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Apple ordered to pay $533 million for infringing patents with iTunes

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Jury says software uses technology owned by Smartflash, a Texas-based patent licensing company

A federal jury in Texas this week ordered Apple to pay $532.9 million for infringing three patents owned by Smartflash, a Texas-based patent licensing company. The jury in Tyler, Texas, where Smartflash is based, determined that Apple used Smartflash's patents without permission in its iTunes software, rejecting Apple's claims that the patents were invalid. The patents in question pertain to digital rights management (DRM), data storage, and payment systems.

Smartflash sought damages of $852 million, which Apple's lawyers described as excessive. The Cupertino-based company said the patents were only worth $4.5 million. Smartflash also argued that Apple intentionally used the patents without permission because the company's founder, Patrick Racz, presented the technology more than ten years ago to Augustin Farrugia, who later became Apple's director of security. Apple said it would appeal Tuesday's decision.

"Smartflash makes no products, has no employees, creates no jobs."

"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," Kristin Huguet, an Apple spokeswoman, said in a statement to Bloomberg Business. "We refused to pay off this company for the ideas our employees spent years innovating and unfortunately we have been left with no choice but to take this fight up through the court system."

The trial was held in the Eastern District of Texas, which has been friendly to patent holders in the past. Smartflash has also sued Amazon and Google in the same court district (Google is trying to move the trial to California). Smartflash's patent trial against Samsung will be scheduled now that the Apple verdict has been handed down.