Apple ordered to pay $530 million to 'patent troll' over iTunes Store

Smartflash doesn't make anything or have US operations, and was set up to allow its founder to make money from his ideas

Apple's App Store recent ran a special promotion to coincide with World Aids Day (Getty Images)

Apple has been ordered to pay $530 million to a company that exists simply to sue big companies over patents.

The payout is related to a patent filed in 1999 that relates to “downloading and paying for data such as audio and video data, text, software, games and other types of data.” Apple must pay $532.9 million to the holder of the patent, Smartflash, because its iTunes Store was found to have been using inventions described in the patent.

The row was about the digital rights management, data storage and payments systems technology found in the iTunes Store. The company said that the patent was infringed in applications such as Coin Dozer and 4 Pics 1 Movie.

Smartflash is thought to be a “patent troll” – a company that secures patents with no intention to use them, but instead to make money by suing other companies.

“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,” Kristin Huguet, an Apple spokeswoman, told Bloomberg. “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.”

Smartflash says that it was established to commercialise the ideas of its founder, Patrick Racz. Its office is registered as a building across the road from the court where the trial was held, Bloomberg reported.

The company is currently locked in disputes with other smartphone manufacturers, Samsung and Google. Amazon was also sued in December.