VirnetX Holdings Corp. (VHC) saw its stock plunge almost 14% on Friday amid news that the U.S. Patent and Trademark Office deemed four of its patents—allegedly infringed upon by Apple Inc. (AAPL)—were invalid, reports Bloomberg. The internet security software and technology company generates its income largely through licensing its technology to consumers and defending intellectual property through patent litigation.
A Brief History of the VirnetX-Apple Patent War
The Zephyr Cove, Nev.-based company’s litigation war against Apple began in 2012, with Apple’s alleged violation of four VirnetX patents assigned to the company by Science Applications International Corp. in 2006. Apple was first ordered to pay $368.2 million to VirnetX, but an appeals court ruled in favor of Apple, and a retrial was scheduled for February 2016. The court then ordered Apple to pay $625.6 million to VirnetX for infringing on the same four patents. But in August, a federal judge threw out the verdict, ordering a new trial to start in just a few weeks. (See also: Apple Loses to VirnetX in Patent Case.)
The upcoming trial will mark the third time Apple and VirnetX square off in the courtroom. All patents will remain legally valid and enforceable until all appeals are decided. But even then, VirnetX can further its case by taking its case to the U.S. Court of Appeals for the Federal Circuit in Washington.
Company and Stock Response
VirnetX CEO Kendell Larsen says, “If you’re trying this, and trying to put this out to the shorts and hurt VirnetX stock, this is what you do. The Federal Circuit is going to make the final determination.”
Apple and VirnetX will meet in Tyler, Texas for their third court session, the jury set to be determined on Sept. 26. Apple has asked for a postponement of the trial until after the patent office reviews are considered, while VirnetX has asked for a reinstatement of the original verdict. Courts and agencies look at patents in fundamentally different ways with the former assuming patents to be valid while the latter does not. So it's not unusual to have the two organizations concluding in opposition to each other.
VirnetX stock tradesd at $2.53 as of midday Monday, representing a 20% drop from its peak of $3.07 on Friday and almost a 7% recovery from market open.
The news continues the years-long saga between tech giant Apple Inc. and VirnetX Holdings, a spinoff of a government contractor with a reported $1.6 million in revenue for 2015. (See also: VirnetX Stock Surges 50% on Apple Patent Win.)