Summary
The post examines the aftermath of the Uniloc v Microsoft judgment by the US Court of Appeals for the Federal Circuit, which rejected the long-standing 25 percent rule for patent damages. The author outlines the facts of the case, where Uniloc sued Microsoft over patent infringement and was initially awarded USD 388 million based on the 25 percent rule. The District Court and the CAFC both found this rule to be fundamentally flawed, holding it inadmissible for calculating reasonable royalty. This landmark judgment has reignited international debate over patent damages due to the scant jurisprudence on the subject. The outcome of the new trial is anticipated to influence global approaches to patent infringement damages, particularly in the United States.
First Publication Date: 6th January 2011
When the US sneezes, the world catches cold!
In post trial motion the District Court granted Microsoft’s motion of new trial for damages as the 25% rule is unjust and unfair in this case. Perturbed by this Uniloc filed an appeal in CAFC , their primary point of contention being that the 25% rule is the right way of calculating damages and that the CAFC has passively tolerated the use of this rule in earlier cases. The CAFC for the first time gave the following observation with respect to the calculation of damages using the 25% rule-
“This court now holds as a matter of Federal Circuit law that the 25 percent rule of thumb is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation.”
Having said the aforementioned the court observed that evidence relying on the 25 percent rule of thumb is inadmissible under Federal rules of evidence, because it fails to tie a reasonable royalty base to the facts of the case at issue. CAFC upheld the District Court’s judgment that Microsoft is entitled to a new trial on damages.
This judgment has brought alive the debate on patent damages the world over. Due to lack of enough jurisprudence and precedents on the subject we expect that this case will be used by a lot of litigants around the world in patent suits. Also the result of the new trial on damages will be interesting to note as it may shape atleast the way US looks at patent infringement damages.