A federal jury in Texas has ordered Apple Inc. to pay $532.9 million in a patent infringement case brought by a Texas company regarding patented inventions that the company said iTunes used without permission in software and games. Apple pledged to appeal.

The plaintiff, Smartflash LLC claimed that Apple infringed three patents related to digital rights management and inventions comprising data storage as well as managing access through payment systems, and alluded their use in apps such as Game Circus  LLC’s 4Pics 1 Movie and Coin Dozer.

Kristin Huguet, an Apple spokeswoman was quoted saying that Smartflash makes no products, has no employees, or U.S. presence and creates no jobs, and is simply exploiting the U.S. patent system to seek royalties for technologies that Apple has invented. Further adding that,Apple refused to pay off to Smartflash for the ideas and technologies that it employees spent years and years innovating.

Apple Fined in iTunes Patent Infringement Case

Earlier, several game companies, including Game Circus and KingsIsle Entertainment Inc., which has been taking advantage of the technologies chose to settle out of court with Smartflash, leaving Apple stranded alone in the patent war.

Originally, Smartflash sought $852 in damages, arguing that it was entitled to a percentage of sales of Apple products, including the iPad, iPhone and Mac computers that were used to access iTunes. Apple witnessed sales of $18 billion for iTunes, software and services in the previous fiscal year, which is about 10 percent of the company’s total revenue. Smartflash claimed that more than a decade ago, an Apple executive had been given a briefing on the technology, and now, Apple has been intentionally infringing the patents,

Cupertino-, California-based Apple tried to get out of paying royalties arguing that the infringed features weren’t the sole reason why consumers bought iPhones. Apple argued that the infringed patents were worth $4.5 million at most. Representing lawyer Eric Albritton put it together saying, people do not buy cellphones for the sole purpose of using apps.The federal jury in Texas rejected Apple’s argument that it didn’t use the technology and that the patents were invalid.

The court ruled in favor of Smartflash, but chose not the award the entire sum of $852 million that the company was seeking.

Smartflash was started by inventor Patrict Racz in the early 2000s in an effort to commercialize his ideas. According to a court filing, at one point, Racz was even offered less than #200,000 for one of his patents.

As per the complaint, Racz met with executives of Gemalto SA, including Augustin Farrugia, now a senior director at Apple. Farrugia is the director of security at Apple and is much-admired in the world of tech for designing the national banking system for Singapore in the 1990s.

Smartflash doesn’t have any products in the market, with its income coming from licensing the seven patents it issued between 2008 and 2012. It isn’t just going after Apple, the company is reportedly planning to sue Samsung and Google, and had previously sued Amazon.com as well.


Apple’s lawyer, John Ward of Ward & Smith in Longview, Texas told the jury that Apple doesn’t respect Smartflash’s inventions, and that not even a single witness could be bothered with reviewing the patent.

In fact, Apple attacked every aspect of Smartflash’s case. It argued that the patents were invalid and weren’t infringed by any means. It also said that Smartflash did not have complete control of the patents and that it waited for a long time to file a suit. It even argued that Smartflash’s royalty demands were unsupportable and excessive.