injunction to halt sales of this wide range of products, which would completely cripple the company and directly impact Apple's bottom line. Furthermore, a license to VirnetX's patent portfolio will easy cost the company hundreds of millions, if not billions, in royalties in the long run.
During deposition, the software engineer claimed to have invented the method of "determining whether to establish a VPN based on a domain name" for Apple's VPN On Demand. The witness continued to explain how he and his team had attempted to patent this very idea via patent application 10/940,225.

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