Apple's $370 Million Video Call
Nov 7th 2012 6:02PM
Updated Nov 7th 2012 6:04PM
Who would have imagined that Apple's (NAS: AAPL) FaceTime video calling service, which is free for users, could end up costing the company so much?
The iPhone maker has just been ordered to pay $368.2 million to patent troll VirnetX Holdings (ASE: VHC) after Apple was found to be infringing on VirnetX's patents related to virtual private network, or VPN, technology. A federal jury in Texas ruled that FaceTime uses VirnetX's patents that involve using a domain name service to set up a VPN, which can then be used to set up a secure line of communication.
Two years ago, VirnetX scored a similar victory over Microsoft (NAS: MSFT) relating to the same technology, earning itself a $200 million settlement in the process. The $368.2 million that Apple's now on the hook for is a little over half of the $708 million in damages that VirnetX was initially seeking, but the Mac maker will certainly appeal at this point.
This is a major win for VirnetX, but little more than an annoying pinprick in Apple's side. VirnetX had just $36,000 in royalty revenueÂ through the first half of 2012, up from $17,000 in the same period a year ago. At the end of June, it had $63.8 million in cash and investments classified as available for sale. In contrast, Apple just cleared $36 billion in revenue last quarter and now sits on over $120 billion in cash and investments.
VirnetX also has pending claims against other tech companies like Cisco Systems (NAS: CSCO) , Avaya, and Siemens, so this victory could give it some ammo in those suits.
FaceTime is a key selling feature of the iPhone 5, a new device that Apple investors have been looking forward to for months. The stakes are high and the opportunity is huge, so to help investors understand this epic Apple event, we've just released an exclusive update dedicated to the iPhone 5 launch. By picking up a copy of our premium research report on Apple, you'll learn everything you need to know about the launch, and receive ongoing guidance as key news hits. Claim your copy today by clicking here now.
The article Apple's $370 Million Video Call originally appeared on Fool.com.Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services recommend Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.