Cisco Beat VirnetX, Keeps More Than Quarter Billion Dollars - The UpStream

Cisco Beat VirnetX, Keeps More Than Quarter Billion Dollars

posted Saturday Mar 16, 2013 by Scott Ertz

Cisco Beat VirnetX, Keeps More Than Quarter Billion Dollars

It has only been a few months since Apple lost a patent suit to VirnetX, a publicly traded IP company. Apple's loss had to do with a very broad patent that the court decided covered FaceTime, Apple's Skype service. Apple's loss cost them $368 million. VirnetX was not so lucky this week, as they lost their case against Cisco, which would have earned them $258 million in damages.

After a hung jury and the judge encouraging continued deliberation, the jury decided against VirnetX and their equally broad Virtual Private Networking patent. Their stock price has fallen massively on the heels of the loss, dropping 40 percent, seemingly all at once. While patent trolling can be incredibly lucrative business, it requires confidence to continue suing and hoping for settlements.

Microsoft settled with VirnetX in 2010, becoming the company's first official licensee. Patent trolls always hope that a company will not fight and will, instead, settle and agree to royalty payments for the technology in question. While Intellectual Property is an important aspect of engineering, patent trolls like VirnetX rely on early, incredibly vague patents, usually involving Internet or communication patents, like the ones in question here and with Apple.

If the patent is vague enough, it can theoretically cover anything. For example, Yahoo's patent case against Facebook included a patent which read "Control for enabling a user to preview display of selected content based on another user's authorization level." It would certainly appear that Yahoo has a patent for the Web, based on that text.

The other side of vagueness is that it is easy for a patent to be dismissed. That is, likely, what will end up being the case for VirnetX in this case. Any licensing they have received may have to be returned, and no future licensing can take place if there is no valid patent. Obviously, having the patent invalidated would be a huge hit to the company, explaining the MASSIVE stock price drop.

With time, most of these vague patents will get closed up, but it certainly makes the current legal landscape a bit of a minefield.


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