Court Finds 25 Percent “Rule Of Thumb” To Be A Fundamentally Flawed Patent Damages Tool

Today’s guest post was written by our friends at Foley Lardner, Cynthia J. Franecki and Rebecca J. Pirozzolo-Mellowes.

In Uniloc USA, Inc. v. Microsoft Corp., ___ F.3d ___ (Fed. Cir. Jan. 4, 2011), the Federal Circuit addressed arguments relating to a number of damages issues. Most notably, the Federal Circuit held that the 25 percent rule of thumb often used by damages experts in patent infringement cases “is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation” and “inadmissible under Daubert and the Federal Rules of Evidence.”


United States Patent No. 5,490,216, assigned to Uniloc, relates to “a software registration system to deter copying of software.” Uniloc accused Microsoft of infringing the ‘216 patent. In 2007, the district court granted summary judgment of non-infringement. Specifically, the district court concluded that the algorithm used in Microsoft’s technology was different from that claimed in the ‘216 patent. On appeal, the Federal Circuit reversed and remanded the case. Thereafter, a jury found: (1) the ‘216 patent valid and infringed, and that (2) Microsoft’s infringement was willful. The jury then awarded Uniloc $388 million in damages. Microsoft filed a number of post-trial motions, including a motion for a new trial on damages based on its assertion that Uniloc’s expert improperly relied on the 25 percent rule of thumb and the entire market value rule. The district court granted Microsoft a new trial on damages based on the improper use of the entire market value rule, but rejected Microsoft’s arguments regarding the 25 percent rule. (more…)

Top 10 Issues for Patent Litigators in 2011

Written by Brandon Baum (Partner at Mayer Brown and Practice Center Contributor).

The end of the year is the time for top 10 lists.  Here, in no particular order, are my top 10 issues for patent litigators in 2011.

10.  Microsoft Corp v. i4i Ltd. Partnership., and the clear and convincing evidence standard where the defendant relies on uncited art.  Will the Supreme Court decide that a lesser burden of proof is required to show invalidity when art was never considered by the USPTO?  If so, this will profoundly change both litigation and prosecution practice.  My favorite possible implication – what presumption applies to a mongrel 103(a) combination of cited and uncited art?  And will the PTO experience a data dump of prior art, if Microsoft prevails?

9.  Global-Tech Appliances v. SEB S.A., and the standard for proving the mental state required for induced infringement.  Whatever language the Supreme Court uses to describe the mental state required to show inducement will send everyone scrambling to prove or disprove the existence of that mental state. (more…)

Contemporary Issues in Patent Royalty Damages

Written by our friends at Kilpatrick Stockton, E. Danielle Thompson Williams and Leslie T. Grab, Ph.D..

TMI:  How Much Settlement Information is Too Much Settlement Information?

I. Introduction

“Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty.”[1]  Damages are a hotly contested issue in nearly every patent litigation.  Patentees have traditionally had three remedies available to compensate for patent infringement:  lost profits; an established royalty; or a reasonable royalty.  Each of the remedies considered unique information on which a patentee could rely in establishing a damages award.  When requesting a reasonable royalty, patentees also often relied on the entire market value rule as another tool to determine the amount of the damages award.  However, a recent string of cases has changed the methodologies for determining a reasonable royalty as well as the standard for using the entire market value rule.  These cases put both the district courts and patent litigants on notice that the standards for establishing damages have been tightened.  Patentees must now “carefully tie proof of damages to the claimed invention’s footprint in the marketplace.”[2]  These decisions have benefits and risks for both plaintiffs and defendants in litigation that include both settlement strategies as well as expert testimony. (more…)

Patent Damages: Harmonizing Recent Judicial Developments With the Georgia-Pacific Factors

Patent Damages law is rapidly evolving with the recent Federal Circuit decisions on the issue and the statutory changes under serious consideration.

In an informative two hour program entitled “Patent Damages in Flux?:  Harmonizing Recent Federal Circuit Decisions With The Georgia-Pacific Factors 2010“,  Jennifer A. Sklenar of Howrey LLP, Jeffrey D. Sullivan of Baker Botts LLP and John M.  Griem, Jr. of Milbank delved into the Patent Damages issues including a review of the recent judicial developments and put them in context of the familiar Georgia-Pacific factors.  They also discussed the current state of potential statutory changes and how they might change patent damages litigation practices.

Jennifer A. Sklenar gave a very informative and detailed presentation of the recent Federal Circuit decisions on patent damages.  Specifically, she discussed Lucent Tech., Inc. v. Gateway, Inc., 580 F.3d 1301, i4i Ltd. Partnership v. Microsoft Corp., 598 F.3d 831,, Inc. v. Lansa, Inc., 594 F.3d 860, and Wordtech Sys., Inc. v. Integrated Network Sol’n, Inc., 2010 WL 2384958 cases.   Slenar has been kind enough to share her slides, entitled “Recent Federal  Circuit Decisions on Patent Damages” with you here.

Jeffrey Sullivan then summarized what the trends seem to be in the damages cases.  He says that in recent years we’ve seen the Federal Circuit take up damages issues more frequently.  That the court has done so in two primary areas related to reasonable royalty calculations: (more…)