Apple faces $533m iTunes patent payout

iTunes Image copyright APple
Image caption Apple was accused of knowingly using inventions owned by another business in iTunes

Apple has suffered a patent defeat involving some of the technologies it uses in its iTunes store.

The company has been ordered to pay $533m (£344m) to Smartflash, a British Virgin Islands-based firm that owns and licenses tech-related patents but does not make products itself.

Smartflash had asked for a bigger payout, but said it was "happy" with the verdict.

Apple said it intended to appeal and called for patent reform.

"We refused to pay off this company for the ideas our employees spent years innovating and unfortunately we have been left with no choice but to take this fight up through the court system," the iPhone maker said in a statement.

Apple's defeat by Smartflash is the latest in a series of victories by companies referred to as non-practising entities (NPEs), and denounced by their critics as being "patent trolls".

Earlier this month, Samsung was ordered to pay Rembrandt IP $15.7m for infringing two Bluetooth-related patents, and security firm Symantec was told to pay Intellectual Ventures $17m for using two anti-malware inventions it owned.

The scale of the penalty imposed on Apple was, in part, determined by the fact that the jury felt the tech giant had not only used Smartflash's intellectual property without permission, but had also done so "wilfully" - meaning it had been aware of the infringement.


The jury found in Smartflash's favour in all three of the patents involved in the case.

The intellectual property filings described techniques to manage the storage of audio and video files, apps and games, including ways to ensure the data had been purchased properly before being allowed to run on a portable device.

Smartflash had sought $852m in damages for Apple's unauthorised use of the patents, basing its calculation on the number of Mac computers, iPhones and iPads that had been sold.

Apple had attempted to argue that the patents were either invalid or worth less than $5m.

According to the Bloomberg news website, Smartflash will next go to trial against Samsung in a related dispute.

It said the company had also sued Amazon and Google.

NPEs accounted for more than half of all patent cases filed in the US, according to a report published by PricewaterhouseCoopers last year. It said most were settled out of court or dismissed.

President Obama has urged Congress to "combat patent trolls" by reforming the legal system they operate in.

But others note that NPEs can play an important role by creating a market for inventions developed outside the largest company's labs.

"If you are a small start-up, a university or other researcher you may not be able to bring a product to market that would take billions of dollars to develop and would compete with the established big players," said Ilya Kazi, from the Chartered Institute of Patent Attorneys.

"But you may have come up with a genuine innovation, and there is a role to be played to protect that innovation and extract a royalty for it."

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