A federal jury in Texas has ordered Apple to pay $533 million in damages after it found that the company's digital media distribution services – including the iTunes Store – infringed on three patents owned by Smartflash LLC. The patents in question were allegedly used without permission in third-party games that were available from iTunes.
According to Bloomberg:
The dispute is over digital rights management and inventions related to data storage and managing access through payment systems. Smartflash claimed that iTunes used the inventions in applications such as Game Circus LLC's Coin Dozer and 4 Pics 1 Movie.
The game companies settled out of court with Smartflash, with Apple deciding to go to court on grounds that the patents in question "were invalid." Kristin Huguet, an Apple spokeswoman, said:
Smartflash makes no products, has no employees, creates no jobs, has no U.S. presence, and is exploiting our patent system to seek royalties for technology Apple invented. 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.
Smartflash does not sell products itself, with its only source of income coming from the seven patents it holds, all of which are attributed to its co-founder Patrick Racz. The company sought $852 million in damages from Apple, a number arrived at calculating a portion of iPhone, iPad and Mac device sales. Apple said that the patents were worth $4.5 million at most, with general counsel Eric Albritton arguing that there was no valid reason for the hardware giant to pay royalties on device sales when the patent dispute is over a single feature. According to the lawyer:
It doesn't make a lick of sense that one person would buy an iPhone and not make calls. People do not buy cell phones for the sole purpose of using apps.
Apple failed in its attempts to persuade the jury that the patents in question were not directly used by iTunes. The Cupertino giant also failed in its bid to get Smartflash's patents invalidated.
With the Apple case coming to a close, Smartflash is going after Samsung next. The company also sued Google and Amazon over the usage of the same patents in their respective digital distribution services. You can view Smartflash's court filing against Apple in its entirety here.