Jersey inventor loses $533 million damages after battle with Apple

Friday 03 March 2017

A US appeals court has overturned a jury verdict that would have seen a Jersey inventor paid $533 million by Apple following a conflict over iTunes technology.

Smartflash LLC – a company owned by islander Patrick Racz – was due to be awarded the half a billion damages sum after a February 2015 jury trial found Apple guilty of breaching patents related to song storage and online payment technology.

The company had previously worked on a digital media player, which was set to be endorsed by Britney Spears on her 2002 tour. However, the popstar pulled out of the deal after the tour was cancelled following 9/11.

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

Despite this, a three-judge federal appeals court panel thought that the patents should have been thrown out much earlier for being too “abstract” and not relating to any firm ideas.

This decision may put an end to a long-term patent row that started in 2013 when Smartflash sued Apple, alleging that Mr Racz had shared his ideas with a man who later became a senior director at Apple.

While US District Judge Rodney Gilstrap upheld the view of the jury that Apple had breached the patents, a retrial was ordered over the quantity of damages to award.

The iPhone makers later took an appeal to the Federal Circuit. They decided this week that Judge Gilstrap should have concluded that Mr Racz’s patents were invalid himself.

With the lawsuit filed in popular patent district Texas, Mr Racz came up against accusations of being a ‘patent troll’ – a pejorative term a person or company who do not manufacture products or supply services.

Pictured: A product created by Smartflash in the early 00s, which was endorsed by Britney Spears. (Image: YouTube/Bailiwick Express)

At the more extreme end, Mr Racz claimed to have even received anonymous death threats.

In a Huffington Post article – Mr Racz’s only public defence - he said: “The truth is that 16 years ago I had the foresight to invent something new and truly inventive that would play a leading part in changing the way we pay for and access content. The United States Patent and Trademark Office also believed this to be the case, which is why our patents were granted in the first place.”

“…One thing I can guarantee is that I won’t be lurking under a bridge anytime soon. Inventor? Yes. Patent troll? No.”

But the closure of the Apple case isn’t the end of the line for the Jersey inventor – Smartflash has brought a similar case against Samsung, as well as Google and Amazon. The legal challenges remain pending.