In the latest case, Smartflash LLC v. Apple Inc., Apple was ordered by a federal jury to pay $532.9 million in damages to Smartflash LLC in a Texas courtroom. Smartflash is a small company that successfully took down Apple over intellectual property rights. Smartflash claims Apple infringed on three of their patents. They originally sought $852 million in damages while Apple contested that damages should be limited to $4.5 million. Smartflash has also sued Samsung and Google using the same patents pertaining to digital rights management, data storage, and managed access payment systems.
In court, Apple argued that Smartflash is a non-practicing entity because they don’t manufacture any of the technology they own; therefore, they are exploiting the patent system, and their patents are invalid. Smartflash may be a non-practicing entity, but they do own and license their intellectual property, which Apple has just been found guilty of infringing. Also, non-practicing is not a legitimate reason for invalidating a patent.
Small companies sue corporations like Apple for infringement all the time. Smartflash LLC v. Apple Inc. is unique because Smartflash’s inventor, Patrick Racz met with Apple senior director Austin Farrugia more than a decade ago when Racz was trying to commercialize his concepts. This was before Farrugia acquired his position at Apple, but it provides an additional connection from Racz to Apple.
Some say that cases like this may be using the US Patent system in a way other than it was originally intended, but they are not exploitative by nature. It is crucial for small companies to be able to assert their intellectual property rights against corporate giants like Apple.
These non-practicing entities have a clear strategy that seems to be working for them. They are first asserting their patents against Apple and then asserting their claims against Apple’s competitors. Even if Apple files an appeal, which they will, Smartflash now has a precedent of winning these claims against Apple. This could weigh in their favor when they challenge Samsung and Google in upcoming litigation.
Google Inc. has also been sued by Smartflash LLC, and Google is trying to have its case transferred to a California court. There is no word on whether they will succeed in transferring the case outside of Texas. These cases are rarely granted a venue transfer, but Google did succeed transferring a case from Texas to California late last year due to mitigating circumstances. Smartflash’s upcoming litigation has yet to be scheduled, but after the win against Apple, this may yet be a lucrative year for Smartflash.
Source: Bloomberg Business