Jersey inventor launches fresh £18bn legal challenge against Apple

Tuesday 25 April 2023

A Jersey inventor has launched a new legal challenge against Apple after claiming the electronics behemoth owes him $18bn for the technology behind the App Store and iTunes – which he says he invented in the late 1990s.

In 2015, Patrick Racz and his company Smartflash LLC won $533 million in compensation for patent infringement by Apple over a number of patents which covered the technology that powers iTunes, and the way that customers can buy and download music.

However, his multi-million damages victory was then thrown out two years later after the US Patent and Trademark Office officially dubbed his patents "invalid", and the Court of Appeals dismissed the verdict altogether in March 2017.

In 2018, the US Supreme Court said that they would not be prepared to listen to a further challenge by Smartflash, and the Court of Appeals upheld the Patent Office’s conclusions. This suggested that Mr Racz's hard-fought battle against Apple had finally come to an end.

Pictured: Mr Racz claims that Apple's iTunes store takes advantage of the technology he first developed in the late 1990s.

However, last week, The Times reported that – armed with evidence gleaned from freedom-of-information requests and with $50m of private-investor backing – Mr Racz was set to resume legal proceedings.

"The technology I invented allowed Apple to become the biggest company in the world, and I still haven’t earned a penny," Mr Racz told the newspaper. 

"After 21 years of fighting for justice, the time has come for me and my long-suffering investors to finally get paid."

And this week, it was reported that Mr Racz has announced the launch of a civil RICO investigation into Apple, Inc. The RICO – Racketeer Influenced and Corrupt Organizations Act – is a federal law that allows for the prosecution of individuals or organisations engaged in illegal activities as part of a larger criminal enterprise.

The investigation will focus on allegations of theft of Smartflash's intellectual property and circumstances relating to the unlawful invalidation of patents.

Mr Racz claims that he developed the capability – which includes digital media players and content provision systems to allow for secure downloads and payments – to help monetise the digital music industry in the face of what seemed to be potentially threatening developments. He filed seven patents in 1999. 

At the time, he signed up American singer-songwriter Britney Spears as a brand ambassador for his company Smartflash.

Video: Britney Spears appears in a video endorsing a product created by Smartflash. (YouTube/Poisonparadiseaddict)

But in 2003, Apple unveiled its iPods and its iTunes store – which allow secure online purchase of individual songs and albums – which Mr Racz claims take advantage of the technology he first developed. He claimed other companies, including Samsung and Google, were also profiting from his invention.

After Mr Racz's $533m of damages were quashed by the US Courts of Appeals, Apple released a statement saying: "Smartflash makes no products, has no employees, creates no jobs, has no US presence, and is exploiting our patent system to seek royalties for technology Apple invented."

They added that they refused to "pay off" the company for the ideas its employees spent years innovating, and said they had no choice but to take up the fight in the court system.

Pictured: Apple says that they refuse to "pay off" Smartflash for the ideas its employees spent years innovating.

However, Mr Racz claims that "Apple's actions are not solely restricted to wilful patent infringement, but also form part of a more significant pattern of wrongful activity.

"We are committed to protecting our intellectual property and to holding Apple accountable for their actions."

The most recent civil RICO investigation is being led by a team of legal experts and will focus on gathering evidence to support Smartflash's claims.