Did Apple Steal iTunes Software? Courts Say Yes!

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Apple Ordered To Pay More Thank 500 Million iTunes Copyright Infringements

According to Reuters, Apple (AAPL) has been ordered by United States courts to pay more than $500 million after a jury found that Apple (AAPL) iTunes infringed on 3 patents. The three patents infringed upon were owned by a Texas patent leasing company called SmartFlash, LLC. While Apple (AAPL) plans to appeal the decision, their stock has plummeted as a result. So, today we’ll talk about the patents involved in the case, Apple’s response to the verdict, the compensation SmartFlash was looking for, and how the news has affected Apple’s stock throughout the day.

How Were The Patents Infringed Upon

The case started in May of 2013 when SmartFlash accused Apple (AAPL) of infringing upon patents associated with accessing and storing data. In this case, the data to be stored was songs, videos, and games. The claim states that SmartFlash owned patents on the technology which Apple (AAPL) is currently using through iTunes to manage these tasks.

SmartFlash claims that Apple (AAPL) gained knowledge of their technologies nearly 15 years ago in the year 2000. At that time, one of the technology co-founders, Patrick Racz, met with the executives of what has become a digital security company called Gemalto. Augustin Farrugia, who used to be one of the company’s executives eventually became a senior director at Apple (AAPL); leading to the leak of knowledge with regard to how the technology works.

Apple’s Response To The Verdict

Throughout the case and continuing after the verdict, Apple (AAPL) has maintained that they have not infringed on any patents. They state that the iTunes software was the result of hours upon hours of in house research and fine tuning. In a statement, Kristin Huguet, a spokeswoman for the company had the following to say

Smartflash makes no products, has no employees, creates no jobs, has no U.S. Presence, and is exploiting our patent system to seek royalties for technology Apple invented…We refuse 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.”

SmartFlash Didn’t Exactly Get The Compensation They Were Looking For

While there was definitely a very stiff judgment in this case, the order to pay wasn’t quite as high as SmartFlash would have hoped. In the suit, the company was seeking $852 million in damages as the result of patent infringement. The settlement awarded today was a hefty $532.9 million, but still a far, nearly $320 million cry from the original amount the company was seeking. Nonetheless, SmartFlash was happy with the verdict; having the following to say…

well-deserved and long-overdue recognition…Ultimately, the jury saw through Apple’s arguments and reached the right result.” – source

How The News Has Affected Apple (AAPL) Stock Throughout The Day

As is the case anytime bad news about an asset becomes available, Apple (AAPL) stock had a rough day. In morning trading, the stock fell to $130.28 per share before finally reaching a resting point. However, as more and more news became available about the verdict, the stock had nowhere to go, but down. Around 1:45 PM, we started to see fast paced downward movement. Unfortunately, that trend would last throughout the day. At the closing bell, Apple (AAPL) shares finished the day off at $128.79.

What Are Your Thoughts?

Do you think Apple (AAPL) infringed on any copyrights or is iTunes the product of research and development? Also, do you think Apple (AAPL) is a good investment following this news? Let me know in the comments below!

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1 COMMENT

  1. I think the takeaway here is, regardless of whether they are guilty or not, a $532 million dollar judgment against a company with a $750 BILLION dollar cap does not warrant the drop they took today. The $532 million dollar judgment is not something they intend to fight because it’ll bankrupt them, but their spokeswoman makes it a fight on principle.

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