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Tyler judge sanctions Apple Inc. in patent suit

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According to law.com

TYLER (KYTX) - A federal judge in Tyler has sanctioned Apple Inc. for the conduct of one of its lawyers in a high-stakes patent case.

In an 11-page order handed down Wednesday, U.S. District Judge Leonard Davis granted a motion for sanctions requested by VirnetX Inc. and its lawyers at McKool Smith, according to online legal news website law.com.

Davis found that an unnamed Apple lawyer improperly terminated a crucial deposition of an Apple engineer during a pivotal moment of questioning. The judge ordered Apple to pay VirnetX's attorneys fees and costs associated with filing the sanctions motion. The judge also wrote that if Apple doesn't make the engineer available for a follow-up deposition, he will instruct jurors that they can infer that Apple tried to block them from hearing damaging evidence.

Davis's order doesn't identify the Apple lawyer who handled the deposition, and the related briefs are under seal.

According to court documents, Apple is represented in this case by Houston-based Williams Morgan & Amerson and Longview's Albritton Law Firm. Kenyon & Kenyon also advises Apple in an of counsel role, and represents Apple in a separate International Trade Commission case brought by VirnetX.

VirnetX, which licenses patents relating to Virtual Private Network (VPN) technology, has been giving tech companies headaches for years. Its lawyers at McKool won a $105 million jury verdict against Microsoft Corporation in 2010, which Microsoft settled, along with another case, for $200 million. Emboldened, VirnetX and McKool soon after sued Apple, Cisco Systems Inc., Aastra Technologies Ltd., and NEC Corporation. (Aastra and NEC Corporation have settled for undisclosed amounts).

The sanctions motion stemmed from the April 6 deposition of Christophe Allie, an engineering manager at Apple who helped develop "VPN on Demand" for iPhone  - the service that allegedly infringes VirnetX's patents. VirnetX's lawyer asked Allie about his attempt to patent the idea of using a domain name to determine whether to establish a VPN, an idea which VirtnetX claims is covered by one of its patents. When VirnetX's lawyer asked Allie if he knew about VirnetX's patent, he said he didn't. VirnetX's lawyer read part of VirnetX's patent to Allie and asked if he could explain how the patent differed from the claimed invention in his patent application. Allie seemed prepared to answer, but Apple's lawyer objected. The Apple lawyer argued that, instead of reading the patent aloud to Allie, VirnetX's lawyer should have let the engineer read both the patent and its related documentation in detail. The Eastern District of Texas discovery hotline wasn't open, so Apple's lawyer pulled the plug on the deposition.

McKool Smith alleged that the Apple lawyer disrupted the deposition because he wanted time to coach Allie's response. The appropriate sanction, they argued, was an "adverse inference" finding--a jury instruction that they can infer that Allie would have given deposition testimony favorable to VirnetX.

The judge agreed, writing that "an adverse inference finding is appropriate upon a showing of bad faith or bad contact, as in this case." But he gave Apple an out. Apple can avoid the adverse inference finding, he ruled, if it makes Allie available for a follow-up interrogation and refrains from communicating with him beforehand. If Apple communicates with Allie in any way, attorney-client privilege for those communications will be deemed waived.

"Judge Davis came up with a measured remedy that will act to deter this behavior in the future," said VirnetX's lead counsel in the case, Doug Cawley.

We reached out to Apple's lead counsel, Danny Williams of Williams Morgan, but didn't hear back.

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