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Massive Patent Verdict Overturned
By Jia Ryu – Edited by Stephanie Young

Uniloc v. Microsoft, No. 03-440 S (D. R.I. Sept. 29, 2009)

The United States District Court for the District of Rhode Island vacated one of the largest patent verdicts in history, in which a jury held that Microsoft’s “Product Activation System” (“PA”) infringed on Uniloc’s patented “System for Software Registration” (the “‘216 patent”). In holding that Microsoft did not infringe as a matter of law, the District Court found that Uniloc had not shown the presence of each element of the patent claim or its substantial equivalent in the accused device as required by Lemelson v. United States, 752 F.2d 1538 (Fed. Cir. 1985). The Court, while noting that the jury’s finding deserved deference, expressed its “firm belief” that the jury failed to grasp the complex issues in the case and lacked a legally sufficient basis for the finding.

The Microsoft Blog provides an overview of the case. Betanews provides a thorough analysis of the main legal issues. Evidence Prof Blog provides a look at the admissibility of expert damages testimony.  Current Events in IP Law questions the jurors’ ability to understand the issues.

Uniloc’s ’216 patent software deters unauthorized copying of software by locking the software to one user and allowing it to run only after a licensing procedure is completed. The accused technology, PA, was developed to limit the number of computers on which a single copy of software could be installed. Uniloc sued Microsoft in September 2003, contending that PA infringed five independent claims of the ‘216 patent. The Court granted summary judgment in Microsoft’s favor on non-infringement, and Uniloc appealed. The Federal Circuit remanded the case to determine whether PA uses an identical (or substantially equivalent) process to generate licensee unique IDs. On remand, the jury found that Microsoft infringed one of the claims (Claim 19) and awarded Uniloc $388,000,000 in damages. Microsoft raised a Rule 50 motion seeking a reversal.

In evaluating Microsoft’s motion the Court cited the Lemelson rule on infringement, which states that  “each element of a claim is material and essential, and that in order for a court to find infringement, the plaintiff must show the presence of every element or its substantial equivalent in the accused device.” The first element was the “Licensee Unique ID” (“LUID”) identified in Claim 19, construed as a “unique identifier associated with a licensee.” Uniloc argued that PA used this identifier to represent a software license holder, and Microsoft  challenged the notion that the value is “associated” with an individual licensee. The Court found that a reasonable jury could conclude that an association is created between the license digest and the licensee, based on Uniloc’s theory that the uniqueness of the license digest could in fact create an individual association.

However, the Court did not find sufficient similarities between the products in the other two elements of Claim 19. With regard to the second element, the issue was whether sufficient evidence supported the jury’s conclusion that the algorithms used by the PA system qualified as a “summation algorithm or a summer and equivalents thereof.” The Court concluded that they did not, because Uniloc did not prove that the systems were similar enough in this regard. The Court found “significant (and undisputed) differences between MD5 and the summation algorithm in the ‘216 patent, which cannot be overstated.”

The third element was the “registration system” using “mode switching means,” construed in the ‘216 patent as “a system that allows digital data or software to run in a use mode on a platform if and only if an appropriate licensing procedure has been followed.” Microsoft argued that PA is a verification technology, not a licensing procedure. Users of Microsoft products become legally licensed upon installing the software, and the PA system does nothing by itself to authorize users. The Court agreed with Microsoft and found that PA is not a registration system with mode switching means as that term has been construed. Because PA does not utilize these elements from the ‘216 patent, the Court concluded that there is no infringement as a matter of law.

This decision is the most recent development in a six-year-long dispute. The case has attracted much attention for its magnitude and implications. The reversal may support the argument for a patent-focused court, as the Court found that jury members were not able to sufficiently understand the technical details and legal issues to reach a reliable verdict. There is also concern over the obstacles presented by increasing patent litigation to high-technology entrepreneurs and companies, which may inhibit innovation.

The final resolution of the case is yet to come: Uniloc has expressed its intent to appeal the Court’s decision.

Posted On Oct - 9 - 2009 Comments Off

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