Company with no product wins $533M verdict vs. Apple, says it’s no “patent troll”



Smartflash LLC is a company that operates out of a tiny office suite in Tyler, Texas. It has no employees or products and no assets except for a handful of patents—but it may be getting a whole lot of cash. A jury verdict (PDF) that came out late yesterday orders Apple to pay the company $533 million for infringing three of its patents.

The company is no "patent troll," its lawyer insisted in e-mail and telephone discussions with Ars. He says that term doesn't apply because the company is part-owned by founder Patrick Racz, who's the named inventor on the three patents found to be infringed, numbered 7,334,720, 8,118,221, and 8,336,772. All three are related to downloading digital content.

"You have the inventor who came up with the idea, disclosed it to the public in a patent application to advance the state of the art, and spent 15 years staying involved as the main figure who always believed in his idea," said Smartflash attorney Brad Caldwell, who discussed the case with Ars by e-mail and telephone.

If the verdict is upheld on appeal, Smartflash's win will be the largest patent verdict ever won by a patent-assertion company or individual inventor. Two other larger verdicts, Saffran v. Johnson & Johnson ($593 million) and Mirror Worlds v. Apple ($625 million), were overturned after trial. Even larger verdicts exist, with the record being $1.17 billion, but those cases were all won by operating companies or universities.

Racz, who lives on the English Channel's Isle of Jersey, first filed for his patents in the late 1990s. Back then, Caldwell says, Smartflash was an operating company with a real product. But by 2002, the business of Smartflash was dead. A company Racz partnered with "walked away from the deal and left him in a bind," Caldwell explained. The inventor "pulled together every cent he had to complete the patent applications."

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