updated 07:00 pm EDT, Fri August 30, 2013
Apple allegedly spending $2.4M per month to reroute video calls
A rare patent suit loss for Apple back in November of last year is costing the company dearly both in money and reputation as it struggles to work around the affected patents owned by VirnetX for its FaceTime video calling service. In addition the $368 million Apple will pay VirnetX for past infringement of a VPN patent (pending appeal), Apple is now working around the patent to avoid further infringement, and the company's solutions to that are both expensive and not working as well, causing customer complaints.
Apple is said to be paying some $2.4 million per month to lease relay servers to handle the routing and connection of FaceTime calls, a heavily-advertised feature of OS X and iOS that lets users simply and easily engage in video calls without complicated setups. The technology relied heavily on VPN connections of a sort patented by VirnetX, but which ironically Apple's workarounds prove should be a standards-essential patent and governed accordingly.
VirnetX has taken the opposite view, arguing that the workarounds prove that the patent is worth more than it is currently charging for them. However, Cisco recently won a similar lawsuit brought by VirnetX against it, offering some hope to Apple's appeal of the ruling.
In order to avoid further infringement and subsequent penalties while it negotiates a license and royalty structure with VirnetX, Apple is now using relay companies to complete FaceTime connections. According to a VirnetX investor contacted by Ars Technica, only about five to 10 percent of FaceTime calls used to require being handled by relay servers, with most going through direct VPN connections.
Because all FT traffic must now be handled by relay servers, Apple has reportedly received more than 500,000 complaints about the service, which continues to work well for the majority of users. The $2.4 million per month Apple is reportedly spending now is far less than the $331,000 per day it would cost the company to continue to use the VirnetX patents while the two companies work out an agreement.
Investor Jeff Lease, who took notes during both the jury trial and a recent conference meeting on the VirnetX case, says that VirnetX is looking for payments of around $700 million for past FaceTime royalties. The two companies are in negotiations, but the judge overseeing the case hasn't yet made a ruling on whether Apple's workarounds are legal, or how much the iPhone maker should have to pay VirnetX for its past infringement.