A jury deliberated for eight hours and found that the world's most-valuable company willfully used Smartflash's patents without permission.
Smartflash had been asking for damages of $852m (£549m) - Apple says it will appeal the decision.
A spokesman for Apple said: "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 case began in May 2013 when Smartflash sued, alleging that iTunes software infringed on patents related to accessing and storing downloaded songs, videos and games.
Apple tried to have the case thrown out, but a judge ruled that Smartflash's technology was not too basic to deserve the patents.
It then asked the jury to find Smartflash's patents invalid because previously patented inventions covered the same technology.
Brad Caldwell, a lawyer for Smartflash, said: "Smartflash is very happy with the jury's verdict, which recognises Apple's longstanding willful infringement."
The city of Tyler in Texas has become the focus for patent litigation.
It was also in Tyler federal court that a jury ordered Apple to pay $368m (£237m) to VirnetX Inc for patent infringement in 2012.