January 5, 2011

Damages Overturned In Microsoft-Uniloc Copyright Case

An appeals court confirmed that Microsoft did infringe upon a Uniloc USA patent for anti-piracy technology, but ruled that the $388 million awarded to the Irvine, California-based company was "fundamentally tainted" and ordered a new trial to reassess damages.

The original lawsuit, filed by Uniloc in October 2003, accused Microsoft of violating their patents in their Windows XP operating system and in some of their Office-brand productivity software programs, Bloomberg reporter Victoria Slind-Flor wrote on Wednesday.

In that case, a Rhode Island court awarded the company damages based on a percentage of revenue earned by Microsoft on the offending products.

Now, according to AFP reports, U.S. District Judge William Smith has ruled, in a 59-page decision, that Uniloc should not have been allowed to place a value of $19 billion on the Windows XP and Office software in front of jurors, and that the so-called '25% rule' that was used to help determine the percentage of a product's value that goes to a patent owner was "fundamentally flawed."

In a telephone interview with Slind-Flor, Uniloc USA CEO Brad David called the verdict "a strong validation of the value of the patent"¦ The damages issue is what it is, and we'll live with it. We have a sense of how much we contributed to Microsoft's bottom line."

Likewise, in an emailed statement published by Bloomberg, Microsoft deputy general counsel said that the ruling was "an important and helpful opinion with respect to the law of damages, and it may signal the end of unreasonable and outsized damages awards based on faulty methodology"¦ We look forward to the new trial."

Uniloc was founded in Australia in 1993, and its US office was established in 2003.

Ashby Jones of the Wall Street Journal commented on the case in the publication's legal blog on Wednesday, calling it "a good news/bad news day for Microsoft."

"On the one hand, the court restored a jury verdict from April 2009 finding that the software giant infringed a patent held by Uniloc USA related to combating software piracy," Jones said. "The good news for the company: the Federal Circuit ruled that the software giant was entitled to a new trial on damages. The jury had awarded Uniloc an eye-popping $388 million."

"It was that bit of news that caught the attention of patent lawyers everywhere," the Wall Street Journal reporter added. "In negating the $388 million award, the Federal Circuit said it said it will now prohibit the use of a commonly used rule that says a patent infringer generally should pay 25% of expected profits on the product using the patent."


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